<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION NO. 333-30297
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHOICEPOINT INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
GEORGIA 7375 58-2309650
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
</TABLE>
1000 ALDERMAN DRIVE
ALPHARETTA, GEORGIA 30005
(770) 752-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DEREK V. SMITH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CHOICEPOINT INC.
1000 ALDERMAN DRIVE
ALPHARETTA, GEORGIA 30005
(770) 752-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<C> <C>
B. LYNN WALSH, ESQ. M. HILL JEFFRIES, JR.
HUNTON & WILLIAMS ALSTON & BIRD LLP
NATIONSBANK PLAZA ONE ATLANTIC CENTER
SUITE 4100 1201 WEST PEACHTREE STREET
600 PEACHTREE STREET, N.E. ATLANTA, GEORGIA 30309-3424
ATLANTA, GEORGIA 30308-2216 (404) 881-7000
(404) 888-4000 (404) 881-7777 (FAX)
(404) 888-4190 (FAX)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED DISTRIBUTION TO THE
PUBLIC: August 7, 1997.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
14,800,000 SHARES
CHOICEPOINT INC.
COMMON STOCK
(PAR VALUE $.10 PER SHARE)
(CHOICEPOINT LOGO)
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This Prospectus is being furnished in connection with the distribution by
Equifax Inc., a Georgia corporation, of one share of Common Stock, par value
$.10 per share, of its wholly-owned subsidiary, ChoicePoint Inc., a Georgia
corporation, for each ten shares of Equifax Common Stock, par value $1.25 per
share, held by Equifax shareholders of record on the Record Date of July 24,
1997. The distribution by Equifax of shares of ChoicePoint Common Stock to
Equifax shareholders is referred to in this Prospectus as the Spinoff.
The Spinoff, and certain related transactions, will be accomplished as
follows:
(i) Pursuant to a Distribution Agreement by and between Equifax and
ChoicePoint: (a) Equifax will contribute to ChoicePoint all of the issued
and outstanding capital stock of the wholly-owned Equifax subsidiaries that
comprise the Insurance Services Group operations of Equifax, which include
Osborn Laboratories Inc. ("Osborn Labs"), Equifax Services Inc. ("Equifax
Services") and Equifax Government and Special Systems, Inc. ("Government and
Special Systems") in exchange for a number of shares of ChoicePoint Common
Stock that, when combined with the shares of ChoicePoint Common Stock
already owned by Equifax, will equal the number of shares of Equifax Common
Stock issued and outstanding on the Record Date of the Spinoff divided by
ten (excluding those shares held by certain grantor trusts of Equifax, which
will not receive ChoicePoint Common Stock in the Spinoff); (b) Equifax will
transfer to ChoicePoint substantially all of the assets and liabilities of
the insurance services division of Equifax's United Kingdom operations; and
(c) immediately following the transactions described in (a) and (b) above,
ChoicePoint will transfer all of the issued and outstanding shares of
capital stock of Osborn Labs and Government and Special Systems to Equifax
Services;
(ii) Equifax will deliver all of the outstanding shares of ChoicePoint
Common Stock to SunTrust Bank, Atlanta, which will serve as the Distribution
Agent for the Spinoff, for distribution of one share of ChoicePoint Common
Stock for each ten shares of Equifax Common Stock held by Equifax record
shareholders on July 24, 1997 (except for certain grantor trusts of Equifax,
which will not receive ChoicePoint Common Stock pursuant to the Spinoff);
and
(iii) The Distribution Agent will aggregate all fractional shares of
ChoicePoint Common Stock that would otherwise be distributed to Equifax
shareholders and sell them in an orderly manner in the open market at
prevailing market prices after regular trading in ChoicePoint Common Stock
has started. After completion of such sales, the Distribution Agent will
distribute a pro rata portion of the proceeds from such sales, based upon
the average gross selling price of all such ChoicePoint Common Stock, to
each Equifax shareholder who would otherwise have received a fractional
share of ChoicePoint Common Stock.
The Spinoff will result in 100% of the outstanding shares of ChoicePoint
Common Stock being distributed to Equifax shareholders. Equifax shareholders do
not have to pay for shares of ChoicePoint Common Stock they will receive in the
Spinoff, nor do they have to surrender or exchange shares of Equifax Common
Stock in order to receive shares of ChoicePoint Common Stock. The number of
shares of Equifax Common Stock held by Equifax shareholders will not change as a
result of the Spinoff. The Distribution Agent will, as applicable, credit the
brokerage accounts of, or mail ChoicePoint Common Stock certificates to, Equifax
shareholders in August 1997. See "THE SPINOFF."
A public trading market for ChoicePoint Common Stock does not currently
exist, although a "when-issued" trading market is expected to develop on or
about the Record Date. Shares of ChoicePoint Common Stock have been approved for
listing, subject to official notice of issuance, on the New York Stock Exchange
("NYSE") under the symbol CPS.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE DISTRIBUTION OF CHOICEPOINT
COMMON STOCK.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this Prospectus is July 18, 1997.
<PAGE> 3
SUMMARY
This summary highlights selected information from this document but does
not contain all details concerning ChoicePoint or the Spinoff, including
information that may be important to you. To better understand ChoicePoint and
the Spinoff, you should carefully read this entire document. References in this
document to "we," "our," "ChoicePoint" or "the Company" mean ChoicePoint Inc.,
its subsidiaries and divisions after the Spinoff and the Insurance Services
Group of Equifax prior to the Spinoff. References in this document to "Equifax"
mean Equifax Inc. and its subsidiaries and divisions.
INTRODUCTION
The Spinoff is the result of a process in which the Equifax Board of
Directors and the executives and employees of Equifax and ChoicePoint undertook
to separate Equifax and ChoicePoint into two publicly traded companies. The
separation was prompted by recognition that the strategies of the two companies
have become increasingly different in response to new market trends and
opportunities. The separation of the two companies will create direct investment
opportunities in a leading provider of information to the financial services
industry and a leading provider of information to the insurance industry. The
Equifax Board of Directors believes that this action is in the best long-term
interests of Equifax shareholders and should further the growth of and increase
the business opportunities available to both Equifax and ChoicePoint.
To provide you with a better understanding of ChoicePoint and the Spinoff,
we have highlighted information in this Summary that provides a general
description of the business and management of ChoicePoint and explains the
Spinoff process. We also have included cross-references in the Summary to other
portions of the document to help you find more detailed information about
ChoicePoint and the Spinoff. We encourage you to read the entire document for a
better understanding of both ChoicePoint and the Spinoff.
CHOICEPOINT INC.
STRATEGIC FOCUS
ChoicePoint believes that new and increasingly complex risks are
confronting organizations and individuals, and that timely and quality
information is a critical component of effective risk assessment and management.
ChoicePoint's mission is to assist its clients in using information to enhance
their risk management decision processes. The Company intends to be the leading
provider of risk management and fraud prevention information and related
technology solutions to a broad range of industries worldwide.
BUSINESS
Based on market share, ChoicePoint is a leading provider of risk management
and fraud prevention information and related technology solutions to the
insurance industry. The Company also offers risk management and fraud prevention
solutions to organizations in other industries. ChoicePoint currently has three
core capabilities: (i) data warehousing; (ii) data access and analytics; and
(iii) related professional services. These capabilities currently are delivered
by the Company through three service groups: Property and Casualty Insurance
Services; Life and Health Insurance Services; and Business and Government
Services.
ChoicePoint provides most major domestic insurance companies with automated
and traditional underwriting and claim information services to assist those
companies in assessing the insurability of individuals and property and the
validity of insurance claims. The Company provides background investigations,
performs paramedical exams, furnishes access to motor vehicle reports, maintains
a database of claims histories and provides claims verification and
investigative services to both the property and casualty and the life and health
insurance markets. ChoicePoint also offers pre-employment background
investigations, pre-employment and regulatory compliance drug testing services
and public record information to other corporate and government organizations,
as well as the aforementioned insurance markets. See "BUSINESS."
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GROWTH STRATEGIES
Management of ChoicePoint intends to pursue the following growth
strategies: (i) diversify ChoicePoint's customer base across non-insurance
markets; (ii) acquire or establish strategic alliances with organizations that
provide new data, markets and technology; (iii) enhance technological
capabilities by improving current systems and developing new solutions; and (iv)
increase awareness of risk and fraud issues to expand new market and business
opportunities. In furtherance of its strategy of growth by acquisition, the
Company has entered into an agreement in principle to purchase all of the
capital stock of Kroll Holdings, Inc., a privately-held investigative services
firm. The acquisition is expected to be completed shortly after the date of the
Spinoff. See "BUSINESS -- Strategic Acquisitions."
FINANCIAL HIGHLIGHTS
For the six months ended June 30, 1997, ChoicePoint generated operating
revenue, net of motor vehicle records registry revenue, of approximately $211.5
million, an increase of 21%, from approximately $174.1 million for the six
months ended June 30, 1996. For the six months ended June 30, 1997, ChoicePoint
generated operating income of approximately $27.8 million, an increase of 29%,
from approximately $21.6 million for the six months ended June 30, 1996. For the
six months ended June 30, 1997, ChoicePoint generated net income of
approximately $12.8 million, an increase of 23%, from approximately $10.4
million for the six months ended June 30, 1996.
For the quarter ended June 30, 1997, ChoicePoint generated operating
revenue, net of motor vehicle records registry revenue, of approximately $108.6
million, an increase of 21%, from approximately $90.0 million for the quarter
ended June 30, 1996. For the quarter ended June 30, 1997, ChoicePoint generated
operating income of approximately $15.6 million, an increase of 25%, from
approximately $12.5 million for the quarter ended June 30, 1996. For the quarter
ended June 30, 1997, ChoicePoint generated net income of approximately $7.3
million, an increase of 18%, from approximately $6.2 million for the quarter
ended June 30, 1996.
For the fiscal year ended December 31, 1996, ChoicePoint generated
operating revenue, net of motor vehicle records registry revenue, of
approximately $366.5 million, an increase of 37% from approximately $268.1
million in 1993, when the Company's current senior management was installed.
ChoicePoint generated operating income of approximately $47.6 million in 1996,
fourteen times the Company's 1993 operating income of approximately $3.4
million. ChoicePoint generated net income of approximately $23.3 million in
1996, nineteen times the Company's 1993 net income of approximately $1.2
million. See "SELECTED FINANCIAL DATA."
ChoicePoint's principal executive offices are located at 1000 Alderman
Drive, Alpharetta, Georgia 30005, and its telephone number is (770) 752-6000.
QUESTIONS AND ANSWERS ABOUT THE SPINOFF
HOW WILL I BENEFIT FROM THE DIRECT INVESTMENT IN TWO MARKET LEADERS. The
SPINOFF? Spinoff will give you a direct investment in two
market leaders.
Based on market share, Equifax is a leading
provider of information services and products to
the financial services industry, including consumer
credit information and transaction processing.
Based on market share, ChoicePoint is a leading
provider of risk management and fraud prevention
information and related technology solutions to the
insurance industry, providing underwriting and
claims management information to property and
casualty and life and health insurance companies.
The Company also offers public record information
services, employee risk management services, and
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specialized investigation services to businesses
and governments to help them manage risk. See
"BUSINESS."
FOCUSED PERFORMANCE. Equifax believes that the
Spinoff will enhance the ability of the financial
markets to evaluate the individual operations of
Equifax and ChoicePoint. This should enable the
markets to measure the performance of the business
of each company against companies in the same or
similar businesses. Management of each company will
be able to focus its efforts and financial
resources on its core business. Each company will
be able to pursue growth opportunities
independently. Moreover, separate incentive
compensation plans for key employees of Equifax and
ChoicePoint will provide incentives that are more
directly related to the performance of the
individual companies. See "THE
SPINOFF -- Background and Reasons for the Spinoff."
DIRECT ACCESS TO CAPITAL. The Spinoff will give
each company direct access to capital markets and
the ability to issue stock to finance expansion and
growth opportunities.
WHY IS EQUIFAX SEPARATING DIVERGENT STRATEGIC DIRECTIONS. The Equifax Board
INTO TWO PUBLICLY TRADED of Directors determined that the Spinoff is in the
COMPANIES AT THIS TIME? best interests of Equifax shareholders because the
strategies of Equifax and ChoicePoint have become
increasingly different. Equifax is focusing on
providing decision support information to the
financial services industry, including the
provision of consumer and commercial credit
information, payment services and analytics and
consulting services. ChoicePoint is focusing on
expanding the scope of its risk management and
fraud prevention information and related technology
solutions to a broader range of industries and
markets worldwide. The Equifax Board of Directors
believes that the public perceives that credit
reporting services offered by Equifax and the more
privacy sensitive services offered by ChoicePoint
should not be available from a single provider.
Moreover, as independent organizations, each
company will be able to more effectively pursue
growth opportunities. See "THE SPINOFF --
Background and Reasons for the Spinoff."
WHAT DO I HAVE TO DO TO NOTHING. No proxy or vote is necessary for the
PARTICIPATE IN THE Spinoff. If you own Equifax Common Stock at the
SPINOFF? close of business on the Record Date of July 24,
1997, shares of ChoicePoint Common Stock will be
credited to your brokerage account or certificates
representing shares of ChoicePoint Common Stock
will be mailed to you in August 1997. You do not
need to mail in Equifax Common Stock certificates
to receive ChoicePoint Common Stock certificates.
You will not receive new Equifax Common Stock
certificates as a result of the Spinoff, nor will
the Spinoff change the number of shares of Equifax
Common Stock that you own. See "THE
SPINOFF -- Manner of Effecting the Spinoff."
WHEN DOES CHOICEPOINT JULY 31, 1997. At the Effective Time, which will
BECOME INDEPENDENT FOR be at 5:00 p.m. Atlanta time on July 31, 1997, all
ACCOUNTING PURPOSES? of the stock, assets and liabilities of the
Insurance Services Group of Equifax will be
transferred by Equifax to its wholly-owned
subsidiary, ChoicePoint. The Spinoff will actually
be complete, however, when Equifax distributes all
of the shares of ChoicePoint Common Stock to its
Record Date shareholders on the Mail Date on or
about August 7, 1997. Regardless of when shares of
ChoicePoint Common Stock are distributed,
ChoicePoint and its new
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public shareholders will be the sole beneficiaries
of the operation of the Insurance Services Group
after the Effective Time.
WHAT IS THE DISTRIBUTION ONE-FOR-TEN. You will receive one share of
RATIO? ChoicePoint Common Stock in the Spinoff for every
ten shares of Equifax Common Stock you own on the
Record Date. You will receive cash for any
fractional shares of ChoicePoint Common Stock. See
"THE SPINOFF -- Manner of Effecting the Spinoff"
and " -- No Issuance of Fractional Shares."
Example: If you own 105 shares of Equifax Common
Stock at the close of business on the Record Date,
you will receive ten shares of ChoicePoint Common
Stock in certificate form or credited to your
brokerage account and a check for the value of .5
shares of ChoicePoint Common Stock. You will
continue to own 105 shares of Equifax Common Stock.
WILL MY DIVIDENDS CHANGE? EQUIFAX CURRENTLY EXPECTS TO CONTINUE PAYING ITS
REGULAR QUARTERLY DIVIDEND OF $.0875 PER SHARE OF
EQUIFAX COMMON STOCK FOR THE FORESEEABLE
FUTURE. ChoicePoint does not anticipate paying any
cash dividends on its Common Stock in the near
future. The dividend policies of Equifax and
ChoicePoint are, however, subject to change. The
Boards of Directors of the respective companies are
responsible for deciding if a dividend will be paid
and the amount of any dividend. See "DIVIDEND
POLICY."
WILL CHOICEPOINT'S SHARES YES. ChoicePoint Common Stock will be listed on
BE LISTED ON A STOCK the New York Stock Exchange under the symbol CPS,
EXCHANGE? and regular trading will begin on or about the Mail
Date. Equifax Common Stock will continue to be
listed on the New York Stock Exchange under the
symbol EFX. See "THE SPINOFF -- Listing and Trading
of ChoicePoint Common Stock."
WILL SHARES TRADE ANY MOST LIKELY, DURING PART OF JULY AND AUGUST
DIFFERENTLY AS A RESULT 1997. A regular public market for ChoicePoint
OF THE SPINOFF? Common Stock will not exist prior to the Mail Date.
We expect, however, that "when-issued" trading for
ChoicePoint Common Stock will develop on or about
the Record Date and continue through the Mail Date.
When-issued trading means that shares can be traded
prior to the time certificates are actually
available or issued and reflects the assumed value
of a security after it has been issued (e.g., the
assumed value of ChoicePoint Common Stock after the
Spinoff). When-issued trading would occur to
develop an orderly market and trading price for
ChoicePoint Common Stock after the Spinoff.
If when-issued trading develops, you may buy and
sell shares of ChoicePoint Common Stock before the
Mail Date. None of these trades, however, would
settle until after the Mail Date, after regular
trading in ChoicePoint has begun. If the Spinoff
does not occur, all when-issued trading would be
null and void. If and as long as when-issued
trading in ChoicePoint Common Stock occurs, the
symbol on the New York Stock Exchange will be
CPSwi.
We expect that Equifax Common Stock will continue
to trade on a regular basis through the Mail Date,
but any shares of Equifax Common Stock sold between
the Record Date and the Mail Date will have a due
bill attached representing ChoicePoint Common Stock
to be distributed in the Spinoff. In addition,
Equifax Common Stock may also trade on a
when-issued basis, reflecting an assumed
post-Spinoff value for Equifax Common Stock. If and
as long as when-issued trading in Equifax Common
Stock occurs, the symbol on the New York Stock
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Exchange will be EFXwi. See "THE SPINOFF -- Listing
and Trading of ChoicePoint Common Stock."
WILL THE SPINOFF AFFECT THE PROBABLY. After the Spinoff, the trading price of
TRADING PRICE OF MY Equifax Common Stock will likely be lower than the
EQUIFAX COMMON STOCK? trading price immediately prior to the Spinoff.
Moreover, until the market has evaluated the
operations of Equifax without ChoicePoint's
operations, the trading price of Equifax Common
Stock may fluctuate significantly. The combined
trading prices of Equifax Common Stock and
ChoicePoint Common Stock after the Spinoff may not
equal the trading price of Equifax Common Stock
prior to the Spinoff. See "THE SPINOFF -- Listing
and Trading of ChoicePoint Common Stock."
WHAT WILL HAPPEN TO SHARES THEY WILL BE TREATED THE SAME AS ALL OTHER SHARES
OWNED THROUGH THE EQUIFAX OF EQUIFAX COMMON STOCK. You will continue to own
DIRECT SHARE PURCHASE the Equifax Common Stock that you owned through the
PROGRAM? Equifax Direct Share Purchase Program prior to the
Spinoff. In the Spinoff, you will receive one share
of ChoicePoint Common Stock in certificate form or
credited to your brokerage account for every ten
shares of Equifax Common Stock that you owned on
the Record Date through the Equifax Direct Share
Purchase Program. You will receive a check for the
cash equivalent of any fractional shares.
WHAT WILL HAPPEN TO GENERALLY, CHOICEPOINT EMPLOYEES WILL RETAIN THEIR
EXISTING OPTIONS TO VESTED OPTIONS TO PURCHASE EQUIFAX COMMON STOCK.
PURCHASE EQUIFAX Although they will forfeit unvested Equifax stock
COMMON STOCK? options, they will receive options to purchase
ChoicePoint Common Stock, adjusted to preserve the
value of the forfeited Equifax stock options.
Certain senior officers of ChoicePoint may choose
either to retain vested Equifax stock options or
have their vested Equifax stock options replaced
with ChoicePoint stock options. See
"MANAGEMENT -- Compensation and Benefit Plans."
IS THE SPINOFF TAXABLE FOR GENERALLY, NO. The Internal Revenue Service has
FEDERAL INCOME TAX ruled that the Spinoff will be tax-free to Equifax
PURPOSES? shareholders for United States federal income tax
purposes, except for cash received for fractional
shares. You may have to pay tax on a limited amount
of capital gain arising from any cash received in
lieu of a fractional share of ChoicePoint Common
Stock. Soon after the Spinoff, Equifax will send a
letter to its Record Date shareholders that will
explain how they should allocate tax basis between
Equifax Common Stock and ChoicePoint Common Stock.
See "THE SPINOFF -- Federal Income Tax Consequences
of the Spinoff."
WHAT ARE THE RISKS INVOLVED ChoicePoint will be subject to risks related to,
IN OWNING CHOICEPOINT among other things, no operating history as an
COMMON STOCK? independent company, dependence on data sources,
dependence on key personnel, inability to find
suitable acquisition targets or to complete
acquisitions, and absence of Equifax funding. See
"RISK FACTORS."
WILL EQUIFAX AND EQUIFAX WILL NO LONGER OWN ANY CHOICEPOINT COMMON
CHOICEPOINT BE RELATED STOCK AFTER THE SPINOFF. Equifax and ChoicePoint
IN ANY WAY AFTER THE will, however, have two common Board members,
SPINOFF? including a common Chairman of the Board for a
transitional period. Equifax and ChoicePoint have
also entered into various agreements to define
their continuing business relationships. See
"ARRANGEMENTS BETWEEN EQUIFAX AND CHOICEPOINT
RELATING TO THE SPINOFF."
WHAT WE HAVE ALREADY ACCOMPLISHED TO PREPARE FOR THE SPINOFF
SELECTED BOARD MEMBERS Equifax, as the current sole shareholder of
ChoicePoint, has identified eight persons to serve
on the ChoicePoint Board of Directors and will
elect such persons at or prior to the Mail Date. C.
B. Rogers, Jr. will
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serve as the Chairman of the Board of Directors of
both Equifax and ChoicePoint for a transitional
period after the Spinoff. Although five of the new
ChoicePoint Board members, including Mr. Rogers,
are currently members of the Equifax Board, three
of those persons will resign from the Equifax Board
prior to the Spinoff. ChoicePoint and Equifax will
therefore have two common Board members, including
a common Chairman of the Board, for a transitional
period. See "MANAGEMENT -- Directors and Executive
Officers."
APPOINTED SENIOR MANAGEMENT The Equifax Board of Directors has appointed Derek
V. Smith as President and Chief Executive Officer
of ChoicePoint. Mr. Smith has been employed by
Equifax for more than 16 years, most recently as
Executive Vice President and Group Executive for
the Insurance Services Group. Mr. Smith and his
management team are credited with the turnaround of
the Insurance Services Group of Equifax, which will
be ChoicePoint after the Spinoff. Mr. Smith's prior
Equifax positions include Senior Vice President and
Chief Financial Officer, as well as Corporate Vice
President and Treasurer. Mr. Smith is supported by
a senior management group with extensive executive
experience, including officers and senior
executives previously responsible for Equifax's
Insurance Services Group. See "MANAGEMENT."
ARRANGED $250 MILLION ChoicePoint has obtained a commitment for a $250
CREDIT FACILITY million five-year unsecured revolving Credit
Facility. Concurrently with the Spinoff,
ChoicePoint expects to use borrowings under the
Credit Facility to repay the net intercompany debt
owed to Equifax at the Effective Time, to repay
$29.0 million of Equifax debt to be assumed by
ChoicePoint, and to purchase approximately $6.5
million of ChoicePoint Common Stock in the open
market after the Mail Date for two grantor trusts.
Intercompany debt as of March 31, 1997 was
approximately $92.6 million. The amount of
intercompany debt owed at the Effective Time will
be reduced by a $13.0 million obligation assumed by
ChoicePoint with respect to certain ChoicePoint
employees. Based upon the relative financial
conditions of Equifax and ChoicePoint and
discussions with and the advice of its investment
advisors, Credit Suisse First Boston Corporation
and The Robinson-Humphrey Company, Inc., Equifax
determined that $29.0 million would be an
appropriate allocation to ChoicePoint of the
existing Equifax debt. The cash distribution will
be used by Equifax to repay Equifax debt. See
"CAPITALIZATION."
REQUESTED INTERNAL REVENUE Equifax has received a tax ruling from the Internal
SERVICE TAX RULING Revenue Service concerning the federal income tax
consequences of the Spinoff to Equifax and its
shareholders. See "THE SPINOFF -- Federal Income
Tax Consequences of the Spinoff."
KEY TERMS AND DEFINITIONS OF THE SPINOFF TRANSACTION
NO SHAREHOLDER ACTION No action is required by Equifax shareholders to
REQUIRED receive ChoicePoint Common Stock in the Spinoff.
You do not need to surrender Equifax Common Stock
to receive ChoicePoint Common Stock in the Spinoff.
The number of shares of Equifax Common Stock you
own will not change as a result of the Spinoff.
RECORD DATE You must own Equifax Common Stock as of the close
of business on the Record Date of July 24, 1997 to
receive ChoicePoint Common Stock in the Spinoff.
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EFFECTIVE TIME The transfer by Equifax of the stock, assets and
liabilities of its Insurance Services Group to
ChoicePoint, its wholly-owned subsidiary, will be
effective as of 5:00 p.m. Atlanta time on July 31,
1997.
MAIL DATE The Distribution Agent will credit the brokerage
accounts of Equifax shareholders or mail
ChoicePoint Common Stock certificates to Equifax
shareholders on or about August 7, 1997.
DISTRIBUTION RATIO You will receive one share of ChoicePoint Common
Stock for every ten shares of Equifax Common Stock
you own as of the close of business on the Record
Date.
SHARES TO BE DISTRIBUTED All of the ChoicePoint Common Stock owned by
Equifax will be distributed in the Spinoff. As a
result of the Spinoff, approximately 14,700,000
shares of ChoicePoint Common Stock are expected to
be outstanding.
NO FRACTIONAL SHARES WILL Fractional shares of ChoicePoint Common Stock will
BE ISSUED not be distributed. Instead, they will be
aggregated and sold in the public market by the
Distribution Agent, and the aggregate cash proceeds
will be distributed to shareholders otherwise
entitled to fractional shares. If you would
otherwise be entitled to a fractional share, you
will receive a check or a credit to your brokerage
account in an amount equal to the value of the
fractional share as soon as practicable after the
Spinoff. See "THE SPINOFF -- No Issuance of
Fractional Shares."
SPINOFF The Spinoff is the series of transactions whereby
Equifax will transfer the stock, assets and
liabilities of its Insurance Services Group to its
wholly-owned subsidiary ChoicePoint and distribute
all the shares of ChoicePoint Common Stock to its
Record Date shareholders.
WHO CAN ASSIST IN ANSWERING YOUR QUESTIONS?
Before the Spinoff, shareholders of Equifax with inquiries relating to the
Spinoff may contact:
Equifax Investor Relations Department
P.O. Box 4081
Atlanta, GA 30302
Telephone: (404)885-8304
After the Spinoff, shareholders of ChoicePoint with inquiries relating to
their investment in ChoicePoint Common Stock may contact:
ChoicePoint Investor Relations Department
1000 Alderman Drive
Alpharetta, GA 30005
Telephone: (770) 752-4050
The Distribution Agent responsible for the distribution of ChoicePoint
Common Stock in the Spinoff and acting as transfer agent and registrar for
ChoicePoint Common Stock after the Spinoff is:
SunTrust Bank, Atlanta
P.O. Box 4625
Atlanta, Georgia 30302
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<PAGE> 10
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data of ChoicePoint highlights
selected historical and pro forma financial data and should be read in
conjunction with the Consolidated Financial Statements and the unaudited pro
forma consolidated financial data included elsewhere in this document. The
historical financial information presents information for ChoicePoint for the
periods in which it operated as the Insurance Services Group of Equifax. The pro
forma data has been derived from the unaudited pro forma consolidated statement
of income for the quarter ended March 31, 1997 and the year ended December 31,
1996 and the unaudited pro forma consolidated balance sheet as of March 31,
1997, which present the consolidated results of operations and financial
position of ChoicePoint assuming that the transactions contemplated by both the
Spinoff and ChoicePoint's acquisition of a 70% interest in CDB Infotek had been
completed as of the beginning of 1996 and as of March 31, 1997, respectively.
Neither the historical financial information nor the pro forma financial data
presented below is necessarily indicative of the results of operations or
financial position that ChoicePoint would have reported if it had operated as an
independent company during the periods presented, nor is it indicative of
ChoicePoint's future performance as an independent company.
For management's explanation of the following results of operations and
financial condition, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------------- ------------------------------------------
PRO FORMA PRO FORMA
1997 1997 1996 1996 1996 1995 1994
--------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenue(1)............... $102,852 $102,852 $ 84,140 $389,262 $366,481 $328,990 $284,566
Operating income................... 12,198 12,198 9,006 44,636 47,611 31,928 16,577
Income before income taxes......... 10,256 10,579 7,431 37,228 41,014 26,098 13,939
Net income......................... 5,347 5,541 4,218 21,042 23,280 14,865 6,612
Pro forma earnings per share....... $ .36 $ 1.41
Pro forma common and common
equivalent shares outstanding.... 14,828 14,957
Total assets....................... $318,914 $318,914 $208,268 $301,824 $301,824 $200,779 $193,820
Long-term debt, less current
maturities....................... 115,965 872 -- 107,544 1,051 -- 5
Total shareholder's equity......... 95,374 210,467 112,344 89,834 196,327 104,641 98,028
EBITDA(2).......................... $ 18,525 $ 18,525 $ 12,425 $ 69,389 $ 66,265 $ 45,249 $ 26,610
Cash flows provided by operating
activities....................... 1,375 1,893 36,779 20,240 8,225
Cash flows used by investing
activities....................... (7,185) (2,863) (91,786) (12,008) (18,076)
Cash flows provided (used) by
financial activities............. 8,585 3,568 56,066 (9,887) 12,386
</TABLE>
- ---------------
(1) Historically, motor vehicle records registry revenue, the fee charged by
states for motor vehicle records which is passed on by ChoicePoint to its
customers, has been reflected in Equifax's consolidated statements of income
as operating revenue and costs of services. ChoicePoint has elected to
exclude these customer reimbursed fees from revenue and reduce cost of
services by a corresponding amount. This change in accounting presentation
does not impact operating income.
(2) EBITDA represents income before income taxes, plus depreciation and
amortization and interest expense. EBITDA is presented not as a substitute
for income from operations, net income or cash flows from operating
activities. The Company has included EBITDA data (which is not a measure of
financial performance under generally accepted accounting principles)
because such data is used by certain investors to analyze and compare
companies on the basis of operating performance, leverage and liquidity, and
to determine a company's ability to service debt. See the Consolidated
Financial Statements and the unaudited pro forma consolidated financial
information and the notes thereto included elsewhere in this document.
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<PAGE> 11
RISK FACTORS
NO OPERATING HISTORY AS AN INDEPENDENT COMPANY
Although ChoicePoint will be comprised of the business operations that
comprised the Insurance Services Group of Equifax, ChoicePoint does not have an
operating history as an independent public company. The Company has historically
relied on Equifax for financial, administrative and managerial support relevant
to operating a public company. Except for certain services for which ChoicePoint
will pay Equifax to provide during the 18-month transition period following the
Effective Time, Equifax will have no obligation to support the Company after the
Effective Time. Following the Spinoff, ChoicePoint will maintain its own lines
of credit and banking relationships and perform its own administrative
functions. There can be no assurance that the Company will be able to develop
successfully the financial, administrative and managerial structure necessary to
operate as an independent public company, or that the development of such
structure will not require a significant amount of management's time and other
resources. See "-- Absence of Equifax Funding," "ARRANGEMENTS BETWEEN EQUIFAX
AND CHOICEPOINT RELATING TO THE SPINOFF -- Transition Support Agreement" and the
Consolidated Financial Statements and notes thereto.
DEPENDENCE ON DATA SOURCES
ChoicePoint relies on data from outside sources to create and maintain its
proprietary and non-proprietary databases, including data received from
customers and various government and public record services. There can be no
assurance that ChoicePoint's data sources, particularly data from customers,
will continue to be available in the future. In addition, ChoicePoint's data
sources generally are not subject to exclusive agreements with ChoicePoint, such
that data included in ChoicePoint's data products may also be included in data
products of ChoicePoint's competitors. Although ChoicePoint has no reason to
believe that access to current data sources will become restricted, loss of such
access or the availability of data in the future due to increased government
regulation or otherwise could have a material adverse effect on ChoicePoint's
business, financial condition and results of operations. See
"BUSINESS -- Sources of Supply."
DEPENDENCE ON KEY PERSONNEL
ChoicePoint's success depends to a significant extent on the continued
service of certain key management personnel, including Derek V. Smith,
ChoicePoint's President and Chief Executive Officer. The loss or interruption of
Mr. Smith's services would likely have a material adverse effect on ChoicePoint.
The loss or interruption of the services of other senior management personnel or
the inability to attract and retain other qualified management, sales, marketing
and technical employees could also have an adverse effect on the Company.
Although ChoicePoint does not currently have employment agreements with any of
its executive officers, the Company intends to enter into employment agreements
with all such executive officers prior to the Spinoff. Such employment
agreements will, where appropriate, include non-compete agreements. In addition,
ChoicePoint will use a variety of incentive plans to attract and retain key
management personnel, including a stock incentive plan, annual bonus plans, a
deferred compensation plan and a 401(k) Profit Sharing Plan. See
"MANAGEMENT -- Compensation and Benefit Plans" and "-- Employment and
Compensation Agreements."
INABILITY TO IDENTIFY OR COMPLETE ACQUISITIONS
ChoicePoint intends to pursue acquisitions and form strategic alliances
that will enable ChoicePoint to acquire complementary skills and capabilities,
offer new products, expand its customer base and obtain other competitive
advantages. There can be no assurance, however, that ChoicePoint will be able to
successfully identify suitable acquisition candidates or strategic partners,
obtain financing on satisfactory terms, complete acquisitions or strategic
alliances, integrate acquired operations into its existing operations or expand
into new markets. Once integrated, acquisitions may not achieve anticipated
levels of revenue, profitability or productivity or otherwise perform as
expected. Acquisitions also involve special risks, including risks associated
with unanticipated problems, liabilities and contingencies, diversion of
management resources and possible adverse effects on earnings resulting from
increased goodwill amortization, increased interest costs,
9
<PAGE> 12
the issuance of additional securities and difficulties related to the
integration of the acquired business. Except for the pending acquisition of
Kroll Holdings, Inc., ChoicePoint is unable to predict whether or when any
prospective acquisition candidate will become available or the likelihood that
any acquisition will be completed. The risks associated with acquisitions could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "BUSINESS -- Strategic Acquisitions" and
"-- Growth Strategies."
ABSENCE OF EQUIFAX FUNDING
ChoicePoint has historically used cash flow from operations and capital
from Equifax to fund its operations and acquisitions. After the Spinoff, Equifax
will no longer provide capital to finance ChoicePoint's operations or for any
other purpose. In order to meet financing needs after the Spinoff, ChoicePoint
will enter into an agreement for a five-year, unsecured revolving Credit
Facility with a group of banks.
GOVERNMENT REGULATION
Certain data and services provided by ChoicePoint are subject to regulation
by the Federal Trade Commission under the Federal Fair Credit Reporting Act, and
to a lesser extent, by various other federal, state and local regulatory
authorities. Compliance with existing federal, state and local laws and
regulations has not had a material adverse effect on the results of operations
or financial condition of ChoicePoint. Nonetheless, federal, state and local
laws and regulations in the United States designed to protect the public from
the misuse of personal information in the marketplace and adverse publicity or
potential litigation concerning the commercial use of such information may
increasingly affect the operations of ChoicePoint, which could result in
substantial regulatory compliance, litigation expense and a loss of revenue.
Certain state and local licensing regulations provide that the licenses
held by Equifax may not be transferred. Accordingly, the Company likely will be
required to apply for relicensing in certain states. Although ChoicePoint
believes that such licenses will be issued to the Company, no assurance can be
given that this will actually occur.
NO PRIOR MARKET FOR CHOICEPOINT COMMON STOCK; FLUCTUATIONS IN PRICE OF
CHOICEPOINT COMMON STOCK
There is currently no public trading market for ChoicePoint Common Stock.
Although ChoicePoint Common Stock has been approved for listing, subject to
official notice of issuance, on the New York Stock Exchange, the Company cannot
predict, estimate or give assurances about the trading prices for ChoicePoint
Common Stock after the Spinoff. Until the ChoicePoint Common Stock is fully
distributed and an orderly trading market develops, the trading prices for
ChoicePoint Common Stock may fluctuate significantly. Prices for ChoicePoint
Common Stock will be determined in the public trading markets and may be
influenced by many factors, including the depth and liquidity of the market for
ChoicePoint Common Stock, investor perceptions of ChoicePoint and its business,
ChoicePoint's results of operations, and general economic and market conditions.
In addition, financial markets, including the New York Stock Exchange, have
experienced extreme price and volume fluctuations that have affected the market
price of many information technology industry stocks and that, at times, could
be viewed as unrelated or disproportionate to the operating performance of such
companies. Such fluctuations have also affected the stock prices of many new
public issues. Such volatility and other factors could materially affect the
market price of ChoicePoint Common Stock.
The ChoicePoint Common Stock distributed to Equifax shareholders in the
Spinoff will be freely transferable under the Securities Act of 1933, as amended
(the "Securities Act"), except for shares of ChoicePoint Common Stock received
by persons who may be deemed affiliates of ChoicePoint. The sale of a
substantial number of shares of ChoicePoint Common Stock after the Spinoff, or
the perception that such sales could occur, could adversely affect the market
price of ChoicePoint Common Stock. See "THE SPINOFF -- Listing and Trading of
ChoicePoint Common Stock."
10
<PAGE> 13
FLUCTUATIONS IN PRICE OF EQUIFAX COMMON STOCK
After the Spinoff, Equifax Common Stock will continue to be listed and
traded on the New York Stock Exchange. As a result of the Spinoff, the trading
price of Equifax Common Stock will likely be lower than the trading price of
Equifax Common Stock immediately prior to the Spinoff. The combined trading
prices of Equifax Common Stock and ChoicePoint Common Stock after the Spinoff
may be less than, equal to or greater than the trading prices of Equifax Common
Stock immediately prior to the Spinoff. Until the market has fully analyzed the
operations of Equifax without the operations of ChoicePoint, the prices at which
Equifax Common Stock trades may fluctuate significantly. See "THE
SPINOFF -- Listing and Trading of ChoicePoint Common Stock."
CURRENT DEPENDENCE ON INSURANCE CUSTOMERS
Approximately 86% of ChoicePoint's revenue in 1996 was derived from its
property and casualty and life and health insurance services to domestic
insurance companies and independent agents who sell insurance products.
ChoicePoint has no long-term agreements with those customers. Although
ChoicePoint's management believes that the quality of its products and services
and its leading position in those markets should permit it to maintain its
relationship with its customers or dominant market position, there can be no
assurance that ChoicePoint will be able to sustain its current revenue levels.
In addition, the insurance industry has experienced significant consolidation in
recent years, which could result in the loss of one or more significant
insurance company customers in the future if the surviving entity in any such
consolidation purchases similar products from a ChoicePoint competitor. One of
ChoicePoint's strategies is to offer a variety of new products to a diverse set
of industries in order to decrease its dependence on the domestic insurance
industry. See "BUSINESS -- Growth Strategies" and "-- Products and Customers."
COMPETITION
The Company operates in a number of geographic and product and service
markets, which are highly competitive. In the property and casualty insurance
services market, ChoicePoint's most significant competitors include Dateq
Information Network, Inc. a subsidiary of Trans Union Corporation, and Policy
Management Systems Corporation. In the life and health insurance services
market, ChoicePoint's most significant competitors include Hooper Holmes, Inc.
and Examination Management Services, Inc. with respect to manual information
collection services and LabOne, Inc. with respect to insurance laboratory
services. In the business and government services market, ChoicePoint's most
significant competitors include Information America, Inc. and Lexis-Nexis with
respect to public records information, various security companies and clinical
labs with respect to pre-employment screening services and various small
companies with respect to background checks or drug screening services. In each
of its markets, the Company competes on the basis of responsiveness to customer
needs and the quality and range of products and services offered. Although the
Company believes that it offers a broader range of products and services in more
geographic markets than its competitors, competition in particular geographic or
product or service markets may have a material adverse effect on the financial
condition or results of operations of the Company. In addition, certain of
ChoicePoint's competitors have greater financial resources than the Company. See
"BUSINESS -- Competition."
CERTAIN ANTI-TAKEOVER PROVISIONS
The ChoicePoint Articles of Incorporation and Bylaws contain provisions
that may make more difficult or expensive or that may discourage a tender offer,
change in control or takeover attempt that is opposed by the ChoicePoint Board
of Directors. Certain provisions of the Articles of Incorporation and Bylaws,
among other things: (i) classify the ChoicePoint Board of Directors into three
classes, each of which serve for staggered three-year terms; (ii) provide that a
director of ChoicePoint may only be removed for "cause" (as defined by the
Georgia Business Corporation Code); (iii) provide that only the Board of
Directors, the Chairman or Vice Chairman of the Board of Directors, certain
officers of ChoicePoint or the holders of all of the outstanding ChoicePoint
voting stock may call special meetings of shareholders; (iv) provide that
shareholders must comply with certain advance notice procedures to nominate
candidates for election to the
11
<PAGE> 14
ChoicePoint Board of Directors or to place shareholder proposals on the agenda
for consideration at annual or special meetings of shareholders; and (v) provide
that ChoicePoint shareholders may amend or repeal the provisions of the
ChoicePoint Articles of Incorporation and Bylaws relating to the staggered terms
of directors only by a vote of the holders of two-thirds of the ChoicePoint
voting stock. See "DESCRIPTION OF CAPITAL STOCK -- Certain Anti-Takeover
Provisions of Georgia Law and the ChoicePoint Articles and Bylaws."
Additionally, the Georgia Business Corporation Code generally imposes
certain restrictions on mergers and other business combinations between
ChoicePoint and any holder of 10% or more of the ChoicePoint Common Stock if the
holder's acquisition of such position was not approved in advance by the
ChoicePoint Board of Directors. In addition, the ChoicePoint 1997 Omnibus Stock
Incentive Plan contains provisions permitting the acceleration or modification
of benefits upon a Change in Control (as defined in the plans) of ChoicePoint,
and ChoicePoint intends to enter into employment agreements with certain of its
key employees, which may contain severance provisions that would provide certain
benefits to such employees in the event of a change in control of ChoicePoint
and the subsequent termination of such employees from the Company. The
ChoicePoint Board of Directors anticipates adopting a Shareholder Rights Plan
after the Spinoff. If adopted, the Shareholder Rights Plan would cause
substantial dilution to a person or group that attempts to acquire ChoicePoint
on terms not approved in advance by the ChoicePoint Board of Directors. See
"MANAGEMENT -- Employment and Compensation Agreements" and "DESCRIPTION OF
CAPITAL STOCK -- Shareholder Rights Plan."
Certain provisions of ChoicePoint's contractual arrangements with Equifax
may also have anti-takeover effects. ChoicePoint has agreed to indemnify Equifax
for any tax liability resulting from the sale of ChoicePoint to a third party
after it is spun off from Equifax. This provision may discourage or preclude an
acquisition of ChoicePoint because it would make the acquisition more expensive.
POTENTIAL TAXATION
Equifax and ChoicePoint intend for the Spinoff generally to be tax-free for
United States federal income tax purposes, and the Internal Revenue Service (the
"IRS") has issued a ruling confirming such tax-free status. It is possible,
however, that the Spinoff could be rendered taxable as a result of subsequent
actions or events, or as a result of a determination that Equifax or ChoicePoint
failed to disclose properly to the IRS all material facts related to the
Spinoff. Also, proposed legislation currently pending in Congress would, if
enacted, cause ChoicePoint to incur substantial federal income tax liability if
Equifax were to be acquired by a third party within two years after it spins off
ChoicePoint and ChoicePoint failed to prove that the subsequent acquisition of
Equifax was not "related" to the Spinoff. Although ChoicePoint would be
indemnified by Equifax for such taxes under the Tax Sharing and Indemnification
Agreement, no assurance can be made that Equifax will be able to pay its
indemnification obligation. Similarly, if ChoicePoint is acquired by a third
party within two years after the Spinoff, Equifax may incur a substantial tax
liability for which ChoicePoint would be obligated to indemnify Equifax under
the Tax Sharing and Indemnification Agreement. This indemnification obligation
would have a material adverse effect on the results of operations and financial
position of ChoicePoint. See "THE SPINOFF -- Federal Income Tax Consequences of
the Spinoff."
Under the Tax Sharing and Indemnification Agreement between ChoicePoint and
Equifax, each of Equifax and ChoicePoint have represented to the other that (i)
it has not knowingly misstated or omitted a material fact in connection with
Equifax obtaining the IRS ruling, (ii) it is not currently engaged in any
negotiations involving a transaction that, if consummated, would constitute such
a "related" acquisition, and (iii) it will neither engage in negotiations nor
consummate a business combination that constitutes such a "related" acquisition.
The Company has agreed to indemnify Equifax against any tax or other liability
that Equifax may incur if the transfer of the capital stock of certain
subsidiaries and certain other assets of Equifax to ChoicePoint (and the
assumption by ChoicePoint of liabilities related thereto) or the Spinoff is not
tax-free solely because of a breach by ChoicePoint of a representation made in
connection with the IRS ruling request or contained in the Tax Sharing and
Indemnification Agreement. The Company has also agreed to indemnify Equifax for
a portion of such liabilities if the transaction is not tax-free and ChoicePoint
is partially responsible or neither party is responsible for such result. See
"ARRANGEMENTS BETWEEN EQUIFAX AND CHOICEPOINT RELATING TO THE SPINOFF -- Tax
Sharing and Indemnification Agreement."
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<PAGE> 15
THE SPINOFF
BACKGROUND AND REASONS FOR THE SPINOFF
The Equifax Board of Directors has determined that the Spinoff is in the
best interest of the shareholders of Equifax because the strategic directions of
the business operations of Equifax and ChoicePoint have diverged. Equifax and
ChoicePoint have different operating objectives and growth opportunities.
Equifax continues to focus primarily on consumer and commercial credit
information services and payment services related to card processing and check
warranty. ChoicePoint's operations have historically consisted of database
information and inspection and investigative services supplied primarily to the
insurance industry. ChoicePoint believes it can enhance future growth and
profitability by offering a broader range of risk assessment services, fraud
management information and technology solutions to clients outside of the
insurance industry. Although Equifax believes that significant growth
opportunities exist for ChoicePoint's products and services, it anticipates that
marketing and promotion of these services will be necessary. The public
perceives, however, that credit reporting services and the more privacy
sensitive services offered by ChoicePoint should not be available from a single
provider.
The Spinoff will also enable management of each company to focus its
efforts and financial resources on the core business of each company. The
Spinoff will enable each company to develop employee compensation and benefit
programs more appropriate to their individual operations, including stock-based
and other incentive programs that reward employees of each company based on the
success of the individual company's operations. The Spinoff will enable each
company to access capital markets independently without the capital resource
allocation issues present within the combined Equifax and provide a stock-based
acquisition currency particular to each of the companies. The Spinoff will also
enable investors to make investment decisions based on the operations of the
individual companies.
MANNER OF EFFECTING THE SPINOFF
The general terms and conditions relating to the Spinoff are set forth in a
Distribution Agreement between Equifax and ChoicePoint. See "ARRANGEMENTS
BETWEEN EQUIFAX AND CHOICEPOINT RELATING TO THE SPINOFF -- Distribution
Agreement."
Equifax will effect the Spinoff by delivering all of the outstanding shares
of ChoicePoint Common Stock to SunTrust Bank, Atlanta, which will serve as the
Distribution Agent for the Spinoff, for distribution to the holders of record of
Equifax Common Stock as of the close of business on the Record Date of July 24,
1997. The distribution of ChoicePoint Common Stock will be made on the basis of
a distribution ratio of one share of ChoicePoint Common Stock for every ten
shares of Equifax Common Stock held as of the close of business on the Record
Date. The actual total number of shares of ChoicePoint Common Stock to be
distributed will depend on the number of shares of Equifax Common Stock
outstanding as of the Record Date. The Distribution Agent will credit the
brokerage accounts of Equifax shareholders or will mail ChoicePoint Common Stock
certificates to Equifax shareholders in August 1997. See "DESCRIPTION OF CAPITAL
STOCK -- ChoicePoint Common Stock."
NO ISSUANCE OF FRACTIONAL SHARES
No certificates representing fractional interests in shares of ChoicePoint
Common Stock will be issued to Equifax shareholders as part of the Spinoff. The
Distribution Agent, acting as agent for Equifax shareholders otherwise entitled
to receive certificates representing fractional shares of ChoicePoint Common
Stock, will aggregate and sell all fractional shares in the open market at then
prevailing market prices and distribute the proceeds to shareholders who are
entitled to payment. The Distribution Agent will sell the fractional shares
after the Spinoff, when regular trading in ChoicePoint Common Stock has started.
RESULTS OF THE SPINOFF
The transfer and assignment by Equifax of the stock, assets and liabilities
of its Insurance Services Group to its wholly-owned subsidiary ChoicePoint will
be effective at the Effective Time, and as long as the Spinoff
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<PAGE> 16
occurs, the business of the Insurance Services Group will be deemed to be
operated for the sole benefit of ChoicePoint and its new public shareholders
after the Effective Time. After the Spinoff, ChoicePoint will be a separate
public company. The number and identity of shareholders of ChoicePoint
immediately after the Spinoff generally will be the same as the number and
identity of shareholders of Equifax prior to the Spinoff. As a result of the
Spinoff, ChoicePoint expects to have approximately 8,800 holders of record of
ChoicePoint Common Stock and approximately 14,700,000 shares of ChoicePoint
Common Stock outstanding, based on the number of record shareholders and issued
and outstanding shares of Equifax Common Stock as of the close of business on
July 14, 1997 and the distribution ratio. The actual number of shares of
ChoicePoint Common Stock to be distributed will be determined as of the Record
Date. The Spinoff will not affect the number of outstanding shares of Equifax
Common Stock or the rights of Equifax shareholders.
FEDERAL INCOME TAX CONSEQUENCES OF THE SPINOFF
The following is a general description of the material federal income tax
consequences associated with the Spinoff. It is not intended to address all tax
consequences of the Spinoff and does not purport to address the tax consequences
applicable to every Equifax shareholder. Accordingly, shareholders are strongly
encouraged to consult their individual tax advisors as to particular tax
consequences of the Spinoff, including but not limited to international, state,
local and other tax consequences that may be applicable to them.
Equifax has received a ruling from the IRS to the effect, among other
things, that for federal income tax purposes:
(i) the Spinoff will qualify as a tax-free distribution under Section
355 of the Internal Revenue Code of 1986, as amended (the "IRC");
(ii) except for any cash received in lieu of fractional shares, Equifax
shareholders will not recognize any gain or loss as a result of their
receipt of ChoicePoint Common Stock in the Spinoff; to the extent an
Equifax shareholder receives cash in lieu of a fractional share, such
shareholder will recognize gain or loss equal to the difference between the
shareholder's basis in the fractional share and the amount received for
such fractional share;
(iii) in connection with the Spinoff, a shareholder's tax basis in
Equifax Common Stock will be apportioned between Equifax Common Stock and
ChoicePoint Common Stock received in the Spinoff in accordance with
relative fair market values of such shares at the time of the Spinoff. For
example, if Equifax Common Stock trades at $94 per share at the time of the
Spinoff and ChoicePoint Common Stock trades at $60 per share at the time of
the Spinoff, a shareholder with 100 shares of Equifax Common Stock would
allocate his tax basis 94% to the Equifax Common Stock (100 shares
multiplied by $94 per share divided by $10,000 aggregate value of Equifax
and ChoicePoint Common Stock) and 6% to the ChoicePoint Common Stock that
he receives in the Spinoff (10 shares multiplied by $60 per share divided
by $10,000 aggregate value of Equifax and ChoicePoint Common Stock); and
(iv) the holding period of the ChoicePoint Common Stock received in the
Spinoff will include the holding period of the Equifax Common Stock with
respect to which the ChoicePoint Common Stock will be distributed, provided
the Equifax Common Stock is held as a capital asset on the date of the
Spinoff.
The ruling from the IRS was issued based upon the accuracy of factual
representations made by Equifax and ChoicePoint in connection with the Spinoff.
Soon after the Spinoff, Equifax will send a letter to Equifax shareholders
receiving ChoicePoint Common Stock in the Spinoff explaining how such
shareholders should allocate tax basis between Equifax Common Stock held
immediately before the Spinoff and the ChoicePoint Common Stock received in the
Spinoff.
Under proposed legislation, if it is enacted in its current form,
ChoicePoint would incur substantial federal income tax liability if Equifax is
acquired by a third party after Equifax spins off ChoicePoint and ChoicePoint
failed to prove that the subsequent acquisition of Equifax was not "related" to
the Spinoff. Similarly, Equifax would incur a substantial federal income tax
liability if ChoicePoint is acquired by a third
14
<PAGE> 17
party after the Spinoff and Equifax failed to prove that the subsequent
acquisition of ChoicePoint was not "related" to the Spinoff.
LISTING AND TRADING OF CHOICEPOINT COMMON STOCK
A public market for ChoicePoint Common Stock does not currently exist. The
ChoicePoint Common Stock has, however, been approved for listing, subject to
official notice of issuance, on the New York Stock Exchange. A when-issued
trading market for ChoicePoint Common Stock is expected to develop on or about
the Record Date. The term "when-issued" means that shares can be traded prior to
the time certificates are actually available or issued. Prices at which the
ChoicePoint Common Stock may trade on a when-issued basis or after the time
certificates are actually available or issued cannot be predicted. Until the
ChoicePoint Common Stock is fully distributed, an orderly trading market
develops, and the market has fully analyzed the operations of ChoicePoint, the
prices at which trading in such stock occurs may fluctuate significantly. The
prices at which ChoicePoint Common Stock trades will be determined by the market
and may be influenced by many factors, including, among others, the depth and
liquidity of the market for ChoicePoint Common Stock, investor perception of
ChoicePoint and its business, ChoicePoint's financial results, ChoicePoint's
dividend policy, sales of substantial amounts of ChoicePoint Common Stock (or
the perception that such sales could occur) and general economic and market
conditions. During the period when ChoicePoint Common Stock is subject to
when-issued trading, its symbol on the New York Stock Exchange will be CPSwi.
Even though when-issued trading may develop, none of these trades would settle
prior to the Mail Date, and if the Spinoff does not occur, all when-issued
trading will be null and void.
Equifax Common Stock will continue to trade on a regular basis and may also
trade on a when-issued basis, reflecting an assumed post-Spinoff value for
Equifax Common Stock. When-issued trading in Equifax Common Stock, if available,
could last from on or about the Record Date through the Mail Date. If when-
issued trading in Equifax Common Stock is available, Equifax shareholders may
trade their existing Equifax Common Stock prior to the Mail Date in either the
when-issued market or in the regular market for Equifax Common Stock. If a
shareholder trades in the when-issued market, he will have no obligation to
transfer to a purchaser of Equifax Common Stock the ChoicePoint Common Stock
such shareholder receives in the Spinoff. If a shareholder trades in the regular
market, the shares of Equifax Common Stock traded will be accompanied by due
bills representing the ChoicePoint Common Stock to be distributed in the
Spinoff.
If a when-issued market for Equifax Common Stock develops, an additional
listing for Equifax Common Stock, identifiable by the trading symbol EFXwi, will
appear on the New York Stock Exchange. Differences may exist between the
combined value of when-issued ChoicePoint Common Stock plus when-issued Equifax
Common Stock and the price of Equifax Common Stock during this period. Until the
market has fully analyzed the operations of Equifax without the operations of
ChoicePoint, the prices at which Equifax Common Stock trades may fluctuate
significantly.
ChoicePoint and Equifax understand that if when-issued trading in Equifax
Common Stock is not available, the New York Stock Exchange will require that
shares of Equifax Common Stock that are sold or purchased during the period from
the Record Date through the Mail Date be accompanied by due bills representing
the ChoicePoint Common Stock distributable with respect to such shares, and that
during such period neither the Equifax Common Stock nor the due bills may be
purchased or sold separately.
ChoicePoint Common Stock distributed to Equifax shareholders in the Spinoff
will be freely transferable under the Securities Act, except for securities
received by persons who may be deemed to be affiliates of ChoicePoint under
Securities Act rules. Persons who may be deemed to be affiliates of ChoicePoint
after the Spinoff generally include individuals or entities that control, are
controlled by, or are under common control with ChoicePoint, such as directors
and executive officers of ChoicePoint. Persons who are affiliates of ChoicePoint
generally will be permitted to sell their shares of ChoicePoint Common Stock
received in the Spinoff only pursuant to Rule 144 under the Securities Act,
except that the holding period requirement of Rule 144 will not apply. As a
result, ChoicePoint Common Stock received by ChoicePoint affiliates pursuant to
the Spinoff may be sold if certain provisions of Rule 144 under the Securities
Act are complied with (e.g., affiliates of ChoicePoint may not sell their shares
of ChoicePoint Common Stock for a period of 90 days after
15
<PAGE> 18
the date of this Prospectus, the amount sold within a three-month period does
not exceed the greater of one percent of the outstanding ChoicePoint Common
Stock or the average weekly trading volume for ChoicePoint Common Stock during
the preceding four week period, and the securities are sold in "broker's
transactions" and in compliance with certain notice provisions under Rule 144).
The Transfer Agent, Distribution Agent and Registrar for ChoicePoint Common
Stock will be SunTrust Bank, Atlanta.
REASONS FOR FURNISHING THIS DOCUMENT
This document is being furnished solely to provide information to Equifax
shareholders who will receive ChoicePoint Common Stock in the Spinoff. It is
not, and is not to be construed as, an inducement or encouragement to buy or
sell any securities of either Equifax or ChoicePoint. Equifax and ChoicePoint
believe that the information contained in this document is accurate as of the
date on the cover. Changes may occur after such date, and neither Equifax nor
ChoicePoint will update the information except as is required in the normal
course of their respective public disclosure practices.
16
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of ChoicePoint as of
March 31, 1997 (actual) and after giving pro forma effect to the Spinoff and
related transactions. ChoicePoint is expected to use borrowings under the Credit
Facility to repay in full the amount of net intercompany debt owed by
ChoicePoint to Equifax at the Effective Time, to repay $29.0 million of Equifax
debt to be assumed by ChoicePoint, and to purchase approximately $6.5 million of
ChoicePoint Common Stock in the open market after the Mail Date for two grantor
trusts. Based upon the relative financial conditions of Equifax and ChoicePoint
and discussions with and the advice of its investment advisors, Credit Suisse
First Boston Corporation and The Robinson-Humphrey Company, Inc., Equifax
determined that $29.0 million would be an appropriate allocation to ChoicePoint
of the existing Equifax debt. Intercompany debt as of March 31, 1997 was
approximately $92.6 million, and this amount may increase or decrease before
repayment based upon normal interim operating cash receipts and payments and
acquisition funding requirements. In addition, the intercompany debt will be
reduced by a $13.0 million obligation assumed by ChoicePoint with respect to
certain ChoicePoint employees. See Note 8 to the Consolidated Financial
Statements.
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
ACTUAL PRO FORMA(1)
-------- ------------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Long-term debt, excluding current portion(2)................ $ 872 $115,965
Shareholder's Equity:
Equifax equity investment(3).............................. 210,555 --
Preferred Stock (pro forma), $.01 par value, 10,000,000
shares authorized, no shares issued and outstanding.... -- --
Common Stock (pro forma), $.10 par value, 100,000,000
shares authorized, 14,718,000 shares issued and
14,393,000 shares outstanding(4)(5).................... -- 1,472
Paid-in capital........................................... -- 100,490
Foreign currency translation adjustments.................. (88) (88)
Stock held by employee benefit trusts(6).................. -- (6,500)
-------- --------
Total Shareholder's Equity........................ 210,467 95,374
-------- --------
Total Capitalization.............................. $211,339 $211,339
======== ========
</TABLE>
- ---------------
(1) See "PRO FORMA CONSOLIDATED FINANCIAL DATA" and notes thereto.
(2) See Notes 2(b) and 2(i) to "PRO FORMA CONSOLIDATED FINANCIAL DATA."
(3) See Note 7 to the Consolidated Financial Statements.
(4) See Notes 2(h) and 2(i) to "PRO FORMA CONSOLIDATED FINANCIAL DATA."
(5) The number of shares issued after giving effect to the Spinoff was
determined based upon the number of shares of Equifax Common Stock
outstanding at March 31, 1997 and reflects the assumed distribution of one
share of ChoicePoint Common Stock ($.10 par value) for every ten shares of
Equifax Common Stock ($1.25 par value) (which does not include two grantor
trusts established by Equifax). In addition, the number of shares issued
includes 200,000 restricted shares anticipated to be issued and outstanding
as a result of the Spinoff. The number of shares outstanding has been
reduced by the 325,000 shares anticipated to be purchased by ChoicePoint in
the open market after the Mail Date for two new grantor trusts. See Note 7
to the Consolidated Financial Statements. The actual number of shares of
ChoicePoint Common Stock distributed will depend on the number of shares of
Equifax Common Stock outstanding on the Record Date.
(6) Represents the 325,000 shares discussed in footnote (5) above with an
assumed market value of $20 per share.
DIVIDEND POLICY
ChoicePoint does not anticipate paying any cash dividends in the
foreseeable future. The Company currently intends to retain future earnings to
finance operations and the expansion of its business. Any future determination
to pay cash dividends will be at the discretion of the Company's Board of
Directors and will be dependent upon the Company's financial condition,
operating results, capital requirements and such other factors as the Company's
Board of Directors deems relevant.
17
<PAGE> 20
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statement of income for the
quarter ended March 31, 1997 and the year ended December 31, 1996 and the
unaudited pro forma consolidated balance sheet as of March 31, 1997 present the
consolidated results of operations and consolidated financial position of
ChoicePoint assuming that the transactions contemplated by both the Spinoff and
ChoicePoint's acquisition of the 70% interest in CDB Infotek had been completed
as of the beginning of 1996 and as of March 31, 1997, respectively. In the
opinion of management, they include all material adjustments necessary to
reflect, on a pro forma basis, the impact of material transactions contemplated
by the Spinoff on ChoicePoint's historical financial information. The
adjustments are described in Note 2 of the Notes to the Pro Forma Consolidated
Financial Data (Unaudited) and are set forth in the "Pro Forma Adjustments"
columns. No pro forma adjustments have been made to selling, general and
administrative expenses because expenses reflected in the historical statements
include an allocation of corporate administrative expenses which ChoicePoint
believes, based upon current circumstances, will not differ materially from
actual selling, general and administrative expenses to be incurred following the
Spinoff.
The unaudited Pro Forma Consolidated Financial Data of ChoicePoint should
be read in conjunction with the Consolidated Financial Statements included
elsewhere in this document. The information presented below is not necessarily
indicative of the financial condition or results of operations that ChoicePoint
would have reported if it had operated as an independent company.
CHOICEPOINT INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1997
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C>
Operating revenue........................................ $102,852 $ -- $102,852
Costs and expenses:
Costs of services...................................... 68,359 -- 68,359
Selling, general and administrative.................... 22,295 -- 22,295
-------- ------- --------
Total costs and expenses....................... 90,654 -- 90,654
Operating income......................................... 12,198 -- 12,198
Interest expense......................................... 1,619 (1,547)(2a) 1,942
1,870(2b)
-------- ------- --------
Income before income taxes............................... 10,579 (323) 10,256
Provision (benefit) for income taxes..................... 5,038 (129)(2c) 4,909
-------- ------- --------
Net income..................................... $ 5,541 $ (194) $ 5,347
======== ======= ========
Pro forma net income per common and common equivalent
share.................................................. $ .36(3)
========
</TABLE>
See Notes to the Pro Forma Consolidated Financial Data.
18
<PAGE> 21
CHOICEPOINT INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------
PRO FORMA ADJUSTMENTS
---------------------------
HISTORICAL CDB INFOTEK(2D) SPINOFF PRO FORMA
---------- --------------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C> <C>
Operating revenue......................... $366,481 $22,781 $ -- $389,262
Costs and expenses:
Costs of services....................... 252,118 12,466 -- 264,584
Selling, general and administrative..... 66,752 7,915 -- 74,667
Non-recurring expenses.................. -- 5,375(2e) -- 5,375
-------- ------- ------- --------
Total costs and expenses........ 318,870 25,756 -- 344,626
Operating income.......................... 47,611 (2,975) -- 44,636
Interest expense.......................... 6,597 1,041 (7,152)(2f) 7,408
6,922(2b)
-------- ------- ------- --------
Income before income taxes................ 41,014 (4,016) 230 37,228
Provision (benefit) for income taxes...... 17,734 (1,640) 92(2c) 16,186
-------- ------- ------- --------
Net income...................... $ 23,280 $(2,376) $ 138 $ 21,042
======== ======= ======= ========
Pro forma net income per common and common
equivalent share........................ $ 1.41(3)
========
</TABLE>
See Notes to the Pro Forma Consolidated Financial Data.
19
<PAGE> 22
CHOICEPOINT INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 4,471 $ -- $ 4,471
Accounts receivable, net............................ 88,635 -- 88,635
Deferred income tax assets.......................... 4,753 -- 4,753
Other current assets................................ 10,894 -- 10,894
-------- --------- --------
Total current assets........................ 108,753 -- 108,753
Property and Equipment, net........................... 38,635 -- 38,635
Goodwill, net......................................... 121,309 -- 121,309
Deferred Income Tax Assets............................ 16,157 -- 16,157
Other................................................. 34,060 -- 34,060
-------- --------- --------
Total Assets................................ $318,914 $ -- $318,914
======== ========= ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt................ $ 864 $ -- $ 864
Accounts payable.................................... 13,537 -- 13,537
Accrued salaries and bonuses........................ 9,791 -- 9,791
Other current liabilities........................... 24,074 -- 24,074
-------- --------- --------
Total current liabilities................... 48,266 -- 48,266
Long-Term Debt, Less Current Maturities............... 872 108,593(2b) 115,965
6,500(2i)
Postretirement Benefit Obligations.................... 55,650 -- 55,650
Other Long-Term Liabilities........................... 3,659 -- 3,659
-------- --------- --------
Total Liabilities........................... 108,447 115,093 223,540
Shareholder's Equity:
Equifax equity investment........................... 210,555 (108,593)(2b) --
(13,000)(2g)
(88,962)(2h)
Preferred stock..................................... -- -- --
Common stock........................................ -- 1,472(2h) 1,472
Paid-in capital..................................... -- 13,000(2g) 100,490
87,490(2h)
Foreign currency translation adjustments.............. (88) -- (88)
Stock held by employee benefit trusts................. -- (6,500)(2i) (6,500)
-------- --------- --------
Total Shareholder's Equity.................. 210,467 (115,093) 95,374
-------- --------- --------
Total Liabilities and Shareholder's
Equity.................................... $318,914 $ -- $318,914
======== ========= ========
</TABLE>
See Notes to the Pro Forma Consolidated Financial Data.
20
<PAGE> 23
CHOICEPOINT INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
NOTE 1. The accompanying unaudited Pro Forma Consolidated Financial Data
reflects all adjustments that, in the opinion of management, are necessary to
present fairly the pro forma financial position and pro forma results of
operations. This information should be read in conjunction with the Consolidated
Financial Statements and notes thereto included elsewhere in this document.
NOTE 2. Following are the pro forma adjustments to the accompanying pro forma
consolidated financial data:
(a) To eliminate the first quarter 1997 corporate interest expense
charged to ChoicePoint.
(b) To record the expected repayment of the net intercompany debt owed
to Equifax, repayment of $29.0 million of Equifax debt to be assumed by
ChoicePoint and the associated increase in debt and interest expense from
the borrowings incurred to fund the payments. The interest expense also
includes interest on borrowings to fund the $6.5 million of ChoicePoint
Common Stock anticipated to be purchased in the open market after the Mail
Date for two grantor trusts discussed in (i) below. An interest rate of
6.5% is assumed on the borrowings. The intercompany debt owed to Equifax
(which was approximately $92.6 million as of March 31, 1997 and $84.0
million as of December 31, 1996) will be reduced by a $13.0 million
obligation assumed by ChoicePoint discussed in (g) below. Borrowings under
the Credit Facility will have a variable interest rate, and a 1% change in
the annual interest rate would impact pro forma interest expense by
$288,000 for the quarter ended March 31, 1997 and $1.1 million for the year
ended December 31, 1996. See "CAPITALIZATION" and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Financial
Condition and Liquidity."
(c) To record the estimated income tax provision (benefit) related to
the net pro forma interest expense adjustments.
(d) Represents the January 1, 1996 to August 30, 1996 operating results
for ChoicePoint's August 30, 1996 acquisition of 70% of the capital stock
of CDB Infotek. The acquisition was accounted for as a purchase. The pro
forma data also includes an additional $3.2 million in expense for
amortization of goodwill and other intangible assets from January 1, 1996
to August 30, 1996 resulting from this transaction. The amortization
expense is included in costs of services. See Note 3 to the Consolidated
Financial Statements.
(e) Represents a one-time charge for the vesting of all CDB Infotek
non-qualified stock options outstanding on August 30,1996 and other stock
option expense as a result of ChoicePoint's purchase of 70% of the capital
stock of CDB Infotek.
(f) To eliminate the 1996 corporate interest expense of $6.2 million
charged to ChoicePoint and to reverse $937,000 of CDB Infotek interest
expense related to third-party long-term debt that was repaid using funds
borrowed from Equifax.
(g) To record, in accordance with the Employee Benefits Agreement, an
assumed obligation of $13.0 million to contribute to a defined contribution
plan for certain ChoicePoint employees. The additional benefits are
intended to offset the adverse impact of transitioning out of a defined
benefit pension plan. The $13.0 million represents the present value of the
estimated future contributions. In exchange for this obligation, Equifax
will make a capital contribution to ChoicePoint in the amount of $13.0
million and ChoicePoint's intercompany liability to Equifax will be reduced
accordingly. See Note 8 to the Consolidated Financial Statements.
(h) To reflect the distribution of Equifax's 100% equity interest in
ChoicePoint to Equifax shareholders. See "CAPITALIZATION." This amount was
determined assuming a distribution ratio of one share of ChoicePoint Common
Stock ($.10 par value per share) for every ten shares of Equifax Common
Stock ($1.25 par value) (which does not include two grantor trusts
established by Equifax) reflected in Equifax's consolidated balance sheet
at March 31, 1997.
21
<PAGE> 24
CHOICEPOINT INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL DATA -- (CONTINUED)
(i) To record the anticipated purchase of 325,000 shares of ChoicePoint
Common Stock in the open market after the Mail Date for two grantor trusts.
The amount also assumes a market value of $20 per share of ChoicePoint
Common Stock. The assumed $20 per share market value is based on a range of
earnings multiples of comparable companies and ChoicePoint's pro forma
earnings as analyzed by Equifax's independent investment advisors, Credit
Suisse First Boston Corporation and The Robinson-Humphrey Company, Inc. See
Note 7 to the Consolidated Financial Statements.
NOTE 3. Net income per share information is based upon 14.8 million and 15.0
million common and common equivalent shares for the quarter ended March 31, 1997
and the fiscal year ended December 31, 1996, respectively. This amount was
determined assuming the distribution ratio of one share of ChoicePoint Common
Stock for every ten shares of Equifax Common Stock reflected in Equifax's March
31, 1997 and December 31, 1996 consolidated financial statements, and
subtracting the 325,000 shares of ChoicePoint Common Stock anticipated to be
purchased in the open market after the Mail Date for two grantor trusts, and
adding the estimated dilutive effect of ChoicePoint stock options and restricted
shares expected to be issued to replace Equifax stock options and restricted
shares held by ChoicePoint officers and employees. The number of shares subject
to stock options will depend upon the extent to which existing stock options to
purchase Equifax Common Stock are converted into options to purchase ChoicePoint
Common Stock. The number of ChoicePoint stock options granted in respect of
converted Equifax stock options and their exercise prices will be set to
maintain the excess of market value over the exercise price of the Equifax stock
options after taking into account such excess amount on the Mail Date and the
fair market value of ChoicePoint Common Stock the day after the Mail Date. The
number of common and common equivalent shares used to compute earnings per share
after the Spinoff will depend upon the number of shares of ChoicePoint Common
Stock and ChoicePoint stock options outstanding and the market price of
ChoicePoint Common Stock.
22
<PAGE> 25
SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
of ChoicePoint, which has been derived from the Consolidated Financial
Statements of ChoicePoint for the quarters ended March 31, 1997 and 1996 and for
each of the five years ended December 31, 1996. The historical information may
not be indicative of ChoicePoint's future performance as an independent company.
The information set forth below should be read in conjunction with "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
the Consolidated Financial Statements and notes thereto included elsewhere in
this document. Per share data has not been presented since the companies that
comprise ChoicePoint were majority-owned subsidiaries of Equifax or one of its
affiliates and will be recapitalized as part of the Spinoff.
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenue(1)..... $102,852 $ 84,140 $366,481 $328,990 $284,566 $268,114 $275,449
Costs and expenses(1).... 90,654 75,134 318,870 297,062 267,989 264,738 273,929
-------- -------- -------- -------- -------- -------- --------
Operating income......... 12,198 9,006 47,611 31,928 16,577 3,376 1,520
Interest expense......... 1,619 1,575 6,597 5,830 2,638 2,181 998
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes.................. 10,579 7,431 41,014 26,098 13,939 1,195 522
Provision (benefit) for
income taxes........... 5,038 3,213 17,734 11,233 7,327 (44) 389
-------- -------- -------- -------- -------- -------- --------
Net income............... $ 5,541 $ 4,218 $ 23,280 $ 14,865 $ 6,612 $ 1,239 $ 133
======== ======== ======== ======== ======== ======== ========
Total assets............. $318,914 $208,268 $301,824 $200,779 $193,820 $106,938 $108,685
Long-term debt, less
current maturities..... $ 872 $ -- $ 1,051 $ -- $ 5 $ -- $ --
Total shareholder's
equity................. $210,467 $112,344 $196,327 $104,641 $ 98,028 $ 13,961 $ 17,053
</TABLE>
- ---------------
(1) Historically, motor vehicle records registry revenue, the fee charged by
states for motor vehicle records which is passed on by ChoicePoint to its
customers, has been reflected in Equifax's consolidated statements of income
as operating revenue and cost of services. ChoicePoint has elected to
exclude these customer reimbursed fees from revenue and reduce cost of
services by a corresponding amount. This change in accounting presentation
does not affect operating income.
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction
with "PRO FORMA CONSOLIDATED FINANCIAL INFORMATION," "SELECTED FINANCIAL DATA"
and the Consolidated Financial Statements and the notes thereto included
elsewhere in this document.
INTRODUCTION
ChoicePoint is a leading provider of risk management and fraud prevention
information and related technology solutions to the insurance industry. The
Company also offers risk management and fraud prevention solutions to
organizations in other industries. ChoicePoint is organized into three service
groups: Property and Casualty Insurance Services, Life and Health Insurance
Services and Business and Government Services. The Company offers the following
products through these groups:
<TABLE>
<CAPTION>
SERVICE GROUP PRODUCTS
- ------------- --------
<S> <C>
Property and Casualty Insurance
Services............................... Automated underwriting and claims
information for home and auto insurers,
commercial inspections, workers
compensation audits of commercial
properties, and customized application
rating and issuance software development
Life and Health Insurance Services....... Underwriting and claims information for
life and health insurers, including
medical records collection, paramedical
services, laboratory services, and
investigative services
Business and Government Services......... Pre-employment background searches, drug
screenings, public record searches,
people locator services, and UCC searches
and filings
</TABLE>
RESULTS OF OPERATIONS
Revenue and operating income for the quarters ended March 31, 1997 and 1996
and the years ended December 31, 1996, 1995, and 1994 were as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------ --------------------------------
1997 1996 1996 1995 1994
-------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating revenue(1).............. $102,852 $84,140 $366,481 $328,990 $284,566
Costs and expenses(1)............. 90,654 75,134 318,870 297,062(2) 267,989
-------- ------- -------- -------- --------
Operating income.................. $ 12,198 $ 9,006 $ 47,611 $ 31,928 $ 16,577
======== ======= ======== ======== ========
</TABLE>
- ---------------
(1) Historically, motor vehicle records registry revenue, the fee charged by
states for motor vehicle records which is passed on by ChoicePoint to its
customers, has been reflected in Equifax's consolidated statements of income
as operating revenue and costs of services. ChoicePoint has elected to
exclude these customer reimbursed fees from revenue and reduce cost of
services by a corresponding amount. This change in accounting presentation
does not impact operating income.
(2) Includes a $9,150,000 restructuring charge discussed below.
Historical earnings per share are not presented because the companies that
comprise ChoicePoint were majority-owned subsidiaries of Equifax or one of its
affiliates and will be recapitalized as part of the Spinoff.
24
<PAGE> 27
Quarter Ended March 31, 1997 Compared to Quarter Ended March 31, 1996
Consolidated revenue increased $18.8 million, or 22.4%, from $84.1 million
in the first quarter of 1996 to $102.9 million in the first quarter of 1997. The
increase was primarily attributable to sales volume growth in all three service
groups, as well as the second quarter 1996 acquisition of Professional Test
Administrators, Inc. ("PTA") and the third quarter 1996 acquisition of a 70%
interest in CDB Infotek. These acquisitions accounted for $8.9 million, or
47.3%, of the increase in consolidated revenue. Since these acquisitions were
accounted for as purchases, their results of operations were included in the
consolidated statements of income from the dates of acquisition. Revenue from
Property and Casualty Insurance Services grew $5.8 million, or 15.3%, from $37.8
million in the first quarter of 1996 to $43.6 million in the first quarter of
1997, primarily due to sales growth in automated underwriting product lines,
offset by declines in claims information and commercial inspection revenue. The
decline in claims information was due to competition while the decline in
commercial inspection revenue was primarily attributable to the reorganization
of the commercial inspection group in 1996. Revenue from Life and Health
Insurance Services increased $2.0 million, or 5.4%, from $37.0 million in the
first quarter of 1996 to $39.0 million in the first quarter of 1997. This
increase was primarily the result of growth in laboratory services revenue,
partially offset by a relative decline in investigative services, because of a
non-recurring customer project recorded in the first quarter of 1996. Revenue
from Business and Government Services increased $11.0 million, or 118.3%, from
$9.3 million in the first quarter of 1996 to $20.3 million in the first quarter
of 1997. Revenue from pre-employment reports increased $1.3 million, or 11.8% of
the increase in Business and Government Services revenue, with the remaining
increase coming primarily from the PTA and CDB Infotek acquisitions.
Operating income increased $3.2 million, or 35.6%, from $9.0 million in the
first quarter of 1996 to $12.2 million in the first quarter of 1997. Operating
margins increased from 10.7% in the first quarter of 1996 to 11.9% in the first
quarter of 1997, primarily as a result of the strong revenue performance in
automated underwriting and lab services and the improved operating efficiencies
in the paramedical services group, partially offset by the dilutive effect of
the CDB Infotek acquisition.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Consolidated revenue increased $37.5 million, or 11.4%, from $329.0 million
in 1995 to $366.5 million in 1996. The increase was primarily attributable to
sales volume growth in all three service groups, as well as the second quarter
1996 acquisition of PTA and the third quarter 1996 acquisition of a 70% interest
in CDB Infotek. These acquisitions accounted for $11.5 million or 30.7% of the
increase in consolidated revenue. Since these acquisitions were accounted for as
purchases, their results of operations were included in the consolidated
statements of income from the dates of acquisition. Revenue from Property and
Casualty Insurance Services grew $13.0 million, or 9.0%, from $143.7 million in
1995 to $156.7 million in 1996, primarily due to sales volume growth in
automated underwriting product lines, offset by a decline in commercial
inspection revenue due to a reorganization of the commercial inspection group in
1996. Revenue from Life and Health Insurance Services increased $8.3 million, or
5.6%, from $148.8 million in 1995 to $157.1 million in 1996. This increase was
primarily the result of growth in laboratory services revenue, partially offset
by a decline in claims revenue, primarily due to increased competition. Revenue
from Business and Government Services increased $16.2 million, or 44.4%, from
$36.5 million in 1995 to $52.7 million in 1996. Revenue from pre-employment
reports increased $4.1 million, or 25.3% of the increase in Business and
Government Services revenue, with the remaining increase coming from the PTA and
CDB Infotek acquisitions.
During the fourth quarter of 1995, ChoicePoint recorded a $9.2 million
restructuring charge to reduce staffing levels and fixed expenses. Excluding the
effects of the restructuring charge, operating income increased $6.5 million, or
15.8%, from $41.1 million in 1995 to $47.6 million in 1996. Operating margins
(excluding the effects of the restructuring charge) increased from 12.5% in 1995
to 13.0% in 1996, primarily as a result of the strong revenue performance in
automated underwriting and lab services, partially offset by a decline in
commercial inspection revenue and the slightly dilutive effect of the CDB
Infotek acquisition. Benefits from the 1995 restructuring and improved operating
efficiencies also contributed to the increase in operating income in 1996.
25
<PAGE> 28
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Consolidated revenue increased $44.4 million, or 15.6%, from $284.6 million
in 1994 to $329.0 million in 1995. This increase was primarily attributable to
sales volume growth in the Property and Casualty Insurance Services and the
Business and Government Services Groups, as well as the full year impact of
acquisitions consummated in 1994. Programming Resources Company ("PRC") was
acquired in the second quarter of 1994 and Osborn Labs was acquired in the
fourth quarter of 1994. These acquisitions accounted for $26.0 million or 58.6%
of the increase in consolidated revenue. They were accounted for as purchases,
and their results of operations were included in the consolidated statements of
income from the dates of acquisition. Revenue from Property and Casualty
Insurance Services increased $15.4 million, or 12.0%, from $128.3 million in
1994 to $143.7 million in 1995. All product lines contributed to this growth,
with the largest contributor being the automated underwriting products sold in
the United States and the United Kingdom. The full year impact of the April 1994
PRC acquisition represented $2.9 million, or 18.8%, of the 1995 increase in
Property and Casualty Insurance Services revenue. Revenue from Life and Health
Insurance Services increased $21.5 million, or 16.9%, from $127.3 million in
1994 to $148.8 million in 1995. This increase resulted primarily from the
inclusion of Osborn Labs operating results for a full year in 1995, which
represented a $23.1 million increase over 1994. Revenue from Business and
Government Services increased $7.5 million, or 25.9%, from $29.0 million in 1994
to $36.5 million in 1995, primarily due to demand for pre-employment background
searches.
Excluding the effect of the fourth quarter 1995 restructuring charge of
$9.2 million, operating income increased $24.5 million, or 148%, from $16.6
million in 1994 to $41.1 million in 1995. Operating margins (excluding the
effects of the restructuring charge) increased from 5.8% in 1994 to 12.5% in
1995. This increase resulted from strong performance in the higher margin
automated underwriting product lines, cost controls in life and health insurance
services and commercial inspection lines, and the full year impact of
acquisitions consummated in 1994.
INCOME TAXES
Historically, the Company has been included in the consolidated federal
income tax return of Equifax. ChoicePoint's provision for income taxes in the
consolidated statements of income reflects federal and state income taxes
calculated on ChoicePoint's separate income, but recognizes the impact of
unitary tax regulations of certain states on ChoicePoint as a member of the
Equifax consolidated group. These unitary tax provisions, as reflected in the
Consolidated Financial Statements, resulted in overall effective tax rates of
47.6% in the first quarter of 1997, 43.2% in the first quarter of 1996, 43.2% in
1996, 43.0% in 1995, and 52.6% in 1994. If the provision for income taxes had
been calculated for ChoicePoint as a separate taxable entity for federal and
state income tax purposes, the Company estimates that its overall effective tax
rates would have been 43.8% in the first quarter of 1997, 40.8% in the first
quarter of 1996, 40.8% in 1996, 40.9% in 1995, and 45.8% in 1994.
The higher effective tax rate in 1994 is due primarily to foreign operating
losses that could not be offset against taxable income in 1994. These losses
were recovered in 1995 and 1996, resulting in reduced effective tax rates. The
increase in effective tax rates from 1996 to 1997 is primarily the result of
foreign income being subject to tax and increased goodwill amortization not
deductible for income tax purposes.
FINANCIAL CONDITION AND LIQUIDITY
Cash provided by operations decreased from $1.9 million in the first
quarter of 1996 to $1.4 million in the first quarter of 1997. This decrease was
primarily attributable to the increase in accounts receivable. During the first
quarter of 1997, ChoicePoint used $7.2 million for investing activities, which
included $6.1 million of property and equipment additions. Building and
leasehold improvements for the office facility in Alpharetta, Georgia and the
expansion of the existing Osborn Labs facility in Olathe, Kansas represented
approximately $1.7 million of the $6.1 million additions with the remainder due
primarily to system upgrades. Net cash provided by financing activities was $8.6
million in the first quarter of 1997, which is due to the increase in the
intercompany debt payable to Equifax.
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<PAGE> 29
Cash provided by operations increased from $20.2 million in 1995 to $36.8
million in 1996. This increase was primarily attributable to strong operating
performance in 1996. During 1996, ChoicePoint used $91.8 million in cash for
investing activities, which included $69.7 million for acquisitions and $18.1
million for property and equipment. Property and equipment additions increased
from $5.4 million in 1995 to $18.1 million in 1996, primarily due to
approximately $8.4 million of building and leasehold improvements for the office
facility in Alpharetta, Georgia and the expansion of the existing Osborn Labs
facility in Olathe, Kansas. Net cash provided by financing activities was $56.1
million in 1996, which is reflected in an increase in the intercompany debt due
to Equifax in connection with acquisitions completed in 1996.
The Company's short-term and long-term liquidity depends primarily upon its
level of net income, accounts receivable, accounts payable and accrued expenses.
In order to meet its working capital needs after the Spinoff, ChoicePoint will
arrange a five-year $250 million revolving Credit Facility with a group of
banks, which will become effective on the date of the Spinoff. The Credit
Facility will bear interest at variable rates and will be expandable to $300
million, subject to approval of the lenders. All obligations of ChoicePoint will
be guaranteed by all current and future subsidiaries. The Credit Facility will
be used by ChoicePoint to repay the net intercompany debt due to Equifax, to
repay $29.0 million of Equifax debt to be assumed by ChoicePoint, to purchase
approximately $6.5 million of ChoicePoint Common Stock in the open market after
the Mail Date for two grantor trusts, and to finance acquisitions and general
corporate cash requirements. For a more complete description of the terms of the
Credit Facility, see Note 5 to the Consolidated Financial Statements.
As of March 31, 1997, ChoicePoint had no significant third party debt.
Intercompany debt at March 31, 1997 was $92.6 million and is included in the
Equifax equity investment account on ChoicePoint's consolidated balance sheet.
This amount is subject to change based on ChoicePoint's operations between March
31, 1997 and the Effective Time and will be reduced by $13.0 million due to
ChoicePoint's obligation to contribute to a defined contribution plan for
certain ChoicePoint employees. Giving pro forma effect to the Spinoff and
related transactions, total long-term debt of ChoicePoint as of March 31, 1997
would have been $109.5 million.
ChoicePoint recently reached an agreement in principle to acquire all of
the capital stock of Kroll Holdings, Inc. ("Kroll"). The proposed acquisition is
subject to customary closing contingencies and is expected to be completed
shortly after the Spinoff. According to information provided by Kroll, it
generated approximately $70.0 million in revenue for the year ended December 31,
1996. The Company anticipates funding this acquisition with a combination of
ChoicePoint Common Stock and borrowings under its Credit Facility. See
"BUSINESS -- Strategic Acquisitions."
Interest expense in the consolidated statements of income includes interest
charged by Equifax based on the relationship of ChoicePoint net assets to
Equifax net assets, excluding corporate debt. The amounts charged were $1.5
million in the first quarter of 1997, $1.6 million in the first quarter of 1996,
$6.2 million in 1996, $5.4 million in 1995, and $2.5 million in 1994. Following
the Spinoff, ChoicePoint's results may be affected by an increase in interest
expense resulting from expected higher borrowing costs as an independent
company, repayment of the net intercompany debt, repayment of $29.0 of Equifax
debt to be assumed by ChoicePoint, and the purchase of $6.5 million of
ChoicePoint Common Stock in the open market after the Mail Date for two grantor
trusts. As a result, based upon anticipated average borrowings under the Credit
Facility during 1997 and interest rate protection arrangements that the Company
will enter into after the Spinoff, it is anticipated that the Company will incur
approximately $1.3 million in additional annual interest expense. See "PRO FORMA
CONSOLIDATED FINANCIAL DATA."
The Company anticipates capital expenditures will be approximately $27.2
million in 1997, which includes $7.3 million for the office facility in
Alpharetta, Georgia and the expansion of the Osborn Labs facility in Olathe,
Kansas. The remainder of the 1997 capital expenditures will be used primarily
for system rewrites and upgrades. In addition, ChoicePoint expects to expense
approximately $4.4 million in 1997 and $5.2 million in 1998 to modify computer
software for compliance with Year 2000 as required by FASB's Emerging Issues
Task Force Issue No. 96-14. Year 2000 expenses were $793,000 in 1996. The amount
and timing of these expenses may vary as current estimates are refined.
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<PAGE> 30
In connection with the acquisition of CDB Infotek, additional consideration
of up to $20.0 million may be paid based on its future operating performance. In
addition, the Company entered into an option agreement with the remaining
shareholders of CDB Infotek. The agreement grants the Company an option to
purchase the remaining 30% interest in CDB Infotek (the "Call Option") and an
option for the remaining shareholders to sell their 30% interest to the Company
(the "Put Option"). The options may be exercised at any time after December 31,
1999. The Put Option will expire on the later of June 30, 2000 or the date that
is 90 days after the final determination of the option price and the Call Option
has no expiration date. The exercise date may be accelerated upon the breach of
certain obligations. If certain 1999 operating results are met, then the option
price is determined by a formula not to exceed $53.0 million. If certain 1999
operating results are not met, and both parties cannot mutually agree on an
option price, then the option price is determined by an independent appraisal,
not to exceed $25.5 million. ChoicePoint expects to fund any additional amounts
paid in connection with the acquisition of CDB Infotek with cash flow from
operations or borrowings under the Credit Facility.
The Company believes that cash flows from operations, availability of funds
under the Credit Facility and other short and long-term debt financing (if any),
including access to capital markets, will be sufficient to satisfy its working
capital, research and development, acquisitions, capital expenditures and other
financing requirements for the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which revises the calculation of and disclosures
related to EPS. The impact of this statement on ChoicePoint cannot currently be
determined as the number of common and common equivalent shares used to compute
EPS will depend upon the number of shares of ChoicePoint Common Stock and
ChoicePoint stock options outstanding and the market price of ChoicePoint Common
Stock.
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<PAGE> 31
BUSINESS
GENERAL
Based on market share, ChoicePoint is a leading provider of risk management
and fraud prevention information and related technology solutions to the
insurance industry. The Company also offers risk management and fraud prevention
solutions to organizations in other industries. ChoicePoint currently has three
core capabilities: (i) data warehousing; (ii) data access and analytics; and
(iii) related professional services. These capabilities currently are delivered
by the Company through three service groups: Property and Casualty Insurance
Services, Life and Health Insurance Services and Business and Government
Services.
ChoicePoint provides most major domestic insurance companies with automated
and traditional underwriting and claim information services to assist those
companies in assessing the insurability of individuals and property and the
validity of insurance claims. The Company provides background investigations,
performs paramedical exams, furnishes access to motor vehicle reports, maintains
a database of claims histories and provides claims verification and
investigative services to both the property and casualty and the life and health
insurance markets. ChoicePoint also offers pre-employment background
investigations, pre-employment and regulatory compliance drug testing services
and public record information to other corporate and government organizations,
as well as the aforementioned insurance markets.
In response to declining revenues and profits in the 1980s and early 1990s,
ChoicePoint's current senior management team was installed in 1993 and initiated
a turnaround of the Company's operations. The Company reorganized itself to
eliminate unnecessary layers of management and rightsized its workforce to
increase profitability and the responsiveness of the organization to its
customers. In response to a shift by insurance companies over the prior decade
from demanding subjective information of the type historically provided by
ChoicePoint to demanding objective information, ChoicePoint accelerated the
automation of its services. The Company also eliminated unprofitable services in
response to diminishing demand for certain labor intensive products and
increased its focus on non-insurance markets, including growth areas such as
pre-employment background screening and business information services.
For the fiscal year ended December 31, 1996, ChoicePoint generated
operating revenue of approximately $366.5 million, an increase of 37% from
approximately $268.1 million in 1993, when the Company's current senior
management team was installed. ChoicePoint generated operating income of
approximately $47.6 million in 1996, fourteen times the Company's 1993 operating
income of approximately $3.4 million. As ChoicePoint's profitability has
increased, the Company has invested significant capital to extend existing
service capabilities to new markets and has pursued strategic acquisitions to
fuel both internal growth and expansion of the Company beyond its historical
customer base.
STRATEGIC ACQUISITIONS
Commencing in 1993, the Company initiated a strategy of acquiring
organizations that add new data, markets and technology to ChoicePoint's
operations. In April 1994, ChoicePoint acquired PRC, headquartered in Hartford,
Connecticut, which develops custom rating and issuance software for commercial
property and casualty insurance companies. The PRC acquisition enhanced
ChoicePoint's technological capability by adding a systems development
competency and expanded the Company's presence in the commercial insurance
market. ChoicePoint also acquired Osborn Labs in 1994. Osborn Labs is a blood,
urine and saliva testing business that provides insurance companies with
applicant-specific information. Osborn Labs, which is the second largest
laboratory of its kind in the United States, uses state-of-the-art technologies
that incorporate voice, image and other data into its production and
communication processes. The combination of Osborn Labs' services and
ChoicePoint's paramedical exam services offers insurers an unbroken chain of
custody to preserve the integrity of specimens. Osborn Labs also has a highly
skilled research and development team, which researches alternative sampling and
testing techniques for delivery of more effective and lower cost testing
solutions to customers.
ChoicePoint acquired PTA, headquartered in Chicago, Illinois, in 1996 to
accelerate the Company's entry into the occupational health market. The PTA
acquisition gives ChoicePoint the ability to administer all
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<PAGE> 32
components of substance abuse programs, including results analysis. Occupational
health screening adds another market to which ChoicePoint's existing paramedical
collection services may be delivered and enhances the value of ChoicePoint's
employment services by creating a total hiring management solution for
customers.
In August 1996, ChoicePoint acquired 70% of the outstanding capital stock
of CDB Infotek, an automated public records company with more than 1,600 on-line
public record databases. Headquartered in Santa Ana, California, CDB Infotek
provides corporations and the legal, insurance and investigative markets with
access to criminal, bankruptcy, judgment and lien databases, which ChoicePoint
can access through CDB Infotek's sophisticated search engines. The Company
believes that significant potential exists to blend CDB Infotek's data with
ChoicePoint's manual and database information gathering services to offer more
comprehensive and effective information solutions. ChoicePoint has the exclusive
option to purchase the remaining shares of CDB Infotek in 2000.
ChoicePoint recently entered into an agreement in principle to acquire all
of the capital stock of Kroll Holdings, Inc. ("Kroll"), the parent company of
Kroll Associates, Inc., which is headquartered in New York, New York. The
proposed acquisition is subject to customary closing contingencies and is
expected to be completed shortly after the Spinoff. Kroll provides
investigative, intelligence and risk management consulting services to a diverse
set of domestic and international clients, including corporations, law firms,
financial institutions and governments around the world. According to
information provided by Kroll, it currently operates 22 offices in 12 countries
and generated approximately $70.0 million in revenue for the year ended December
31, 1996, of which approximately 40.0% was generated from international
operations. The acquisition of Kroll immediately and significantly expands
ChoicePoint's available customer base beyond its current core insurance market
base and expands the Company's international presence. The Company believes that
Kroll's risk management consulting expertise will significantly enhance
ChoicePoint's risk management product and service offerings.
GROWTH STRATEGIES
ChoicePoint believes that organizations and individuals are encountering
more and increasingly complex risks. The Company believes that these enhanced
risks are generating a growing demand by organizations and individuals for
effective and efficient risk management and fraud prevention tools. ChoicePoint
believes that timely and quality information is the most powerful tool available
to decision makers to mitigate escalating risk.
ChoicePoint's strategic goal is to be the leading provider of risk
management and fraud prevention information and related technology solutions to
a broad range of industries worldwide. The Company is continuing to enhance its
database distribution, data gathering and technological capabilities, and
believes that it is positioned to offer a variety of new products to a diverse
set of industries. ChoicePoint believes that its range of information sources
and technology position ChoicePoint to be the leader in the risk management and
fraud prevention markets.
The Company intends to accomplish its goals by pursuing the following
strategies:
Expand presence in non-insurance markets. ChoicePoint believes that its
most significant opportunities for growth exist beyond its traditional
business of assisting insurance companies in assessing the insurability of
individuals and organizations. The Company believes that significant
opportunities exist to expand the application of its information resources
and technology to non-insurance business and government markets. For
example, ChoicePoint intends to: (i) pursue growth opportunities in pre-
employment services by leveraging its technology, background screening and
drug testing capabilities to offer a total hiring solution to customers;
(ii) pursue additional applications in the government and health care
markets, including assisting agencies in developing solutions to reduce
fraudulent healthcare claims; (iii) expand public record information
applications to both organization and individual risk assessment and
management; and (iv) pursue international expansion of the Company's risk
management services.
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<PAGE> 33
Aggressively pursue acquisitions and strategic alliances. ChoicePoint
intends to continue pursuing acquisitions of, or strategic alliances with,
domestic and international organizations that would allow the Company to
enter new markets or to increase its presence in existing markets, as well
as to expand technology expertise to advance the Company's customized
solutions-building capabilities, and add data resources and skills that
enhance ChoicePoint's ability to deliver risk management solutions. In
particular, the Company intends to identify and acquire organizations with
data warehousing and modeling capabilities that will enhance ChoicePoint's
ability to tailor data solutions to individual customer requirements.
ChoicePoint's numerous acquisitions since 1993 and its agreement in
principle to acquire Kroll are examples of the Company's commitment to
pursue acquisitions that complement and expand the Company's existing
customer base, products and services. See "-- Strategic Acquisitions."
Develop and enhance key technological capabilities. The Company is: (i)
enhancing its capability to automate, database and disseminate certain
public record information; (ii) developing new databases and key interfaces
to external data sources to expand information resources; and (iii)
developing proprietary front-end interfaces to the Company's systems to
facilitate customized order and delivery processes. ChoicePoint
continuously updates current systems critical to its infrastructure, and
develops, as appropriate, new technology solutions.
Increase public awareness of risk and fraud issues. ChoicePoint
believes that the success of its risk management strategy and expansion of
the Company's business opportunities may be enhanced by increasing the
awareness of organizations and individuals of changing risk profiles and
ChoicePoint's ability to assist them in identifying and managing such
risks. To enhance public awareness, the Company intends to publicize
examples of increased personal risks, proactively participate in
legislative discussions to define legitimate and proper use of databased
risk and fraud information, and communicate the value of increased use of
fraud-related public record data in managing business and personal risks.
PRODUCTS AND CUSTOMERS
ChoicePoint currently has three core capabilities: (i) data warehousing;
(ii) data access and analytics; and (iii) related professional services. These
capabilities currently are delivered by the Company through three service
groups: Property and Casualty Insurance Services, Life and Health Insurance
Services and Business and Government Services. ChoicePoint's offices are
currently located throughout the United States and in the United Kingdom. The
Company's business is not seasonal. The following table reflects the revenue
generated by each of ChoicePoint's service groups from 1994 to 1996 and the
percentage contribution by each group to ChoicePoint revenue for each such year.
HISTORICAL REVENUE BY SERVICE GROUP
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
AMOUNT % AMOUNT % AMOUNT %
-------- --- -------- --- -------- ---
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Property and Casualty Insurance Services.... $156,698 43% $143,726 44% $128,305 45%
Life and Health Insurance Services.......... 157,071 43 148,765 45 127,216 45
Business and Government Services............ 52,712 14 36,499 11 29,045 10
-------- --- -------- --- -------- ---
Total............................. $366,481 100% $328,990 100% $284,566 100%
======== === ======== === ======== ===
</TABLE>
Property and Casualty Insurance Services. ChoicePoint provides
underwriting and claims information to property and casualty insurance companies
in the United States and the United Kingdom. Personal lines property and
casualty insurance services include automated underwriting and claims
information, such as motor vehicle reports and the Company's Comprehensive Loss
Underwriting Exchange ("C.L.U.E.") database services, subrogation services,
surveillance, accident scene documentation and investigation of potentially
fraudulent claims. C.L.U.E. is a proprietary database comprised of claims
information contributed by major insurance underwriters (and accessed by those
same underwriters), which enable them to assess underwriting risks and pending
claims in the auto and home insurance markets. ChoicePoint's proprietary
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<PAGE> 34
Auto and Home 2000 systems use customer-specific decision making criteria to
provide property and casualty insurance underwriters with decision management
tools that streamline and reduce the cost of the underwriting process.
The CUE UK database, a proprietary database containing home and motor
insurance claims information, was developed by the Company in response to
growing insurance fraud in the United Kingdom. The success of C.L.U.E. database
services in the United States served as a catalyst for the development of the
CUE UK database, which was specifically designed to serve the United Kingdom
market. The CUE UK database compiles claim information contributed by the United
Kingdom's larger insurers for use by the same insurers to detect fraudulent
claims. The CUE UK database is comprised of the CUE Home and CUE Motor
proprietary databases.
In addition to personal lines underwriting and claims information,
ChoicePoint provides services to the commercial property and casualty insurance
market. Those services include commercial inspections for underwriting purposes,
workers compensation audits of commercial properties, and development of
high-end customized application rating and issuance software for commercial
customers.
Life and Health Insurance Services. ChoicePoint also provides underwriting
and claims information to most major life and health insurance companies in the
United States. Life and health insurance services include medical records
collection, paramedical exams, health history interview services, blood and
urine specimen collection and laboratory testing services, verification of
continued disability, investigations of contestable and accidental death claims
and surveillance of claimants' activities in connection with potentially
fraudulent claims.
ChoicePoint's proprietary LifePlus database contains automated real-time
information used by life and health insurers to reduce underwriting time and
application processing costs. Life 2000, based upon the same concept as the Auto
and Home 2000 systems, uses customer-specific decision making criteria to
provide life and health insurance underwriters with a decision management tool
that streamlines and reduces the cost of the underwriting process.
Business and Government Services. In addition to serving the property and
casualty and life and health insurance markets, ChoicePoint provides risk
management and fraud prevention services and related technology solutions to
many non-insurance businesses and government agencies. For instance, the Company
provides information and services to customers in a variety of industries for
use in the hiring and employee regulatory compliance process, including: (i)
pre-employment background screenings, which include credit and driving record
checks, prior employment verification, education and licensing verification and
criminal record searches; (ii) pre-employment and/or continuous compliance drug
screening; and (iii) comprehensive drug screening program management and
administration. ChoicePoint believes it is the only company in the United States
that offers customers a full range of proprietary integrated services and
products to manage and mitigate risk in the hiring process.
The Company also provides risk management information services to
government agencies, such as (i) its parent locator services, which locate for
the public sector individuals who are in violation of court mandates and (ii)
screening of certain Medicare and Medicaid providers and provider applicants to
assist in identifying and reducing health care fraud. ChoicePoint also maintains
databases of medical device recipients, which assist device manufacturers in
locating and notifying device recipients of certain information when necessary.
In connection with its business and government services, the Company provides
searches and filings of public business records, including Uniform Commercial
Code searches and filings, bankruptcy, lien and judgment searches, searches of
partnership and corporation filing records, and criminal record searches to
assist organizations and lending institutions in managing potential risk
exposure.
Customers. ChoicePoint's customer base includes substantially all domestic
insurance companies, many Fortune 500 companies, and certain state and federal
government agencies. The Company has more than 5,000 customers, most of which
are insurance companies. The top 30 customers of the Company contributed
approximately one-third of the Company's total revenue in 1996. ChoicePoint has
two customers, each of which accounted for approximately 5% of the Company's
total revenue for 1996. Based upon ChoicePoint's
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<PAGE> 35
relationship with these customers, and the customers' dependence upon the
Company's services in their operations, ChoicePoint believes that there is no
significant risk of loss of a material portion of this revenue.
Each of ChoicePoint's three service groups has the capability to receive
orders for and deliver products and services through electronic communications.
The Company supplies software to customers that wish to access ChoicePoint via
private networks.
INTERNATIONAL OPERATIONS
CUE UK, located in the United Kingdom, is currently ChoicePoint's primary
international operation. Annual revenues from this operation were less than 5%
of the Company's total revenue in each of 1994, 1995 and 1996. In connection
with the acquisition of Kroll, the Company expects that the amount of revenue
generated by the Company outside the United States will increase.
COMPETITION
The Company operates in a number of geographic and product and service
markets, which are highly competitive. In the property and casualty insurance
services market, ChoicePoint's most significant competitors include Dateq
Information Network, Inc., a subsidiary of Trans Union Corporation and Policy
Management Systems Corporation. In the life and health insurance services
market, ChoicePoint's most significant competitors include Hooper Holmes, Inc.
and Examination Management Services, Inc. with respect to manual information
collection services and LabOne, Inc. with respect to insurance laboratory
services. In the business and government services market, ChoicePoint's most
significant competitors include Information America, Inc. and Lexis-Nexis with
respect to public records information, various security companies and clinical
labs with respect to pre-employment screening services and various small
companies with respect to background checks or drug screening services. In each
of its markets, the Company competes on the basis of responsiveness to customer
needs and the quality and range of products and services offered.
SOURCES OF SUPPLY
ChoicePoint's operations depend upon information derived from a wide
variety of automated and manual sources. External sources of data include public
records information companies, governmental authorities, and on-line search
systems. ChoicePoint does not anticipate the termination of any significant
relationships with data suppliers. In the event that such a termination
occurred, the Company believes that it could acquire the data from other
sources, and such termination would not have a materially adverse effect on the
Company's financial condition or results of operations.
ChoicePoint currently maintains databases that contain information provided
and used by insurance underwriters. The information comprising these databases
is not owned by ChoicePoint, and the participating organizations could
discontinue contributing information to the databases. If this were to occur,
the Company's financial condition and results of operations would be materially
affected. ChoicePoint believes, however, that such an event is unlikely because
contributors to the databases depend upon the aggregated information in such
databases to conduct their business operations.
In connection with the inspection and investigative services that it
provides, ChoicePoint compiles data from manual and automated sources, including
insurance applicants, medical service providers and public records sources.
PROPERTIES AND EMPLOYEES
ChoicePoint's current principal executive offices are located in 200,000
square feet of leased office space in Alpharetta, Georgia, a suburb of Atlanta.
ChoicePoint maintains 170 other offices in the United States and one office in
the United Kingdom. These offices, all of which are leased, contain a total of
approximately 850,000 square feet of space. Through Osborn Labs, ChoicePoint
owns two laboratory facilities in Olathe, Kansas with approximately 31,000
square feet of space.
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ChoicePoint currently employs approximately 4,600 persons, none of whom are
unionized. Substantially all of the Company's workforce currently is employed in
the United States. ChoicePoint employs approximately 330 individuals in Olathe,
Kansas in its Osborn Labs facilities, approximately 190 individuals in Hartford,
Connecticut in its PRC facilities, approximately 195 individuals in San Diego at
its CDB Infotek location, and approximately 26 individuals in the United Kingdom
in connection with CUE UK. Approximately 700 individuals are employed in the
Atlanta area in the Company's headquarters and three branch office locations.
The balance of ChoicePoint's employees are located in the Company's remaining
offices. ChoicePoint believes that its relations with its employees are good.
PROPRIETARY MATTERS
ChoicePoint owns a number of trademarks and tradenames that ChoicePoint
believes are important to its business. Except for the ChoicePoint trademark,
however, ChoicePoint is not dependent upon any single trademark or tradename or
group of trademarks or tradenames. The ChoicePoint trademark is currently
registered in the United States. The current duration for such registration
ranges from seven to 15 years, but each registration may be renewed an unlimited
number of times. Other trademarks and tradenames used in the ChoicePoint
business are registered and maintained in the U.S. and United Kingdom.
LEGAL PROCEEDINGS
ChoicePoint is involved in litigation from time to time in the ordinary
course of its business. The Company does not believe that the outcomes of any
pending or threatened litigation will have a material adverse effect on the
financial position or results of operations of ChoicePoint. However, as is
inherent in legal proceedings where issues may be decided by finders of fact,
there is a risk that unpredictable decisions adverse to the Company could be
reached. See "RISK FACTORS -- Government Regulation."
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<PAGE> 37
EQUIFAX INC.
Equifax currently conducts its operations primarily through the Insurance
Services Group and the Financial Services Group. After the Spinoff, ChoicePoint
will conduct the business of the Insurance Services Group and Equifax will
continue to operate the business of the Financial Services Group.
Through its Financial Services Group, based on market share, Equifax is a
worldwide leader in providing decision support information to retailers, banks
and financial institutions and customers in other industries. Equifax provides
services and systems that help its customers grant credit, authorize and process
credit card and check transactions, manage receivables, predict consumer
behavior and market their products. Equifax offers credit services, payment
services and analytics and consulting services worldwide, with operations in 17
countries in North America, Europe, Latin America and Asia.
The following table sets forth, for each of the last three years, the
operating revenue, operating income, total assets and number of employees for
ChoicePoint and the remainder of Equifax. This historical information is not
necessarily indicative of the results of operation or financial position that
either company would have reported if they had operated independently.
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
---------- --- ---------- --- ---------- ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Equifax operating revenue............... $1,219,959 67% $1,102,323 68% $ 965,537 68%
ChoicePoint operating revenue(1)........ 366,481 20 328,990 20 284,566 20
ChoicePoint registry revenue(2)......... 224,783 13 191,645 12 171,893 12
---------- --- ---------- --- ---------- ---
$1,811,223 100% $1,622,958 100% $1,421,996 100%
========== === ========== === ========== ===
Equifax operating income................ $ 256,807 84% $ 231,011 88% $ 197,530 92%
ChoicePoint operating income(1)......... 47,611 16 31,928 12 16,577 8
---------- --- ---------- --- ---------- ---
$ 304,418 100% $ 262,939 100% $ 214,107 100%
========== === ========== === ========== ===
Equifax total assets.................... $1,000,960 77% $ 852,916 81% $ 827,354 81%
ChoicePoint total assets(1)............. 301,824 23 200,779 19 193,820 19
---------- --- ---------- --- ---------- ---
$1,302,784 100% $1,053,695 100% $1,021,174 100%
========== === ========== === ========== ===
Equifax number of employees............. 9,500 67% 9,800 69% 9,600 68%
ChoicePoint number of employees......... 4,600 33 4,400 31 4,600 32
---------- --- ---------- --- ---------- ---
14,100 100% 14,200 100% 14,200 100%
========== === ========== === ========== ===
</TABLE>
- ---------------
(1) ChoicePoint's consolidated financial data included in this Prospectus
differs from Equifax's historically reported segment information on the
Insurance Services Group due to certain intercompany adjustments, allocation
of general corporate expenses, the transfer of Equifax Government and
Special Systems, Inc. to the Insurance Services Group, and the registry
revenue discussed below.
(2) Historically, motor vehicle records registry revenue, the fee charged by
states for motor vehicle records which is passed on by ChoicePoint to its
customers, has been reflected in Equifax's consolidated statements of income
as operating revenue and cost of services. ChoicePoint has elected to
exclude these customer reimbursed fees from revenue and reduce cost of
services by a corresponding amount. This change in accounting presentation
does not impact operating income.
35
<PAGE> 38
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of May 1, 1997
concerning the persons who are currently serving or are expected to serve as the
executive officers and directors of ChoicePoint after the Spinoff.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Derek V. Smith............................. 42 President, Chief Executive Officer and
Director
Dan H. Rocco............................... 56 Executive Vice President
Douglas C. Curling......................... 42 Executive Vice President, Chief Financial
Officer and Treasurer
David T. Lee............................... 37 Senior Vice President
J. Michael de Janes........................ 39 General Counsel and Assistant Secretary
C. B. Rogers, Jr........................... 67 Chairman of the Board of Directors
Ron D. Barbaro............................. 65 Director Nominee
James M. Denny............................. 64 Director
Tinsley H. Irvin........................... 63 Director Nominee
Daniel W. McGlaughlin...................... 60 Director
Julia B. North............................. 49 Director
Charles I. Story........................... 42 Director
</TABLE>
Derek V. Smith is a director and the President and Chief Executive Officer
of ChoicePoint. He has served as Executive Vice President of Equifax and Group
Executive of the Insurance Services Group since 1993. Mr. Smith was appointed to
the Board of Directors of Equifax in 1996 and was elected to serve a three year
term beginning April 1997. From 1991 to 1993, he served as Senior Vice President
and Chief Financial Officer of Equifax. Mr. Smith was Corporate Vice President
and Treasurer of Equifax from 1990 to 1991. He also served as Vice President of
Equifax Credit Information Services and in several other positions after joining
Equifax in January 1981. Mr. Smith also serves as a director of Integon
Corporation. At or prior to the Spinoff, Mr. Smith will resign from his
positions as an officer and director of Equifax.
Dan H. Rocco is Executive Vice President of ChoicePoint. He has served as
Senior Vice President -- Operations of the Insurance Services Group since 1993.
Mr. Rocco served as President and General Manager of the Automated Services
Division of the Insurance Services Group from 1991 to 1993.
Douglas C. Curling is Executive Vice President, Chief Financial Officer and
Treasurer of ChoicePoint. He has served as Senior Vice President -- Finance and
Administration of the Insurance Services Group since 1993. Mr. Curling served as
Vice President and Assistant Corporate Controller of Equifax from 1989 to 1993.
David T. Lee is Senior Vice President of ChoicePoint. He served as Vice
President -- Property and Casualty Marketing and Sales of the Insurance Services
Group from 1991 to the present. Since joining Equifax in 1984, Mr. Lee has
served in a variety of positions, including Vice President for Systems and
Services, Assistant Vice President -- Executive Assistant to the Chief Executive
Officer, Director of Corporate Financial Systems and Financial Systems Analyst.
J. Michael de Janes is General Counsel and Assistant Secretary of
ChoicePoint. He has served as Vice President and Counsel of the Insurance
Services Group since 1993. Prior to joining the Insurance Services Group, Mr. de
Janes was an Assistant Vice President in Equifax Credit Information Services
legal department from 1991 to 1993.
C. B. Rogers, Jr. is Chairman of the Board of ChoicePoint. Mr. Rogers is
also currently the Chairman of the Board of Directors of Equifax and served as
an executive officer of Equifax for more than five years prior to his retirement
on December 31, 1995 as Chief Executive Officer. He currently serves as a
director of Sears, Roebuck & Co., Morgan Stanley, Dean Witter, Discover & Co.,
Briggs and Stratton Corporation, Oxford Industries, Inc. and Teleport
Communications Group, Inc., and has served as a director of Equifax
36
<PAGE> 39
since 1978. After the Spinoff, Mr. Rogers will serve as Chairman of the Board of
Directors of both Equifax and ChoicePoint for a transitional period.
Ron D. Barbaro is expected to serve as a director of ChoicePoint after the
Spinoff. Prior to Mr. Barbaro's retirement in December 1992 as President of The
Prudential Insurance Company of America, an international multi-line insurance
company, he served in various executive positions with that company or its
subsidiaries for more than five years. Mr. Barbaro currently serves as a
director of Prudential of America Life Insurance Company (Canada), The Thomson
Corporation, Canbra Foods Limited, Flow International, Inc., Clairvest Group,
Inc. and Natraceuticals Inc. He served as a director of Equifax Canada Inc. from
1990 through 1992, and has been a director of Equifax since 1992. At or prior to
the Spinoff, Mr. Barbaro will resign from his position as a director of Equifax.
James M. Denny is a director of ChoicePoint. Mr. Denny has served as a
Managing Director of William Blair Capital Partners, L.L.C., a company engaged
in private equity investments, since September 1995. Mr. Denny served as Vice
Chairman of Sears, Roebuck and Co. from February 1992 until his retirement in
August 1995. Previously, Mr. Denny was Senior Vice President and Chief Financial
Officer of Sears from 1988 to 1992. He also serves as a director of Allstate
Corporation, Astra AB, GATX Corporation and Gilead Sciences, Inc.
Tinsley H. Irvin is expected to serve as a director of ChoicePoint after
the Spinoff. Mr. Irvin retired as Chairman and Chief Executive Officer of
Alexander & Alexander Services Inc., an international insurance brokerage
company, in 1994. Prior to his retirement, Mr. Irvin served in various executive
capacities with Alexander & Alexander Services Inc. or its subsidiaries. He has
served as a director of Equifax since 1989, but will resign from such position
at or prior to the Spinoff.
Daniel W. McGlaughlin is a director of ChoicePoint. He is currently the
President and Chief Executive Officer of Equifax, and has served as an executive
officer of Equifax for more than five years. Mr. McGlaughlin serves as a
director of Wachovia Corporation of Georgia, Wachovia Bank of Georgia, N.A.,
American Business Products, Inc. and FORE Systems, Inc. He also has been a
director of Equifax since 1990. After the Spinoff, he will serve as a director
of ChoicePoint, as well as Vice Chairman of the Board of Directors and Chief
Executive Officer of Equifax.
Julia B. North is a director of ChoicePoint. Ms. North has been
President-Consumer Services for BellSouth Telecommunications since April 1996.
From April 1989 to April 1996, she was a Vice President for BellSouth
Telecommunications. Ms. North is a member of the Board of Directors of
Winn-Dixie Stores, Inc., the National Board of Distinguished Women at
Mississippi University for Women, the Executive Advisory Board of the YWCA, a
member of the Society of International Business Fellows, and a member of the
Management of Technology Business Council at the Georgia Institute of
Technology. She has been a member of the Board of Directors of the American Red
Cross, the Board of Science and Technology Museum of Atlanta, and a
Vice-Chairman of United Way in Charlotte, North Carolina.
Charles I. Story is a director of ChoicePoint. Mr. Story is the President
and Chief Executive Officer of INROADS, Inc., a national non-profit training and
development organization that prepares talented minorities for careers in
business and engineering. He served as Executive Vice President -- Operations of
INROADS, Inc. from July 1991 to December 1992 and as Vice President and Director
of Community Development of First American National Bank from 1989 to 1991. Mr.
Story also serves as a director of INROADS, Inc. and Briggs and Stratton
Corporation and is an advisory director of First American National Bank.
The ChoicePoint Board of Directors is divided into three classes of
directors serving staggered three-year terms. Of the initial ChoicePoint
directors, Messrs. Rogers, McGlaughlin and Smith will serve until the 1998
annual meeting of shareholders, Messrs. Irvin and Barbaro will serve until the
1999 annual meeting of directors, and Messrs. Story and Denny and Ms. North will
serve until the 2000 annual meeting of directors. See "DESCRIPTION OF CAPITAL
STOCK -- Certain Anti-Takeover Provisions of Georgia Law and the ChoicePoint
Articles and Bylaws."
37
<PAGE> 40
SUMMARY OF EXECUTIVE COMPENSATION
The following table shows, for fiscal 1996, all compensation awarded to,
earned by or paid to ChoicePoint's Chief Executive Officer and the four other
most highly compensated executive officers of ChoicePoint (collectively, the
"Named Officers"). All cash compensation was paid by Equifax and all stock
compensation was in the form of Equifax Common Stock or options to purchase
Equifax Common Stock.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ------------------------------------
AWARDS
------------------------- PAYOUTS
OTHER RESTRICTED SECURITIES --------
NAME AND PRINCIPAL ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITION SALARY BONUS(1) COMPENSATION(2) AWARDS(1)(3) OPTIONS(#) PAYOUTS COMPENSATION(4)
- ------------------ -------- -------- --------------- ------------ ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Derek V. Smith.......... $259,654 $259,654 $209,422 $120,246 125,000 $465,150 $4,950
President and Chief
Executive Officer
Dan H. Rocco............ $198,532 $158,825 $ -- $ -- 50,000 $139,545 $4,950
Executive Vice
President
Douglas C. Curling...... $168,834 $148,219 $ -- $ -- 50,000 $ 94,718 $4,950
Executive Vice
President, Chief
Financial Officer
and Treasurer
David T. Lee............ $143,000 $ 83,697 $ -- $ -- 7,000 $ -- $4,719
Senior Vice President
J. Michael de Janes..... $ 96,061 $ 52,833 $ -- $ -- 5,000 $ -- $3,161
General Counsel and
Assistant Secretary
</TABLE>
- ---------------
(1) Represents an annual incentive award earned and paid in cash for performance
in 1996. Participants in the Equifax executive incentive plan may elect to
receive all or part of any cash bonus earned in the form of restricted
stock, and all amounts earned above a designated percentage of salary are
only awarded in the form of restricted stock.
(2) Includes for Mr. Smith a cash amount of $196,197, designated for satisfying
certain income tax obligations due as a consequence of the vesting of
restricted stock grants made to Mr. Smith in 1991. This tax assistance
provision, which was included as part of the original terms of the grant,
but discontinued in subsequent grants, enabled Mr. Smith to retain 100% of
the shares earned rather than being required to dispose of a portion of
these shares to satisfy income taxes due. Miscellaneous benefits such as
financial planning services are also included under this column.
(3) Dividend income is paid on restricted stock at the same rate as paid to all
Equifax shareholders. Value of restricted stock shown in table is as of the
date of grant. As of December 31, 1996, total restricted stock awards
outstanding and related fair market values were 35,548 shares and
$1,088,658, respectively. Such restricted stock awards will vest as to
24,000 shares on December 31, 1998, 7,472 shares on January 25, 2000 and
4,076 shares on January 29, 2002. Mr. Smith is entitled to all dividends
paid on the restricted stock, which dividends are currently $.0875 per share
per quarter.
(4) Includes Equifax 401(k) Retirement Savings Plan matching contribution.
38
<PAGE> 41
OPTION GRANTS
The following table shows all grants by Equifax of options to purchase
Equifax Common Stock to the Named Officers during 1996. For a discussion of the
treatment of Equifax stock options after the Spinoff, see "-- Compensation and
Benefit Plans."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ---------- ------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Derek V. Smith................. 5,369(1) 0.25% $18.63 1/31/06 $ 62,888 $159,370
19,631(2) 0.90 18.63 1/31/06 229,941 582,719
25,000(3) 1.14 22.35 1/31/06 199,704 648,961
25,000(3) 1.14 24.21 1/31/06 153,129 602,386
25,000(4) 1.14 26.08 1/31/06 106,579 555,836
25,000(4) 1.14 27.94 1/31/06 60,004 509,261
Dan H. Rocco................... 10,000(3) 0.46% $18.63 1/31/06 $117,132 $296,835
5,341(5) 0.24 22.35 1/31/06 42,665 138,644
4,659(6) 0.21 22.35 1/31/06 37,217 120,940
369(1) 0.02 24.21 1/31/06 2,260 8,891
9,631(7) 0.44 24.21 1/31/06 58,991 232,063
2,466(4) 0.11 26.08 1/31/06 10,513 54,828
7,534(4) 0.34 26.08 1/31/06 32,119 167,507
10,000(4) 0.46 27.94 1/31/06 24,002 203,705
Douglas C. Curling............. 10,000(3) 0.46% $18.63 1/31/06 $117,132 $296,835
5,341(5) 0.24 22.35 1/31/06 42,665 138,664
4,659(6) 0.21 22.35 1/31/06 37,217 120,940
369(1) 0.02 24.21 1/31/06 2,260 8,891
9,631(7) 0.44 24.21 1/31/06 58,991 232,063
2,684(4) 0.12 26.08 1/31/06 11,442 59,675
7,316(4) 0.33 26.08 1/31/06 31,189 162,660
10,000(4) 0.46 27.94 1/31/06 24,002 203,705
David T. Lee................... 7,000(3) 0.32% $18.63 1/31/06 $ 81,992 $207,784
J. Michael de Janes............ 5,000(3) 0.23% $18.63 1/31/06 $ 58,566 $148,417
</TABLE>
- ---------------
(1) Vest 100% on fourth anniversary of date of grant.
(2) Vest in increments of 6,250 each on the first through the third anniversary
of date of grant and in an increment of 881 on the fourth anniversary of
date of grant.
(3) Vest 25% on the first through the fourth anniversary of date of grant.
(4) Vested 100% on date of grant.
(5) Vest in increments of 947 each on the first through the third anniversary of
date of grant and in an increment of 2,500 on the fourth anniversary of date
of grant.
(6) Vest 33 1/3% on the first through the third anniversary of date of grant.
(7) Vest in increments of 2,500 each on the first through the third anniversary
of date of grant and in an increment of 2,131 on the fourth anniversary of
date of grant.
39
<PAGE> 42
OPTION EXERCISES
The following table shows all exercises of options to purchase Equifax
Common Stock by the Named Officers during 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR-END(#) FISCAL YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Derek V. Smith............... -- $ -- 127,000 138,000 $1,714,738 $1,745,863
Dan H. Rocco................. -- -- 42,750 44,250 537,979 518,448
Douglas C. Curling........... 5,900 77,531 22,500 43,900 113,151 511,208
David T. Lee................. -- -- 18,400 14,600 383,075 219,038
J. Michael de Janes.......... -- -- 4,800 10,400 91,519 152,994
</TABLE>
- ---------------
(1) Value of unexercised options equals the fair market value per share of
Equifax Common Stock as of December 31, 1996, less the exercise price,
multiplied by the number of shares underlying the stock options. The fair
market value of a share of Equifax Common Stock as of December 31, 1996, was
$30 5/8.
LONG-TERM INCENTIVE COMPENSATION PLAN AWARDS
The following table provides information concerning awards to the Named
Officers under Equifax's 1988 Performance Share Plan for Officers (the
"Performance Share Plan"), each of which awards will, after the Spinoff, be
converted into the right to receive ChoicePoint restricted stock. Each unit
under the Performance Share Plan, when awarded in 1996, represented the right,
subject to certain conditions set forth in the Performance Share Plan, to
receive one share of Equifax Common Stock or its cash equivalent (up to 50% of
total units awarded), plus cash representing dividends. Payments of awards are
tied to achieving specified levels of return on equity, growth in earnings per
share and stock price appreciation, as well as achievement of other specified
financial performance targets. The target amount will be earned if 100% of
targeted goals are achieved. If targeted goals are not met or are exceeded, the
award will be reduced or increased proportionately.
As a result of the Spinoff, each outstanding performance share award held
by ChoicePoint employees under the Performance Share Plan and granted to them in
1996 or 1997 will be converted into shares of ChoicePoint restricted stock under
the ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan. Payment will be made at
the end of the relevant performance measurement periods. The ChoicePoint
restricted stock will retain similar compensation opportunities, deliver
compensation on approximately the same schedule and contain performance criteria
similar to the Performance Share Plan for the relevant performance measurement
periods. The number of shares of ChoicePoint restricted stock awarded will be
based upon the price of Equifax Common Stock as of the Mail Date and ChoicePoint
Common Stock the day after the Mail Date.
LONG-TERM INCENTIVE PLANS -- AWARDS FOR LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS OF THE CHOICEPOINT
OR OTHER RESTRICTED STOCK GRANTS(1)
PERIOD UNTIL ---------------------------------------------
MATURATION THRESHOLD TARGET MAXIMUM
NAME OR PAYOUT (# OF SHARES) (# OF SHARES) (# OF SHARES)
- ---- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Derek V. Smith............................... 12/31/98 29,859 37,406 52,500
Dan H. Rocco................................. 12/31/98 11,944 14,963 21,000
Douglas C. Curling........................... 12/31/98 11,944 14,963 21,000
</TABLE>
- ---------------
(1) The estimated number of shares of ChoicePoint restricted stock to be granted
is based on assumed per share prices of Equifax Common Stock of $35 and
ChoicePoint Common Stock of $20.
40
<PAGE> 43
COMPENSATION AND BENEFIT PLANS
The Company has adopted the ChoicePoint 1997 Omnibus Stock Incentive Plan
(the "Omnibus Plan"), which is intended to attract and retain directors,
officers and key employees. The Omnibus Plan authorizes grants of stock options,
stock appreciation rights, restricted stock, deferred shares, performance shares
and performance units totaling four million shares of ChoicePoint Common Stock
(subject to adjustment for subsequent stock splits, stock dividends and in
certain other circumstances). Except as set forth below, ChoicePoint Employees
will retain their vested options to purchase Equifax Common Stock under various
Equifax equity-based compensation plans. Although they will forfeit the unvested
Equifax stock options, they will receive options to purchase ChoicePoint Common
Stock. Certain senior officers of ChoicePoint will be permitted to choose either
to retain vested Equifax stock options or have their vested Equifax stock
options replaced with ChoicePoint stock options in amounts and at exercise
prices intended to preserve the economic benefit inherent in the Equifax stock
options at such time.
ChoicePoint has also adopted annual bonus plans for eligible employees that
provide for the payment of annual cash bonuses following the close of each
fiscal year based upon the achievement of specified objective performance goals.
The Compensation Committee of the Board of Directors of ChoicePoint will approve
the bonus plans with respect to the executive officers of ChoicePoint.
Equifax has historically maintained deferred compensation plans for certain
of its employees. These plans are not qualified for federal tax purposes and are
not "funded" within the meaning of the Employee Retirement Income Security Act
of 1974. With the consent of the affected employees, ChoicePoint, rather than
Equifax, will provide the benefits related to past deferrals made by ChoicePoint
employees under certain of these plans. The Company has implemented a new
deferred compensation plan that will allow certain ChoicePoint employees to: (a)
defer all or a portion of their annual salary and bonus payouts; (b) make
contributions in excess of 401(k) contribution limitations for "highly
compensated" employees; and (c) receive additional employer contributions as a
supplement to the 401(k) Profit Sharing Plan. A participant's deferred
compensation will be invested in one or more hypothetical investment funds
selected by the participant and the plan.
ChoicePoint has adopted a 401(k) Profit Sharing Plan, under which eligible
Company employees may contribute up to 16% of their compensation. ChoicePoint
will make minimum matching contributions in the form of ChoicePoint Common Stock
equal to 25% of employee contributions up to the first 6% of an employee's
contributions. Employee contributions will be invested in one of the available
investment funds, including a ChoicePoint stock fund. Matching contributions
will be invested in the ChoicePoint stock fund. ChoicePoint may make additional
contributions based on achievement of targeted performance levels.
Assets of Equifax's 401(k) Retirement Savings Plan that are attributable to
the accounts of ChoicePoint employees will be transferred to ChoicePoint's
401(k) Profit Sharing Plan and will be held for the benefit of these employees.
ChoicePoint employees may direct that their investment in the Equifax stock fund
be retained or be liquidated and the proceeds invested in a ChoicePoint stock
fund or any other available investment funds.
ChoicePoint intends to establish two grantor trusts to which the Company
will transfer cash with the intention of purchasing approximately 325,000 shares
of ChoicePoint Common Stock for distribution under its various compensation and
benefit plans. The purchase of such shares by these trusts will occur as soon as
reasonably practicable after the Spinoff.
DIRECTOR COMPENSATION
Directors who are salaried employees of ChoicePoint will receive no
additional compensation for services as a director or as a member of a committee
of the Board of Directors. Each director who is not a ChoicePoint salaried
officer or employee shall be compensated as follows. The Chairman of the Board
of Directors will be paid an annual fee of $30,000 for services as a director
and an additional fee of $2,500 for attendance at each meeting of the Board of
Directors or a committee thereof. Each other director will be paid an annual fee
of $15,000 for services as a director and an additional fee of $1,000 for
attendance at each meeting of the Board of Directors and $1,000 ($2,500 if
Committee Chairman) for attendance at each committee meeting. In addition, each
non-employee director, upon initial election to the Board of Directors,
41
<PAGE> 44
will receive a one-time grant of restricted ChoicePoint Common Stock with a
market value of $25,000, which will vest after 36 months or upon death or
retirement from the Board of Directors, whichever occurs first. Non-employee
directors will also receive annual stock option awards of 3,000 shares of
ChoicePoint Common Stock, and the Chairman of the Board of Directors will
receive annual stock option awards of 5,000 shares. The stock option awards will
vest after 24 months or upon death or retirement from the Board of Directors,
whichever occurs first. Restricted stock and stock option awards will be issued
under the Omnibus Plan.
EMPLOYMENT AND COMPENSATION AGREEMENTS
The Company intends to enter into employment agreements with all of its
executive officers prior to the Effective Time. The employment agreements are
expected to contain change in control provisions, which will provide for
severance pay and certain other benefits in the event that a change in control
of the Company occurs. Each change in control provision will have an initial
term of up to five years and will be renewable for an additional period of time
and effective only in the event any such executive officer's employment with the
Company is terminated within five years from the date of a change in control of
the Company. A "change in control" will be defined in the employment agreements
generally to include the acquisition by an entity, or a group of entities acting
in concert, of more than fifty percent of the shares of outstanding stock of any
class of voting stock of the Company, and other specified events. In such event,
upon termination of the executive's employment within five years after the date
of a change in control, the executive will be entitled to severance pay and
certain other benefits, unless such termination: (i) occurs as a result of the
executive's death; (ii) is effected by the Company for "Cause" or "Disability"
(as defined in the employment agreements); or (iii) is effected by the executive
for reasons other than a "Constructive Termination" (as defined in the
employment agreements). The severance payment will be based upon annual
compensation, multiplied by a factor not to exceed three, plus payments for
other benefits.
Equifax currently has a Compensation Agreement with Mr. Rocco which
entitles Mr. Rocco to annual base compensation of not less than $200,000 and
total compensation of not less than $225,000. The Compensation Agreement
provides for deferred benefit payments to Mr. Rocco and his participation in all
employee benefit plans of Equifax. Pursuant to the agreement, subject to certain
limitations and employment conditions, if Mr. Rocco remains continuously
employed by the Company for three years after January 1, 1996, Mr. Rocco would
be entitled to severance benefits in a lump sum of $150,000. The Company intends
to become a successor to such agreement or to enter into a new employment
agreement with Mr. Rocco upon the Spinoff.
42
<PAGE> 45
ARRANGEMENTS BETWEEN EQUIFAX AND CHOICEPOINT
RELATING TO THE SPINOFF
Equifax and ChoicePoint have entered into or expect to enter into the
agreements described in this section to facilitate an orderly transition in
connection with establishing ChoicePoint as an independent company. The
agreements summarized below have been filed as exhibits to a Registration
Statement on Form S-1 (the "Registration Statement") filed under the Securities
Act. The following descriptions include a summary of all material terms of such
agreements but are qualified in their entirety by reference to the filed
agreements.
DISTRIBUTION AGREEMENT
The Distribution Agreement provides for, among other things, the principal
corporate transactions required to effect the Spinoff, the conditions that must
be satisfied prior to the Mail Date and the allocation between ChoicePoint and
Equifax of certain assets and liabilities. The Distribution Agreement also
contemplates the execution by the parties of the following Additional Agreements
that address particular matters related to the Spinoff: the Employee Benefits
Agreement, the Transition Support Agreement, the Intercompany Information
Services Agreement, the Real Estate Agreements, the Tax Sharing and
Indemnification Agreement, the Intellectual Property Agreement and the CUE UK
Agreements. In the event of a conflict between the terms of the Distribution
Agreement and the terms of an Additional Agreement, the terms of the Additional
Agreement will govern.
Reorganization. The Distribution Agreement sets forth the following
corporate transactions to be accomplished at or before the Effective Time:
(i) Equifax will contribute to ChoicePoint all of the issued and
outstanding capital stock of the wholly-owned Equifax subsidiaries that
comprise the Insurance Services Group operations, which include Osborn
Labs, Equifax Services and Government and Special Systems in exchange for a
number of shares of ChoicePoint Common Stock that, when combined with the
shares of ChoicePoint Common Stock already owned by Equifax, will equal the
number of shares of Equifax Common Stock issued and outstanding on the
Record Date divided by ten (excluding those shares held by certain grantor
trusts of Equifax, which will not receive ChoicePoint Common Stock pursuant
to the Spinoff);
(ii) Equifax will transfer to ChoicePoint substantially all the assets
and substantially all the liabilities of CUE UK, the insurance services
division of Equifax's United Kingdom operations; and
(iii) Immediately following the transactions described in items (i) and
(ii) above, ChoicePoint will transfer all of the issued and outstanding
shares of capital stock of Osborn Labs and Government and Special Systems
to Equifax Services.
Distribution. On or before the Mail Date, Equifax will deliver to the
Distribution Agent a certificate or certificates representing all of the then
outstanding shares of ChoicePoint Common Stock held by Equifax, and will
instruct the Distribution Agent to distribute to each holder of record of
Equifax Common Stock on the Record Date (except for certain grantor trusts of
Equifax, which will not receive ChoicePoint Common Stock pursuant to the
Spinoff) one share of ChoicePoint Common Stock for each ten shares of Equifax
Common Stock so held, either by crediting the holder's brokerage account or
delivering a certificate or certificates representing such shares.
Fractional Shares. The Distribution Agent will not distribute any
fractional shares of ChoicePoint Common Stock to any holder of Equifax Common
Stock. The Distribution Agent will aggregate all fractional shares and sell them
in an orderly manner in the open market after the Mail Date. After completion of
such sales, the Distribution Agent will distribute a pro rata portion of the
proceeds from such sales, based upon the average gross selling price of all such
ChoicePoint Common Stock, to each holder of Equifax Common Stock who would
otherwise have received a fractional share of ChoicePoint Common Stock.
Effective Time. The Distribution Agreement provides that the transfer by
Equifax of the stock, assets and liabilities of its Insurance Services Group to
ChoicePoint will be effective as of the Effective Time and
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<PAGE> 46
that the insurance services business will be operated for the sole benefit of
ChoicePoint and its public shareholders after the Effective Time.
Satisfaction of Conditions. Equifax's Board of Directors has the sole
discretion to establish the Record Date, the Mail Date and any appropriate
procedures in connection with the Spinoff. The Spinoff will not occur unless the
following conditions have been satisfied: (i) all necessary regulatory approvals
have been received; (ii) the Registration Statement has become effective under
the Securities Act; (iii) ChoicePoint's Board of Directors has been elected by
Equifax, as sole shareholder of ChoicePoint, and the ChoicePoint Articles of
Incorporation and Bylaws are in effect; (iv) ChoicePoint Common Stock has been
approved for listing on the New York Stock Exchange, subject to official notice
of issuance; (v) Equifax has received a favorable ruling from the IRS that the
distribution of ChoicePoint Common Stock will generally not be taxable to
Equifax or its shareholders, except for cash received for fractional shares;
(vi) ChoicePoint has entered into the Credit Facility; and (vii) no order,
injunction or decree issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing consummation of the Spinoff shall be
in effect.
Allocation of Assets and Liabilities. The Distribution Agreement provides
that the following will become exclusively the assets of ChoicePoint at or prior
to the Effective Time: (i) the capital stock of Osborn Labs, Government and
Special Systems and Equifax Services; and (ii) any assets that (a) are owned of
record or held in the name of ChoicePoint as of the Effective Time, (b) are
treated for internal financial reporting purposes of Equifax prior to the
Effective Time as owned by ChoicePoint, and (c) at the Effective Time are used
exclusively by ChoicePoint (collectively, the "ChoicePoint Assets"). Equifax has
agreed to transfer all of its right, title and interest in the ChoicePoint
Assets to ChoicePoint. All assets of Equifax other than the ChoicePoint Assets
will remain exclusively the assets of Equifax. ChoicePoint has agreed to
transfer to Equifax all right, title and interest to any assets that are not
ChoicePoint Assets.
The Distribution Agreement further provides generally that any liabilities
of the Insurance Services Group, including, without limitation, liabilities: (i)
of ChoicePoint arising under the Distribution Agreement or any Additional
Agreement; (ii) incurred in connection with the conduct or operation of
ChoicePoint's business (including any acquired businesses) or the ownership or
use by ChoicePoint of its assets, whether arising before, at or after the
Effective Time; (iii) arising under or in connection with the Registration
Statement, except to the extent such liabilities arise out of or are based upon
information included in the section of the Registration Statement entitled
"Equifax Inc.;" (iv) set forth on the balance sheet of the Insurance Services
Group of Equifax as of the Effective Time (the "ISG Balance Sheet"); (v) of
Equifax or ChoicePoint relating to any business formerly owned or operated by
ChoicePoint or arising out of the sale thereof; (vi) assumed by ChoicePoint in
connection with its purchase of CUE UK; (vii) under a certain Equifax
discretionary line of credit in the amount of $29.0 million; and (viii) relating
to the acquisition by the Insurance Services Group of any business prior to the
Effective Time, except to the extent such liabilities arise out of the issuance
of securities of Equifax in any such acquisition (collectively, the "ChoicePoint
Liabilities") will become exclusively the liabilities of ChoicePoint as of the
Effective Time. All liabilities of Equifax, other than the ChoicePoint
Liabilities, will remain exclusively the liabilities of Equifax (collectively,
the "Equifax Liabilities").
Intercompany accounts. On or before the Mail Date, Equifax will deliver to
ChoicePoint a preliminary ISG Balance Sheet setting forth estimates of all
intercompany account balances between Equifax and ChoicePoint as of the
Effective Time, and ChoicePoint shall pay all estimated account balances on the
Mail Date. Within 30 business days after the Effective Time, Equifax will
deliver to ChoicePoint a final ISG Balance Sheet setting forth final
intercompany account balances between Equifax and ChoicePoint as of the
Effective Time, and either Equifax or ChoicePoint, as the case may be, will pay
to the other the difference between the estimated account balances and the final
account balances.
Payments Received. From and after the Effective Time, both Equifax and
ChoicePoint will promptly transfer to the other, from time to time, any property
received that is an asset of the other. Funds received by one upon the payment
of accounts receivable that belong to the other will be transferred to the other
by wire transfer not more than five business days after receipt of such payment.
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<PAGE> 47
Amendments; Further Assurances. The Distribution Agreement may only be
amended or rights thereunder waived by an instrument signed by the party to be
charged with the amendment or waiver. Equifax and ChoicePoint will use their
reasonable efforts to: (i) execute and deliver such further instruments and
documents and take such actions as the other party may reasonably request in
order to effectuate the purposes of the Distribution Agreement and the
Additional Agreements and their terms; and (ii) take all actions and do all
things reasonably necessary under applicable laws and agreements or otherwise to
consummate and make effective the transactions contemplated by the Distribution
Agreement and the Additional Agreements.
No Representations or Warranties. Except as stated in the Distribution
Agreement or an Additional Agreement, no party to such agreements or any other
agreement or document contemplated by the Distribution Agreement or any
Additional Agreement has or shall be deemed to have made any representation or
warranty as to: (i) the assets, businesses or liabilities retained, transferred
or assumed as contemplated thereby; (ii) any consents or approvals required in
connection with the transfer or assumption by such party of any asset or
liability contemplated by the Distribution Agreement; (iii) the value or freedom
from any lien, claim, equity or other encumbrance of, or any other matter
concerning, any assets of such party; or (iv) the absence of any defenses or
right of setoff or freedom from counterclaim with respect to any claim or other
asset of any party. Except as may expressly be set forth in the Distribution
Agreement or an Additional Agreement, all such assets were, or are being,
transferred, or are being retained, on an "as is," "where is" basis and the
respective transferees will bear the economic and legal risks that any
conveyance will prove to be insufficient to vest in the transferee a title that
is free and clear of any lien, claim, equity or other encumbrance.
Dispute Resolution. Except as specifically provided in an Additional
Agreement, any disputes arising from or in connection with the Distribution
Agreement or any Additional Agreement must be resolved in accordance with the
dispute resolution procedures set forth in the Distribution Agreement.
Insurance. ChoicePoint will use its best efforts to procure and maintain
directors' and officers' liability insurance coverage at least equal to the
amount of Equifax's current directors' and officers' insurance coverage with
respect to directors and officers of Equifax who will become directors and
officers of ChoicePoint as of the Mail Date for acts as directors and officers
of ChoicePoint for periods from and after the Mail Date. Equifax has agreed to
use its best efforts to maintain directors' and officers' liability insurance
coverage at least equal to the amount of Equifax's current directors' and
officers' liability insurance coverage for a period of five years with respect
to the directors and officers of Equifax who will become directors and officers
of ChoicePoint as of the Mail Date for acts as directors and officers of Equifax
or one of its affiliates during periods prior to the Mail Date.
Employee Matters. Unless otherwise agreed to by Equifax and ChoicePoint,
no employees who previously provided services for both Equifax and ChoicePoint
will become employees of ChoicePoint after the Effective Time.
Guaranteed Liabilities. ChoicePoint will use all reasonable efforts
(excluding payment of money) to obtain as promptly as practicable after the Mail
Date the release of Equifax from its obligations with respect to the ChoicePoint
Liabilities on which Equifax is an obligor by reason of any guarantee or
contractual commitment (the "Guaranteed ChoicePoint Liabilities"). In no event
shall ChoicePoint extend the term of any Guaranteed ChoicePoint Liabilities
(such as by exercising an option to renew a lease) or modify any such Guaranteed
ChoicePoint Liability in any way that would increase the liability guaranteed
thereunder unless the guarantee of Equifax is released as to any extended or
released liability of obligations under such Guaranteed ChoicePoint Liabilities
or Equifax otherwise consents in writing. In the event that Equifax is required
to pay any Guaranteed ChoicePoint Liabilities, Equifax will be entitled to all
the rights of the payee in any property of ChoicePoint pledged as security for
such Guaranteed ChoicePoint Liabilities. Equifax will use all reasonable efforts
(excluding payment of money) to obtain as promptly as practicable after the Mail
Date the release of ChoicePoint from its obligations with respect to the Equifax
Liabilities on which ChoicePoint is an obligor by reason of any guarantee or
contractual commitment (the "Guaranteed Equifax Liabilities"). In no event shall
Equifax extend the term of any Guaranteed Equifax Liabilities (such as by
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<PAGE> 48
exercising an option to renew a lease) unless the guarantee of ChoicePoint is
released as to any future obligations under such Guaranteed Equifax Liabilities
or ChoicePoint otherwise agrees in writing. In the event that ChoicePoint is
required to pay any Guaranteed Equifax Liabilities, ChoicePoint will be entitled
to all the rights of the payee in any property of Equifax pledged as security
for such Guaranteed Equifax Liabilities.
Cross Indemnification. At and after the Mail Date, ChoicePoint will
indemnify, defend and hold harmless Equifax and its directors, officers,
employees and agents (the "Equifax Indemnitees") from and against any and all
damage, loss, liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any and all actions or threatened actions) (collectively, the
"Indemnifiable Losses") incurred or suffered by any of the Equifax Indemnitees
and arising out of, or due to: (i) the failure of ChoicePoint to pay, perform or
otherwise discharge, any of the ChoicePoint Liabilities; and (ii) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, the preliminary or final Prospectus, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading (other than information provided by Equifax contained in
the section entitled "Equifax Inc." of the preliminary or final Registration
Statement, the preliminary or final Prospectus or any amendment or supplement
thereto). At and after the Mail Date, Equifax will indemnify, defend and hold
harmless ChoicePoint and its directors, officers, employees and agents (the
"ChoicePoint Indemnitees") from and against any and all Indemnifiable Losses
incurred or suffered by any of the ChoicePoint Indemnitees and arising out of,
or due to: (i) the failure of Equifax to pay, perform or otherwise discharge,
any of the Equifax Liabilities; and (ii) any untrue statement or alleged untrue
statement of any material fact contained in the section entitled "Equifax Inc."
of the preliminary or final Registration Statement, the preliminary or final
Prospectus, or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading. In circumstances in
which the indemnity is unavailable or insufficient, for any reason, to hold
harmless an indemnified party in respect of any Indemnifiable Losses, each
indemnifying party, in order to provide for just and equitable contribution,
will contribute to the amount paid or payable by such indemnified party as a
result of such Indemnifiable Losses, in such proportion as is appropriate to
reflect the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such Indemnifiable
Losses, as well as any other relevant equitable considerations.
Other Expenses of the Spinoff. The Distribution Agreement provides that
all costs and expenses incurred in connection with the consummation of the
Spinoff and the transactions contemplated thereby and in connection with the
preparation, execution, delivery and implementation of the Distribution
Agreement and the Additional Agreements will be paid by Equifax. Equifax will
pay the legal, filing, accounting, printing and other expenses incurred in
connection with the preparation, printing and filing of the Registration
Statement.
EMPLOYEE BENEFITS AGREEMENT
ChoicePoint and Equifax have entered into an agreement that provides for
the transition of employee plans or programs sponsored by Equifax for its
employees who will become employed by ChoicePoint (the "ChoicePoint Employees").
In the case of certain retiree medical and death benefits, the Employee Benefits
Agreement also applies to specified former employees of Equifax subsidiaries
that will become ChoicePoint subsidiaries. Under the Employee Benefits
Agreement, ChoicePoint is liable for providing specified welfare and retirement
benefits to salaried ChoicePoint Employees at and after July 1, 1997. These
benefits include medical and dental benefits, flexible spending accounts
covering health care and dependent care expenses, life and accident insurance
plans, a before-tax premium plan (which allows employees to pay for medical,
dental and certain other benefit premiums on a before-tax basis), a 401(k) plan,
and policies covering vacations, holidays, sick leave and short-term disability.
ChoicePoint will not adopt a defined benefit retirement plan but will adopt
a 401(k) Profit Sharing Plan. ChoicePoint will also provide a transition benefit
to employees of ChoicePoint who have been participants in the Equifax defined
benefit retirement plan. The benefit will consist of additional contributions
based on
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<PAGE> 49
prior service with Equifax to reduce the impact of the loss of future benefits
from the Equifax defined benefit retirement plan. The present value of the
future contributions for these transition benefits is approximately $13.0
million. To facilitate funding of these additional contributions, Equifax will
make a capital contribution to ChoicePoint in the amount of $13.0 million and
ChoicePoint's intercompany liability to Equifax will be reduced accordingly.
ChoicePoint's 401(k) plan will receive a transfer of account balances from
Equifax's 401(k) plan for the ChoicePoint Employees. A ChoicePoint stock account
will be created under the 401(k) plans of both companies to hold the ChoicePoint
Common Stock distributed with respect to the Equifax Common Stock held in the
Equifax 401(k) plan prior to the Mail Date. ChoicePoint Employees who had
participated in the Equifax Inc. Supplemental Executive Retirement Plan will be
credited with an account under a ChoicePoint deferred compensation plan equal to
the actuarial equivalent of the benefit accrued under the Equifax Inc.
Supplemental Executive Retirement Plan, if they consent to the transfer of such
benefit from Equifax to ChoicePoint. ChoicePoint Employees who were participants
in other Equifax deferred compensation plans may consent to the transfer of such
accounts from Equifax to ChoicePoint. Except as set forth below, ChoicePoint
Employees will retain their vested options to purchase Equifax Common Stock
under various Equifax equity-based compensation plans. Although they will
forfeit their unvested Equifax stock options, they will receive options to
purchase ChoicePoint Common Stock, adjusted to preserve the value of the
forfeited Equifax stock options. Certain senior officers of ChoicePoint will be
permitted to choose either to retain vested Equifax stock options or have their
vested Equifax stock options replaced with ChoicePoint stock options in amounts
and at exercise prices intended to preserve the economic benefit inherent in the
Equifax stock options at such time. See "MANAGEMENT -- Summary of Executive
Compensation."
TRANSITION SUPPORT AGREEMENT
Pursuant to the Transition Support Agreement, following the Effective Time,
Equifax has agreed to provide ChoicePoint with tax services, centralized
accounting services, purchasing services, travel services, corporate information
services, distribution database services, mailroom services, corporate financial
systems and certain other services, and ChoicePoint has agreed to provide
Equifax with certain services as agreed upon by Equifax and ChoicePoint prior to
the Effective Time. The period during which Equifax and ChoicePoint are required
to provide services to the other will vary depending upon the particular
category of service, but in no event will any service be provided beyond 15
months from the Effective Time. Equifax and ChoicePoint will charge each other
for services on a shared-cost basis consistent with current methods of
allocating internal costs. Equifax and ChoicePoint will submit invoices to each
other within 15 business days after the end of each month during the term of the
Transition Support Agreement, and the invoice will be payable within five
business days after the receipt thereof. Upon 60 days prior written notice,
either ChoicePoint or Equifax may direct the other to discontinue any particular
category of service provided under the Transition Support Agreement. The
Transition Support Agreement may be terminated by mutual consent of the parties,
by either party for a material uncured breach, the insolvency of either party,
or the acquisition of either party by a competitor of the non-acquired party,
but such termination will be applicable only with respect to services provided
by the non-acquired party to the portion of the acquired party's business that
has been affected by the change in control. The party receiving the services
under the Transition Support Agreement will indemnify the party furnishing the
services, subject to certain limitations, for losses resulting from the
provider's furnishing or failure to furnish the services unless the party
receiving the services commits willful misconduct or gross negligence. The party
furnishing the services will indemnify the party receiving the services, subject
to certain limitations, for losses resulting from its gross negligence in
providing services.
INTERCOMPANY INFORMATION SERVICES AGREEMENT
The Intercompany Information Services Agreement will state that each of
Equifax and ChoicePoint will provide to the other certain data and products for
utilization in their respective operations and, in some instances, the
appointment by each of them of the other as a broker for certain of their
respective products. The agreement will have a one-year renewable term and is
subject to certain limitations as set forth in the Intellectual Property
Agreement and the Transition Support Agreement. During the initial one-year term
of
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the Intercompany Information Services Agreement, ChoicePoint and Equifax will
purchase from, and supply to, each other certain information, including but not
limited to, consumer credit information and drivers license and motor vehicle
information, subject to certain exceptions. ChoicePoint and Equifax intend to
enter into the Intercompany Information Services Agreement prior to the
Effective Time.
REAL ESTATE AGREEMENTS
As of the Effective Time, Equifax, ChoicePoint and Equifax Services will
enter into various agreements relating to the lease, sublease and sharing of
facilities (collectively, the "Real Estate Agreements"). Pursuant to the Real
Estate Agreements, Equifax will sublease to Equifax Services a portion of
Equifax's corporate headquarters and a portion of Equifax's principal data
center. The sublease arrangements will generally provide for the pro rata
allocation of rental and other occupancy costs based upon the square footage of
the premises subleased by Equifax Services. Equifax will also grant to
ChoicePoint an easement across property owned by Equifax that will permit
ChoicePoint to connect certain of its data processing facilities to data
processing equipment located at Equifax's principal data center. Following the
Effective Time, Equifax and Equifax Services will continue to share a number of
office facilities located throughout the United States. In those cases where the
lease of the office facility is in the name of an Equifax company, that company
will sublease a portion of the space in that facility to Equifax Services.
Equifax Services will sublease to an Equifax company a portion of the space in
those office facilities currently leased by an Equifax Services company. The
provisions contained in such subleases will mirror the provisions of the
underlying leases and be subject to the terms thereof. ChoicePoint intends to
lease its principal office facilities in Alpharetta, Georgia from a third party.
TAX SHARING AND INDEMNIFICATION AGREEMENT
ChoicePoint and Equifax have entered into a Tax Sharing and Indemnification
Agreement to allocate federal, state, local and foreign tax liabilities between
ChoicePoint and Equifax and their respective subsidiaries. Under the Tax Sharing
and Indemnification Agreement, Equifax has agreed to pay and indemnify
ChoicePoint for all taxes attributable to Equifax that are imposed for periods
before and after the Effective Time (except to the extent described below).
ChoicePoint has agreed to pay and indemnify Equifax for all taxes
attributable to ChoicePoint that are imposed for periods before and after the
Effective Time. ChoicePoint's post-Effective Time liability for certain
pre-Effective Time taxes is, however, limited to an amount equal to $2.0 million
(on an after tax basis), and Equifax will indemnify ChoicePoint for any
liability in excess of that amount. Equifax will also indemnify ChoicePoint for
any taxes incurred by ChoicePoint (plus a gross-up amount) caused solely by a
breach by Equifax of any representation made by Equifax in connection with the
IRS ruling request or contained in the Tax Sharing and Indemnification
Agreement. In addition, ChoicePoint has agreed to indemnify Equifax for any
taxes attributable to Equifax and any liability to Equifax's shareholders (plus
a gross-up amount and certain related expenses) resulting from the failure of
the Spinoff to qualify as a tax-free transaction where such failure is caused
solely by the breach by ChoicePoint of a representation made in connection with
the IRS ruling request or contained in the Tax Sharing and Indemnification
Agreement. Where both Equifax and ChoicePoint are responsible for the breach (or
each is responsible for a separate breach), or where such failure occurs
notwithstanding the absence of a breach, ChoicePoint has agreed to indemnify
Equifax for only a portion of such amounts.
In the Tax Sharing and Indemnification Agreement, each of Equifax and
ChoicePoint represents that it: (i) has not knowingly misstated or omitted a
material fact in connection with Equifax obtaining the IRS ruling; (ii) is not
currently engaged in any negotiations involving a transaction that, if
consummated, would constitute a 50% acquisition; and (iii) will neither engage
in negotiations nor consummate a business combination that constitutes such an
acquisition. For this purpose a 50% acquisition includes an acquisition by one
or more persons of fifty percent or more of the stock of either Equifax or
ChoicePoint where the parties fail to prove that such acquisition is not part of
the same overall plan or series of related transactions that includes the
Spinoff and, as a result, tax is imposed on the nonacquired party under
subsequently enacted
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legislation. Each of Equifax and ChoicePoint further represents that it has not
and will not do anything that would cause the Spinoff to be taxable under United
States federal or state income tax laws.
ChoicePoint will prepare all tax returns due after the Spinoff where such
returns relate exclusively to the property or operations of ChoicePoint. Equifax
will prepare all other tax returns for taxable periods beginning before the
Spinoff. ChoicePoint will have the opportunity to review certain of the tax
returns prepared by Equifax prior to the time such returns are filed. Each party
agrees to cooperate with the other in the preparation and filing of all tax
returns.
Equifax will be entitled to all refunds from any taxing authority with
respect to any tax returns filed by Equifax, except that ChoicePoint will be
entitled to all refunds to the extent the refund relates exclusively to property
or operations of ChoicePoint and does not represent taxes attributable to
ChoicePoint for which Equifax was required to indemnify ChoicePoint. ChoicePoint
will be entitled to all refunds with respect to any tax returns filed by
ChoicePoint.
In general, tax controversies will be handled by the party having filing
responsibility for the tax return to which the controversy relates. At a certain
stage in the proceedings, ChoicePoint may assume control of a tax controversy
that pertains solely to it.
INTELLECTUAL PROPERTY AGREEMENT
The Intellectual Property Agreement addresses the allocation between
Equifax and ChoicePoint of copyrights, trademarks, software and other
intellectual property (the "Intellectual Property"). The agreement will provide
that Equifax will transfer to ChoicePoint, without charge, title to any of the
Intellectual Property used solely or primarily in the business of ChoicePoint,
effective at the Effective Time. Equifax will retain title to any of the
Intellectual Property it uses solely or primarily in its business. As of the
Effective Time, each of ChoicePoint and Equifax will license to the other party
certain items of Intellectual Property it owns and the other party uses on a
royalty free, non-exclusive basis, subject to certain limitations set forth in
the Intellectual Property Agreement, the Intercompany Information Services
Agreement and the Transition Support Agreement. Equifax and ChoicePoint will
agree to cooperate with each other after the Effective Time to effect the
purposes of the Intellectual Property Agreement and the related licenses granted
by Equifax and ChoicePoint to each other.
The Intellectual Property Agreement also states that Equifax will provide
ChoicePoint, at Equifax's expense, with all rights to certain third party
software and other intellectual property necessary for the continued operation
of ChoicePoint's business ("Third Party Rights"). After the Effective Time,
ChoicePoint will be responsible for on-going maintenance, support and upgrades
associated with the continued use of the Third Party Rights at ChoicePoint's
expense. Equifax and ChoicePoint will agree to cooperate after the Effective
Time with the other party in the identification, negotiation, assignment and
acquisition of Third Party Rights as may be reasonably necessary to effect the
purpose of the Intellectual Property Agreement.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The current Chairman of the Board of Equifax, C.B. Rogers, Jr., will serve
as Chairman of the Board of ChoicePoint for a transitional period after the
Spinoff. In addition to Mr. Rogers, four of the other seven persons identified
by Equifax to serve on the ChoicePoint Board of Directors currently serve on the
Equifax Board of Directors. Three of those persons, however, will resign from
the Equifax Board prior to the Spinoff. ChoicePoint and Equifax will therefore
have two common Board members, including a common Chairman of the Board, for a
transitional period. See "MANAGEMENT."
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BENEFICIAL OWNERSHIP OF CHOICEPOINT COMMON STOCK
The following table sets forth certain information as of March 31, 1997
regarding the projected beneficial ownership of ChoicePoint Common Stock as a
result of the Spinoff by: (i) each director of ChoicePoint; (ii) each Named
Officer; and (iii) all of the directors and executive officers of ChoicePoint as
a group. The Company is not aware of any person who will beneficially own more
than five percent of the ChoicePoint Common Stock as of the Mail Date.
<TABLE>
<CAPTION>
Projected Percentage of
Amount and Nature of Outstanding ChoicePoint
Name of Beneficial Owner Beneficial Ownership(1) Common Stock(2)
------------------------ ----------------------- -----------------------
<S> <C> <C>
Ron D. Barbaro........................................ 1,908(3) *
Douglas C. Curling.................................... 95,954(4) *
J. Michael de Janes................................... 14,083(5) *
James M. Denny........................................ 1,250(6) *
Tinsley H. Irvin...................................... 1,650(3) *
David T. Lee.......................................... 42,582(7) *
Daniel W. McGlaughlin................................. 28,598(8) *
Julia B. North........................................ 1,280(3) *
Dan H. Rocco.......................................... 139,778(9) *
C. B. Rogers, Jr. .................................... 102,513(10) *
Derek V. Smith........................................ 473,608(11) 3.1%
Charles I. Story...................................... 1,250(6) *
All directors and executive officers as a group (12
persons)............................................ 904,454(12) 5.9%
</TABLE>
- ---------------
(1) According to SEC rules, a person is the "beneficial owner" of securities if
he or she has or shares the power to vote them or to direct their
investment or has the right to acquire beneficial ownership of such
securities within 60 days through the exercise of an option, warrant or
right, the conversion of a security or otherwise. To the knowledge of the
Company, the indicated owners will have sole voting and investment power
with respect to shares beneficially owned, except as otherwise noted. The
ownership information presented above: (i) assumes that all of the vested
Equifax stock options held by such beneficial owners are converted into
ChoicePoint stock options; (ii) assumes Equifax stock options are converted
into ChoicePoint stock options at a conversion factor of 1.75 based on a
$35 per share price of Equifax Common Stock and a $20 per share price of
ChoicePoint Common Stock; (iii) assumes that no Equifax stock options are
exercised between March 31, 1997 and the Mail Date; and (iv) reflects the
distribution ratio of one share of ChoicePoint Common Stock for every ten
shares of Equifax Common Stock.
(2) An asterisk indicates projected beneficial ownership of less than 1% of the
ChoicePoint Common Stock.
(3) Includes 1,250 restricted shares of ChoicePoint Common Stock awarded
pursuant to the Omnibus Plan.
(4) Includes 179 shares of ChoicePoint Common Stock owned through ChoicePoint's
401(k) Profit Sharing Plan and 56,875 shares of ChoicePoint Common Stock
subject to ChoicePoint stock options exercisable on or within 60 days after
the Mail Date and 38,500 shares of restricted ChoicePoint Common Stock
awarded pursuant to the Omnibus Plan.
(5) Includes 345 shares of ChoicePoint Common Stock owned through ChoicePoint's
401(k) Profit Sharing Plan, 13,738 shares of ChoicePoint Common Stock
subject to ChoicePoint stock options exercisable on or within 60 days after
the Mail Date.
(6) Represents restricted shares of ChoicePoint Common Stock awarded pursuant
to the Omnibus Plan.
(7) Includes 296 shares of ChoicePoint Common Stock owned through ChoicePoint's
401(k) Profit Sharing Plan and 42,000 shares of ChoicePoint Common Stock
subject to ChoicePoint stock options exercisable on or within 60 days after
the Mail Date.
(8) Includes 404 shares of ChoicePoint Common Stock owned through Equifax's
401(k) Retirement Savings Plan and 1,250 restricted shares of ChoicePoint
Common Stock awarded pursuant to the Omnibus Plan.
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(9) Includes 415 shares of ChoicePoint Common Stock owned through ChoicePoint's
401(k) Profit Sharing Plan and 100,188 shares of ChoicePoint Common Stock
subject to ChoicePoint stock options exercisable on or within 60 days after
the Mail Date and 38,500 shares of restricted ChoicePoint Common Stock
awarded pursuant to the Omnibus Plan.
(10) Includes 1,492 shares of ChoicePoint Common Stock owned through Equifax's
401(k) Retirement Savings Plan and 1,250 restricted shares of ChoicePoint
Common Stock awarded pursuant to the ChoicePoint Restricted Stock Plan.
(11) Includes: (i) 569 shares of ChoicePoint Common Stock owned through
ChoicePoint's 401(k) Profit Sharing Plan; (ii) 302,313 shares of
ChoicePoint Common Stock subject to ChoicePoint stock options exercisable
on or within 60 days after the Mail Date; (iii) 62,209 restricted shares of
ChoicePoint Common Stock acquired upon an assumed conversion of 35,548
restricted shares of Equifax Common Stock on the Mail Date; and (iv)
101,500 shares of restricted ChoicePoint Common Stock awarded pursuant to
the Omnibus Plan.
(12) Includes: (i) 1,804 shares of ChoicePoint Common Stock owned through
ChoicePoint's 401(k) Profit Sharing Plan; (ii) 1,896 shares of ChoicePoint
Common Stock owned through Equifax's 401(k) Retirement Savings Plan; (iii)
515,114 shares of ChoicePoint Common Stock subject to ChoicePoint stock
options exercisable on or within 60 days after the Mail Date; and (iv)
251,792 restricted shares of ChoicePoint Common Stock.
BENEFICIAL OWNERSHIP OF MANAGEMENT
Equifax currently owns all of the outstanding shares of ChoicePoint Common
Stock. For information with respect to the number of shares of ChoicePoint
Common Stock expected to be beneficially owned immediately following the Spinoff
by: (i) the persons expected to be ChoicePoint directors; and (ii) the executive
officers of ChoicePoint named under "MANAGEMENT -- Summary of Executive
Compensation," see the table set forth under "BENEFICIAL OWNERSHIP OF
CHOICEPOINT COMMON STOCK."
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DESCRIPTION OF CAPITAL STOCK
INTRODUCTION
ChoicePoint presently expects that it will have the following capital stock
authorization and terms and anti-takeover provisions in place at the Effective
Time.
The authorized capital stock of ChoicePoint consists of 100 million shares
of ChoicePoint Common Stock, par value $.10 per share, and ten million shares of
Preferred Stock, par value $.01 per share.
As a result of the Spinoff, there are expected to be approximately
14,700,000 shares of ChoicePoint Common Stock outstanding held by approximately
8,800 holders of record. No shares of Preferred Stock have been issued by
ChoicePoint and no shares of Preferred Stock will be issued in the Spinoff.
CHOICEPOINT COMMON STOCK
Subject to all of the rights of the Preferred Stock as expressly provided
for in the ChoicePoint Articles of Incorporation (the "ChoicePoint Articles"),
by operation of law or by the Board of Directors pursuant to the ChoicePoint
Articles, holders of ChoicePoint Common Stock are entitled to: (i) one vote per
share on all matters required to be voted on by shareholders, including the
election of directors; (ii) such dividends as may be declared or set apart for
payment from assets or funds legally available therefor; and (iii) in the event
of liquidation, dissolution or winding-up of ChoicePoint, a pro rata
distribution of the net assets of ChoicePoint available for distribution in
accordance with their respective rights and interests. The ChoicePoint Articles
do not provide for cumulative voting in the election of directors. Additionally,
the holders of ChoicePoint Common Stock have no preemptive, conversion or other
subscription rights and there are no redemption or sinking fund provisions
applicable to the ChoicePoint Common Stock.
PREFERRED STOCK
The ChoicePoint Articles provide that ChoicePoint may issue up to ten
million shares of Preferred Stock, par value $.01 per share. The ChoicePoint
Articles further provide that in accordance with the provisions of the Georgia
Business Corporation Code ("GBCC"), the Board of Directors of the Corporation
may determine the preferences, limitations, and relative rights of: (i) any
class of shares before the issuance of any shares of that class; or (ii) one or
more series within a class, and designate the number of shares within that
series, before the issuance of any shares of that series.
No shares of Preferred Stock are currently designated, and there is no
current plan to designate or issue any class or series of Preferred Stock.
However, because the terms of the Preferred Stock may be fixed by the
ChoicePoint Board of Directors without shareholder action, Preferred Stock could
be issued quickly with terms calculated to defeat a proposed takeover of
ChoicePoint or to make the removal of management of ChoicePoint more difficult.
In addition, the issuance of Preferred Stock could decrease the amount of
earnings and assets available for distribution to holders of ChoicePoint Common
Stock. In certain circumstances, the aforementioned factors could have the
effect of decreasing the market price of the ChoicePoint Common Stock. See "RISK
FACTORS -- Certain Anti-Takeover Provisions" and " -- Shareholder Rights Plan."
CERTAIN ANTI-TAKEOVER PROVISIONS OF GEORGIA LAW AND THE CHOICEPOINT ARTICLES AND
BYLAWS
The summary of certain provisions of the ChoicePoint Articles and Bylaws
set forth below is subject to and qualified in its entirety by reference to the
ChoicePoint Articles and Bylaws. Certain provisions of Georgia law and the
ChoicePoint Articles and Bylaws are described elsewhere in this Prospectus.
Provisions of Georgia Law
Unless otherwise provided by the articles of incorporation or bylaws or by
resolution of the Board of Directors (by conditioning its submission of a
proposed merger or share exchange), the GBCC generally requires the affirmative
vote of a majority of all votes entitled to be cast, by all shares entitled to
vote, voting as a single class, to approve mergers and share exchanges.
Shareholders of the corporation surviving a merger
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<PAGE> 55
need not approve a merger if: (i) the articles of incorporation of the surviving
corporation will not differ from its articles before the merger; (ii) each share
of stock of the surviving corporation outstanding immediately before the
effective date of the merger is to be an identical outstanding or reacquired
share immediately after the merger; and (iii) the number and kind of shares
outstanding immediately after the merger, plus the number and kind of shares
issuable as a result of the merger and by the conversion of securities issued
pursuant to the merger or the exercise of rights and warrants issued pursuant to
the merger, will not exceed the total number and kind of shares of the surviving
corporation authorized by its articles of incorporation immediately before the
merger. The ChoicePoint Bylaws do not contain a provision which alters the GBCC
voting requirements with respect to mergers.
ChoicePoint has elected to be covered by two provisions of the GBCC that
restrict business combinations with interested shareholders: the Business
Combinations Provision (as defined herein) and the Fair Price Provision (as
defined herein). These provisions do not apply to a Georgia corporation unless
its bylaws specifically make the statute applicable, and once adopted, in
addition to any other vote required by the corporation's articles of
incorporation or bylaws to amend the bylaws, such a bylaw may be repealed only
by the affirmative vote of at least two-thirds of the continuing directors and a
majority of the votes entitled to be cast by the voting shares of such
corporation, other than shares beneficially owned by an interested shareholder
and, with the respect to the Fair Price Provision, his, her or its associates
and affiliates.
Interested Shareholders Transactions. The provisions of the GBCC
concerning "Business Combinations with Interested Shareholders" (the "Business
Combinations Provision") generally prohibits certain "resident domestic
[Georgia] corporations" from entering into certain business combination
transactions with any "interested shareholder" (generally defined as any person
other than the corporation or its subsidiaries beneficially owning at least 10%
of the outstanding voting stock of the corporation) for a period of five years
from the date that person became an interested shareholder, unless: (i) prior to
becoming an interested shareholder, the board of directors of the corporation
approved either the business combination or the transaction by which the
shareholder became an interested shareholder; (ii) in the transaction in which
the shareholder became an interested shareholder, the interested shareholder
became the beneficial owner of at least 90% of the voting stock outstanding
(excluding, for purposes of determining the number of shares outstanding,
"Insider Shares," as defined below) at the time the transaction commenced; or
(iii) subsequent to becoming an interested shareholder, such shareholder
acquired additional shares resulting in the interested shareholder being the
beneficial owner of at least 90% of the outstanding voting shares (excluding,
for purposes of determining the number of shares outstanding, Insider Shares)
and the transaction was approved at an annual or special meeting of shareholders
by the holders of a majority of the voting stock entitled to vote thereon
(excluding from such vote, Insider Shares and voting stock beneficially owned by
the interested shareholder). For purposes of the Business Combinations
Provision, Insider Shares refers generally to shares owned by: (a) persons who
are directors or officers of the corporation, their affiliates, or associates;
(b) subsidiaries of the corporation; and (c) any employee stock plan under which
participants do not have the right (as determined exclusively by reference to
the terms of such plan and any trust which is part of such plan) to determine
confidentially the extent to which shares held under such plan will be tendered
in a tender or exchange offer. A Georgia corporation's bylaws must specify that
all requirements of the Business Combinations Provision apply to the corporation
in order for the Business Combinations Provision to apply. The ChoicePoint
Bylaws contain a provision stating that all requirements of the Business
Combinations Provision (and any successor provisions thereto) apply to
ChoicePoint. See "RISK FACTORS -- Certain Anti-Takeover Provisions."
Fair Price Requirements. The GBCC also contains a provision concerning
"Fair Price Requirements" (the "Fair Price Provision") which imposes certain
requirements on "business combinations" of a Georgia corporation with any person
who is an "interested shareholder" of that corporation. In addition to any vote
otherwise required by law or the corporation's articles of incorporation, under
the Fair Price Provision, business combinations with an interested shareholder
must meet one of the three following criteria designed to protect a
corporation's minority shareholders: (i) the transaction must be unanimously
approved by the "continuing directors" of the corporation (generally directors
who served prior to the time an interested shareholder acquired 10% ownership
and who are unaffiliated with such interested shareholder) provided that
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<PAGE> 56
the continuing directors constitute at least three members of the board of
directors at the time of such approval; (ii) the transaction must be recommended
by at least two-thirds of the continuing directors and approved by a majority of
the votes entitled to be cast by holders of voting shares, other than voting
shares beneficially owned by the interested shareholder who is, or whose
affiliate is, a party to the business combination; or (iii) the terms of the
transaction must meet specified fair pricing criteria and certain other tests. A
Georgia corporation's bylaws must specify that all requirements of the Fair
Price Provision apply to the corporation in order for the Fair Price Provision
to apply. The ChoicePoint Bylaws contain a provision stating that all
requirements of the Fair Price Provision (and any successor provisions thereto)
apply to ChoicePoint. See "RISK FACTORS -- Certain Anti-Takeover Provisions."
Removal of Directors. In addition to the Business Combinations Provision
and the Fair Price Provision, the GBCC contains a provision concerning "Removal
of Directors by Shareholders" (the "Removal Provision") which, among other
things, limits the ability of shareholders of a Georgia corporation to remove
the directors of such corporation if such corporation's directors serve
staggered terms. The Removal Provision generally provides that: (i) directors
having staggered terms may be removed only for "cause," unless the corporation's
articles of incorporation or a bylaw adopted by the corporation's shareholders
provides otherwise; (ii) directors may be removed only by a majority vote of the
shares entitled to vote for the removal of directors; and (iii) a director may
be removed by a corporation's shareholders only at a meeting called for the
purpose of removing him or her and the meeting notice must state that the
purpose, or one of the purposes, of the meeting is removal of the director.
Neither the ChoicePoint Articles nor Bylaws contain provisions permitting the
removal of members of the ChoicePoint Board of Directors other than for "cause."
Accordingly, the Removal Provision could have the effect of restricting the
ability of ChoicePoint shareholders to remove incumbent directors and fill the
vacancies created by such removal with their own nominees. See " -- Articles of
Incorporation and Bylaws -- Staggered Board of Directors."
Articles of Incorporation and Bylaws
Staggered Board of Directors. The ChoicePoint Articles and Bylaws provide
that the ChoicePoint Board of Directors will consist of not less than seven but
no more than fifteen shareholders. The initial Board of Directors has been set
at eight directors. The ChoicePoint Board of Directors is divided into three
classes of directors serving staggered three-year terms, with each class
consisting, as nearly as possible, of one-third of the total number of
directors. If the number of directors is increased or decreased, such increase
or decrease will be apportioned among the classes so as to maintain, as nearly
as possible, an equal number of directors in each class, provided however, that
no decrease in the number of directors for a class shall shorten the term of an
incumbent director. Any additional director elected to fill a vacancy resulting
from an increase in the size of the ChoicePoint Board of Directors shall hold
office for a term that coincides with the remaining term of the class to which
such director is elected, unless otherwise required by law. Of the initial
directors of ChoicePoint, one-third will serve until the 1998 annual meeting of
shareholders, one-third will serve until the 1999 annual meeting of shareholders
and one-third will serve until the 2000 annual meeting of shareholders.
Beginning with the 1998 annual meeting of shareholders, one class of directors
will be elected each year to serve a three-year term. The GBCC provides that a
bylaw establishing staggered terms for directors may only be adopted, amended or
repealed by the shareholders.
The classification of directors has the effect of making it more difficult
for shareholders to change the composition of the ChoicePoint Board of
Directors. At least two annual meetings of shareholders, instead of one,
generally will be required to effect a change in the majority of the ChoicePoint
Board of Directors. The classification provisions could also have the effect of
discouraging a third party from initiating a proxy contest, making a tender
offer or otherwise attempting to obtain control of ChoicePoint, even though such
an attempt might be beneficial to ChoicePoint and its shareholders. See "RISK
FACTORS -- Certain Anti-Takeover Provisions."
Filling Vacancies. The ChoicePoint Articles and Bylaws provide that any
vacancy on the ChoicePoint Board of Directors that results from an increase in
the number of directors, or from prior death, resignation, retirement,
disqualification or removal from office of any director, shall be filled by a
majority of the remaining members of the ChoicePoint Board of Directors, though
less than a quorum, or by the sole
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<PAGE> 57
remaining director. Any director elected to fill a vacancy resulting from prior
death, resignation, retirement, disqualification or removal from office of a
director shall have the same remaining term as his or her predecessor.
Accordingly, the ChoicePoint Board of Directors could temporarily prevent any
shareholder from enlarging the ChoicePoint Board of Directors and filling the
new directorships with such shareholder's own nominees.
Shareholder Proposals at Annual Meeting; Director Nominations. The
ChoicePoint Bylaws provide that in order to bring certain matters before the
annual meeting of shareholders, including nominations of directors, shareholders
must give notice to ChoicePoint containing certain information within the time
period specified in SEC Rule 14a-8(a)(3)(i). Shareholders making proposals,
other than those that appear in a proxy statement after compliance with SEC Rule
14a-8, must file written notice with the ChoicePoint Board of Directors setting
forth certain information called for by the ChoicePoint Bylaws.
Special Meetings of Shareholders. The GBCC provides that a Georgia
corporation shall hold a special meeting of shareholders: (i) on the call of the
corporation's board of directors or the person or persons authorized by the
corporation's articles of incorporation or bylaws; (ii) in the case of a
corporation having more than one hundred (100) shareholders of record, upon the
written demand of the holders of at least twenty five percent (25%), or such
greater or lesser percentage as may be provided in the corporation's articles of
incorporation or bylaws, of all the votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting; or (iii) in the case
of a corporation having one hundred (100) or fewer shareholders of record, upon
the written demand of the holders of at least twenty five percent (25%), or such
lesser percentage as may be provided in the corporation's articles of
incorporation or bylaws, of all the votes entitled to be cast on any issue
considered at the proposed special meeting. The ChoicePoint Bylaws provide that
a special meeting of shareholders may be called by: (i) the Chairman or Vice
Chairman of the ChoicePoint Board of Directors; (ii) the Chief Executive Officer
of ChoicePoint; (iii) the President of ChoicePoint; (iv) the ChoicePoint Board
of Directors by vote at a meeting; (v) a majority of the ChoicePoint Board of
Directors in writing without a meeting; or (vi) the unanimous call of the
ChoicePoint shareholders. The ChoicePoint Bylaws provide that in order to bring
certain matters before a special meeting of shareholders, including the
nomination of directors, shareholders must give notice to ChoicePoint containing
certain information no later than the close of business on the earlier of (i)
the 30th day following the public announcement that a matter will be submitted
to a vote of the shareholders at a special meeting, or (ii) the 15th day
following the day on which notice of the special meeting was given.
Amendment of ChoicePoint Articles. Under the GBCC, in general and except
as otherwise provided by the ChoicePoint Articles, amendments to the ChoicePoint
Articles must be recommended to the shareholders by the ChoicePoint Board of
Directors and approved at a properly called shareholder meeting by a majority of
the votes entitled to be cast on the amendment by each voting group entitled to
vote on the amendment. The ChoicePoint Articles require the affirmative vote of
the holders of not less than two-thirds of the votes entitled to be cast by the
holders of all then outstanding shares of voting stock, voting together as a
single class, to make, alter, amend, change, add to or repeal any provision of
the ChoicePoint Articles or Bylaws where such creation, alteration, amendment,
change, addition or repeal would be inconsistent with the provisions of the
ChoicePoint Articles relating to: (i) the number of members of the ChoicePoint
Board of Directors; (ii) the classification of the ChoicePoint Board of
Directors; or (iii) the filling of vacancies on the ChoicePoint Board of
Directors, provided however, that such two-thirds vote is not required for any
alteration, amendment, change, addition or repeal recommended by a majority of
the ChoicePoint Board of Directors. See " -- Articles of Incorporation and
Bylaws -- Amendment of ChoicePoint Bylaws."
Amendment of ChoicePoint Bylaws. Under the GBCC, in general and subject to
the requirements of the Business Combinations Provision, the Fair Price
Provision and the ChoicePoint Articles of Incorporation, ChoicePoint Bylaws may
be altered, amended or repealed by the ChoicePoint Board of Directors or by the
affirmative vote of the holders of a majority of the shares of ChoicePoint
Common Stock entitled to vote and actually voted on such matter. See
" -- Articles of Incorporation and Bylaws -- Amendment of ChoicePoint Articles,"
" -- Certain Anti-Takeover Provisions of Georgia Law and the ChoicePoint
Articles and Bylaws -- Provisions of Georgia Law" and "RISK FACTORS -- Certain
Anti-Takeover Provisions."
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<PAGE> 58
LIMITED LIABILITY AND INDEMNIFICATION PROVISIONS
The ChoicePoint Articles provide for indemnification of the officers and
directors of ChoicePoint to the fullest extent permitted by the GBCC. Such
indemnification is not exclusive of any additional indemnification that the
ChoicePoint Board of Directors may deem advisable or of any rights to which
those indemnified may otherwise be entitled. The ChoicePoint Articles provide
that the ChoicePoint Board of Directors may determine from time to time whether
and to what extent to maintain insurance providing indemnification for officers
and directors, and such insurance need not be limited to ChoicePoint's power of
indemnification under the GBCC. ChoicePoint intends to purchase and maintain
insurance on behalf of ChoicePoint's officers and directors against liability
asserted against or incurred by such person in such capacity, or arising out of
such person's status as such, whether or not ChoicePoint would have the power to
indemnify or advance expenses to such person against such liability under the
ChoicePoint Articles of Incorporation, the Bylaws or the GBCC.
The ChoicePoint Bylaws generally provide that ChoicePoint shall not
indemnify any officer or director who is adjudged liable to ChoicePoint or is
subjected to injunctive relief in favor of ChoicePoint: (i) for any
appropriation, in violation of his or her duties, of any business opportunity of
ChoicePoint; (ii) for acts or omissions which involve intentional misconduct or
a knowing violation of law; (iii) for the types of liability for unlawful
distributions set forth in Section 14-2-832 of the GBCC; or (iv) for any
transaction from which he or she received an improper personal benefit. The
ChoicePoint Bylaws obligate ChoicePoint, under certain circumstances, to advance
expenses to its officers and directors who are parties to an action, suit or
proceeding for which indemnification may be sought. The ChoicePoint Bylaws
permit, but do not require, ChoicePoint to indemnify and advance expenses to
employees or agents of ChoicePoint who are not officers or directors to the same
extent and subject to the same conditions that a corporation could, without
shareholder approval under Section 14-2-856 of the GBCC. ChoicePoint's Articles
also provide that no director shall have any liability to the Company or to its
shareholders for monetary damages for any action taken, or any failure to take
action, including, without limitation, for breach of duty of care or other duty
as a director, except that there shall be no elimination or limitation of
liability of a director for any conduct described in above clauses (i) through
(iv). As a result of this provision, shareholders may be unable to recover
monetary damages from directors for actions taken by them that constitute
negligence or gross negligence or that are in violation of their fiduciary
duties, although it may be possible to obtain injunctive or other equitable
relief with respect to such actions.
REGISTRATION RIGHTS
ChoicePoint expects to grant to the persons who receive ChoicePoint Common
Stock in the Kroll acquisition certain "demand" Registration Rights. The
Registration Rights become effective not sooner than one year after the date of
the Kroll acquisition. The registration rights, with certain limitations, grant
the holders thereof the right to have such shares registered under a
registration statement filed by ChoicePoint relating to the issuance of
ChoicePoint Common Stock. ChoicePoint will bear the expenses incident to the
registration requirements with respect to such registration rights, except that
such expenses shall not include any underwriting discount or commission,
Commission or state securities registration fees or transfer taxes relating to
such shares.
SHAREHOLDER RIGHTS PLAN
The ChoicePoint Board of Directors anticipates adopting a Shareholder
Rights Plan (the "Rights Plan") after the Spinoff. If adopted, the Rights Plan
will contain provisions to protect the Company's shareholders in the event of an
unsolicited offer to acquire the Company, including offers that do not treat all
shareholders equally, the acquisition in the open market of shares constituting
control without offering fair value to all shareholders, and other coercive,
unfair or inadequate takeover bids and practices that could impair the ability
of the ChoicePoint Board of Directors to represent shareholders' interests
fully. Pursuant to the Rights Plan, if adopted, the ChoicePoint Board of
Directors is expected to declare a dividend of one Share Purchase Right (a
"Right") for each outstanding share of the Company's Common Stock as of a record
date established by the Board of Directors. The Rights will be represented by,
and trade together with, the
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<PAGE> 59
Company's Common Stock. The Rights will not be currently exercisable and will
not become exercisable unless certain triggering events occur. Among the
triggering events will be the acquisition of 20% or more of the Company's Common
Stock by a person or group of affiliated or associated persons. Unless
previously redeemed by the ChoicePoint Board of Directors, upon the occurrence
of one of the specified triggering events, each Right that is not held by the
20% or more shareholder will entitle its holder to purchase one share of
ChoicePoint Common Stock or, under certain circumstances, additional shares of
Common Stock at a discounted price. The Rights will cause substantial dilution
to a person or group that attempts to acquire ChoicePoint on terms not approved
by the ChoicePoint Board of Directors. Thus, the Rights are intended to
encourage persons who may seek to acquire control of ChoicePoint to initiate
such an acquisition through negotiations with the Board of Directors.
OTHER MATTERS
The ChoicePoint Common Stock has been approved for listing on the New York
Stock Exchange, subject to official notice of issuance, under the symbol CPS.
The transfer agent and registrar for the ChoicePoint Common Stock is
SunTrust Bank, Atlanta.
LEGAL MATTERS
The validity of the shares of ChoicePoint Common Stock distributed hereby
will be passed upon for ChoicePoint by Hunton & Williams, Atlanta, Georgia.
EXPERTS
The consolidated balance sheets of ChoicePoint Inc. as of December 31, 1996
and 1995 and the related consolidated statements of income, shareholder's equity
and cash flows for each of the three years in the period ended December 31,
1996, and the Consolidated Financial Statements of CDB Infotek as of December
31, 1995 and for the year then ended, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
ADDITIONAL INFORMATION
ChoicePoint has filed the Registration Statement with the Securities and
Exchange Commission (the "SEC") concerning the shares of ChoicePoint Common
Stock being received by Equifax shareholders in the Spinoff. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. With respect to each contract, agreement
or other document filed as an exhibit to the Registration Statement, reference
is made to such exhibit for a more complete description of the matter involved,
and each statement made in this document concerning the contents of any such
contract, agreement or other document shall be deemed qualified in its entirety
by such reference.
Following the Spinoff, ChoicePoint will be required to comply with the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, will file annual, quarterly and
other reports, proxy and information statements and other information with the
SEC. ChoicePoint will be subject to the proxy solicitation requirements of the
Exchange Act and, accordingly, will furnish audited financial statements to its
shareholders in connection with its annual meetings of shareholders. Such
reports, proxy and other information and the Registration Statement and the
exhibits and schedules thereto filed by ChoicePoint may be inspected and copied
at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the Regional Offices of the
SEC at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such information can be obtained by mail from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such materials can also be inspected at the offices of the New York Stock
Exchange, 20
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Broad Street, New York, New York 10005 or accessed electronically by means of
the SEC's home page on the Internet (http://www.sec.gov).
No person is authorized by Equifax or ChoicePoint to give any information
or to make any representations other than those contained in this document, and
if given or made, such information or representations must not be relied upon as
having been authorized.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CHOICEPOINT INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................ F-2
Consolidated Statements of Income......................... F-3
Consolidated Balance Sheets............................... F-4
Consolidated Statements of Shareholder's Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
CDB INFOTEK
Report of Independent Public Accountants.................. F-18
Consolidated Statements of Income......................... F-19
Consolidated Balance Sheets............................... F-20
Consolidated Statement of Stockholders' Equity............ F-21
Consolidated Statements of Cash Flows..................... F-22
Notes to Consolidated Financial Statements................ F-23
</TABLE>
F-1
<PAGE> 62
REPORT OF INDEPENDENT AUDITORS
To the Shareholder of ChoicePoint Inc.:
We have audited the accompanying consolidated balance sheets of the
business conducted through Equifax's Insurance Services Group (as defined in
Note 1), to be reorganized as ChoicePoint Inc. (a Georgia corporation) as of
December 31, 1996 and 1995, and the related consolidated statements of income,
shareholder's equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the business conducted
through Equifax's Insurance Services Group as of December 31, 1996 and 1995, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Atlanta, Georgia
April 15, 1997
F-2
<PAGE> 63
CHOICEPOINT INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------
1997 1996 1996 1995 1994
-------- ------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating revenue................. $102,852 $84,140 $366,481 $328,990 $284,566
-------- ------- -------- -------- --------
Costs and expenses:
Costs of services............... 68,359 59,422 252,118 221,045 205,590
Selling, general, and
administrative............... 22,295 15,712 66,752 66,867 62,399
Restructuring provision......... -- -- -- 9,150 --
-------- ------- -------- -------- --------
Total costs and
expenses.............. 90,654 75,134 318,870 297,062 267,989
Operating income.................. 12,198 9,006 47,611 31,928 16,577
Interest expense.................. 1,619 1,575 6,597 5,830 2,638
-------- ------- -------- -------- --------
Income before income taxes........ 10,579 7,431 41,014 26,098 13,939
Provision for income taxes........ 5,038 3,213 17,734 11,233 7,327
-------- ------- -------- -------- --------
Net income.............. $ 5,541 $ 4,218 $ 23,280 $ 14,865 $ 6,612
======== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE> 64
CHOICEPOINT INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 4,471 $ 1,726 $ 645
Accounts receivable, net of allowance for doubtful
accounts of $1,489 at March 31, 1997, $1,578 at
December 31, 1996 and $798 at
December 31, 1995...................................... 88,635 78,138 65,063
Deferred income tax assets................................ 4,753 3,984 8,428
Other current assets...................................... 10,894 8,083 4,023
-------- -------- --------
Total current assets.............................. 108,753 91,931 78,159
Property and Equipment, net................................. 38,635 35,407 19,796
Goodwill, net............................................... 121,309 123,997 67,513
Deferred Income Tax Assets.................................. 16,157 15,042 18,573
Other....................................................... 34,060 35,447 16,738
-------- -------- --------
Total Assets...................................... $318,914 $301,824 $200,779
======== ======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt...................... $ 864 $ 927 $ 4
Accounts payable.......................................... 13,537 12,828 9,680
Accrued salaries and bonuses.............................. 9,791 11,594 7,632
Other current liabilities................................. 24,074 19,616 23,104
-------- -------- --------
Total current liabilities......................... 48,266 44,965 40,420
Long-Term Debt, Less Current Maturities..................... 872 1,051 --
Postretirement Benefit Obligations.......................... 55,650 55,622 54,430
Other Long-Term Liabilities................................. 3,659 3,859 1,288
-------- -------- --------
Total Liabilities................................. 108,447 105,497 96,138
Commitments and Contingencies (Note 9)
Shareholder's Equity:
Equifax equity investment................................. 210,555 196,414 104,684
Foreign currency translation adjustments.................. (88) (87) (43)
-------- -------- --------
Total Shareholder's Equity........................ 210,467 196,327 104,641
-------- -------- --------
Total Liabilities and Shareholder's Equity........ $318,914 $301,824 $200,779
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE> 65
CHOICEPOINT INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOREIGN
EQUIFAX CURRENCY
EQUITY TRANSLATION
INVESTMENT ADJUSTMENTS TOTAL
---------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, December 31, 1993.................................. $ 13,961 $ -- $ 13,961
Net income................................................ 6,612 -- 6,612
Net transactions with Equifax............................. 15,892 -- 15,892
Translation adjustments................................... -- (76) (76)
Contribution from Equifax (Note 7)........................ 61,639 -- 61,639
-------- ---- --------
Balance, December 31, 1994.................................. 98,104 (76) 98,028
Net income................................................ 14,865 -- 14,865
Net transactions with Equifax............................. (8,285) -- (8,285)
Translation adjustments................................... -- 33 33
-------- ---- --------
Balance, December 31, 1995.................................. 104,684 (43) 104,641
Net income................................................ 23,280 -- 23,280
Net transactions with Equifax............................. 68,450 -- 68,450
Translation adjustments................................... -- (44) (44)
-------- ---- --------
Balance, December 31, 1996.................................. 196,414 (87) 196,327
Net income (Unaudited).................................... 5,541 -- 5,541
Net transactions with Equifax (Unaudited)................. 8,600 -- 8,600
Translation adjustments (Unaudited)....................... -- (1) (1)
-------- ---- --------
Balance, March 31, 1997 (Unaudited)......................... $210,555 $(88) $210,467
======== ==== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 66
CHOICEPOINT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- --------------------------------
1997 1996 1996 1995 1994
-------- ------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income......................... $ 5,541 $ 4,218 $ 23,280 $ 14,865 $ 6,612
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization... 6,327 3,419 18,654 13,321 10,033
Restructuring provision, net of
cash payments................. -- -- -- 6,944 --
Changes in assets and
liabilities, excluding effects
of acquisitions:
Accounts receivable, net...... (10,555) (5,834) (7,362) (2,966) (9,247)
Current liabilities, excluding
debt....................... 3,389 (700) (60) (4,585) 2,818
Other current assets.......... (2,831) (156) (1,582) (486) (197)
Deferred income taxes......... (325) 449 2,052 (4,845) (2,391)
Other long-term liabilities,
excluding debt............. (171) 497 1,797 (2,008) 597
-------- ------- -------- -------- --------
Net cash provided by
operating activities..... 1,375 1,893 36,779 20,240 8,225
-------- ------- -------- -------- --------
Cash flows from investing activities:
Acquisitions, net of cash
acquired........................ -- -- (69,654) (1,421) (12,462)
Additions to property and
equipment....................... (6,120) (2,206) (18,098) (5,355) (2,574)
Additions to other assets, net..... (1,065) (657) (4,034) (5,232) (3,040)
-------- ------- -------- -------- --------
Net cash used by investing
activities...................... (7,185) (2,863) (91,786) (12,008) (18,076)
-------- ------- -------- -------- --------
Cash flows from financing activities:
Payment of debt assumed in
acquisition..................... -- -- (11,778) -- --
Payments on long-term debt......... (241) (2) (315) (12) (1,008)
Net transactions with Equifax...... 8,826 3,570 68,159 (9,875) 13,394
-------- ------- -------- -------- --------
Net cash provided (used) by
financing activities............ 8,585 3,568 56,066 (9,887) 12,386
-------- ------- -------- -------- --------
Effect of foreign currency exchange
rates on cash...................... (30) (9) 22 23 13
-------- ------- -------- -------- --------
Net increase (decrease) in cash...... 2,745 2,589 1,081 (1,632) 2,548
Cash and cash equivalents, beginning
of period.......................... 1,726 645 645 2,277 (271)
-------- ------- -------- -------- --------
Cash and cash equivalents, end of
period............................. $ 4,471 $ 3,234 $ 1,726 $ 645 $ 2,277
======== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 67
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES APPLICABLE TO MARCH 31, 1997 AND 1996 ARE UNAUDITED)
1. SPIN OFF AND BASIS OF PRESENTATION
In December 1996, the Board of Directors of Equifax Inc. ("Equifax")
announced that it planned to spin off the business conducted through Equifax's
Insurance Services Group to Equifax shareholders (the "Spinoff"). This Spinoff
is expected to occur on August 7, 1997 ("the Spinoff date") and will be
accomplished by forming ChoicePoint Inc. ("ChoicePoint" or the "Company"),
transferring the stock of the companies which comprise the Insurance Services
Group to ChoicePoint and then distributing all of the shares of Common Stock of
ChoicePoint to Equifax shareholders. Equifax shareholders will receive one share
of ChoicePoint Common Stock for every ten shares of Equifax Common Stock owned
as of the Record Date (which does not include two grantor trusts established by
Equifax). The actual total number of shares of ChoicePoint Common Stock to be
distributed will depend on the number of shares of Equifax Common Stock
outstanding on the Record Date. After the Spinoff, ChoicePoint and Equifax will
be two separate public companies.
The consolidated financial statements of ChoicePoint include substantially
all of the assets, liabilities, revenues, and expenses of the business conducted
through Equifax's Insurance Services Group. ChoicePoint operates in a single
industry segment and provides substantially all domestic insurance companies
with automated and traditional underwriting and claims information services to
assist companies in assessing the insurability of individuals and property and
the validity of insurance claims. ChoicePoint provides background
investigations, performs paramedical exams, furnishes access to motor vehicle
reports, maintains a database of claims histories and provides claims
verification and investigative services to both the property and casualty and
the life and health insurance markets. The Company also offers pre-employment
background investigations, pre-employment and regulatory compliance drug testing
services and public record information to other corporate and government
organizations. The Company's operations are predominantly located in the United
States.
All material transactions between entities included in the consolidated
financial statements have been eliminated. The consolidated financial statements
have been prepared on the historical cost basis, and present the Company's
financial position, results of operations and cash flows as derived from
Equifax's historical financial statements.
In conjunction with the separation of their businesses, ChoicePoint and
Equifax entered into various agreements that address the allocation of assets
and liabilities between them and that define their relationship after the
separation, including a Distribution Agreement, the Employee Benefits Agreement,
the Transition Support Agreement, the Intercompany Information Services
Agreement, the Intellectual Property Agreement, the Tax Sharing and
Indemnification Agreement, the Real Estate Agreements and the CUE UK Agreements.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements as well as reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from these estimates.
Revenue Presentation. Historically, motor vehicle records registry
revenue, the fee charged by states for motor vehicle records which is passed on
by ChoicePoint to its customers, has been reflected in Equifax's consolidated
statements of income as operating revenue and cost of services. ChoicePoint has
elected to exclude these customer reimbursed fees from revenue and reduce cost
of services by a corresponding amount. This change in accounting presentation
does not impact operating income. Registry revenue previously
F-7
<PAGE> 68
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reflected in Equifax's consolidated statements of income was $63,922,000 in the
first quarter of 1997, $52,477,000 in the first quarter of 1996, $224,783,000 in
1996, $191,645,000 in 1995 and $171,893,000 in 1994.
Property and Equipment. Property and equipment at December 31, 1996 and
1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land, buildings, and improvements........................... $ 10,824 $ 5,087
Data processing equipment and furniture..................... 66,019 43,086
-------- --------
76,843 48,173
Less: Accumulated depreciation.............................. (41,436) (28,377)
-------- --------
$ 35,407 $ 19,796
======== ========
</TABLE>
The cost of property and equipment is depreciated primarily on the
straight-line basis over estimated asset lives of 30 to 40 years for buildings;
useful lives, not to exceed lease terms, for leasehold improvements; three to
five years for data processing equipment and eight to 20 years for furniture.
Goodwill and Other Assets. Goodwill is amortized on a straight-line basis
over 20 to 40 years. Amortization expense was $2,873,000 in 1996, $2,013,000 in
1995, and $894,000 in 1994. As of December 31, 1996 and 1995, accumulated
amortization was $9,032,000 and $5,134,000, respectively.
Other assets at December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Purchased software, datafiles, and technology............... $26,629 $14,126
Other....................................................... 8,818 2,612
------- -------
$35,447 $16,738
======= =======
</TABLE>
Purchased software, datafiles, and technology are being amortized on a
straight-line basis over five to ten years. Amortization expense for other
assets was $6,479,000 in 1996, $3,810,000 in 1995, and $2,913,000 in 1994. As of
December 31, 1996 and 1995, accumulated amortization was $17,719,000 and
$11,240,000, respectively.
The Company regularly evaluates whether events and circumstances have
occurred that indicate the carrying amount of goodwill or other assets may
warrant revision or may not be recoverable. When factors indicate that goodwill
or other assets should be evaluated for possible impairment, the Company uses an
estimate of the future undiscounted net cash flows of the related business over
the remaining life of the goodwill or other assets in measuring whether the
goodwill or other assets are recoverable.
Foreign Currency Translation. The assets and liabilities of foreign
subsidiaries are translated at the year-end rate of exchange and income
statement items are translated at the average rates prevailing during the year.
The resulting translation adjustment is recorded as a component of shareholder's
equity. Foreign currency transaction gains and losses, which are not material,
are recorded in the consolidated statements of income.
Consolidated Statements of Cash Flows. The Company considers cash
equivalents to be short-term cash investments with original maturities of three
months or less.
F-8
<PAGE> 69
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Tax provisions are settled through the intercompany account and Equifax
makes income tax payments on behalf of the Company. Based on the income tax
returns filed, or to be filed, the amounts paid would have been approximately
$14,842,000 in 1996, $8,723,000 in 1995, and $5,962,000 in 1994.
Interest paid on long-term debt, excluding amounts charged by Equifax,
totaled $147,000 in 1996, $200,000 in 1995, and $131,000 in 1994.
In 1996, 1995 and 1994, the Company acquired various businesses that were
accounted for as purchases (Note 3). In conjunction with these transactions,
liabilities were assumed as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Fair value of assets acquired.............................. $97,204 $1,438 $82,970
Cash paid for acquisitions................................. 71,661 1,421 14,146
Contribution by Equifax (Note 7)........................... -- -- 60,000
------- ------ -------
Liabilities assumed........................................ $25,543 $ 17 $ 8,824
======= ====== =======
</TABLE>
Financial Instruments. The Company's financial instruments consist
primarily of cash and cash equivalents, accounts and notes receivable, accounts
payable and long-term debt. The carrying amounts of these items approximate
their fair market values. During 1996, the Company did not hold any derivative
financial instruments.
Earnings Per Share. Historical earnings per share are not presented since
the companies that comprise ChoicePoint were majority-owned subsidiaries of
Equifax or one of its affiliates and will be recapitalized as part of the
Spinoff.
3. ACQUISITIONS
During 1996, 1995 and 1994, the Company acquired or made equity investments
in the following businesses:
<TABLE>
<CAPTION>
DATE PERCENTAGE
BUSINESS ACQUIRED OWNERSHIP
- -------- ------------- ----------
<S> <C> <C>
CDB Infotek................................................. August 1996 70.0%
Professional Test Administrators, Inc....................... April 1996 100.0
Vallance and Associates, Inc................................ February 1995 100.0
Osborn Laboratories, Inc.................................... November 1994 100.0
Programming Resources Company............................... April 1994 100.0
</TABLE>
The 1996 acquisitions were accounted for as purchases and had an aggregate
purchase price of $71,661,000, with $59,457,000 allocated to goodwill, and
$20,932,000 to other intangible assets (primarily purchased datafiles and
software). Their results of operations have been included in the consolidated
statements of income from the dates of acquisition.
Additional consideration of up to $20.0 million may be paid for the 1996
acquisition of CDB Infotek based on its future operating performance. In
addition, the Company entered into an option agreement with the remaining
shareholders of CDB Infotek. The agreement grants the Company an option to
purchase the remaining 30% interest in CDB Infotek (the "Call Option") and an
option for the remaining shareholders to sell their 30% interest to the Company
(the "Put Option"). The options may be exercised at any time after December 31,
1999. The Put Option will expire on the later of June 30, 2000 or the date that
is 90 days after the final determination of the option price and the Call Option
has no expiration date. The exercise date may be accelerated upon the breach of
certain obligations. If certain 1999 operating results are met, then the option
price is determined by a formula not to exceed $53.0 million. If certain 1999
operating results are not met,
F-9
<PAGE> 70
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and both parties cannot mutually agree on an option price, then the option price
is determined by an independent appraisal, not to exceed $25.5 million.
The following unaudited pro forma information has been prepared as if the
1996 acquisition of CDB Infotek had occurred on January 1, 1995. The information
is based on historical results of the separate companies and may not necessarily
be indicative of the results that could have been achieved or of results which
may occur in the future. The pro forma information includes the expense for
amortization of goodwill and other intangible assets resulting from this
transaction.
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenue..................................................... $389,262 $361,010
Net Income.................................................. 20,904 12,765
</TABLE>
The 1995 acquisition was accounted for as a purchase and had an aggregate
purchase price of $1,421,000, with $1,222,000 allocated to goodwill and $216,000
to other intangible assets (noncompete agreement). The results of operations
have been included in the consolidated statements of income from the date of
acquisition and were not material.
The 1994 acquisitions were accounted for as purchases and had an aggregate
purchase price of $74,146,000, with $54,486,000 allocated to goodwill, and
$10,908,000 to other intangible assets (primarily purchased software and
technology). Their results of operations have been included in the consolidated
statements of income from the dates of acquisition. They were purchased using a
combination of cash totaling $14,146,000, and the contribution by Equifax of
$60,000,000 (Note 7).
4. TRANSACTIONS WITH EQUIFAX
There are no material intercompany purchase or sale transactions between
Equifax and ChoicePoint. Under Equifax's centralized cash management system,
short-term advances from Equifax and excess cash sent to Equifax are reflected
as intercompany debt and are included in Equifax equity investment in the
accompanying balance sheets (Note 7). ChoicePoint was charged corporate costs in
the amount of $2,551,000 in the first quarter of 1997, $2,815,000 in the first
quarter of 1996, $11,260,000 in 1996, $11,833,000 in 1995, and $11,065,000 in
1994. These allocations were based on an estimate of the proportion of corporate
expenses related to ChoicePoint, utilizing such factors as revenues, number of
employees, number of transactions processed and other applicable factors. In the
opinion of management, the corporate charges have been made on a reasonable
basis and approximate all the incremental costs ChoicePoint would have incurred
had it been operating on a stand-alone basis. These amounts have been included
in selling, general, and administrative expenses. ChoicePoint was also charged
corporate interest expense based on the relationship of its net assets to total
Equifax net assets, excluding corporate debt, in amounts of $1,547,000 in the
first quarter of 1997, $1,554,000 in the first quarter of 1996, $6,215,000 in
1996, $5,401,000 in 1995, and $2,489,000 in 1994. These amounts are included in
interest expense. Intercompany debt as of March 31, 1997 and December 31, 1996
was $92,593,000 and $83,993,000, respectively, and is included in Equifax equity
investment in the accompanying balance sheets.
F-10
<PAGE> 71
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT, SHORT-TERM BORROWINGS, AND CREDIT FACILITY
Long-term debt at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------ ----
(IN THOUSANDS)
<S> <C> <C>
Capital leases.............................................. $1,978 $ 4
Less current maturities..................................... (927) (4)
------ ----
$1,051 $ 0
====== ====
</TABLE>
Scheduled maturities of long-term debt during the five years subsequent to
December 31, 1996 are as follows: $927,000 in 1997, $596,000 in 1998, $372,000
in 1999, $83,000 in 2000, and $0 in 2001.
There were no short-term borrowings during 1996 and 1995.
ChoicePoint will arrange a $250 million unsecured revolving credit facility
(the "Credit Facility") with a group of banks. The Credit Facility will be a
revolving facility expandable to $300 million, subject to approval of the
lenders. All obligations of ChoicePoint are guaranteed by all future
subsidiaries. The Credit Facility will be used to repay the net intercompany
debt due to Equifax (Note 7), to repay $29.0 million of Equifax debt to be
assumed by ChoicePoint, to purchase approximately $6.5 million of ChoicePoint
Common Stock in the open market after the Mail Date for two grantor trusts and
for general corporate purposes and for acquisitions. The commitment termination
date and final maturity of the Credit Facility will occur five years after the
closing of the Credit Facility.
Revolving loans under the Credit Facility will bear interest at the
following rates as applicable and selected by the Company from time to time: (1)
the lender's Base Rate, (2) LIBOR plus the applicable margin, (3) the lender's
Cost of Funds plus the applicable margin, and (4) the Competitive Bid Rate
offered by the syndicate lenders at their discretion. The applicable margin will
range from .16% to .45% per annum based on ChoicePoint's leverage ratio. Any
amount not paid when due shall bear interest at the applicable rate plus 2%. At
the end of the applicable interest period for LIBOR or Bid Rate Loans, interest
shall accrue at the Base Rate plus 2%. The Company will also pay customary
annual facility fees based upon its leverage ratio.
The Credit Facility will contain covenants customary for facilities of this
type. Such covenants include limitations, in certain circumstances, on the
ability of the Company and its subsidiaries to (i) effect a change of control of
the Company, (ii) incur certain types of liens, and (iii) transfer or sell
assets. The Credit Facility also requires compliance with financial covenants,
including (i) maximum leverage and (ii) minimum fixed charge coverage.
6. INCOME TAXES
Historically, the Company has been included in the consolidated federal
income tax return of Equifax. ChoicePoint's provision for income taxes in the
accompanying consolidated statements of income reflects federal and state income
taxes calculated on ChoicePoint's separate income, but recognizes the impact of
unitary tax regulations of certain states on ChoicePoint as a member of the
Equifax consolidated group.
The Company records deferred income taxes using enacted tax laws and rates
for the years in which the taxes are expected to be paid. Deferred income tax
assets and liabilities are recorded based on the differences between the
financial reporting and income tax bases of assets and liabilities.
F-11
<PAGE> 72
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.................................................. $12,538 $10,890 $3,729
State.................................................... 4,048 2,431 2,041
Foreign.................................................. 444 186 8
------- ------- ------
17,030 13,507 5,778
------- ------- ------
Deferred:
Federal.................................................. 878 (2,863) 997
State.................................................... (169) 589 552
Foreign.................................................. (5) -- --
------- ------- ------
704 (2,274) 1,549
------- ------- ------
Total............................................ $17,734 $11,233 $7,327
======= ======= ======
</TABLE>
The provision for income taxes is based upon income before income taxes as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States............................................. $38,373 $25,394 $15,837
Foreign................................................... 2,641 704 (1,898)
------- ------- -------
$41,014 $26,098 $13,939
======= ======= =======
</TABLE>
The provision for income taxes is reconciled with the federal statutory
rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal statutory rate..................................... 35.0% 35.0% 35.0%
Provision computed at federal statutory rate............... $14,355 $ 9,134 $4,879
State and local taxes, net of federal tax benefit.......... 2,521 1,963 1,685
Tax effect resulting from foreign activities............... (726) (105) 671
Goodwill amortization...................................... 867 567 201
Other...................................................... 717 (326) (109)
------- ------- ------
$17,734 $11,233 $7,327
======= ======= ======
Overall effective rate..................................... 43.2% 43.0% 52.6%
</TABLE>
F-12
<PAGE> 73
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of the Company's deferred income tax assets and liabilities at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Postretirement benefits................................... $22,804 $22,558
Reserves and accrued expenses............................. 3,870 8,411
Employee compensation programs............................ 2,374 407
Other..................................................... 1,318 1,440
------- -------
30,366 32,816
------- -------
Deferred income tax liabilities:
Purchased software, datafiles, technology, and other
assets................................................. (7,824) (1,518)
Depreciation.............................................. (1,653) (1,782)
Deferred expenses......................................... (1,667) (241)
Other..................................................... (196) (2,274)
------- -------
(11,340) (5,815)
------- -------
Net deferred income tax assets.................... $19,026 $27,001
======= =======
</TABLE>
Accumulated undistributed retained earnings of the Canadian subsidiary are
not considered material at December 31, 1996.
7. SHAREHOLDER'S EQUITY
Equifax Equity Investment. Equifax equity investment includes the original
investment in ChoicePoint, accumulated income of ChoicePoint, and the net
intercompany payable due to Equifax reflecting transactions described in Note 4.
As of March 31, 1997 and December 31, 1996 and 1995, the net intercompany
payable due to Equifax included in Equifax equity investment in the accompanying
balance sheets was $92,593,000, $83,993,000 and $15,543,000, respectively.
Contribution from Equifax. One of the Company's 1994 acquisitions was
acquired by Equifax using cash and the issuance of treasury shares totaling
$60,000,000 in 1994 and $1,639,000 in 1995. As part of the Spinoff, Equifax will
transfer all of the issued and outstanding shares of capital stock of this
acquisition to ChoicePoint. The accompanying financial statements reflect this
transfer as a capital contribution in 1994.
Stock Options. Equifax has certain Stock Option Plans (the "Plans") under
which incentive stock options and non-qualified stock options may be granted to
officers, key employees and directors of Equifax. In connection with the
separation of ChoicePoint from Equifax, stock options under the Plans that are
not exercised prior to the date of the Spinoff will be adjusted. Upon the
Spinoff and except as set forth below, ChoicePoint employees will retain their
vested options to purchase Equifax Common Stock under various Equifax
equity-based compensation plans. Although they will forfeit their unvested
Equifax Stock Options, they will receive options to purchase ChoicePoint Common
Stock. Certain senior officers of ChoicePoint will be permitted to choose either
to retain vested Equifax stock options or have their vested Equifax stock
options replaced with ChoicePoint stock options in amounts and at exercise
prices intended to preserve the economic benefit of the Equifax stock options at
such time. The fair market value of Equifax Common Stock immediately before the
Spinoff and the fair market value of ChoicePoint Common Stock, upon the
commencement of regular way trading, will also impact the number of options
issued to ChoicePoint employees. The number of shares of Equifax Common Stock
subject to options held by option holders expected to become ChoicePoint
employees at December 31, 1996 was 1,510,000. The exercise price of such options
range from $8.13 to $27.94. The ultimate number of Equifax stock options to be
held by ChoicePoint
F-13
<PAGE> 74
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
employees at December 31, 1996 and the number and exercise price of the
ChoicePoint stock options to be issued, subject to the above calculation, cannot
yet be determined.
1997 Omnibus Stock Incentive Plan. ChoicePoint intends to adopt a 1997
Omnibus Stock Incentive Plan (the "Omnibus Plan"). The Omnibus Plan will
authorize grants of stock options, stock appreciation rights, restricted stock,
deferred shares, performance shares and performance units for an aggregate of
four million shares of ChoicePoint Common Stock. With the exception of the
Equifax stock options that are being replaced with ChoicePoint stock options,
the Omnibus Plan will require options to be granted at no less than fair value.
Shareholder Rights Plan. The Company's Board of Directors anticipates
adopting a Shareholder Rights Plan (the "Rights Plan") after the Spinoff. If
adopted, the Rights Plan will contain provisions to protect the Company's
shareholders in the event of an unsolicited offer to acquire the Company,
including offers that do not treat all shareholders equally, the acquisition in
the open market of shares constituting control without offering fair value to
all shareholders, and other coercive, unfair or inadequate takeover bids and
practices that could impair the ability of the ChoicePoint Board of Directors to
represent shareholders' interests fully. Pursuant to the Rights Plan, if
adopted, the ChoicePoint Board of Directors is expected to declare a dividend of
one Share Purchase Right (a "Right") for each outstanding share of the Company's
Common Stock as of a record date established by the Board of Directors. The
Rights will be represented by, and trade together with, the Company's Common
Stock. The Rights will not be immediately exercisable and will not become
exercisable unless certain triggering events occur. Among the triggering events
is the acquisition of 20% or more of the Company's Common Stock by a person or
group of affiliated or associated persons. Unless previously redeemed by the
ChoicePoint Board of Directors, upon the occurrence of one of the specified
triggering events, each Right that is not held by the 20% or more shareholder
will entitle its holder to purchase one share of common stock or, under certain
circumstances, additional shares of common stock at a discounted price.
Grantor Trusts. ChoicePoint intends to establish two grantor trusts to
which the Company will transfer cash with the intention of purchasing
approximately 325,000 shares of ChoicePoint Common Stock for distribution under
its various compensation and benefit plans. The purchase of such shares by these
trusts will occur as soon as reasonably practicable after the Spinoff.
Common And Preferred Stock. ChoicePoint expects to have 100 million shares
of ChoicePoint Common Stock, par value $.10 per share, authorized and 10 million
shares of Preferred Stock, par value $.01 per share (the "Preferred Stock")
authorized as of the date of the Spinoff. No shares of Preferred Stock are
expected to be issued as of the Spinoff date.
8. EMPLOYEE BENEFITS
United States Retirement Income Plan. Historically, the Company has
participated in the Equifax United States Retirement Income Plan (the "Plan").
The Plan is a non-contributory defined benefit qualified retirement plan that
covers most salaried employees. Under the Plan, retirement benefits are
primarily a function of years of service and the level of compensation during
the final years of employment. Total pension expense allocated to ChoicePoint
and included in the Company's financial results, was $3,310,000 in 1996,
$3,356,000 in 1995 and $2,198,000 in 1994. The expenses for the Plan, other than
service costs (which are allocated directly), are allocated to the companies
comprising the Insurance Services Group based on the relative projected benefit
obligations for Insurance Services Group employees compared with the obligations
for all participants. In the opinion of management, the expenses have been
allocated on a reasonable basis and were actuarially allocated to approximate
the expense ChoicePoint would have incurred had it been operating on a
stand-alone basis.
ChoicePoint has not adopted a defined benefit plan for its employees;
however, it anticipates adopting a profit sharing plan, as described below,
after the Spinoff.
F-14
<PAGE> 75
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Retirement Savings Plan. Equifax's retirement savings plan provides for
annual contributions at the discretion of the Board of Directors for the benefit
of eligible employees, including ChoicePoint employees, in the form of cash or
shares of the Company's common stock. The Company's portion of expense for this
plan was $1,632,000 in 1996, $1,600,000 in 1995 and $1,349,000 in 1994 and is
included in the Company's financial results. The expense for the Retirement
Savings Plan is a direct function of the contributions made by the participants
employed by the Insurance Services Group. In the opinion of management, the
expenses have been allocated on a reasonable basis and approximate all the
expenses ChoicePoint would have incurred had it been operating on a stand-alone
basis.
ChoicePoint has adopted a 401(k) profit sharing plan, under which eligible
Company employees may contribute up to 16% of their compensation. ChoicePoint
intends to make minimum matching contributions in the form of ChoicePoint Common
Stock equal to 25% of employee contributions up to the first 6% of an employee's
contributions. Employee contributions will be invested in one of the available
investment funds, including a ChoicePoint stock fund. Matching contributions
will be invested in the ChoicePoint stock fund. ChoicePoint may make additional
contributions based on achievement of targeted performance levels. ChoicePoint
will also adopt a defined contribution plan for certain employees to offset the
adverse impact of transitioning out of Equifax's defined benefit pension plan.
Postretirement Benefits. The Company provides certain healthcare and life
insurance benefits for eligible retired employees. Healthcare benefits are
provided through a trust, while life insurance benefits are provided through an
insurance company. The Company accrues the cost of providing postretirement
benefits for medical and life insurance coverage over the active service period
of each employee.
The following table presents a reconciliation of the plan's funded status
at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $ 47,599 $ 51,649
Fully eligible active plan participants................... 3,605 5,528
Other active participants................................. 4,826 5,875
-------- --------
56,030 63,052
Plan assets at fair value................................... -- --
-------- --------
Accumulated benefit obligation in excess of plan assets..... (56,030) (63,052)
Unrecognized prior service credit due to plan amendments.... (8,457) (6,950)
Unrecognized net losses..................................... 5,865 12,013
-------- --------
(58,622) (57,989)
Less: Current portion..................................... (3,000) (3,559)
-------- --------
Accrued postretirement benefit obligation................... $(55,622) $(54,430)
======== ========
</TABLE>
The current portion is included in other current liabilities in the accompanying
balance sheets.
Net periodic postretirement benefit expense includes the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................... $ 823 $ 935 $ 1,028
Interest cost on accumulated benefit obligation....... 3,667 4,499 4,095
Amortization of prior service credit.................. (2,652) (2,318) (2,463)
Amortization of losses................................ 118 -- 455
------- ------- -------
Net periodic postretirement benefit expense........... $ 1,956 $ 3,116 $ 3,115
======= ======= =======
</TABLE>
F-15
<PAGE> 76
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assumptions used in the computation of postretirement benefit expense and
the related obligation are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Discount rate used to determine accumulated postretirement
benefit obligation at December 31......................... 7.50% 7.25% 8.75%
Initial healthcare cost trend rate.......................... 10.50% 11.00% 11.00%
Ultimate healthcare cost trend rate......................... 6.00% 6.00% 6.00%
Year ultimate healthcare cost trend rate reached............ 2005 2005 2005
</TABLE>
If the healthcare cost trend rate were increased 1% for all future years,
the accumulated postretirement benefit obligation as of December 31, 1996 would
have increased 12.2%. The effect of such a change on the aggregate of service
and interest cost for 1996 would have been an increase of 8.7%.
The Company continues to evaluate ways in which it can better manage these
benefits and control its costs. Any changes in the plan, revisions to
assumptions, or changes in the Medicare program that affect the amount of
expected future benefits may have a significant effect on the amount of the
reported obligation and future annual expense.
9. COMMITMENTS AND CONTINGENCIES
Leases. The Company's operating leases involve principally office space
and office equipment. Rental expense relating to these leases was $13,353,000 in
1996, $10,655,000 in 1995, and $11,511,000 in 1994.
Future minimum payment obligations for noncancelable operating leases
exceeding one year are as follows as of December 31, 1996:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1997........................................................ $11,217
1998........................................................ 8,584
1999........................................................ 6,520
2000........................................................ 4,613
2001........................................................ 2,584
Thereafter.................................................. 7,417
-------
$40,935
=======
</TABLE>
Data Processing Services Agreement. In April 1993, the Company began
outsourcing a portion of its computer data processing operations and related
functions to Integrated Systems Solutions Corporation ("ISSC"), a subsidiary of
IBM. In 1995 a new five-year outsourcing agreement was reached with ISSC. Under
the terms of the agreement, the Company will pay ISSC an estimated $3.5 million
a year over the five-year term of the agreement, although this amount could be
more or less depending upon various factors such as the inflation rate, the
introduction of significant new technologies or changes in the Company's data
processing needs as a result of acquisitions or divestitures. Under certain
circumstances (e.g., a change in control of the Company), the Company may cancel
the ISSC agreement; however, the agreement provides that the Company must pay a
significant penalty in the event of such a cancellation.
Change in Control Provisions in Employment Agreements. The Company intends
to enter into employment agreements with certain executive officers prior to the
Spinoff which will provide certain severance pay and benefits in the event of a
"change in control" of ChoicePoint, which includes the acquisition of more than
50% of ChoicePoint's outstanding common stock by an entity or a concerted group
of entities.
F-16
<PAGE> 77
CHOICEPOINT INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The severance payment is a derivative of annual compensation multiplied by a
factor not to exceed three plus payments for other benefits.
Litigation. A limited number of lawsuits seeking damages are brought
against the Company each year. The Company provides for estimated legal fees and
settlements relating to pending lawsuits. In the opinion of management, the
ultimate resolution of these matters will not have a materially adverse effect
on the Company's financial position, liquidity or results of operations. The
accrued liability for litigation at December 31, 1996 and 1995 was $3,749,000
and $2,730,000 respectively, and is included in other current liabilities in the
accompanying balance sheets.
10. RESTRUCTURING
In the fourth quarter of 1995, the Company initiated a restructuring
program designed to streamline operations by reducing staffing levels and
consolidating facilities. Staffing levels were reduced by approximately 750
employees. The total cost of this program was $9,150,000. Components of the
restructuring provision and utilization through December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
SEVERANCE AND
TERMINATION LEASE
BENEFITS COSTS TOTAL
------------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Original provision.................................. $ 7,470 $1,680 $ 9,150
Utilized in 1995.................................. (1,291) (915) (2,206)
------- ------ -------
Balance, December 31, 1995.......................... 6,179 765 6,944
Utilized in 1996.................................. (4,973) (765) (5,738)
------- ------ -------
Balance, December 31, 1996.......................... $ 1,206 $ -- $ 1,206
======= ====== =======
</TABLE>
The reserve balance is included in other current liabilities in the accompanying
balance sheets.
11. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
Following is a summary of the unaudited interim results of operations for
each quarter in the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Revenue....................................... $84,140 $89,986 $94,354 $98,001 $366,481
Operating income.............................. 9,006 12,546 13,744 12,315 47,611
Net income.................................... 4,218 6,207 6,888 5,967 23,280
Year ended December 31, 1995
Revenue....................................... $82,042 $84,370 $82,190 $80,388 $328,990
Operating income.............................. 8,866 10,074 10,566 2,422 31,928
Net income.................................... 4,266 4,904 5,222 473 14,865
</TABLE>
Operating income decreased in the fourth quarter of 1996 due primarily to
the dilutive effect of the amortization of intangibles related to the CDB
Infotek acquisition in August 1996. The fourth quarter of 1995 includes a
$9,150,000 pre-tax ($5,582,000 after-tax) restructuring charge.
F-17
<PAGE> 78
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of CDB Infotek:
We have audited the accompanying consolidated balance sheet of CDB INFOTEK
(a California corporation) and subsidiaries as of December 31, 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CDB Infotek and subsidiaries
as of December 31, 1995, and the results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Orange County, California
April 24, 1996
F-18
<PAGE> 79
CDB INFOTEK
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ -------- --------
(AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET REVENUES......................................... $32,020 $16,643 $17,084
------- ------- -------
COSTS AND EXPENSES:
Direct costs....................................... 14,170 7,355 7,149
Depreciation and amortization...................... 3,884 2,130 2,132
Selling and marketing.............................. 5,135 2,518 2,189
General and administrative......................... 3,447 1,738 1,898
Non-recurring expenses and acquisition costs....... 1,363 1,136 --
------- ------- -------
27,999 14,877 13,368
------- ------- -------
Income from operations............................. 4,021 1,766 3,716
------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense, net.............................. (1,688) (584) (578)
Other, net......................................... 4 (22) (63)
------- ------- -------
(1,684) (606) (641)
------- ------- -------
Income before provision for income taxes........... 2,337 1,160 3,075
------- ------- -------
PROVISION FOR INCOME TAXES........................... 1,209 605 1,354
------- ------- -------
NET INCOME........................................... $ 1,128 $ 555 $ 1,721
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE> 80
CDB INFOTEK
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(AUDITED) (UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 660 $ 907
Accounts receivable, net of allowance for doubtful
accounts of $354 and $304 in 1995 and 1996,
respectively........................................... 4,455 5,195
Other receivables......................................... 650 108
Prepaid expenses.......................................... 586 513
Income taxes receivable................................... 159 --
Deferred income tax benefit............................... 460 515
------- -------
Total Current Assets.............................. 6,970 7,238
------- -------
PROPERTY AND EQUIPMENT, at cost............................. 17,821 19,616
Less -- Accumulated depreciation and amortization......... 6,470 8,280
------- -------
11,351 11,336
------- -------
INTANGIBLE AND OTHER ASSETS, net............................ 3,921 3,605
------- -------
Total Assets...................................... $22,242 $22,179
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long term debt...................... $ 2,600 $ 2,600
Current maturities of capital leases...................... 870 890
Accounts payable.......................................... 1,810 1,060
Accrued expenses.......................................... 1,442 1,374
Accrued employee benefits................................. 387 690
Income taxes payable...................................... -- 456
Deferred rent............................................. 39 18
------- -------
Total Current Liabilities......................... 7,148 7,088
------- -------
LONG TERM DEBT, net of current maturities................... 10,400 9,100
CAPITAL LEASES, net of current maturities................... 2,055 1,557
DEFERRED RENT............................................... 192 174
DEFERRED INCOME TAXES....................................... 2,120 2,212
------- -------
Total Liabilities................................. 21,915 20,131
------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value, 20,000,000 shares authorized,
10,832,214 shares issued and outstanding, stated at.... 8,195 8,195
Retained deficit.......................................... (7,868) (6,147)
------- -------
Total stockholders' equity........................ 327 2,048
------- -------
Total Liabilities and Stockholders' Equity........ $22,242 $22,179
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE> 81
CDB INFOTEK
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995, AND THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED EARNINGS AND
ACCUMULATED DEFICIT
PREFERRED STOCK COMMON STOCK -------------------------------------
------------------- ------------------- PREMIUM PAID TOTAL TOTAL
NUMBER OF NUMBER OF RETAINED ON STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT EARNINGS REPURCHASES DEFICIT EQUITY
---------- ------ ---------- ------ -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1994.................. 2,750,000 $2,700 6,801,527 $ 15 $2,417 $ (2,040) $ 377 $ 3,092
---------- ------ ---------- ------ ------ -------- ------- --------
Repurchase of preferred
stock, common stock
and warrants.......... (2,750,000) (2,700) (218,313) (664) -- (9,373) (9,373) (12,737)
Issuance of common stock
in connection with
acquisitions.......... -- -- 4,249,000 8,844 -- 8,844
Net Income.............. -- -- -- -- 1,128 -- 1,128 1,128
---------- ------ ---------- ------ ------ -------- ------- --------
BALANCE, December 31,
1995.................. -- -- 10,832,214 8,195 3,545 (11,413) (7,868) 327
---------- ------ ---------- ------ ------ -------- ------- --------
Net Income (unaudited).. -- -- -- -- 1,721 -- 1,721 1,721
---------- ------ ---------- ------ ------ -------- ------- --------
BALANCE, June 30, 1996
(unaudited)........... -- -- 10,832,214 $8,195 $5,266 $(11,413) $(6,147) $ 2,048
========== ====== ========== ====== ====== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE> 82
CDB INFOTEK
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ ------------ ------------
(AUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income.............................................. $ 1,128 $ 555 $ 1,721
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization................... 3,884 1,877 2,132
Change in assets and liabilities, net of effect of
acquisitions:
Increase in accounts receivable, net................. (578) (956) (740)
(Increase) decrease in other receivables............. (354) (11) 576
(Increase) decrease in prepaid expenses.............. (256) (326) 73
(Increase) decrease in income taxes receivable....... (159) -- 159
(Increase) decrease in deferred income tax benefit... 106 (206) (55)
Increase in intangible and other assets.............. (181) (270) (5)
Increase (decrease) in accounts payable.............. 403 347 (784)
Increase (decrease) in accrued expenses.............. 896 936 (69)
Increase (decrease) in accrued employee benefits..... (139) 94 303
Increase (decrease) in income taxes payable.......... (479) 170 456
Decrease in deferred rent............................ (156) (68) (38)
Increase (decrease) in deferred income taxes......... (473) (123) 92
-------- -------- -------
Net cash provided by operating activities............... 3,642 2,019 3,821
-------- -------- -------
CASH USED IN INVESTING ACTIVITIES:
Purchase of property and equipment, net................. (3,625) (1,848) (1,795)
-------- -------- -------
CASH USED IN FINANCING ACTIVITIES:
Borrowings (repayments) under long term debt, net....... 13,000 13,000 (1,300)
Principal payments under capital leases................. (850) (359) (479)
Repurchase of preferred stock, common stock and
warrants............................................. (12,737) (12,737) --
-------- -------- -------
Net cash used in financing activities........... (587) (96) (1,779)
-------- -------- -------
CASH AND CASH EQUIVALENTS:
NET INCREASE (DECREASE)................................... (570) 75 247
-------- -------- -------
AT BEGINNING OF PERIOD.................................... 1,230 1,230 660
-------- -------- -------
AT END OF PERIOD.......................................... $ 660 $ 1,305 $ 907
======== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest................ $ 1,623 $ 678 $ 578
======== ======== =======
Cash paid during the period for income taxes............ $ 2,214 $ 580 $ 738
======== ======== =======
Capital lease obligations incurred...................... $ 1,218 $ 900 $ --
======== ======== =======
Issuance of Common Stock in connection with acquisitions
(see Note 2 to Notes to Consolidated Financial
Statements).......................................... $ 8,844 $ 8,844 $ --
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE> 83
CDB INFOTEK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Statement Presentation. The accompanying consolidated financial
statements include the accounts of CDB Infotek and its subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Statement of Cash Flows. The Company considers investments with a maturity
of three months or less when purchased to be cash equivalents.
Acquisitions. All acquisitions have been accounted for as purchases;
operations of the companies and businesses acquired have been included in the
accompanying consolidated financial statements from their respective dates of
acquisition.
Revenue Recognition. The Company recognizes revenues at the time services
are provided.
Property and Equipment. Property and equipment are recorded at cost.
Depreciation and amortization is computed under the straight-line method over
the assets' estimated useful lives, which range from three to five years.
Leasehold improvements are amortized over the life of the respective lease or
the useful life of the improvement, whichever is shorter. Maintenance and
repairs of property and equipment are charged to expense as incurred. The costs
of additions and betterments that increase the useful lives of the assets are
capitalized. The cost and accumulated depreciation or amortization of property
and equipment retired or otherwise disposed of is removed from the accounts, and
any resulting gain or loss is included in the determination of net income.
The Company capitalizes certain direct costs, comprised primarily of data
and personnel costs that are incurred during the acquisition, design and
development of on-line public record information used in its business.
Amortization of such direct costs commences when the products are available for
general release to customers and is computed on a product-by-product basis using
the straight-line method over the lesser of the expected useful or legal life,
generally three to five years.
Income Taxes. The Company accounts for income taxes using the asset and
liability method pursuant to Statement of Financial Accounting Standards No. 109
(SFAS 109).
Under SFAS 109, deferred tax assets and liabilities are determined based on
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse, net of a valuation
allowance for deferred tax assets which are determined to be more likely than
not unrealizable. The effect on deferred taxes of a change in tax rates is
recognized in net income in the period that includes the enactment date.
Concentration of Credit Risk and Major Customer Data. Financial
instruments which potentially expose the Company to concentrations of credit
risk, as defined by Statement of Financial Accounting Standards No. 105, consist
primarily of trade accounts receivable. The Company's customer base is broad,
spans several industries and, although the Company is directly affected by the
general state of the economy, management does not believe any significant
concentration of credit risks exist at December 31, 1995.
During the year ending December 31, 1995, no single customer accounted for
more than 10% of the Company's consolidated net revenues.
Postemployment Benefits. The Financial Accounting Standards Board has
issued SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," and SFAS No. 112, "Employers' Accounting for Postemployment
Benefits." The Company does not presently have postretirement or postemployment
benefits for its employees, thus, there is no liability recorded applicable to
these pronouncements.
F-23
<PAGE> 84
CDB INFOTEK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Lived Assets. In March 1995, the Financial Accounting Standards Board
issued SFAS No. 121 on accounting for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to assets to be held and
used. SFAS No. 121 also establishes accounting standards for long-lived assets
and certain identifiable intangibles to be disposed of. The Company is required
to adopt SFAS No. 121 no later than January 1, 1996, although earlier
implementation is permitted. SFAS No. 121 is required to be applied
prospectively for assets to be held and used. The initial application of SFAS
No. 121 to assets held for disposal is required to be reported as the cumulative
effect of a change in accounting principle.
The Company plans to adopt SFAS No. 121 on January 1, 1996 and does not
expect such adoption to have a material impact on its consolidated financial
statements.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Basis of Presentation for Unaudited Financial Statements as of June 30,
1996 and for the Six Month Periods Ended June 30, 1996 and 1995
(unaudited). The accompanying interim financial statements have been prepared
by the Company in accordance with generally accepted accounting principles.
Certain disclosures and information normally included in financial statements
have been condensed or omitted. In the opinion of the management of the Company,
these financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the interim periods.
These statements should be read in conjunction with the financial statements and
notes thereto for the year ended December 31, 1995.
2. COMPANY OPERATIONS
The Company was founded in March 1982 to provide on-line computer access to
public record information and research services for insurance companies, legal
and accounting firms, financial institutions, private investigators and other
businesses. The majority of the Company's revenues are derived from sales to
customers in California.
On January 1, 1995, the Company acquired all of the capital stock of three
corporations from Prentice-Hall, Inc. ("PH"), an indirect subsidiary of Viacom,
Inc., in exchange for 4,249,000 shares or approximately 35% of the Company's
common stock, calculated on a fully diluted basis and valued at $8,844. The
entities purchased represent the businesses through which PH operated its
Prentice-Hall On-line ("PHO") and Charles E. Simon & Co. ("CES") businesses (the
"Acquired Entities"). The transactions have been accounted for collectively as a
purchase. Accordingly, the purchase price was allocated to the acquired assets
and liabilities based upon their estimated fair market values. The cost in
excess of net assets acquired has been included in intangible assets in the
accompanying balance sheets and is being amortized using the straight-line
method over 5 years. See Note 4 of the Notes to Consolidated Financial
Statements for further discussion of intangible assets. In addition to the
capital stock of the Acquired Entities, PH delivered to the Company a covenant
not to compete with the Company in these businesses until December 31, 1998, and
a license to use certain trademarks proprietary to PH in the acquired businesses
until April 30, 1997.
Included in other receivables at December 31, 1995 is a $372 receivable
from PH which arose from the resolution of certain provisions in the acquisition
agreement. The amount was received by the Company in January 1996.
Concurrent with the acquisition, the Company entered into an agreement with
PH that grants to PH the right, at certain dates and/or in certain
circumstances, to purchase the remaining capital stock of the Company then
outstanding or to require the Company's majority shareholder to repurchase from
PH the
F-24
<PAGE> 85
CDB INFOTEK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares of Company common stock owned by PH. (See Note 9 of the Notes to
Consolidated Financial Statements). A Shareholders' Agreement between the
Company and PH mandates that two designees of PH be at all times members of the
Company's five person Board of Directors. The Shareholders' Agreement also
stipulates that, in the case of certain types of proposed actions of the Board
of Directors, a majority including at least one of the PH designees must vote in
favor of a resolution in order for it to be adopted. The agreement would
terminate if PH ceased to own Company capital stock at any time. (See Note 12 of
the Notes to Consolidated Financial Statements for a discussion of subsequent
events.)
3. PROPERTY AND EQUIPMENT
The following summarizes the components of property and equipment as of
December 31:
<TABLE>
<CAPTION>
1995
-------
<S> <C>
Computer hardware and software.............................. $ 8,887
Capitalized data base acquisition and development costs..... 7,786
Furniture and fixtures...................................... 846
Leasehold improvements and other............................ 302
-------
$17,821
=======
</TABLE>
The Company capitalized $5,566 in data base acquisition and development
costs in the fiscal year ended December 31, 1995. Included in capitalized data
base acquisition and development costs at December 31, 1995 are acquired
databases from PH (see Note 2 of the Notes to Consolidated Financial Statements)
which had an estimated fair value of $5,000 on the date of acquisition.
Amortization expense related to capitalized data acquisition and development
costs was $1,767 for the fiscal year ended December 31, 1995.
Property and equipment include assets held under capital leases of $4,881,
net of accumulated amortization of $2,147, at December 31, 1995.
4. INTANGIBLE ASSETS
The Company amortizes intangible assets over the period during which it
expects to derive benefit from the related underlying assets. Accumulated
amortization of intangible assets as of December 31, 1995 was $645.
5. DEBT
Effective January 1, 1995, the Company entered into definitive agreements
with a bank pursuant to which the Company may borrow up to $16,000; $13,000 of
which is represented by a term credit facility ("Term Facility") and $3,000 of
which is represented by a revolving credit facility ("Revolving Facility"). At
December 31, 1995, $13,000 was outstanding on the Term Facility and there were
no borrowings on the Revolving Facility.
The Term Facility requires that the Company pay interest on amounts
outstanding at a rate of 2.75 percent above the bank's prime lending rate in the
first year of the six year Term Facility, and at specified rates thereafter
dependent upon the Company's degree of conformity with certain financial
covenants contained in the Term Facility agreement (11.25% as of December 31,
1995). Amounts due under the Term Facility may not be reborrowed by the Company
following repayment. The Company is required to make monthly interest payments
on the outstanding balance under the Term Facility for the first twelve months
of the agreement commencing February 1, 1995, with mandatory quarterly
repayments of principal of $650 and interest each required to be paid commencing
March 1, 1996. Additional repayments of principal may be made in increments of
at least $100 at any time. All amounts of principal and accrued interest must be
repaid by December 31, 2000.
F-25
<PAGE> 86
CDB INFOTEK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Revolving Facility permits the Company to borrow up to $3,000 from time
to time. The interest rate on the Revolving Facility at December 31, 1995 was
1.0 percent above the bank's prime lending rate of interest. Thereafter, the
interest rate will be, at the Company's option, the bank's prime lending rate of
interest or LIBOR, in each case, plus a margin dependent upon the Company's
degree of conformity with certain financial covenants contained in the Term
Facility agreement.
Both the Term Facility and the Revolving Facility are secured by a pledge
of the Company's common stock owned by its President and the Company's assets.
The Term and Revolving Facility contain certain covenants requiring that
the Company maintain certain ratios related to the Company's financial
performance. At December 31, 1995, the Company was in compliance with all such
covenants.
On January 3, 1995, the Company borrowed the $13,000 outstanding at
December 31, 1995 on the Term Facility and paid $12,737 of such sum to entities
controlled by its venture capital partner in exchange for all of the Company's
capital stock and warrants then owned by the venture capital partner. See Note 8
of the Notes to Consolidated Financial Statements.
Maturities of long term debt as of December 31, 1995, are as follows:
<TABLE>
<S> <C>
Fiscal year ending:
1996...................................................... $ 2,600
1997...................................................... 2,600
1998...................................................... 2,600
1999...................................................... 2,600
2000...................................................... 2,600
-------
$13,000
=======
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
Operating and Capital Leases. The Company leases certain of its operating
facilities and equipment under non-cancelable operating leases with terms
ranging up to five years. In addition, the Company leases certain equipment and
furniture under capital leases.
F-26
<PAGE> 87
CDB INFOTEK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule by year of future minimum lease payments under
capital and noncancelable operating leases, together with the present value of
the net minimum lease payments under the capital leases as of December 31, 1995:
<TABLE>
<CAPTION>
CAPITAL OPERATING TOTAL FUTURE
LEASES LEASES PAYMENTS
------- --------- ------------
<S> <C> <C> <C>
Fiscal year ending:
1996................................................... $1,142 $1,017 $2,159
1997................................................... 1,074 993 2,067
1998................................................... 677 922 1,599
1999................................................... 396 818 1,214
2000................................................... 51 539 590
Thereafter............................................. -- 5 5
------ ------ ------
Future minimum lease payments............................ 3,340 $4,294 $7,634
------ ====== ======
Less -- Amount representing interest..................... 415
------
Present value of minimum lease payments.................. 2,925
Less -- Current portion of capital lease obligations..... 870
------
$2,055
======
</TABLE>
Rental expense under operating leases was approximately $1,053 for the
fiscal year ended December 31, 1995.
Royalty and License Agreements. The Company has entered into certain
royalty and license agreements to sell the public record information of certain
specialty information service providers. Such agreements provide for either
discounted pricing based on required minimum usage by the Company of the
associated database, unlimited usage of a database for a specified period of
time at a fixed price determined at the agreement's inception or a royalty paid
to the provider based upon actual usage of the database. The Company expects to
maintain or enhance its current royalty and site license agreements and to
continue to enter into additional similar agreements in the future.
The future minimum royalty and license payments required are as follows:
<TABLE>
<S> <C>
Fiscal year ending:
1996...................................................... $1,619
1997...................................................... 1,322
1998...................................................... 1,490
1999...................................................... 1,601
2000...................................................... 1,217
------
$7,249
======
</TABLE>
Employment Agreement. Effective January 1, 1995, the Company entered into
an employment agreement with its President which provides for continued
employment of the President by the Company through December 31, 1999.
Litigation. The Company is party to a number of pending or threatened
lawsuits arising out of, or incident to, its ordinary course of business. In the
opinion of management, outcome of these lawsuits will not have a material
adverse effect upon the financial position or the results of operations of the
Company.
F-27
<PAGE> 88
CDB INFOTEK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The provision for income taxes for the year ending December 31, 1995 is
comprised of the following:
<TABLE>
<S> <C>
Current:
Federal................................................... $1,340
State..................................................... 236
------
1,576
------
Deferred:
Federal................................................... (312)
State..................................................... (55)
------
(367)
------
Total............................................. $1,209
======
</TABLE>
The difference between the statutory tax rates and the effective tax rates
is due to certain nondeductible expenses. Deferred income taxes have been
provided for at the prevailing and projected actual statutory and combined
average state income tax rates for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.
The components of the Company's net deferred income tax benefit (liability)
as of December 31, are as follows:
<TABLE>
<CAPTION>
1995
------
<S> <C>
Current Assets, net:
Accounts receivable....................................... $ 157
Accrued expenses.......................................... 155
Accrued vacation.......................................... 102
Deferred rent and accrued relocation expenses............. 15
Accrued employee benefits................................. 31
------
Total current deferred tax assets........................... $ 460
======
Noncurrent (Asset) Liability, net:
Capitalized data acquisition & dev. costs................. $1,669
Depreciation and amortization............................. 480
Capital lease treated as operating lease for tax
purposes............................................... 58
Deferred rent and accrued relocation expenses............. (87)
------
Noncurrent deferred tax liability, net...................... $2,120
======
</TABLE>
The deferred tax assets related to accounts receivable and accrued expenses
and the deferred tax liability related to capitalized data acquisition and
development costs as of December 31, 1995 include assets of $113 and $155 and a
liability of $1,600, respectively, arising from the differences between the tax
and book bases of assets and liabilities acquired from PH (see Notes 2 and 3 of
the Notes to Consolidated Financial Statements).
F-28
<PAGE> 89
CDB INFOTEK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effective tax rates differ from the federal statutory rate of 34% due
to the following items:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Expected tax provision at statutory rates................... $ 802
State taxes, net of federal tax benefit..................... 182
Expenses not deductible for tax purposes.................... 184
Other....................................................... 41
------
Provision for income taxes.................................. $1,209
======
Effective tax rate.......................................... 51.7%
======
</TABLE>
8. REDEMPTION OF CAPITAL STOCK AND RELATED SECURITIES
Effective January 3, 1995, the Company repurchased 2,750,000 shares of the
Company's Series A Preferred Stock, 218,313 shares of the Company's Common
Stock, and warrants to purchase an additional 340,712 shares of Company Common
Stock from its venture capital partner for an aggregate purchase price of
$12,737. The Preferred and Common Stock that the Company redeemed reverts to
authorized but unissued capital stock by operation of law. As part of the
transaction, the venture capital partner relinquished all right, title and
interest in the Company in exchange for the repurchase price paid to it by the
Company.
9. STOCK OPTION AGREEMENT
Concurrent with the acquisition of the Acquired Entities (see Note 2 to
Notes to Consolidated Financial Statements), the Company entered into an
agreement (the "Stock Option Agreement") with PH and certain officers and
directors of the Company ("Shareholders") pursuant to which PH was granted the
right to purchase from the Shareholders all of the capital stock of the Company
owned by such Shareholders upon the happening of certain events, for a purchase
price per share representing the fair market value at the date of purchase by
PH. A further provision of the Stock Option Agreement gives PH the right to
demand that the Company's President repurchase from PH the 4,249,000 shares of
Company common stock owned by it upon the happening of certain events for an
aggregate purchase price representing the then fair market value or $21,000 (the
"Repurchase Price"), whichever is greater. Effective October 23, 1995, the
parties amended the agreement to alter the period during which those rights of
PH may be exercised at the election of the Company's President. In January 1996,
the Company's President elected to fix such period at May 1, 1996 through May
31, 1996. Also in January 1996, the parties further amended the agreement to
remove PH's right to purchase the remainder of the Company's capital stock,
increased the minimum Repurchase Price to $22,600, and extended the period
during which PH may compel the repurchase of its shares of Company common stock
to an indefinite future period.
10. STOCK OPTION PLAN
In June 1992, the Company established a non-qualified stock option plan
(the Plan), whereby options to purchase the common stock of the Company may be
granted to certain executive officers and board members. The total number of
shares which may be granted under this plan, as amended, is 1,307,761. During
the year ended December 31, 1994, 209,920 options were granted pursuant to the
Plan at an exercise price of $.40 per share. During the year ended December 31,
1995, 150,000 options were granted pursuant to the Plan at an exercise price of
$.50 per share. As of December 31, 1995, 1,225,840 shares had been granted with
an exercise price range of $.204-$.50 per share. In 1994 and 1995, the options
granted were below the then determined fair value of the Company's common stock,
resulting in compensation expense. Such compensation expense is being amortized
through a charge to operations over the vesting period of four years and
amounted to $70 for 1995.
F-29
<PAGE> 90
CDB INFOTEK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. PROFIT SHARING PLAN
The Company has established the CDB Infotek 401(k) Plan and Trust (the
"401(k) Plan") which provides benefits to all employees who are at least 21
years of age and have completed one year of service with the Company. Company
contributions to the 401(k) Plan vest at the rate of 20 percent per year. The
401(k) Plan provides for employer matching contributions equaling 50% of the
first 4% of compensation contributed by qualified participating employees,
subject to certain limitations provided for in Section 401 of the Internal
Revenue Code. In addition, the Company may make additional contributions at the
discretion of the board of directors. The Company recorded approximately $105
for its matching contribution to the 401(k) Plan for the year ending December
31, 1995.
12. SUBSEQUENT EVENT (UNAUDITED)
On August 30, 1996, certain stockholders, including stockholders who
exercised options issued under the Company's Non-qualified Stock Option Plan
(see Note 10 of the Notes to Consolidated Financial Statements), sold equity
interests representing 70% of the fully diluted outstanding capital stock of the
Company to Equifax Services Inc., a Georgia corporation ("Services"), a
subsidiary of Equifax, Inc. (the "Equifax Transaction"). Among the capital stock
purchased by Services were all of the shares of Common Stock of the company
formerly owned by PH. Concurrent with the Equifax Transaction, the owners of the
remaining 30% interest in the Company granted to Services, and received from
Services, the right to compel the purchase of their interest by Services after
December 31, 1999 for a price per share to be determined by preset formula
(based on the Company's revenue in 1997, 1998 and 1999 and earnings before
interest, taxes, depreciation and amortization subject to certain adjustments in
1999) at the time of sale.
F-30
<PAGE> 91
======================================================
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS SPINOFF
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 9
The Spinoff........................... 13
Capitalization........................ 17
Dividend Policy....................... 17
Pro Forma Consolidated Financial
Data................................ 18
Selected Financial Data............... 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 24
Business.............................. 29
Equifax Inc........................... 35
Management............................ 36
Arrangements Between Equifax and
ChoicePoint Relating to the
Spinoff............................. 43
Certain Relationships and
Transactions........................ 49
Beneficial Ownership of ChoicePoint
Common Stock........................ 50
Beneficial Ownership of Management.... 51
Description of Capital Stock.......... 52
Legal Matters......................... 57
Experts............................... 57
Additional Information................ 57
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL AUGUST 12, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CHOICEPOINT COMMON STOCK DISTRIBUTED HEREBY,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS.
======================================================
======================================================
14,800,000 SHARES
CHOICEPOINT INC.
COMMON STOCK
[CHOICEPOINT LOGO]
------------
PROSPECTUS
JULY 18, 1997
------------
======================================================
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered. All of the amounts shown are estimated except for the Securities and
Exchange Commission registration fee, which is an actual amount:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 89,697
New York Stock Exchange Inc. listing fee.................... 119,000
Blue sky qualification fees and expenses.................... 15,000
Printing and engraving expenses............................. 225,000
Mailing expenses............................................ 200,000
Legal fees and expenses..................................... 2,700,000
Accounting fees and expenses................................ 150,000
Investment banking fees and expenses........................ 1,900,000
Consulting fees and expenses................................ 530,000
Transfer agent and registrar fees........................... 25,000
Miscellaneous............................................... 192,000
----------
Total..................................................... $6,145,697
==========
</TABLE>
- ---------------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The ChoicePoint Articles provide for indemnification of the officers and
directors of ChoicePoint to the fullest extent permitted by the GBCC. Such
indemnification is not exclusive of any additional indemnification that the
ChoicePoint Board of Directors may deem advisable or of any rights to which
those indemnified may otherwise be entitled. The ChoicePoint Articles provide
that the ChoicePoint Board of Directors may determine from time to time whether
and to what extent to maintain insurance providing indemnification for officers
and directors, and such insurance need not be limited to ChoicePoint's power of
indemnification under the GBCC. ChoicePoint intends to purchase and maintain
insurance on behalf of ChoicePoint's officers and directors against liability
asserted against or incurred by such person in such capacity, or arising out of
such person's status as such, whether or not ChoicePoint would have the power to
indemnify or advance expenses to such person against such liability under the
ChoicePoint Articles of Incorporation, the Bylaws or the GBCC.
The ChoicePoint Bylaws generally provide that ChoicePoint shall not
indemnify any officer or director who is adjudged liable to ChoicePoint or is
subjected to injunctive relief in favor of ChoicePoint: (i) for any
appropriation, in violation of his or her duties, of any business opportunity of
ChoicePoint; (ii) for acts or omissions which involve intentional misconduct or
a knowing violation of law; (iii) for the types of liability for unlawful
distributions set forth in Section 14-2-832 of the GBCC; or (iv) for any
transaction from which he or she received an improper personal benefit. The
ChoicePoint Bylaws obligate ChoicePoint, under certain circumstances, to advance
expenses to its officers and directors who are parties to an action, suit or
proceeding for which indemnification may be sought. The ChoicePoint Bylaws
permit, but do not require, ChoicePoint to indemnify and advance expenses to
employees or agents of ChoicePoint who are not officers or directors to the same
extent and subject to the same conditions that a corporation could, without
shareholder approval under Section 14-2-856 of the GBCC. ChoicePoint's Articles
also provide that no director shall have any liability to the Company or to its
shareholders for monetary damages for any action taken, or any failure to take
action, including, without limitation, for breach of duty of care or other duty
as a director, except that there shall be no elimination or limitation of
liability of a director for any conduct described in above clauses (i) through
(iv). As a result of this provision, shareholders may be unable to recover
monetary damages from directors for actions taken by them that constitute
negligence or gross negligence or that are in violation of
II-1
<PAGE> 93
their fiduciary duties, although it may be possible to obtain injunctive or
other equitable relief with respect to such actions.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation of ChoicePoint, on May 29, 1997, 100
shares of ChoicePoint Common Stock were issued to Equifax in exchange for $100.
Such securities were offered only to Equifax and were issued pursuant to Section
4(2) of the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<C> <C> <S>
3.01* -- Articles of Incorporation of the Company, as amended
3.02* -- Bylaws of the Company, as amended
4.01* -- Form of Common Stock certificate
5.01 -- Opinion of Hunton & Williams
10.01* -- Form of ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan
10.02* -- ChoicePoint Inc. 401(k) Profit Sharing Plan
10.03* -- Form of Distribution Agreement by and between Equifax and
the Company
10.04* -- Form of Employee Benefits Agreement by and between Equifax
and the Company
10.05 -- Form of Transition Support Agreement by and between Equifax
and the Company
10.06* -- Form of Intercompany Information Services Agreement by and
between Equifax and the Company
10.07* -- Form of Tax Sharing and Indemnification Agreement by and
between Equifax and the Company
10.08 -- Form of Intellectual Property Agreement by and between
Equifax and the Company
10.09* -- Agreement, dated July 24, 1996, by and between Equifax Inc.
and Dan Rocco, to be effective January 1, 1996 (relating to
compensation of Mr. Rocco)
10.10* -- Form of $250,000,000 Revolving Credit Agreement by and among
ChoicePoint Inc. and Wachovia Bank, N.A. and SunTrust Bank,
Atlanta, as co-arrangers
10.11 -- Form of Lease Agreement between SunTrust Banks, Inc., as
Lessor, and ChoicePoint Inc., as Lessee (synthetic lease
related to certain property and building located at 1000
Alderman Drive, Alpharetta, Georgia)
10.12* -- Form of Sublease Agreement by and between Equifax Inc. and
Equifax Services, Inc. (for certain property and building
located at 1600 Peachtree Street, NW, Atlanta, Georgia)
10.13* -- Form of Sublease Agreement by and between Equifax Inc. and
Equifax Services, Inc. (for certain property and building
located at 1525 Windward Concourse, Alpharetta, Georgia
(J.V. White Technology Center))
10.14 -- Form of Employment and Compensation Agreement by and between
the Company and each of Derek V. Smith, Dan H. Rocco,
Douglas C. Curling, David T. Lee and J. Michael de Janes
21.01* -- Subsidiaries of the Company
23.01 -- Consent of Arthur Andersen LLP
23.02 -- Consent of Hunton & Williams (included in Exhibit 5.01
hereto)
24.01* -- Powers of Attorney
27* -- Financial Data Schedule (for SEC use only)
99.01* -- Consent of Ron D. Barbaro to be named as a director nominee
in the Registration Statement
99.02* -- Consent of Tinsley H. Irvin to be named as a director
nominee in the Registration Statement
</TABLE>
- ---------------
* Previously filed.
II-2
<PAGE> 94
(b) The financial statements and schedules filed as a part of this
Registration Statement are as follows:
1. Financial Statements. See Index to Financial Statements on page F-1
of the Prospectus included in this Registration Statement.
2. Financial Statement Schedules. Financial statement schedules have
been omitted because they are not applicable or are not required, as the
information required to be set forth therein is included in the
consolidated financial statements of the registrant.
ITEM 17. UNDERTAKINGS
(a)-(g), (j) Not applicable
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 403A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia on July 17, 1997.
CHOICEPOINT INC.
By: /s/ DEREK V. SMITH
------------------------------------
Derek V. Smith
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DEREK V. SMITH President, Chief Executive July 17, 1997
- ----------------------------------------------------- Officer and Director
Derek V. Smith
/s/ DOUGLAS C. CURLING Executive Vice President, Chief July 17, 1997
- ----------------------------------------------------- Financial Officer and
Douglas C. Curling Treasurer (Chief Accounting
Officer)
* Director July 17, 1997
- -----------------------------------------------------
James M. Denny
* Director July 17, 1997
- -----------------------------------------------------
Daniel W. McGlaughlin
* Director July 17, 1997
- -----------------------------------------------------
Julia B. North
* Director July 17, 1997
- -----------------------------------------------------
C.B. Rogers, Jr.
* Director July 17, 1997
- -----------------------------------------------------
Charles I. Story
*By: /s/ DEREK V. SMITH July 17, 1997
- -----------------------------------------------------
Derek V. Smith, as Attorney-in-fact
</TABLE>
II-4
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <C> <S>
3.01* -- Articles of Incorporation of the Company, as amended
3.02* -- Bylaws of the Company, as amended
4.01* -- Form of Common Stock certificate
5.01 -- Opinion of Hunton & Williams
10.01* -- Form of ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan
10.02* -- ChoicePoint Inc. 401(k) Profit Sharing Plan
10.03* -- Form of Distribution Agreement by and between Equifax and
the Company
10.04* -- Form of Employee Benefits Agreement by and between Equifax
and the Company
10.05 -- Form of Transition Support Agreement by and between Equifax
and the Company
10.06* -- Form of Intercompany Information Services Agreement by and
between Equifax and the Company
10.07* -- Form of Tax Sharing and Indemnification Agreement by and
between Equifax and the Company
10.08 -- Form of Intellectual Property Agreement by and between
Equifax and the Company
10.09* -- Agreement, dated July 24, 1996, by and between Equifax Inc.
and Dan Rocco, to be effective January 1, 1996 (relating to
compensation of Mr. Rocco)
10.10* -- Form of $250,000,000 Revolving Credit Agreement by and among
ChoicePoint Inc. and Wachovia Bank, N.A. and SunTrust Bank,
Atlanta, as co-arrangers
10.11 -- Form of Lease Agreement between SunTrust Banks, Inc., as
Lessor, and ChoicePoint Inc., as Lessee (synthetic lease
related to certain property and building located at 1000
Alderman Drive, Alpharetta, Georgia)
10.12* -- Form of Sublease Agreement by and between Equifax Inc. and
Equifax Services, Inc. (for certain property and building
located at 1600 Peachtree Street, NW, Atlanta, Georgia)
10.13* -- Form of Sublease Agreement by and between Equifax Inc. and
Equifax Services, Inc. (for certain property and building
located at 1525 Windward Concourse, Alpharetta, Georgia
(J.V. White Technology Center))
10.14 -- Form of Employment and Compensation Agreement by and between
the Company and each of Derek V. Smith, Dan H. Rocco,
Douglas C. Curling, David T. Lee and J. Michael de Janes
21.01* -- Subsidiaries of the Company
23.01 -- Consent of Arthur Andersen LLP
23.02 -- Consent of Hunton & Williams (included in Exhibit 5.01
hereto)
24.01* -- Powers of Attorney
27* -- Financial Data Schedule (for SEC use only)
99.01* -- Consent of Ron D. Barbaro to be named as a director nominee
in the Registration Statement
99.02* -- Consent of Tinsley H. Irvin to be named as a director
nominee in the Registration Statement
- ---------------
</TABLE>
* Previously filed.
<PAGE> 1
EXHIBIT 5.01
[HUNTON & WILLIAMS LOGO]
July 17, 1996
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, Georgia 30005
Re: Registration of 14,800,000 Shares of Common Stock;
Registration Statement on Form S-1 (Reg. No. 333-30297)
Ladies and Gentlemen:
We have acted as counsel to ChoicePoint Inc., a Georgia corporation
(the "Company"), in connection with the registration under the Securities Act of
1933, as amended, pursuant to the Company's Registration Statement on Form S-1
(the "Registration Statement"), of a distribution of 14,800,000 shares of common
stock, $.10 par value ("Common Stock") of the Company (the "Shares"), all of
which are being distributed by Equifax Inc., a Georgia corporation ("Equifax"),
to its shareholders in connection with a spin-off of the Company from Equifax as
described in the Registration Statement.
In this capacity, we have examined the Registration Statement in the
form filed by the Company with the Securities and Exchange Commission (the
"Commission") on June 30, 1997, Amendment No. 1 to the Registration Statement in
the form filed with the Commission on July 16, 1997, Amendment No. 2 to the
Registration Statement in the form proposed to be filed with the Commission on
July 18, 1997, and originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments of the Company relating to the authorization and issuance of the
Shares to be distributed and other matters as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth.
In conducting our examination we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
<PAGE> 2
ChoicePoint Inc.
July 17,1997
Page 2
Based upon the foregoing, and in reliance thereon, and subject to the
limitations and qualifications set forth herein, we are of the opinion that the
Shares, when issued and delivered in accordance with the terms described in the
Registration Statement, will be legally and validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.01 to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus which is a part of the Registration Statement.
We further consent to the use of this opinion as an exhibit to
applications to securities commissioners of various states of the United States
for the registration or qualification of the Shares under the securities or
"blue sky" laws of such states.
Very truly yours,
/s/Hunton & Williams
-----------------------------
HUNTON & WILLIAMS
07679
08058
08086
<PAGE> 1
EXHIBIT 10.05
TRANSITION SUPPORT AGREEMENT
THIS AGREEMENT for the performance of corporate services is executed
and made effective as of July 31, 1997, between Equifax Inc., a Georgia
corporation ("Equifax"), and ChoicePoint Inc. , a Georgia corporation
("ChoicePoint").
WHEREAS, Equifax, through the operation of its Insurance Services
Group, is engaged in the business of providing information for insurance
underwriting purposes;
WHEREAS, the Board of Directors of Equifax has determined that it would
be advisable and in the best interests of Equifax and its shareholders for
Equifax to contribute its insurance services businesses, operations, assets and
liabilities (collectively, the "Business") to ChoicePoint in exchange for
ChoicePoint common stock and to thereafter distribute all of the outstanding
shares of ChoicePoint's common stock on a pro rata basis to the holders of
Equifax's common stock (the "Distribution") pursuant to a Distribution
Agreement, dated as of the date hereof, between Equifax and ChoicePoint (the
"Distribution Agreement");
WHEREAS, the parties intend that the transactions described herein will
be effective at the Effective Time (as defined in the Distribution Agreement);
and
WHEREAS, the parties hereto deem it to be appropriate and in the best
interests of the parties that they provide certain services to each other on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Description of Services.
(a) Equifax shall, subject to the terms and provisions of this
Agreement: (i) provide ChoicePoint with general services of a financial,
technical, commercial, administrative and/or advisory nature, with respect to
the Business, as set forth on Exhibits A through I hereto and (ii) render such
other specific services as ChoicePoint may from time to time reasonably request,
subject to Equifax's sole discretion and its being in a position to supply such
additional services at the time of such request.
(b) ChoicePoint shall, subject to the terms and provisions of
this Agreement: (i) provide Equifax with services as set forth on Exhibit J
hereto and (ii) render such other services as Equifax may from time to time
reasonably request, subject to ChoicePoint's sole discretion and its being in a
position to supply such additional services at the time of the request.
<PAGE> 2
Each of Equifax and ChoicePoint, as the case may be, shall use
commercially reasonable efforts to provide the services described in the
exhibits hereto and to transition from using the services provided by the other
under this Agreement on or prior to the termination of the term for the
provision of such services. Additionally, each of Equifax and ChoicePoint agree
that they shall use commercially reasonable efforts to assist, as necessary, in
the development of the respective transition plans described in the exhibits
hereto and shall provide assistance and training to the other as may be
necessary to assure a smooth and orderly transition.
2. Consideration for Services. ChoicePoint shall pay Equifax for all
the services described on Exhibits A through I and Equifax shall pay ChoicePoint
for all the services described on Exhibit J at the rates specified on each such
exhibit.
3. Terms of Payment. Within fifteen (15) business days after the end of
each month during the term of this Agreement, Equifax will submit a written
invoice to ChoicePoint and ChoicePoint will submit a written invoice to Equifax
for service fees for the immediately preceding month together with an accounting
of the charges for the immediately preceding month's services. Within five (5)
business days after the receipt of such invoices, Equifax and ChoicePoint, as
the case may be, will remit payment of the full amount of such invoices to the
other in the manner provided below. Interest shall accrue at a rate of 8% per
annum on any amounts not received by the party providing the service hereunder
within five (5) business days after receipt by the other of the invoice. The
amount of any monthly service fee shall be prorated to correspond with the
portion of a given month for which services were actually rendered.
4. Method of Payment. All amounts payable by ChoicePoint and Equifax
for the services rendered by the other pursuant to their Agreement shall be
remitted to Equifax or ChoicePoint, as the case may be, in United States dollars
in the form of a wire transfer.
5. WARRANTIES. THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY STATED
IN THIS AGREEMENT, THERE ARE NO EXPRESS WARRANTIES OR GUARANTIES, INCLUDING, BUT
NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS FOR
A PARTICULAR PURPOSE.
6. Liability; Indemnification; Dispute Resolution.
(a) In no event shall either Equifax or ChoicePoint have any
liability, whether based on contract, tort (including, without limitation,
negligence), warranty or any other legal or equitable grounds, for any punitive,
consequential, special, indirect or incidental loss or damage suffered by the
other arising from or related to this Agreement, including without limitation,
loss of data, profits, interest or revenue, or interruption of business, even if
the party providing the services hereunder is advised of the possibility of such
losses or damages.
-2-
<PAGE> 3
(b) The limitations set forth in Section 6(a) above shall not
apply to liabilities which may arise as the result of willful misconduct or
gross negligence of the party providing the services hereunder.
(c) Effective as of the date of this Agreement, ChoicePoint
shall indemnify, defend and hold harmless Equifax and its affiliates and their
respective directors, officers, employees and agents (the "Equifax Indemnitees")
from and against any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any and all actions or
threatened actions) ("Indemnifiable Losses") incurred or suffered by any of the
Equifax Indemnitees arising from, related to or associated with (i) Equifax's
furnishing or failure to furnish the services provided for in this Agreement,
other than liabilities arising out of the willful misconduct or gross negligence
of the Equifax Indemnitees and (ii) the gross negligence or willful misconduct
of ChoicePoint in furnishing or failing to furnish the services to be provided
by ChoicePoint in this Agreement, provided however, in no event shall
ChoicePoint be obligated to indemnify the Equifax Indemnitees (taken together)
under this Section 6(c) for Indemnifiable Losses arising out of ChoicePoint's
gross negligence in an amount in excess of three times the service fee charged
for the category of service related to the Indemnifiable Loss in the month in
which the act or failure to act by ChoicePoint that gave rise to such
Indemnifiable Loss occurs.
(d) Effective as of the date of this Agreement, Equifax shall
indemnify, defend and hold harmless ChoicePoint and its affiliates and their
respective directors, officers, employees and agents (the "ChoicePoint
Indemnitees") from and against any and all Indemnifiable Losses incurred or
suffered by any of the ChoicePoint Indemnitees arising from, related to or
associated with (i) ChoicePoint's furnishing or failure to furnish the services
provided for in this Agreement, other than liabilities arising out of the
willful misconduct or gross negligence of the ChoicePoint Indemnitees, and (ii)
the gross negligence or willful misconduct of Equifax in furnishing or failing
to furnish the services to be provided by Equifax to ChoicePoint in this
Agreement, provided however, in no event shall Equifax be obligated to indemnify
the ChoicePoint Indemnitees (taken together) under this Section 6(d) for
Indemnifiable Losses arising out of Equifax's gross negligence in an amount in
excess of three times the service fee charged for the category of service
related to the Indemnifiable Loss in the month in which the act or failure to
act by Equifax that gave rise to such Indemnifiable Loss occurs.
(e) Any disputes arising under this Agreement shall be
resolved in accordance with Section 15.10 of the Distribution Agreement.
7. Termination.
(a) Each category of service provided under this Agreement
shall terminate at the end of the period set forth on Exhibit K, provided that
certain categories
-3-
<PAGE> 4
of service identified on Exhibit K may be extended for one 90 day period at the
request of the party receiving the service.
(b) Notwithstanding Section 7(a) above, except as otherwise
set forth on a particular exhibit hereto, either Equifax or ChoicePoint may, at
its option, upon no less than sixty (60) days prior written notice to the other
(or such other period as the parties may mutually agree in writing), direct the
other to no longer provide a particular category of service.
(c) Notwithstanding Sections 7(a) and 7(b) above, except as
otherwise set forth on a particular exhibit, this Agreement may be terminated in
its entirety in accordance with the following:
(i) Upon written agreement of the parties;
(ii) By either ChoicePoint or Equifax for
material breach by the other of any of the terms hereof if the breach
is not cured within thirty (30) calendar days after written notice of
breach is delivered to the breaching party;
(iii) By either ChoicePoint or Equifax, upon
written notice to the other if the other shall become insolvent or
shall make an assignment of substantially all of its assets for the
benefit of creditors, or shall be placed in receivership,
reorganization, liquidation or bankruptcy;
(iv) By Equifax, upon written notice to
ChoicePoint, if, for any reason, the ownership or control of
ChoicePoint or any of ChoicePoint's operations, becomes vested in, or
is made subject to the control or direction of, any direct competitor
of Equifax, but such termination shall be applicable only with respect
to services provided by Equifax to the portion of ChoicePoint's
businesses that has been affected by the change in control.
(v) By ChoicePoint, upon written notice to
Equifax, if for any reason, the ownership or control of Equifax or any
of Equifax's operations becomes vested in, or is made subject to the
control or direction of, any direct competitor of ChoicePoint, but such
termination shall be applicable only with respect to services provided
by ChoicePoint to the portion of Equifax's business that has been
affected by the change in control.
(d) Upon any termination pursuant to Sections 7(b) and 7(c)
above, Equifax and ChoicePoint shall be compensated for all services performed
to the date of termination in accordance with the provisions of this Agreement,
and Equifax and ChoicePoint, as the case may be, will consider hiring certain
employees of the other identified by the other prior to the termination to the
extent that Equifax or ChoicePoint, as the case may be, does not contract with
third parties to provide the services rendered by Equifax or ChoicePoint
pursuant to this Agreement.
-4-
<PAGE> 5
8. Amendment. This Agreement may be modified or amended only by the
agreement of the parties hereto in writing, duly executed by the authorized
representatives of each party.
9. Force Majeure. Any delays in or failure of performance by Equifax or
ChoicePoint shall not constitute a default hereunder if and to the extent such
delay or failure of performance is caused by occurrences beyond the reasonable
control of Equifax or ChoicePoint, as the case may be, including, but not
limited to: acts of God or the public enemy; compliance with any order or
request of any governmental authority; acts of war; riots or strikes or other
concerted acts of personnel; or any other causes beyond the reasonable control
of Equifax or ChoicePoint, whether or not of the same class or kind as those
specifically named above.
10. Assignment. This Agreement shall not be assignable by either party
hereto without the prior written consent of the other party hereto. When duly
assigned in accordance with the foregoing, this Agreement shall be binding upon
and shall inure to the benefit of the assignee.
11. Confidentiality. Each party shall hold and cause its directors,
officers, employees, agents, consultants and advisors to hold, in strict
confidence, unless compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law, all information
concerning the other party (except to the extent that such information can be
shown to have been (a) in the public domain through no fault of such disclosing
party or (b) later lawfully acquired after the Effective Time on a
non-confidential basis from other sources by the disclosing party), and neither
party shall release or disclose such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors who shall be advised of the provisions of this Section 11 and be bound
by them.
12. Notices. All notices and communications under this Agreement shall
be deemed to have been given (a) when received, if such notice or communication
is delivered by facsimile, hand delivery or overnight courier, and (b) three (3)
business days after mailing if such notice or communication is sent by United
States registered or certified mail, return receipt requested, first class
postage prepaid. All notices and communications, to be effective, must be
properly addressed to the party to whom the same is directed at its address as
follows:
-5-
<PAGE> 6
If to Equifax, to:
Equifax Inc.
1600 Peachtree Street, N.W.
Atlanta, GA 30309
Attention: Bruce S. Richards
Corporate Vice President and General Counsel
Fax: (404) 885-8682
with a copy to:
Thomas F. Chapman
President and Chief Operating Officer
Equifax Inc.
1600 Peachtree Street, N.W.
Atlanta, GA 30309
Fax: (404) 885-8766.
If to ChoicePoint, to:
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, GA 30005
Attention: J. Michael de Janes, Esq.
Fax: (770) 752-5939
with a copy to:
Derek V. Smith
President and Chief Executive Officer
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, GA 30005
Fax: (770) 752-6243.
Either party may, by written notice delivered to the other party in accordance
with this Section 12, change the address to which delivery of any notice shall
thereafter be made.
13. Waiver. The failure of either party at any time or times to enforce
or require performance of any provision hereof shall in no way operate as a
waiver or affect the right of such party at a later time to enforce the same.
14. Severability. The provisions of this Agreement are severable and
should any provision hereof be void or unenforceable under any applicable law,
such provision
-6-
<PAGE> 7
shall not affect or invalidate any other provision of this Agreement, which
shall continue to govern the relative rights and duties of the parties as though
such void or unenforceable provision were not a part hereof.
15. Third Party Agreements. Equifax and ChoicePoint recognize that
certain technology support services described in the exhibits hereto are
provided by third party contractors under specific third party agreements
("Third Party Agreements"). Equifax and ChoicePoint further recognize that the
Third Party Agreements may have been entered into by either Equifax or
ChoicePoint and that the other receives technology support services as a result
of the Third Party Agreements. Equifax and ChoicePoint shall use their
respective commercially reasonable efforts to cause the third party providers to
continue to provide the technology support to the other under the terms of the
Third Party Agreements as in effect as at the Effective Time.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EQUIFAX INC.
By:
-----------------------------------------
Name:
Title:
CHOICEPOINT INC.
By:
-----------------------------------------
Name:
Title:
-7-
<PAGE> 1
EXHIBIT 10.08
INTELLECTUAL PROPERTY AGREEMENT
BETWEEN
EQUIFAX INC.
AND
CHOICEPOINT INC.
_____________, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS....................................................................................2
SECTION 1.1. DEFINITIONS..............................................................................2
ARTICLE II CONVEYANCE OF CERTAIN ASSETS; ASSUMPTION OF CERTAIN LIABILITIES...............................7
SECTION 2.1. CONVEYANCE OF TRANSFERRED ASSETS.........................................................7
2.1.1. General Intent..............................................................................7
2.1.2. Transferred Equifax Assets..................................................................8
2.1.3. Transferred ChoicePoint Assets..............................................................8
2.1.4. Assumption of Liabilities...................................................................9
2.1.5. Completion of Transactions..................................................................9
ARTICLE III THIRD PARTY AGREEMENTS......................................................................10
SECTION 3.1. THIRD PARTY AGREEMENTS..................................................................10
SECTION 3.2. REQUIRED CONSENTS.......................................................................10
SECTION 3.3. DISCHARGE OF LIABILITIES................................................................12
ARTICLE IV LICENSED MATERIALS...........................................................................12
SECTION 4.1. GRANT OF LICENSES BY EQUIFAX............................................................12
SECTION 4.2. OWNERSHIP OF ENHANCEMENTS BY CHOICEPOINT................................................15
SECTION 4.3. LICENSE TO EQUIFAX MARKS................................................................15
SECTION 4.4. GRANT OF LICENSE BY CHOICEPOINT.........................................................16
SECTION 4.5. OWNERSHIP OF ENHANCEMENTS BY EQUIFAX....................................................18
SECTION 4.6. DATA....................................................................................18
SECTION 4.7. MUTUAL OBLIGATIONS......................................................................19
ARTICLE V THE CLOSING...................................................................................19
SECTION 5.1. EQUIFAX DELIVERABLES....................................................................19
SECTION 5.2. CHOICEPOINT DELIVERABLES................................................................19
SECTION 5.3. TERMINATION.............................................................................20
ARTICLE VI REPRESENTATIONS AND WARRANTIES...............................................................20
ARTICLE VII INDEMNIFICATION.............................................................................20
SECTION 7.1. CHOICEPOINT INDEMNIFICATION OF THE EQUIFAX GROUP........................................20
SECTION 7.2. EQUIFAX INDEMNIFICATION OF THE CHOICEPOINT GROUP........................................21
SECTION 7.3. INSURANCE AND THIRD PARTY OBLIGATIONS...................................................21
ARTICLE VIII INDEMNIFICATION PROCEDURES.................................................................21
SECTION 8.1. NOTICE AND PAYMENT OF CLAIMS............................................................21
SECTION 8.2. NOTICE AND DEFENSE OF THIRD PARTY CLAIMS................................................21
ARTICLE IX CONFIDENTIALITY..............................................................................23
SECTION 9.1. EXCLUSIONS..............................................................................23
SECTION 9.2. CONFIDENTIALITY.........................................................................23
SECTION 9.3. EMPLOYEE CONFIDENTIALITY AGREEMENTS.....................................................24
SECTION 9.4. RIGHTS AND REMEDIES.....................................................................24
SECTION 9.5. COMPETITIVE ACTIVITIES..................................................................25
SECTION 9.6. NO IMPLIED RIGHTS.......................................................................25
ARTICLE X CONTINUED ASSISTANCE..........................................................................26
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 10.1. CONTINUED ASSISTANCE AND TRANSITION....................................................26
SECTION 10.2. RECORDS AND DOCUMENTS..................................................................26
SECTION 10.3. LITIGATION COOPERATION.................................................................27
ARTICLE XI MISCELLANEOUS................................................................................27
SECTION 11.1. EXPENSES...............................................................................27
SECTION 11.2. NOTICES................................................................................27
SECTION 11.3. AMENDMENT AND WAIVER...................................................................28
SECTION 11.4. ENTIRE AGREEMENT.......................................................................28
SECTION 11.5. PARTIES IN INTEREST....................................................................29
SECTION 11.6. FURTHER ASSURANCES AND CONSENTS........................................................29
SECTION 11.7. SEVERABILITY...........................................................................29
SECTION 11.8. GOVERNING LAW..........................................................................29
SECTION 11.9. COUNTERPARTS...........................................................................29
SECTION 11.10. DISPUTES..............................................................................30
SECTION 11.11. FORCE MAJEURE.........................................................................30
SECTION 11.12. DOCUMENTATION.........................................................................31
SECTION 11.13. HEADINGS..............................................................................31
</TABLE>
EXHIBIT A - CHOICEPOINT GROUP
EXHIBIT B - EXCLUDED ASSETS
EXHIBIT C - CHOICEPOINT PRIMARY USE ASSETS
EXHIBIT D - CHOICEPOINT DATABASES
EXHIBIT E - CHOICEPOINT MARKS
EXHIBIT F - CHOICEPOINT COPYRIGHTS
EXHIBIT G - UTILITY SOFTWARE PROGRAMS
2
<PAGE> 4
THIS INTELLECTUAL PROPERTY AGREEMENT ("Agreement"), dated as of
________________, 1997, is entered into by Equifax Inc., a Georgia corporation
("Equifax"), and ChoicePoint Inc., a Georgia corporation ("ChoicePoint").
BACKGROUND
A. ChoicePoint is a wholly owned subsidiary of Equifax formed among other
reasons for the purpose of taking title to the intellectual property assets and
assuming the associated liabilities related to the business operations of the
ChoicePoint Group (as defined below).
B. The Board of Directors of Equifax has determined that it is in the best
interests of Equifax and its shareholders to transfer and assign to
ChoicePoint, as part of the contribution to the capital of ChoicePoint, certain
intellectual property assets used in the business operations of the ChoicePoint
Group as described herein and currently utilized to operate the ChoicePoint
Business (as defined below), and to receive in exchange therefor the
consideration described in the Distribution Agreement (as defined below).
C. The parties intend that the Distribution (as defined in the
Distribution Agreement) not be taxable to Equifax or its shareholders pursuant
to Section 355 of the Code (as defined below).
D. Equifax and its Affiliates (as defined below) own certain intellectual
property that is used in, or may be useful in, the conduct of the business
operations of the Equifax Group (as defined below) and/or the ChoicePoint
Group. Equifax and ChoicePoint have determined that (1) ownership of certain of
such intellectual property shall be transferred to the entity specified in this
Agreement on or before the Distribution Date (as defined below); (2) certain
intellectual property owned by Equifax and/or its Affiliates shall be licensed
to the entity(ies) specified in this Agreement on or before the Distribution
Date; and (3) the respective rights and obligations of Equifax and/or its
Affiliates under certain Third Party Agreements shall be acquired, assumed or
otherwise transferred to the entity(ies) specified in this Agreement, subject
to the consent of the applicable Third Party Provider.
E. The parties have determined that it is necessary and desirable to
describe the principal transactions required to effect the allocation of their
respective intellectual property rights in conjunction with the Distribution
and to set forth other agreements that will govern certain other matters
regarding the parties' respective intellectual property rights following the
Distribution.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements and covenants contained in this Agreement, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1
<PAGE> 5
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.
As used herein, the following terms have the following meanings:
(a) "Action" means any claim, suit, arbitration, inquiry, proceeding
or investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any other tribunal.
(b) "Affiliate" means, with respect to Equifax, any Person, which,
whether directly or indirectly, is Controlled by or is under common Control
with Equifax prior to the Distribution Date.
(c) "Ancillary Agreements" means all of the written agreements,
instruments, understandings, assignments or other arrangements entered into in
connection with the transactions contemplated hereby, including without
limitation, the Distribution Agreement, Intercompany Information Services
Agreement and Transition Support Agreement.
(d) "Assets" means (i) all intellectual property rights in and to any
ideas, trade secrets, specifications, designs, masks, mask works, copyrights,
patents, Marks and other proprietary rights, of every kind and description,
wherever located, including without limitation, all electronic circuit designs,
works of authorship, databases, compositions of matter, computer software,
algorithms, and works of authorship expressing such algorithms, (ii) all
service, support and maintenance rights related thereto or attendant therewith,
and (iii) all contractual rights, commitments, undertakings and obligations
(including service, data processing, support and maintenance rights and
obligations) attendant therewith or directly related thereto, excluding the
ChoicePoint Marks.
(e) "ChoicePoint Business" means the businesses conducted by the
members of the ChoicePoint Group as of the Distribution Date and the
ChoicePoint UK Business.
(f) "ChoicePoint Copyrights" means the copyrights set forth on
Exhibit F.
(g) "ChoicePoint Databases" means the Databases set forth on Exhibit
D, that includes a listing of such Databases by name, by ChoicePoint
Application Code and/or by system identification designation.
(h) "ChoicePoint Enhancements" means software and/or associated
documentation created by or for any member of the ChoicePoint Group on or after
the Distribution Date, that provides processing capabilities, functionality or
efficiencies, maintenance, bug fixes or updates not contained in the
Transferred Equifax Assets on the Distribution Date and which is intended for
use with and requires a portion of the Transferred Equifax Assets in order to
function properly.
2
<PAGE> 6
(i) "ChoicePoint Group" means the entities set forth on Exhibit A.
(j) "ChoicePoint Indemnitees" has the meaning given in Section 7.2.
(k) "ChoicePoint Liabilities" means all unsatisfied Liabilities,
whether arising before, on or after the Distribution Date, based upon or
arising out of the use or possession by the ChoicePoint Group or ownership of
the Transferred Equifax Assets, the Licensed Equifax Materials or the Equifax
Marks, but excluding all liability arising out of or in connection with the
processing of data for members of the Equifax Group on the machine designated
the "REDD machine" in contravention of the terms of any license for software
program(s) operating on that machine at any time prior to the Distribution
Date.
(l) "ChoicePoint Marks" means the marks set forth on Exhibit E.
(m) "ChoicePoint UK" means ChoicePoint Limited, a corporation formed
under the laws of England.
(n) "ChoicePoint UK Business" means the business(es) intended by
ChoicePoint and Equifax to be conducted by ChoicePoint UK on the day after the
Distribution Date.
(o) "Closing Date" means the date designated by the Board of
Directors of Equifax to effect the transactions described in this Agreement.
(p) "Code" means the Internal Revenue Code of 1986, as amended.
(q) "Company Information" means collectively the Proprietary
Information and the Confidential Information of the disclosing party. Company
Information also includes information that has been disclosed to Equifax or any
of its Affiliates prior to the Distribution Date, or to any member of either
Group after the Distribution Date, by a third party subject to an obligation to
treat such information as confidential or secret.
(r) "Confidential Information" means any and all confidential
business information of the disclosing party that does not constitute
Proprietary Information and that is the subject of efforts by the disclosing
party that are reasonable under the circumstances to maintain its secrecy and
confidentiality, including without limitation, the existence and nature of the
relationship between the parties, employees of the disclosing party, and any
and all additional information disclosed by the disclosing party to the
receiving party as a result of the receiving party's access to and presence at
the disclosing party's facilities.
(s) "Control" means the ownership, directly or indirectly, of more
than fifty percent (50%) of the voting shares of an entity, or otherwise
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an entity, or the power to veto
major policy decisions of any such entity, whether through the ownership of
voting securities by contract, or otherwise.
3
<PAGE> 7
(t) "Database" means a collection of data and/or files contained on
media, electronic or hardcopy, active or archived, constructed of fields of a
particular type, together with a collection of operations that facilitate
searching, sorting, recombination and similar activities.
(u) "Derivative Work" means a work based on one or more pre-existing
works, including without limitation, a condensation, transformation, expansion
or adaptation, that would constitute a copyright infringement if prepared
without authorization of the owner of the copyright of such pre-existing work.
(v) "Designated ChoicePoint Member" means a member of the ChoicePoint
Group, as designated by ChoicePoint in its sole discretion from time to time.
(w) "Designated Equifax Member" means a member of the Equifax Group,
as designated by Equifax in its sole discretion from time to time.
(x) "Disputes" has the meaning given in Section 11.10.
(y) "Distribution Agreement" means that certain Distribution
Agreement entered into on or prior to the Distribution Date between Equifax and
ChoicePoint, as amended from time to time.
(z) "Distribution Date" means the day as of which the Distribution
shall be effective, as determined by the Board of Directors of Equifax.
(aa) "Divested Business" means the sale or other transfer of a member
of either Group, or a portion of the business operations of any such member, to
an unrelated third party after the Distribution Date.
(bb) "Equifax Business" means the businesses now or formerly
conducted by Equifax and its present and former Affiliates, other than the
ChoicePoint Business, on the Distribution Date.
(cc) "Equifax Enhancements" means software and/or associated
documentation created by or for any member of the Equifax Group on or after the
Distribution Date, that provides processing capabilities, functionality or
efficiencies, maintenance, bug fixes or updates not contained in the
Transferred ChoicePoint Assets on the Distribution Date and which is intended
for use with and requires a portion of the Transferred ChoicePoint Assets in
order to function properly.
(dd) "Equifax Group" means Equifax and its Affiliates existing on the
Distribution Date and as modified from time to time thereafter, excluding all
members of the ChoicePoint Group.
(ee) "Equifax Indemnitees" has the meaning given in Section 7.1.
(ff) "Equifax Liabilities" means all unsatisfied Liabilities, whether
arising before, on or after the Distribution Date, based upon or arising out of
the use or possession by the Equifax
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Group or ownership of the Transferred ChoicePoint Assets or the Licensed
ChoicePoint Materials.
(gg) "Equifax Marks" means the Marks of the members of the Equifax
Group.
(hh) "Equifax Services" means Equifax Services Inc. (Georgia).
(ii) "Equifax Services Business" means the businesses conducted by
Equifax Services Inc. (Georgia) as of the Distribution Date and the ChoicePoint
UK Business, but excluding all of the businesses conducted by all other
Affiliates of Equifax Services Inc. (Georgia), including, without limitation,
subsidiaries of Equifax Services Inc. (Georgia).
(jj) "Excluded Assets" means assets which shall be excluded from the
Assets transferred to the ChoicePoint Group pursuant to this Agreement, even
though such Assets would qualify for transfer under the terms of this
Agreement, as set forth on Exhibit B.
(kk) "Group" means the ChoicePoint Group and/or the Equifax Group.
(ll) "Indemnifiable Losses" has the meaning given in Section 7.1.
(mm) "Indemnified Party" has the meaning given in Section 8.1.
(nn) "Indemnifying Party" has the meaning given in Section 8.1.
(oo) "Intercompany Information Services Agreement" means that certain
Intercompany Information Services Agreement entered into on or prior to the
Distribution Date between Equifax and ChoicePoint, as amended from time to
time.
(pp) "Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising, with
respect to a specified object, matter, contract, commitment or undertaking,
including without limitation, all claims, debts, liabilities and obligations
arising under any law, rule, regulation, action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, related thereto
or arising under any contract, commitment or undertaking relating to such
specified object, matter, contract, commitment or undertaking.
(qq) "Licensed ChoicePoint Materials" means that portion of the
Assets held by the ChoicePoint Group (excluding Third Party Rights and the
ChoicePoint Marks) after the Distribution Date (as such Assets are described in
this Agreement) that satisfy each of the following criteria: (i) such Assets
were used in the Equifax Business during the twelve (12) calendar months prior
to the Distribution Date and for which a continuing business requirement exists
on the Distribution Date, and (ii) such Assets or the services, information or
deliverables produced with such Assets (A) are not made commercially available
by the ChoicePoint Group to third parties on the Distribution Date, and (B) are
not made available to the Equifax Group after the Distribution Date pursuant to
the Intercompany Information Agreement or the Transition Support Agreement.
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(rr) "Licensed Equifax Materials" means that portion of the Assets
held by the Equifax Group (excluding Third Party Rights and the Equifax Marks)
after the Distribution Date (as such Assets are described in this Agreement)
that satisfy each of the following criteria: (i) such Assets were used in the
ChoicePoint Business during the twelve (12) calendar months prior to the
Distribution Date and for which a continuing business requirement exists on the
Distribution Date, and (ii) such Assets or the services, information or
deliverables produced with such Assets (A) are not made commercially available
by the Equifax Group to third parties on the Distribution Date, and (B) are not
made available to the ChoicePoint Group after the Distribution Date pursuant to
the Intercompany Information Agreement or the Transition Support Agreement.
(ss) "Licensed Materials" means the Licensed ChoicePoint Materials
and/or Licensed Equifax Materials.
(tt) "Marks" means trademarks, tradenames, and other slogans, designs
and distinctive advertising, whether or not registered or filed with any
governmental agency.
(uu) "Person" means an individual, partnership, joint venture,
association, corporation, limited liability company, trust or any other legal
entity.
(vv) "Proprietary Information" means all non-public information
whether tangible or intangible related to the services or business of the
disclosing party that (i) derives economic value, actual or potential, from not
being generally known to or readily ascertainable by another Person who can
obtain economic value from its disclosure or use; and (ii) is the subject of
efforts by the disclosing party that are reasonable under the circumstances to
maintain its secrecy, including without limitation, (A) marking any information
reduced to tangible form clearly and conspicuously with a legend identifying
its confidential or proprietary nature; (B) identifying any oral communication
as confidential immediately before, during, or after such oral communication;
or (C) otherwise treating such information as confidential or secret. Assuming
the criteria in clauses (i) and (ii) above are met, Proprietary Information
includes information, without regard to form, including, but not limited to,
technical and nontechnical data, databases, formulas, patterns, designs,
compilations, computer programs and software, devices, inventions, methods,
techniques, drawings, processes, financial data, financial plans, product
plans, lists of actual or potential customers and suppliers (which are not
commonly known by or available to the public), research, development, and
existing and future products.
(ww) "Representatives" means, individually and collectively,
officers, directors, employees, agents, and/or independent contractors of the
members of the Group.
(xx) "Required Consents" means any consents or approvals required to
be obtained (i) to allow the transfer of any Assets to and the assumption of
the obligations attendant therewith by a party and release of the transferring
party from such obligations; (ii) to allow a party to assume financial,
support, operational, management and/or administrative responsibility for the
Third Party Rights and the Third Party Software utilized in the operation of
the Equifax Business or ChoicePoint Business, respectively; (iii) for the
licensing, transfer and/or grant of the rights to the Equifax Group or
ChoicePoint Group, respectively, to use the Third Party Rights
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and the Third Party Software as contemplated by this Agreement; and/or (iv) for
a party to have access to and use of the space, equipment, software and/or
third party services provided under the Third Party Agreements entered into by
the other party as contemplated by this Agreement.
(yy) "Third Party Agreements" means those arrangements under which
Equifax or its Affiliates are provided and/or granted Third Party Rights
immediately prior to the Distribution Date.
(zz) "Third Party Claim" has the meaning given in Section 8.2.
(aaa) "Third Party Provider" means a Person other than a member of
either Group that provides products, software, services, maintenance and/or
support under a Third Party Agreement.
(bbb) "Third Party Rights" means rights to Assets (however described)
licensed or otherwise provided to Equifax and/or any of its Affiliates by Third
Party Providers.
(ccc) "Third Party Software" means all software programs (however
described) licensed to Equifax and/or any of its Affiliates by third parties
which are not members of either Group, and which are used internally by any
member of either Group.
(ddd) "Transferred Assets" means the Transferred Equifax Assets and
Transferred ChoicePoint Assets.
(eee) "Transferred Equifax Assets" means the Assets described in
Section 2.1.2.
(fff) "Transferred ChoicePoint Assets" means the Assets described in
Section 2.1.3.
(ggg) "Transition Support Agreement" means that certain Transition
Support Agreement entered into on or prior to the Distribution Date between
Equifax and ChoicePoint, as amended from time to time.
(hhh) "Utility Software Programs" means the software programs set
forth on Exhibit G.
ARTICLE II
CONVEYANCE OF CERTAIN ASSETS; ASSUMPTION OF
CERTAIN LIABILITIES
Section 2.1. Conveyance of Transferred Assets.
2.1.1. General Intent.
Except as otherwise expressly provided herein or in any of the
Ancillary Agreements, on the Distribution Date:
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(a) all Assets held by Equifax and its Affiliates that are used (i)
exclusively in the conduct of the ChoicePoint Business, (ii) primarily in the
conduct of the ChoicePoint Business, secondarily in the conduct of the Equifax
Business and scheduled on an Exhibit, (iii) as Databases supporting the
ChoicePoint Business scheduled on an Exhibit, and (iv) the ChoicePoint Marks,
are intended to be and shall become Assets of the ChoicePoint Group, except for
the Excluded Assets;
(b) all Liabilities held in the name of members of the ChoicePoint
Group or otherwise incurred with respect to the Assets described in Section
2.1.1.(a) above are intended to be and shall become exclusively the Liabilities
of ChoicePoint or the Designated ChoicePoint Member; and
(c) all other Assets and Liabilities of Equifax and its Affiliates
are intended to be and shall remain exclusively the Assets and Liabilities of
the Equifax Group.
2.1.2. Transferred Equifax Assets.
As of the Distribution Date and subject to Sections 2.1.4 and 2.1.5
and Article III hereof, Equifax agrees, at its expense, (i) to transfer, or
cause to be transferred, to ChoicePoint or to the Designated ChoicePoint Member
all right, title and interest held by Equifax and/or its Affiliates as of the
Distribution Date in and to each of the Assets (excluding Third Party Rights
and Marks) utilized by the members of the ChoicePoint Group described in each
of (A) through (C): (A) Assets used exclusively in the conduct of the
ChoicePoint Business immediately preceding the Distribution Date including the
ChoicePoint Copyrights listed on Exhibit F hereto, (B) Assets used primarily in
the ChoicePoint Business listed on Exhibit C hereto, and (C) Assets used as
ChoicePoint Databases supporting the ChoicePoint Business listed on Exhibit D
hereto; (ii) to transfer, or cause to be transferred, to or otherwise acquire,
purchase or secure for Equifax Services or ChoicePoint UK, as appropriate, all
Third Party Rights and Third Party Agreements, as appropriate, held by Equifax
and/or any of its Affiliates to the extent necessary to the conduct of the
Equifax Services Business during the twelve (12) calendar months prior to the
Distribution Date and for which a continuing business requirement exists on the
Distribution Date; and (iii) to transfer, or cause to be transferred, to
ChoicePoint or to the Designated ChoicePoint member all right, title and
interest held by Equifax and/or its Affiliates as of the Distribution Date in
and to the ChoicePoint Marks. In each of cases (i), (ii) and (iii), the
transfers shall be exclusive of the Excluded Assets.
2.1.3. Transferred ChoicePoint Assets.
As of the Distribution Date, and subject to Sections 2.1.4 and 2.1.5
and Article III hereof, ChoicePoint agrees to transfer, or cause to be
transferred, to Equifax or to the Designated Equifax Member all right, title
and interest held by the members of the ChoicePoint Group in and to all Assets
that (i) are not used by the members of the ChoicePoint Group exclusively in
the conduct of the ChoicePoint Business immediately preceding the Distribution
Date or listed on Exhibits C, D or F, and (ii) were used by members of the
Equifax Group in the conduct of the Equifax Business during the twelve (12)
calendar months prior to the Distribution Date and for which a continuing
business requirement exists on the Distribution Date. The expenses payable
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to third parties that are not members of either Group to effect such transfers
shall be the financial responsibility of Equifax.
2.1.4. Assumption of Liabilities
(a) As of the Distribution Date, Equifax shall, or shall cause the
Designated Equifax Member to, assume all payment and performance obligations
attendant with the Transferred ChoicePoint Assets and the Equifax Liabilities.
(b) As of the Distribution Date, ChoicePoint shall, or shall cause
the Designated ChoicePoint Member to, assume all payment and performance
obligations attendant with the Transferred Equifax Assets and the ChoicePoint
Liabilities.
2.1.5. Completion of Transactions.
(a) In the event that any conveyance of an Asset, provision of Third
Party Rights or Third Party Software, or assumption of any Liability, required
by this Agreement is not effected on the Distribution Date, the obligation to
transfer such Asset, provide such Third Party Rights or Third Party Software,
and assume such Liability shall continue past the Distribution Date and shall
be effected by the parties as soon thereafter as practicable.
(b) If any Transferred Asset may not be transferred or acquired by
reason of a requirement to obtain a Required Consent or any other approval of
any third party and such Required Consent or other approval has not been
obtained by the Distribution Date, then such Transferred Asset shall not be
transferred until such Required Consent or other approval has been obtained.
Equifax and ChoicePoint shall, and as the case may be, shall cause the member
of its respective Group which is the holder of such Transferred Asset prior to
transfer, to use all reasonable efforts to provide to the designated member of
the other Group, all the rights and benefits under such Transferred Asset and
cause such holder to enforce such Transferred Asset for the benefit of such
member of the other Group. Moreover, if any transfer of a Transferred Asset or
provision of a Third Party Right is not completed by the Distribution Date in
accordance with this Agreement for any reason, Equifax and ChoicePoint shall,
and shall cause the members of its Group to, cooperate in achieving a
reasonable alternative arrangement for the affected members of the Groups to
obtain the economic and operational equivalent of the intended transfer of such
Transferred Assets and/or provision of such Third Party Right and assumption of
the attendant Liabilities, with minimum interference to such members' business
operations until such transfer of such Transferred Assets and/or provision of
such Third Party Right is completed. The costs payable to third parties that
are not members of either Group to achieve any such reasonable alternative
arrangement shall be the financial responsibility of Equifax.
(c) From time to time on and after the Distribution Date, each party
shall promptly transfer, and cause the appropriate members of its Group
promptly to transfer, to the other party, or the designated member of the other
party's Group, any property and other benefits received by such party, or the
members of its Group, that are intended to be or are a Transferred Asset of the
other party under this Agreement. Without limiting the foregoing, funds
received by a member of either Group that belong to a member of the other Group
(whether by payment of accounts
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receivable, credits, rebates or other amounts, however described) shall be
delivered to the other Group by wire transfer not more than five (5) business
days after receipt of such payment.
(d) The obligation of Equifax to transfer, or cause to be
transferred, to or otherwise secure for Equifax Services and ChoicePoint UK the
Third Party Rights described in Section 2.1.2(ii) shall terminate with respect
to all such Third Party Rights held by Equifax and/or any of its Affiliates not
identified by Equifax Services to Equifax as necessary to the conduct of the
Equifax Services Business within twelve (12) months after the Distribution
Date.
ARTICLE III
THIRD PARTY AGREEMENTS
Section 3.1. Third Party Agreements.
(a) As a part of its obligations under Section 2.1.2(ii), Equifax
shall transfer, or cause to be transferred to Equifax Services or ChoicePoint
UK, as appropriate, the rights and obligations of Equifax and its Affiliates in
and to the Third Party Agreements that are a part of the Transferred Equifax
Assets, or otherwise secure appropriate rights to Third Party Software which is
the subject of such agreements for Equifax Services or ChoicePoint UK, as
appropriate, to the extent required by Section 2.1.2(ii) hereof.
(b) As part of its obligation under Section 2.1.3, ChoicePoint shall
transfer, or cause to be transferred, to Equifax or to a Designated Equifax
Member, the rights and obligations of the members of the ChoicePoint Group in
and to the Third Party Agreements that are a part of the Transferred
ChoicePoint Assets to the extent required by Section 2.1.3 hereof.
Section 3.2. Required Consents.
(a) Equifax with respect to Third Party Agreements in its name that
are a part of the Transferred Equifax Assets, and ChoicePoint with respect to
Third Party Agreements in its name that are a part of the Transferred
ChoicePoint Assets, shall, or shall cause the appropriate member of its
respective Group with respect to Third Party Agreements in their names that are
a part of the Transferred Assets to, use its best efforts to obtain the grant
to the appropriate member of the other Group, the Required Consents from the
Third Party Providers under such Third Party Agreements as necessary to effect
the provisions of this Agreement. Each party will provide the other party with
advice on its experience and agreements with the Third Party Providers with
regard to obtaining any Required Consent under such Third Party Agreements.
Equifax and ChoicePoint will each have management and administrative
responsibilities for obtaining all Required Consents under such Third Party
Agreements existing as of the Distribution Date to which a member of its
respective Group is a party. Equifax shall have the right of prior approval of
the terms upon which all Required Consents are obtained.
(b) Equifax shall bear the costs payable to third parties that are
not members of either Group, if any, of obtaining all Required Consents,
including without limitation, all charges and fees
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related to obtaining the Required Consents for the Third Party Agreements that
are a part of the Transferred Assets pursuant to this Agreement.
(c) Equifax and ChoicePoint shall use reasonable commercial efforts
to obtain all Required Consents with regard to Third Party Agreements that are
a part of the Transferred Assets within one hundred eighty (180) days after the
Distribution Date, unless otherwise agreed by the parties in writing. Until all
Required Consents are obtained, Equifax and ChoicePoint shall each periodically
publish a list setting forth the status of each Required Consent for which a
member of its respective Group is the contracting party immediately prior to
the Distribution Date. Equifax and ChoicePoint shall timely cooperate with each
other in order to facilitate the proper and timely publication of such periodic
Required Consents list. If any Required Consent is not obtained with respect to
any of the Third Party Agreements that are a part of the Transferred Assets,
the parties shall cooperate with each other in achieving a reasonable
alternative arrangement for the affected Group to continue to process its work
with minimum interference to its business operations until such Required
Consents are obtained, including without limitation, implementing the
provisions of Section 2.1.5(b). The cost payable to third parties that are not
a member of either Group of achieving such reasonable alternative arrangements
with respect to Third Party Rights that are a part of the Transferred Assets
shall be borne by Equifax.
(d) The financial obligations of Equifax under Sections 3.2(b) and
(c) for Required Consents and alternative arrangements, shall terminate with
respect to all such Required Consents and alternative arrangements not
identified by the parties to each other in a writing within twelve (12) months
after the Distribution Date, and for all Required Consents and alternative
arrangements identified thereafter, all such financial obligations shall be
borne by the party needing the Required Consent or alternative arrangement to
operate under or take assignment of the Third Party Agreement or to obtain such
Third Party Right for which such Required Consent or alternative arrangement is
required.
(e) After the Distribution Date, except as set forth in Sections
3.2(b) and 3.2(c) for Required Consent and alternative arrangements, Equifax
and ChoicePoint shall each bear financial responsibility and pay the Third
Party Providers, directly or indirectly through a third party, under all Third
Party Agreements transferred to its respective Group pursuant to Sections
3.1(a) and 3.1(b) above.
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(f) Equifax shall obtain all Required Consents necessary for the
Equifax Group to continue to have its data processed on the machine designated
the "REDD machine" after the Distribution Date. ChoicePoint shall, and shall
cause the members of the ChoicePoint Group to, cooperate with Equifax to secure
all such consents. ChoicePoint and members of ChoicePoint Group shall provide
such cooperation without charge to Equifax; provided, however, that Equifax
shall have the financial responsibility for all fees and charges payable to
third parties that are not members of either Group to obtain such Required
Consents.
Section 3.3. Discharge of Liabilities.
(a) ChoicePoint agrees that on and after the Distribution Date it
will timely pay, perform and discharge, or cause to be timely paid, performed
and discharged, all of the ChoicePoint Liabilities.
(b) Equifax agrees that on and after the Distribution Date it will
timely pay, perform and discharge, or cause to be timely paid, performed and
discharged, all of the Equifax Liabilities.
ARTICLE IV
LICENSED MATERIALS
Section 4.1. Grant of Licenses by Equifax.
(a) Equifax hereby grants, and will cause the other members of the
Equifax Group to grant, to ChoicePoint a fully paid, non-exclusive, perpetual,
worldwide, non-transferable source and object code license to use, modify,
improve, create Derivative Works and ChoicePoint Enhancements from, and
sublicense, the Licensed Equifax Materials (excluding the Utility Software
Programs) solely for use in the ChoicePoint Business and as that business may
evolve and change in the future, subject to the following:
(i) ChoicePoint shall not sublicense, or otherwise
disclose or distribute, or permit any Person to
use, the Licensed Equifax Materials (excluding
the Utility Software Programs), except in
accordance with Section 4.1(b);
(ii) ChoicePoint shall hold the Licensed Equifax
Materials (excluding the Utility Software
Programs) in strict confidence; will not remove
or destroy any proprietary markings of the
Equifax Group on or contained in the Licensed
Equifax Materials (excluding the Utility Software
Programs); and will include the copyright and
patent notices of the licensor as specified from
time to time by the licensor for the Licensed
Equifax Materials (excluding the Utility Software
Programs) on and in all copies of the Licensed
Equifax Materials (excluding the Utility Software
Programs);
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(iii) ChoicePoint shall not export or re-export the
Licensed Equifax Materials (excluding the Utility
Software Programs) without the appropriate United
States or foreign government licenses; and
(iv) all sublicenses from ChoicePoint to members of
the ChoicePoint Group (A) shall contain the
rights and restrictions set forth in this Section
4.1(a) with respect to the license granted to
ChoicePoint and comply with Sections 4.1(b)
through (d) hereof and (B) shall be diligently
enforced by ChoicePoint.
(b) The sublicense rights granted to ChoicePoint pursuant to Section
4.1(a) include the right for ChoicePoint to grant sublicenses to the Licensed
Equifax Materials (excluding the Utility Software Programs) to the members of
the ChoicePoint Group, which sublicenses may include the right to further
sublicense such Licensed Equifax Materials (excluding the Utility Software
Programs) to such Group member's customers solely for each such customer's
internal business purposes to the extent related to the ChoicePoint Business.
All sublicensing by ChoicePoint and other members of the ChoicePoint Group to
their customers shall be pursuant to written agreements with such customer,
executed before or at the time of furnishing each copy of the Licensed Equifax
Materials (excluding the Utility Software Programs) to such customer, and which
provide at a minimum that such customer:
(i) receives only a personal, non-transferable and
nonexclusive right to use such copy of the
Licensed Equifax Materials (excluding the Utility
Software Programs);
(ii) receives no title in the intellectual property
contained in the Licensed Equifax Materials
(excluding the Utility Software Programs);
(iii) will not copy the Licensed Equifax Materials
(excluding the Utility Software Programs), except
as necessary to use such Licensed Equifax
Materials (excluding the Utility Software
Programs) in accordance with the license grant
and to make one archival copy;
(iv) will not export or re-export the Licensed Equifax
Materials (excluding the Utility Software
Programs) without the appropriate United States
or foreign government licenses;
(v) will hold the Licensed Equifax Materials
(excluding the Utility Software Programs) in
confidence; will not reverse compile or
disassemble the Licensed Equifax Materials
(excluding the Utility Software Programs); will
not remove or destroy any proprietary markings of
the Group on or contained in the Licensed Equifax
Materials (excluding the Utility Software
Programs), and will include the copyright and
patent notices of the licensor as specified from
time to time by the licensor for the Licensed
Equifax Materials (excluding the Utility Software
Programs) on and in all
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copies of the Licensed Equifax Materials
(excluding the Utility Software Programs); and
(vi) will not sublicense, assign or otherwise transfer
the Licensed Equifax Materials (excluding the
Utility Software Programs) to any other Person.
(c) In the event any member of the ChoicePoint Group sublicenses any
portion of the Licensed Equifax Materials (excluding the Utility Software
Programs) to any third party pursuant to Section 4.1(a) and (b) above,
ChoicePoint agrees to ensure that such member shall diligently enforce the
terms and conditions of all sublicenses granted pursuant to this Section 4.1.
(d) In the event that ChoicePoint, or another member of the
ChoicePoint Group, shall enter into a Divested Business transaction with
respect to the ChoicePoint Group, and the scope of permitted use or other terms
applicable to the Licensed Equifax Materials (excluding the Utility Software
Programs) under the license or sublicenses granted in this Section 4.1 are
required to be modified to effect such transaction, Equifax will, or will cause
the sublicensor under the applicable sublicense to, agree to such modifications
to the extent (i) required for the transaction to be effected and (ii) not
materially detrimental to the interests of the Equifax Group. Such
modifications shall not be effective until the Divested Business or the
acquiror thereof, as required by Equifax, has entered into a license agreement
with the appropriate member of the Equifax Group incorporating the terms of
Section 4.1 and Section 4.2 and such other terms as Equifax reasonably deems
appropriate for the protection of its interests in the Licensed Equifax
Materials (excluding the Utility Software Programs).
(e) Equifax hereby grants, and will cause the other members of the
Equifax Group to grant, to ChoicePoint a fully paid, non-exclusive, perpetual,
worldwide, transferable, source and object code license to use, modify,
improve, create Derivative Works and ChoicePoint Enhancements from, and
sublicense, the Licensed Equifax Materials that are comprised of the Utility
Software Programs for any and all fields of use and to any and all Persons.
(f) The Licensed Equifax Materials may be marketed under such name
and in such manner as ChoicePoint chooses, consistent with the terms and
conditions of this Agreement.
(g) Except for the ChoicePoint Group's rights described in Section
4.1(a), (b) and (e) above, the Equifax Group's rights in and to the Licensed
Equifax Materials shall be and remain the exclusive property of Equifax or the
Designated Equifax Member.
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Section 4.2. Ownership of Enhancements by ChoicePoint.
(a) ChoicePoint, or the Designated ChoicePoint Member, shall own all
the modifications and improvements to, and the ChoicePoint Enhancements and/or
Derivative Works made from, the Licensed Equifax Materials developed by any
member of the ChoicePoint Group, or by any party other than a member of the
Equifax Group at the expense of the ChoicePoint Group. Equifax hereby assigns,
and shall cause each member of the Equifax Group to assign, to ChoicePoint, or
the Designated ChoicePoint Member, all right, title and interest it may hold in
such modifications, improvements, ChoicePoint Enhancements and Derivative
Works. ChoicePoint shall, or shall cause the Designated ChoicePoint Member to,
have the right to make and file all applications and other documents required
to register the copyright(s) and file for patents for such modifications,
improvements, ChoicePoint Enhancements and Derivative Works in its discretion
and at its sole cost and expense.
(b) Should ChoicePoint elect to file any application for the
registration, perfection or protection of any modifications, improvements,
ChoicePoint Enhancements or Derivative Works described in Section 4.2(a), under
any copyright, patent, semi-conductor chip protection or other law of any
country or jurisdiction, Equifax will, at the request and expense of
ChoicePoint, do all things and sign all documents or instruments reasonably
necessary in the opinion of ChoicePoint to assist in the registration of such
claims, file such applications, and obtain, defend and enforce such copyright,
patent, mask work and other rights.
(c) Subject to the license rights granted in Section 4.1, the Licensed
Equifax Materials shall be and shall remain the sole and exclusive property of
the Equifax Group and the members of the Equifax Group may make any internal
use and may commercially exploit any enhancements to the Licensed Materials
made or caused to be made by members of the Equifax Group, as they shall deem
appropriate without any obligation to any member of the ChoicePoint Group or
other restriction. The Equifax Group may in particular distribute and
manufacture, or cause to be manufactured or distributed by any third party, any
such enhancements and/or the Licensed Equifax Materials.
Section 4.3. License to Equifax Marks.
Equifax hereby grants, and will cause each member of the Equifax Group
to grant, to ChoicePoint and each member of the ChoicePoint Group a fully paid,
non-exclusive, worldwide, non-transferable right to continue to use the Equifax
Marks employed in the ChoicePoint Business, but only to the extent such Equifax
Marks were displayed by the ChoicePoint Group prior to the Distribution Date
(a) on the Transferred Equifax Assets, (b) on premises jointly occupied with
Equifax, and (c) on letterhead, product and services documentation, invoices,
software programs, packaging and similar materials used by the members of the
ChoicePoint Group, and such Equifax Marks are used in accordance with the
guidelines for usage of the Equifax Marks published and amended by Equifax from
time to time. ChoicePoint will terminate the use of such Equifax Marks as soon
as commercially practical but in any event within twelve (12) months after the
Distribution Date.
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Section 4.4. Grant of License by ChoicePoint.
(a) ChoicePoint hereby grants, and will cause the other members of the
ChoicePoint Group to grant, to Equifax a fully paid, non-exclusive, perpetual,
worldwide, non-transferable license to use, modify, improve, create Derivative
Works and Equifax Enhancements from, and sublicense, the Licensed ChoicePoint
Materials (excluding the Utility Software Programs) solely for use in the
Equifax Business and as that business may evolve and change in the future,
subject to the following:
(i) Equifax shall not sublicense, or otherwise
disclose or distribute, or permit any Person to
use, the Licensed ChoicePoint Materials
(excluding the Utility Software Programs), except
in accordance with Section 4.4(b);
(ii) Equifax shall hold the Licensed ChoicePoint
Materials (excluding the Utility Software
Programs) in strict confidence; will not remove
or destroy any proprietary markings of the
ChoicePoint Group on or contained in the Licensed
ChoicePoint Materials (excluding the Utility
Software Programs); and will include the
copyright and patent notices of the licensor as
specified from time to time by the licensor for
the Licensed ChoicePoint Materials (excluding the
Utility Software Programs) on and in all copies
of the Licensed ChoicePoint Materials (excluding
the Utility Software Programs);
(iii) Equifax shall not export or re-export the
Licensed ChoicePoint Materials (excluding the
Utility Software Programs) without the
appropriate United States or foreign government
license; and
(iv) all sublicenses from Equifax to members of the
Equifax Group (A) shall contain the rights and
restrictions set forth in this Section 4.4(a)
with respect to the license granted to Equifax
and comply with Sections 4.4(b) through (d)
hereof and (B) shall be diligently enforced by
Equifax.
(b) The sublicense rights granted to Equifax pursuant to Section
4.4(a) include the right for Equifax to grant sublicenses to the Licensed
ChoicePoint Materials (excluding the Utility Software Programs) to the members
of the Equifax Group, which sublicenses may include the right to further
sublicense such Licensed ChoicePoint Materials (excluding the Utility Software
Programs) to such Group member's customers solely for each such customer's
internal business purposes to the extent related to the Equifax Business. All
sublicensing by Equifax and other members of the Equifax Group to their
customers shall be pursuant to written agreements with such customer, executed
before or at the time of furnishing each copy of the Licensed ChoicePoint
Materials (excluding the Utility Software Programs) to such customer, and which
provide at a minimum that such customer:
(i) receives only a personal, non-transferable and
nonexclusive right to use such copy of the
Licensed ChoicePoint Materials (excluding the
Utility Software Programs);
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(ii) receives no title in the intellectual property
contained in the Licensed ChoicePoint Materials
(excluding the Utility Software Programs);
(iii) will not copy the Licensed ChoicePoint Materials
(excluding the Utility Software Programs), except
as necessary to use such Licensed ChoicePoint
Materials (excluding the Utility Software
Programs) in accordance with the license grant
and to make one archival copy;
(iv) will not export or re-export the Licensed
ChoicePoint Materials (excluding the Utility
Software Programs) without the appropriate United
States or foreign government licenses;
(v) will hold the Licensed ChoicePoint Materials
(excluding the Utility Software Programs) in
confidence; will not reverse compile or
disassemble the Licensed ChoicePoint Materials
(excluding the Utility Software Programs); will
not remove or destroy any proprietary markings of
the Group on or contained in the Licensed
ChoicePoint Materials (excluding the Utility
Software Programs); and will include the
copyright and patent notices of the licensor as
specified from time to time by the licensor for
the Licensed ChoicePoint Materials (excluding the
Utility Software Programs) on and in all copies
of the Licensed ChoicePoint Materials (excluding
the Utility Software Programs); and
(vi) will not sublicense, assign or otherwise transfer
the Licensed ChoicePoint Materials (excluding the
Utility Software Programs) to any other Person.
(c) In the event any member of the Equifax Group sublicenses any
portion of the Licensed ChoicePoint Materials (excluding the Utility Software
Programs) to any third party pursuant to Section 4.4(a) and (b) above, Equifax
agrees to ensure that such member shall diligently enforce the terms and
conditions of all sublicenses granted pursuant to this Section 4.4.
(d) In the event that Equifax, or another member of the Equifax Group,
shall enter into a Divested Business transaction with respect to the Equifax
Group, and the scope of permitted use or other terms applicable to the Licensed
ChoicePoint Materials (excluding the Utility Software Programs) under the
license or sublicenses granted in this Section 4.4 are required to be modified
to effect such transaction, ChoicePoint will, or will cause the sublicensor
under the applicable sublicense to, agree to such modifications to the extent
(i) required for the transaction to be effected and (ii) not materially
detrimental to the interests of the ChoicePoint Group. Such modifications shall
not be effective until the Divested Business or the acquiror thereof, as
required by ChoicePoint, has entered into a license agreement with the
appropriate member of the ChoicePoint Group incorporating the terms of Section
4.4 and Section 4.5 and such other terms as ChoicePoint reasonably deems
appropriate for the protection of its interests in the Licensed ChoicePoint
Materials (excluding the Utility Software Programs).
(e) ChoicePoint hereby grants, and will cause the other members of the
ChoicePoint Group to grant, to Equifax a fully paid, non-exclusive, perpetual,
worldwide, transferable, source
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and object code license to use, modify, improve, create Derivative Works and
ChoicePoint Enhancements from, and sublicense, the Licensed ChoicePoint
Materials that are comprised of the Utility Software Programs for any and all
fields of use and to any and all Persons.
(f) The Licensed ChoicePoint Materials may be marketed under such name
and in such manner as Equifax chooses, consistent with the terms and conditions
of this Agreement.
(g) Except for the Equifax Group's rights described in Section 4.4(a),
(b) and (e) above, the ChoicePoint Group's rights in and to the Licensed
ChoicePoint Materials shall be and remain the exclusive property of ChoicePoint
or the Designated ChoicePoint Member.
Section 4.5. Ownership of Enhancements by Equifax.
(a) Equifax, or the Designated Equifax Member, shall own all the
modifications and improvements to, and the Equifax Enhancements and/or
Derivative Works made from, the Licensed ChoicePoint Materials developed by any
member of the Equifax Group, or by any party other than a member of the
ChoicePoint Group at the expense of the Equifax Group. ChoicePoint hereby
assigns, and shall cause each member of the ChoicePoint Group to assign, to
Equifax, or the Designated Equifax Member, all right, title and interest it may
hold in such modifications, improvements, Equifax Enhancements and Derivative
Works. Equifax shall, or shall cause the Designated Equifax Member to, have the
right to make and file all applications and other documents required to
register the copyright(s) and file for patents for such modifications,
improvements, Equifax Enhancements and Derivative Works in its discretion and
at its sole cost and expense.
(b) Should Equifax elect to file any application for the registration,
perfection or protection of any modifications, improvements, Equifax
Enhancements or Derivative Works described in Section 4.5(a), under any
copyright, patent, semi-conductor chip protection or other law of any country
or jurisdiction, ChoicePoint will, at the request and expense of Equifax, do
all things and sign all documents or instruments reasonably necessary in the
opinion of Equifax to assist in the registration of such claims, file such
applications, and obtain, defend and enforce such copyright, patent, mask work
and other rights.
(c) Subject to the license rights granted in Section 4.4, the Licensed
ChoicePoint Materials shall be and shall remain the sole and exclusive property
of the ChoicePoint Group and the members of the ChoicePoint Group may make any
internal use and may commercially exploit any enhancements to the Licensed
Materials made or cause to be made by members of the Equifax Group, as they
deem appropriate without any obligation to any member of the Equifax Group or
other restriction. The ChoicePoint Group may in particular distribute and
manufacture, or cause to be manufactured or distributed by any third party, any
such enhancements and/or Licensed ChoicePoint Materials.
Section 4.6. Data.
In no event shall any member of the Group be deemed to have been
granted any rights under this Agreement in or to any data owned or maintained
by any other member of the Group,
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except as specifically provided in Section 2.1.2. The respective rights of the
members of the Group in and to such data shall be governed exclusively by
Section 2.1.2 and the Intercompany Information Services Agreement.
Section 4.7. Mutual Obligations.
(a) The parties acknowledge that the Licensed Materials are
"intellectual property" within the meaning of Section 101 of the Federal
Bankruptcy Act and shall be subject to Section 365(n) thereof, all as set forth
in the Intellectual Property Bankruptcy Protection Act, Public Law 100-506, 102
Stat. 2538.
(b) In full and complete payment of the licenses granted in this
Agreement, the parties have made the payment described in the Distribution
Agreement as set forth in that Agreement.
(c) Each party shall notify the other party of any involuntary
attachment or other judicial process affecting the Licensed Materials.
ARTICLE V
THE CLOSING
Section 5.1. Equifax Deliverables.
On the Closing Date, Equifax will, and/or will cause each member of
the Equifax Group to, deliver to ChoicePoint each of the following:
(a) Duly executed assignment and assumption agreements necessary for
the assignment and transfer to, and the assumption by ChoicePoint of, the
Transferred Equifax Assets;
(b) Duly executed assignment and assumption agreements necessary for
the assignment and transfer to, and the assumption by Equifax of, the Equifax
Liabilities; and
(c) Such other agreements, leases, documents or instruments as the
parties may agree are necessary or desirable in order to achieve the purposes
of this Agreement.
Section 5.2. ChoicePoint Deliverables.
On the Closing Date, ChoicePoint will, and/or will cause each member
of the ChoicePoint Group to, deliver to Equifax each of the following:
(a) Duly executed assignment and assumption agreements necessary for
the assignment and transfer to, and the assumption by Equifax of, the
Transferred ChoicePoint Assets;
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(b) Duly executed assignment and assumption agreements necessary for
the assignment and transfer to, and the assumption by ChoicePoint of, the
ChoicePoint Liabilities; and
(c) Such other agreements, documents or instruments as the parties
may agree are necessary or desirable in order to achieve the purposes of this
Agreement.
Section 5.3. Termination.
If the Closing Date does not occur prior to September 15, 1997, this
Agreement shall be terminated.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Except as expressly set forth in this Agreement or any Ancillary
Agreement, neither any member of the Equifax Group, nor any member of the
ChoicePoint Group, has given or is giving any representation or warranty
regarding the Assets or Liabilities retained, transferred, assumed or licensed
as contemplated hereby or thereby, including without limitation, (i) title to
the Assets, (ii) validity of the Liabilities, (iii) any lien, claim or other
encumbrance affecting the Assets or Liabilities, or (iv) the value of the
Assets and the amount of the Liabilities. Except as may be expressly set forth
in this Agreement or any Ancillary Agreement, all Assets and Liabilities were,
or are being, transferred, assigned, licensed, assumed, or are being retained,
on an "AS IS", "WHERE IS" basis and the respective transferees, licensees and
assignees will bear the economic and legal risks that any such conveyance (i)
shall prove to be insufficient to vest in the transferee a title that is free
and clear of any lien, claim or other encumbrance, or (ii) shall not constitute
an infringement of a third party's rights.
ARTICLE VII
INDEMNIFICATION
Section 7.1. ChoicePoint Indemnification of the Equifax Group.
On and after the Distribution Date, ChoicePoint shall indemnify,
defend and hold harmless each member of the Equifax Group, and each of their
respective directors, officers, employees and agents (collectively the "Equifax
Indemnitees") from and against any and all damage, loss, liability and expense,
(including without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any and all Actions
or threatened Actions) (collectively, "Indemnifiable Losses") incurred or
suffered by any of the Equifax Indemnitees arising in connection with the
failure of ChoicePoint, or any other member of the ChoicePoint Group, to timely
pay, perform or otherwise discharge, any of the ChoicePoint Liabilities or its
obligations under this Agreement or any Ancillary Agreement.
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Section 7.2. Equifax Indemnification of the ChoicePoint Group.
On and after the Distribution Date, Equifax shall indemnify, defend
and hold harmless each member of the ChoicePoint Group and each of their
respective directors, officers, employees and agents (collectively the
"ChoicePoint Indemnitees") from and against any and all Indemnifiable Losses
incurred or suffered by any of the ChoicePoint Indemnitees arising in
connection with the failure of Equifax, or any other member of the Equifax
Group, to timely pay, perform or otherwise discharge, any of the Equifax
Liabilities or its obligations under this Agreement or any Ancillary Agreement.
Section 7.3. Insurance and Third Party Obligations.
No insurer or any other third party shall be (a) entitled to a
benefit it would not be entitled to receive in the absence of the foregoing
indemnification provisions, (b) relieved of the responsibility to pay any
claims to which it is obligated, or (c) entitled to any subrogation rights with
respect to any obligation hereunder.
ARTICLE VIII
INDEMNIFICATION PROCEDURES
Section 8.1. Notice and Payment of Claims.
If any Equifax or ChoicePoint Indemnitee (the "Indemnified Party")
determines that it is or may be entitled to indemnification by a party (the
"Indemnifying Party") under Article VII (other than in connection with any
Action or claim subject to Section 8.2), the Indemnified Party shall deliver to
the Indemnifying Party a written notice specifying, to the extent reasonably
practicable, the basis for its claim for indemnification and the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. After the Indemnifying Party shall have been notified of the
amount for which the Indemnified Party seeks indemnification, the Indemnifying
Party shall, within thirty (30) days after receipt of such notice, pay the
Indemnified Party such amount in cash or other immediately available funds (or
reach agreement with the Indemnified Party as to a mutually agreeable
alternative payment schedule) unless the Indemnifying Party objects to the
claim for indemnification or the amount thereof. If the Indemnifying Party does
not give the Indemnified Party written notice objecting to such claim and
setting forth the grounds therefor within the same thirty (30) day period, the
Indemnifying Party shall be deemed to have acknowledged its liability for such
claim and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such amount. Any amount owed under this Section 8.1
that is past due shall bear interest at a simple rate of interest per annum
equal to the lesser of 1% per month or the maximum amount permitted by law.
Section 8.2. Notice and Defense of Third Party Claims.
(a) Promptly following the earlier of either (i) receipt of notice of
the commencement by a third party of any Action against or otherwise involving
any Indemnified Party, or (ii) receipt of information from a third party
alleging the existence of a claim against an Indemnified
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<PAGE> 25
Party, with respect to which indemnification may be sought pursuant to this
Agreement (a "Third Party Claim"), the Indemnified Party shall give the
Indemnifying Party written notice thereof. The failure of the Indemnified Party
to give notice as provided in this Section 8.2 shall not relieve the
Indemnifying Party of its obligations under this Agreement, except to the
extent that the Indemnifying Party is prejudiced by such failure to give
notice. Within thirty (30) days after receipt of such notice, the Indemnifying
Party shall by giving written notice thereof to the Indemnified Party, (i)
acknowledge, as between the parties hereto, liability for and, at its option,
assume the defense of such Third Party Claim at its sole cost and expense, or
(ii) object to the claim of indemnification set forth in the notice delivered
by the Indemnified Party pursuant to the first sentence of this Section 8.2
setting forth the grounds therefor; provided that if the Indemnifying Party
does not within the same thirty (30) day period give the Indemnified Party
written notice acknowledging liability and electing to assume the defense, or
objecting to such claim and setting forth the grounds therefor, the
Indemnifying Party shall be deemed to have acknowledged, as between the parties
hereto, its liability for such Third Party Claim.
(b) Any contest of a Third Party Claim as to which the Indemnifying
Party has elected to assume the defense shall be conducted by attorneys
employed by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party; provided that the Indemnified Party shall have the right to
participate in such proceedings and to be represented by attorneys of its own
choosing at the Indemnified Party's sole cost and expense. If the Indemnifying
Party assumes the defense of a Third Party Claim, the Indemnifying Party may
settle or compromise the Third Party Claim without the prior written consent of
the Indemnified Party; provided that the Indemnifying Party may not agree to
any such settlement pursuant to which any such remedy or relief, shall be
applied to or against the Indemnified Party, other than monetary damages for
which the Indemnifying Party shall be responsible hereunder, without the prior
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
(c) If the Indemnifying Party does not assume the defense of a Third
Party Claim for which it has acknowledged liability for indemnification under
Article VII, the Indemnified Party may require the Indemnifying Party to
reimburse it on a current basis for its reasonable expenses of investigation,
reasonable attorneys' fees and reasonable out-of-pocket expenses incurred in
defending against such Third Party Claim and the Indemnifying Party shall be
bound by the result obtained by the Indemnified Party with respect thereto;
provided that the Indemnifying Party shall not be liable for any settlement
effected without its consent, which consent shall not be unreasonably withheld.
The Indemnifying Party shall pay to the Indemnified Party in cash the amount
for which the Indemnified Party is entitled to be indemnified (if any) within
fifteen (15) days after the final resolution of such Third Party Claim, whether
such final resolution is (i) by the final nonappealable judgment of a court of
competent jurisdiction, or (ii) in the case of any Third Party Claim as to
which the Indemnifying Party's objection has been resolved by settlement,
compromise, arbitration or otherwise.
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ARTICLE IX
CONFIDENTIALITY
Section 9.1. Exclusions.
Notwithstanding anything to the contrary contained in this Agreement,
"Company Information" does not include any information that (a) subsequent to
the Distribution Date, is already known to the receiving party at the time it
is disclosed to the receiving party by the disclosing party; or (b) before
being divulged by the receiving party (i) has become generally known to the
public through no wrongful act of the receiving party; (ii) has been rightfully
received by the receiving party from a third party without restriction on
disclosure and without, to the knowledge of the receiving party, a breach of an
obligation of confidentiality running directly or indirectly to the disclosing
party; (iii) has been approved for release to the general public by a written
authorization of the disclosing party; (iv) has been independently developed by
the receiving party without use, directly or indirectly, of the Company
Information received from the disclosing party; or (v) has been furnished to a
third party by the disclosing party without restrictions on the third party's
rights to disclose the information.
Section 9.2. Confidentiality.
(a) Each party agrees, and shall cause each member of the Group to
agree, that it is in possession of significant confidential or proprietary
information concerning the business, operations and Assets of the members of
the other Group.
(b) Each party shall, and shall ensure that each member of the Group
shall, (i) receive and hold the Company Information of the other Group in trust
and in strictest confidence; (ii) protect such Company Information from
disclosure and in no event take any action causing, or fail to take the action
necessary in order to prevent, any such Company Information to lose its
character as Company Information; (iii) exercise at a minimum the same care it
would exercise to protect its own highly confidential information; and (iv) not
use, reproduce, distribute, disclose, or otherwise disseminate the Company
Information of the other Group, (A) except as authorized pursuant to this
Agreement or any Ancillary Agreement, or (B) except pursuant to a requirement
of a governmental agency or of law without similar restrictions or other
protections against public disclosure; provided, however, with respect to
disclosures pursuant to (B) above, the receiving party must first give written
notice of such required disclosure to the disclosing party, make a reasonable
effort to obtain a protective order requiring that the Company Information so
disclosed be used only for the purposes for which disclosure is required, take
reasonable steps to allow the disclosing party to seek to protect the
confidentiality of the Company Information required to be disclosed, and shall
disclose only that part of the Company Information which, in the written
opinion of its legal counsel, it is required to disclose. In no event shall the
receiving party exercise less than a reasonable standard of care to keep
confidential the Company Information. Any and all reproductions of such Company
Information must prominently contain a confidential legend.
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(c) The receiving party may make disclosures of the Company
Information of the disclosing party only to Representatives of the receiving
party's Group (i) who have a specific need to know such information; and (ii)
who the receiving party has obligated under a written agreement to hold such
Company Information in trust and in strictest confidence and otherwise to
comply with the terms and provisions of this Agreement or terms and conditions
substantially similar to and implementing the same restrictions and covenants
as those set forth in this Agreement. ChoicePoint and Equifax agree to
diligently monitor each such Representative, diligently enforce such agreements
with its Representatives, and, upon request by the other party, promptly to
furnish to the other party a certified list of the receiving party's
Representatives having had access to such Company Information.
(d) The covenants of confidentiality set forth in this Agreement (i)
will apply after the Distribution Date to all Company Information disclosed to
the receiving party before, on and after the Distribution Date and (ii) will
continue and must be maintained from the Distribution Date through (A) with
respect to Proprietary Information, the period during which the Proprietary
Information constituting a part of the Company Information retains its status
as a "trade secret" under applicable law; and (B) with respect to Confidential
Information constituting a part of the Company Information, for the shorter of
a period equal to two (2) years after the Distribution Date, or until such
Confidentiality Information no longer qualifies as confidential under
applicable law.
Section 9.3. Employee Confidentiality Agreements. The members of each
Group have entered into confidentiality and non-disclosure agreements with
their respective employees. To the extent that any employee during or after
employment violates any such agreement and such violation is or may in the
future be to the detriment of the other Group, at the written request of the
affected party, the other party shall, or shall cause the appropriate members
of its Group to, promptly bring and diligently pursue an action against such
employee if and to the extent reasonable under the circumstances to preserve
the value of the Assets and Licensed Materials. The Group member employing the
employee violating his/her confidentiality and non-disclosure agreement shall
have the unilateral right to determine the forum for, the manner of proceeding
in, and legal counsel for such action and shall be entitled to any damages or
other relief against such employee awarded in such action to the extent related
to such Group's Assets or business or to the Licensed Materials. Such
enforcement against and recovery by a Group member from its breaching employee
shall not constitute a release or sole remedy for the members of the other
Group injured by such breaching employee's actions, and such members of the
other Group may bring a claim against the Group members employing the breaching
employee for a breach of this Agreement. Each party shall bear all
out-of-pocket costs of pursuing such action and the other party shall cooperate
in connection therewith.
Section 9.4. Rights and Remedies.
(a) If either party, or any member of the Group, should breach or
threaten to breach any of the provisions of this Agreement, the non-breaching
party, in addition to any other remedies it may have at law or in equity, may
seek a restraining order, injunction, or other similar remedy in order to
specifically enforce the provisions of this Agreement. Each party
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specifically acknowledges, and shall cause each member of the Group to
acknowledge, that money damages alone would be an inadequate remedy for the
injuries and damage that would be suffered and incurred by the non-breaching
party as a result of a breach of any of the provisions of this Agreement. In
the event that either party, or a member of such party's Group, should seek an
injunction hereunder, the other party hereby waives, and shall cause each
member of its Group to waive, any requirement for the submission of proof of
the economic value of any Company Information or the posting of a bond or any
other security. In the event of a dispute between the parties, the
non-prevailing party shall pay all costs and expenses associated with resolving
the dispute, including, but not limited to, reasonable attorneys' fees.
(b) The receiving party shall notify the disclosing party immediately
upon discovery of any unauthorized use or disclosure of Company Information, or
any other breach of this Agreement by the receiving party or any Representative
of the receiving party's Group, and will cooperate with the disclosing party in
every reasonable way to help the disclosing party regain possession of its
Company Information and prevent its further unauthorized use or disclosure. The
receiving party shall be responsible for the acts of any Representative of its
Group that are in violation of this Agreement.
Section 9.5. Competitive Activities.
(a) Subject to the rights and obligations set forth in Article IX,
each party understands and acknowledges that the other party's Group may now
market or have under development products that are competitive with products or
services now offered or that may be offered by it and/or members of its Group,
and the parties' communications hereunder will not serve to impair the right of
either party, or any member of the Group, to independently develop, make, use,
procure, or market products or services now or in the future that may be
competitive with those offered by the other party's Group, nor require either
party, and/or the members of its Group, to disclose any planning or other
information to the other party.
(b) Neither party will be restricted in using, in the development,
manufacturing and marketing of its products and services and its operations,
any data processing or network management or operation ideas, concepts,
know-how and techniques which are retained in the minds of employees who have
had access to the other party's Company Information subject to the restrictions
set forth in this Agreement.
Section 9.6. No Implied Rights.
All Company Information is and shall remain the property of the
disclosing party and/or the member's of its Group. By disclosing Company
Information to the receiving party's Group, the disclosing party and/or the
members of its Group do(es) not grant any express or implied rights or license
to the receiving party's Group to or under any patents, patent applications,
inventions, copyrights, trademarks, trade secret information, or other
intellectual property rights heretofore or hereafter possessed by the
disclosing party and/or the members of its Group.
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ARTICLE X
CONTINUED ASSISTANCE
Section 10.1. Continued Assistance and Transition.
(a) Following the Distribution Date, Equifax shall, and shall cause
each member of the Equifax Group to, cooperate in an orderly transfer of the
Transferred Equifax Assets to ChoicePoint or the Designated ChoicePoint Member.
From time to time, at ChoicePoint's request and without further consideration,
Equifax shall, and shall cause each member of the Equifax Group, as applicable,
to execute, acknowledge and deliver such documents, instruments or assurances
and take such other action as ChoicePoint may reasonably request to more
effectively assign, convey and transfer any of the Transferred Equifax Assets.
Equifax will assist ChoicePoint in the vesting, collection or reduction to
possession of such Transferred Equifax Assets.
(b) Following the Distribution Date, ChoicePoint shall, and shall
cause each member of the ChoicePoint Group to, cooperate in an orderly transfer
of the Transferred ChoicePoint Assets to Equifax or the Designated Equifax
Member. From time to time, at Equifax's request and without further
consideration, ChoicePoint shall, and shall cause each member of the
ChoicePoint Group, as applicable, to execute, acknowledge and deliver such
documents, instruments or assurances and take such other action as Equifax may
reasonably request to more effectively assign, convey and transfer any of the
Transferred ChoicePoint Assets. ChoicePoint will assist Equifax in the vesting,
collection or reduction to possession of such Transferred ChoicePoint Assets.
Section 10.2. Records and Documents.
(a) As soon as practicable following the Distribution Date, Equifax
and ChoicePoint shall each arrange for the delivery to the other of existing
corporate and other documents (e.g. minute books, stock registers, stock
certificates, documents of title, source code, contracts, etc.) in its
possession relating to the Transferred Assets and assumed Liabilities.
(b) From and after the Distribution Date, Equifax and ChoicePoint
shall each, and shall cause each member of its Group to, afford the other and
its accountants, counsel and other designated Representatives reasonable access
(including using reasonable efforts to give access to person or firms
possessing such information) and duplicating rights during normal business
hours to all records, books, contracts, instruments, computer data and other
data and information in its possession relating to the Assets, Liabilities,
Licensed Materials, business and affairs of the other (other than data and
information subject to any attorney/client or other privilege), insofar as such
access is reasonably required by the other, including without limitation, for
audit, accounting and litigation purposes.
(c) Notwithstanding the foregoing, either party may destroy or
otherwise dispose of any information at any time in accordance with the
corporate record retention policy maintained by such party with respect to its
own records.
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Section 10.3. Litigation Cooperation.
Upon written request by either party and at the cost and expense of
the requesting party, Equifax and ChoicePoint shall, and shall cause each
member of its Group to, use reasonable efforts to make available to the
requesting party, its Representatives as witnesses to the extent that such
persons may reasonably be required in connection with any legal, administrative
or other proceedings involving third parties that are not a member of either
Group, arising out of this Agreement or related to the matters which are the
subject of this Agreement, and in which the requesting party or any member of
its Group may from time to time be involved.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Expenses.
Except as specifically provided in this Agreement or any Ancillary
Agreement, all costs and expenses incurred in connection with the preparation,
execution, delivery and implementation of this Agreement and the Ancillary
Agreements and with the consummation of the transactions contemplated by this
Agreement (including transfer taxes and the fees and expenses of all counsel,
accountants and financial and other advisors) shall be paid by Equifax.
Section 11.2. Notices.
All notices and communications under this Agreement shall be deemed
to have been given (a) when received, if such notice or communication is
delivered by facsimile, hand delivery or courier, and (b) three (3) business
days after mailing if such notice or communication is sent by United States
registered or certified mail, return receipt requested, first class postage
prepaid. All notices and communications, to be effective, must be properly
addressed to the party to whom the same is directed at its address as follows:
If to Equifax, to:
Equifax Inc.
1600 Peachtree Street, N.W.
Atlanta, GA 30309
Attention: Bruce S. Richards
Corporate Vice President and General Counsel
Fax: (404) 888-8682
27
<PAGE> 31
with a copy (which shall not constitute notice) to:
Thomas F. Chapman
President and Chief Operating Officer
Equifax Inc.
1600 Peachtree Street, N.W.
Atlanta, GA 30309
Fax: (404) 885-8766
If to ChoicePoint, to:
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, GA 30005
Attention: J. Michael de Janes, Esq.
Fax: (770) 752-5939
with a copy (which shall not constitute notice) to:
Derek V. Smith
President and Chief Executive Officer
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, GA 30005
Fax: (770) 752-6243
Either party may, by written notice so delivered to the other party in
accordance with this Section 11.2, change the address to which delivery of any
notice shall thereafter be made.
Section 11.3. Amendment and Waiver.
This Agreement may not be altered or amended, nor may any rights
hereunder be waived, except by an instrument in writing executed by the party
or parties to be charged with such amendment or waiver. No waiver of any terms,
provision or condition of or failure to exercise or delay in exercising any
rights or remedies under this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further continuing waiver of any such term,
provision, condition, right or remedy or as a waiver of any other term,
provision or condition of this Agreement.
Section 11.4. Entire Agreement.
This Agreement, together with the Ancillary Agreements, constitutes
the entire understanding of the parties hereto with respect to the subject
matter hereof, superseding all negotiations, prior discussions and prior
agreements and understandings relating to such subject matter. To the extent
that the provisions of this Agreement are inconsistent with the provisions
28
<PAGE> 32
of any other Ancillary Agreement, the provisions of this Agreement shall
prevail with respect to the subject matter hereof.
Section 11.5. Parties in Interest. Neither of the parties hereto may
assign its rights or delegate any of its duties under this Agreement without
the prior written consent of each other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns. Nothing contained in this
Agreement, express or implied, is intended to confer any benefits, rights or
remedies upon any person or entity other than members of the Equifax Group and
the ChoicePoint Group and the Equifax Indemnitees and ChoicePoint Indemnitees
under Articles VII and VIII hereof.
Section 11.6. Further Assurances and Consents.
In addition to the actions specifically provided for elsewhere in
this Agreement, each of the parties hereto will use its reasonable efforts to
(a) execute and deliver such further instruments and documents and take such
other actions as any other party may reasonably request in order to effectuate
the purposes of this Agreement and to carry out the terms hereof and (b) take,
or cause to be taken, all actions, and to do, or cause to be done, all things,
reasonably necessary, proper or advisable under applicable laws, regulations
and agreements or otherwise to consummate and make effective the transactions
contemplated by this Agreement, including without limitation, using its
reasonable efforts to obtain any consents and approvals and to make any filings
and applications necessary or desirable in order to consummate the transactions
contemplated by this Agreement.
Section 11.7. Severability.
The provisions of this Agreement are severable and should any
provision hereof be void, voidable or unenforceable under any applicable law,
such provision shall not affect or invalidate any other provision of this
Agreement, which shall continue to govern the relative rights and duties of the
parties as though such void, voidable or unenforceable provision were not a
part hereof.
Section 11.8. Governing Law.
This Agreement shall be construed in accordance with, and governed
by, the laws of the State of Georgia, without regard to the conflicts of law
rules of such state.
Section 11.9. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original instrument, but all of which together shall
constitute but one and the same Agreement.
29
<PAGE> 33
Section 11.10. Disputes.
(a) All disputes arising from or in connection with this Agreement,
whether based on contract, tort, statute or otherwise, including, but not
limited to, disputes in connection with claims by third parties (collectively,
"Disputes"), shall only be in accordance with the provisions of this Section
11.10; provided, however, that nothing contained herein shall preclude either
party from seeking or obtaining (i) injunctive relief to prevent an actual or
threatened breach of any of the provisions of this Agreement, or (ii) equitable
or other judicial relief to enforce the provisions thereof or to preserve the
status quo pending resolution of Disputes hereunder.
(b) Either party may give the other party written notice of any
Dispute not resolved in the normal course of business. Within ten (10) days
after delivery of the notice, the receiving party shall submit to the other a
written response. The notice and the response shall include a statement of such
party's position and a summary of arguments supporting that position and the
name and title of the executive who will represent that party and of any other
person who will accompany such executive in resolving the Dispute. Within
twenty (20) days after delivery of the first notice, the executives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, and shall negotiate in good faith to
attempt to resolve the Dispute. All reasonable requests for information made by
one party to the other will be honored.
(c) If the Dispute has not been resolved by negotiation with sixty
(60) days of the first party's notice, the Dispute shall be submitted, upon
application of either party, for resolution by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (the
"Rules"). Arbitration shall be by a single arbitrator experienced in the
matters that are at issue in the Dispute, which arbitrator shall be selected by
the parties in accordance with the Rules. The arbitration shall be conducted in
Atlanta, Georgia (or at any other place agreed upon by the parties and the
arbitrator). The decision of the arbitrator shall be final and binding as to
all matters at issue in the Dispute; provided, however, if necessary such
decision may be enforced by either party in any court of law having
jurisdiction over the parties or the subject matter of the Dispute. Unless the
arbitrator shall assess the costs and expenses of the arbitration proceeding
and of the parties differently, each party shall pay it costs and expenses
incurred in connection with the arbitration proceeding, and the costs and
expenses of the arbitrator shall be shared equally by the parties.
Section 11.11. Force Majeure.
Neither party will be liable for any loss or damage due to causes
beyond its control, including, but not limited to, fire, accident, labor
difficulty, war, power or transmission failures, riot, Acts of God or changes
in laws and regulations, provided that the affected party must (a) promptly
notify the other party in writing and furnish all relevant information
concerning the event of force majeure; (b) use reasonable efforts to avoid or
remove the cause of its nonperformance; and (c) proceed to perform its
obligations with dispatch when such cause is removed.
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<PAGE> 34
Section 11.12. Documentation.
Prior to the Distribution Date and from time to time thereafter, the
parties will prepare, maintain and update schedules of the Transferred Equifax
Assets, the Transferred ChoicePoint Assets, the Licensed Equifax Materials, the
Licensed ChoicePoint Materials, and the Third Party Agreements, the Third Party
Rights and the Third Party Software transferred and/or provided by each Group
to the other Group, in such detail as shall be appropriate for the management
and administration of these items as described in this Agreement.
Section 11.13. Headings.
The Article and Section headings set forth in this Agreement are
included for administrative, organizational and convenience purposes, and are
not intended to affect the meaning of the provisions set forth in this
Agreement or to be used in the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
EQUIFAX INC.
By:
---------------------------
Title:
------------------------
Date:
------------------------
CHOICEPOINT INC.
By:
---------------------------
Title:
------------------------
Date:
-------------------------
31
<PAGE> 1
EXHIBIT 10.11
================================================================================
================================================================================
LEASE AGREEMENT
Dated as of ______________, 1997
between
SUNTRUST BANKS, INC., as Lessor,
and
CHOICEPOINT INC., as Lessee
================================================================================
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Lease Agreement)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. DEFINITIONS.......................................................... 1
ARTICLE II. LEASE OF LEASED PROPERTY............................................ 1
Section 2.1 Acceptance and Lease of Property........................... 1
Section 2.2 Acceptance Procedure....................................... 2
ARTICLE III. RENT............................................................... 2
Section 3.1 Basic Rent................................................. 2
Section 3.2 Supplemental Rent.......................................... 2
Section 3.3 Method of Payment.......................................... 3
Section 3.4 Late Payment............................................... 3
Section 3.5 Net Lease; No Setoff, Etc.................................. 3
Section 3.6 Certain Taxes.............................................. 5
Section 3.7 Utility Charges............................................ 5
ARTICLE IV. WAIVERS............................................................. 6
ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES................................ 7
ARTICLE VI. MAINTENANCE AND REPAIR; ALTERATIONS, MODIFICATIONS AND ADDITIONS.... 8
Section 6.1 Maintenance and Repair; Compliance With Law................ 8
Section 6.2 Alterations................................................ 9
Section 6.3 Title to Alterations....................................... 9
ARTICLE VII. USE................................................................ 9
ARTICLE VIII. INSURANCE......................................................... 9
ARTICLE IX. ASSIGNMENT AND SUBLEASING.......................................... 11
ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE........................... 12
Section 10.1 Event of Loss............................................ 12
Section 10.2 Event of Taking.......................................... 12
Section 10.3 Casualty................................................. 13
Section 10.4 Condemnation............................................. 13
Section 10.5 Verification of Restoration and Rebuilding............... 13
Section 10.6 Application of Payments.................................. 14
Section 10.7 Prosecution of Awards.................................... 15
Section 10.8 Application of Certain Payments Not Relating
to an Event of Taking.................................. 16
Section 10.9 Other Dispositions....................................... 16
Section 10.10 No Rent Abatement........................................ 16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE XI. INTEREST CONVEYED TO LESSEE........................................ 16
ARTICLE XII. EVENTS OF DEFAULT................................................. 17
ARTICLE XIII. ENFORCEMENT...................................................... 20
Section 13.1 Remedies................................................. 20
Section 13.2 Remedies Cumulative; No Waiver; Consents................. 22
ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY;
RENEWAL ............................................................... 23
Section 14.1 Lessee's Option to Purchase.............................. 23
Section 14.2 Conveyance to Lessee..................................... 23
Section 14.3 Acceleration of Purchase Obligation...................... 24
Section 14.4 Determination of Purchase Price.......................... 24
Section 14.5 Purchase Procedure....................................... 24
Section 14.6 Option to Remarket....................................... 25
Section 14.7 Rejection of Sale................................................. 28
Section 14.8 Return of Leased Property................................ 28
Section 14.9 Renewal.................................................. 29
ARTICLE XV. LESSEE'S EQUIPMENT................................................. 30
ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE....................................... 30
ARTICLE XVII. MISCELLANEOUS.................................................... 31
Section 17.1 Reports.................................................. 31
Section 17.2 Binding Effect; Successors and Assigns; Survival......... 31
Section 17.3 Quiet Enjoyment.......................................... 31
Section 17.4 Notices.................................................. 32
Section 17.5 Severability............................................. 32
Section 17.6 Amendment; Complete Agreements........................... 32
Section 17.7 Construction............................................. 33
Section 17.8 Headings................................................. 33
Section 17.9 Counterparts............................................. 33
Section 17.10 GOVERNING LAW............................................ 33
Section 17.11 Discharge of Lessee's Obligations by its Affiliates...... 33
Section 17.12 Liability of Lessor Limited.............................. 34
Section 17.13 Estoppel Certificates.................................... 34
Section 17.14 No Joint Venture......................................... 35
Section 17.15 No Accord and Satisfaction............................... 35
Section 17.16 No Merger............................................... 35
Section 17.17 Survival................................................ 35
Section 17.18 Chattel Paper........................................... 35
Section 17.19 Time of Essence......................................... 35
Section 17.20 Recordation of Lease.................................... 36
Section 17.21 Investment of Security Funds............................ 36
</TABLE>
(ii)
<PAGE> 4
APPENDICES AND EXHIBITS
APPENDIX A Defined Terms
EXHIBIT A Lease Supplement
(iii)
<PAGE> 5
THIS LEASE AGREEMENT (as from time to time amended or supplemented, this
"Lease"), dated as of ______________, 1997 is between SUNTRUST BANKS, INC., a
Georgia corporation (together with its successors and assigns hereunder, the
"Lessor"), as Lessor, and CHOICEPOINT INC., a Georgia corporation (together with
its successors and permitted assigns hereunder, the "Lessee"), as Lessee.
PRELIMINARY STATEMENT
A. Lessor will purchase from one or more third parties designated by
Lessee, on each Closing Date, certain parcels of real property to be specified
by Lessee, together with any improvements thereon.
B. Lessor desires to lease to Lessee, and Lessee desires to lease from
Lessor, each such property.
C. Lessee will construct certain improvements on such parcels of real
property which as constructed will be the property of Lessor and will become
part of such property subject to the terms of this Lease.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, receipt of which is hereby acknowledged, Lessor and
Lessee hereby agree as follows:
ARTICLE I.
DEFINITIONS
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in Appendix A hereto for all purposes hereof.
ARTICLE II.
LEASE OF LEASED PROPERTY
Section 2.1 Acceptance and Lease of Property. On each Closing Date,
Lessor, subject to the satisfaction or waiver of the conditions set forth in
Section 3 of the Master Agreement, hereby agrees to accept delivery on such
Closing Date of the Land designated by Lessee to be delivered on such Closing
Date pursuant to the terms of the Master Agreement, together with any
improvements thereon and simultaneously to lease to Lessee hereunder for the
Lease Term, Lessor's interest in such Land and in such improvements, together
with any Building which thereafter may be constructed thereon pursuant to the
Construction Agency
<PAGE> 6
Agreement, and Lessee hereby agrees, expressly for the direct benefit of Lessor,
commencing on such Closing Date for the Lease Term, to lease from Lessor's
interest in such Land to be delivered on such Closing Date together with
Lessor's interest in any Building and other improvements thereon or which
thereafter may be constructed thereon pursuant to the Construction Agency
Agreement.
Section 2.2 Acceptance Procedure. Lessor hereby authorizes one or more
employees of Lessee, to be designated by Lessee, as the authorized
representative or representatives of Lessor to accept delivery on behalf of
Lessor of that Leased Property identified on the applicable Funding Request.
Lessee hereby agrees that such acceptance of delivery by such authorized
representative or representatives and the execution and delivery by Lessee on
each Closing Date of a Lease Supplement in substantially the form of Exhibit A
hereto (appropriately completed) shall, without further act, constitute the
irrevocable acceptance by Lessee of that Leased Property which is the subject
thereof for all purposes of this Lease and the other Operative Documents on the
terms set forth therein and herein, and that such Leased Property, together with
any improvements constructed thereon pursuant to the Construction Agency
Agreement, shall be deemed to be included in the leasehold estate of this Lease
and shall be subject to the terms and conditions of this Lease as of such
Closing Date. The demise and lease of each Building pursuant to this Section 2.2
shall include any additional right, title or interest in such Building which may
at any time be acquired by Lessor, the intent being that all right, title and
interest of Lessor in and to such Building shall at all times be demised and
leased to Lessee hereunder.
ARTICLE III.
RENT
Section 3.1 Basic Rent. Beginning with and including the first Payment
Date occurring after the Closing Date, Lessee shall pay to the Agent the Basic
Rent for the Leased Properties, in installments, payable in arrears on each
Payment Date during the Lease Term, subject to Section 2.3(c) of the Master
Agreement.
Section 3.2 Supplemental Rent. Lessee shall pay to the Agent, or to
whomever shall be entitled thereto as expressly provided herein or in any other
Operative Document, any and all Supplemental Rent within five (5) Business Days
of the date the same shall become due and payable and in the event of any
failure on the part of Lessee to pay any Supplemental Rent, the Agent shall have
all rights, powers and remedies provided for herein or by law or in equity or
otherwise in the case of nonpayment of Basic Rent. All Supplemental Rent to be
paid pursuant to this
2
<PAGE> 7
Section 3.2 shall be payable in the type of funds and in the manner set forth in
Section 3.3.
Section 3.3 Method of Payment. Basic Rent shall be paid to the Agent, and
Supplemental Rent (including amounts due under Article XIV hereof) shall be paid
to the Agent (or to such Person as may be entitled thereto) or, in each case, to
such Person as the Agent (or such other Person) shall specify in writing to
Lessee, and at such place as the Agent (or such other Person) shall specify in
writing to Lessee, which specifications by the Agent shall be given by the Agent
at least five (5) Business Days prior to the due date therefor. Each payment of
Rent (including payments under Article XIV hereof) shall be made by Lessee prior
to 12:00 p.m. (noon) Atlanta, Georgia time at the place of payment in funds
consisting of lawful currency of the United States of America which shall be
immediately available on the scheduled date when such payment shall be due,
unless such scheduled date shall not be a Business Day, in which case such
payment shall be made on the next succeeding Business Day.
Section 3.4 Late Payment. If any Basic Rent shall not be paid on the date
when due, Lessee shall pay to the Agent, as Supplemental Rent, interest (to the
maximum extent permitted by law) on such overdue amount from and including the
due date thereof to but excluding the Business Day of payment thereof at the
Overdue Rate.
Section 3.5 Net Lease; No Setoff, Etc. This Lease is a net lease and
notwithstanding any other provision of this Lease, Lessee shall pay all Basic
Rent and Supplemental Rent, and all costs, charges, taxes (other than taxes
covered by the exclusion described in Section 7.4(b) of the Master Agreement),
assessments and other expenses foreseen or unforeseen, for which Lessee or any
Indemnitee is or shall become liable by reason of Lessee's or such Indemnitee's
estate, right, title or interest in the Leased Properties, or that are connected
with or arise out of the acquisition (except the initial costs of purchase by
Lessor of its interest in any Leased Property, which costs, subject to the terms
of the Master Agreement, shall be funded by the Funding Parties pursuant to the
Master Agreement), installation, possession, use, occupancy, maintenance,
ownership, leasing, repairs and rebuilding of, or addition to, the Leased
Properties or any portion thereof, and any other amounts payable hereunder and
under the other Operative Documents without counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or reduction,
and Lessee's obligation to pay all such amounts throughout the Lease Term,
including the Construction Term, is absolute and unconditional. The obligations
and liabilities of Lessee hereunder shall in no way be released, discharged or
otherwise affected for any reason,
3
<PAGE> 8
including without limitation: (a) any defect in the condition, merchantability,
design, quality or fitness for use of any Leased Property or any part thereof,
or the failure of any Leased Property to comply with all Applicable Law,
including any inability to occupy or use any Leased Property by reason of such
non-compliance; (b) any damage to, removal, abandonment, salvage, loss,
contamination of or Release from, scrapping or destruction of or any requisition
or taking of any Leased Property or any part thereof; (c) any restriction,
prevention or curtailment of or interference with any use of any Leased Property
or any part thereof including eviction; (d) any defect in title to or rights to
any Leased Property or any Lien on such title or rights or on any Leased
Property; (e) any change, waiver, extension, indulgence or other action or
omission or breach in respect of any obligation or liability of or by Lessor,
the Agent, any Lease Participant or any Lender; (f) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceedings relating to Lessee, Lessor, any Lease Participant, any Lender, the
Agent or any other Person, or any action taken with respect to this Lease by any
trustee or receiver of Lessee, Lessor, any Lease Participant, any Lender, the
Agent or any other Person, or by any court, in any such proceeding; (g) any
claim that Lessee has or might have against any Person, including without
limitation, Lessor, any vendor, manufacturer, contractor of or for any Building
or any part thereof, the Agent, any Lease Participant or any Lender; (h) any
failure on the part of Lessor to perform or comply with any of the terms of this
Lease, any other Operative Document or of any other agreement; (i) any
invalidity or unenforceability or illegality or disaffirmance of this Lease
against or by Lessee or any provision hereof or any of the other Operative
Documents or any provision of any thereof whether or not related to the
Transaction; (j) the impossibility or illegality of performance by Lessee,
Lessor or both; (k) any action by any court, administrative agency or other
Governmental Authority; (l) any restriction, prevention or curtailment of or
interference with the Construction or any use of any Leased Property or any part
thereof; or (m) any other occurrence whatsoever, whether similar or dissimilar
to the foregoing, whether or not Lessee shall have notice or knowledge of any of
the foregoing. Except as specifically set forth in Articles XIV or X of this
Lease, this Lease shall be noncancellable by Lessee in any circumstance
whatsoever and Lessee, to the extent permitted by Applicable Law, waives all
rights now or hereafter conferred by statute or otherwise to quit, terminate or
surrender this Lease, or to any diminution, abatement or reduction of Rent
payable by Lessee hereunder. Each payment of Rent made by Lessee hereunder shall
be final and Lessee shall not seek or have any right to recover all or any part
of such payment from Lessor, the Agent, any Lease Participant, any Lender or any
party to any agreements related
4
<PAGE> 9
thereto for any reason whatsoever. Lessee assumes the sole responsibility for
the condition, use, operation, maintenance, and management of the Leased
Properties and Lessor shall have no responsibility in respect thereof and shall
have no liability for damage to the property of either Lessee or any subtenant
of Lessee on any account or for any reason whatsoever, other than solely by
reason of Lessor's willful misconduct or gross negligence.
Section 3.6 Certain Taxes. Without limiting the generality of Section
3.5, Lessee agrees to pay when due all real estate taxes, personal property
taxes, gross sales taxes, including any sales or lease tax imposed upon the
rental payments hereunder or under a sublease, occupational license taxes, water
charges, sewer charges, assessments of any nature and all other governmental
impositions and charges of every kind and nature whatsoever (the "tax(es)"),
when the same shall be due and payable without penalty or interest; provided,
however, that this Section shall not apply to any of the taxes covered by the
exclusion described in Section 7.4(b) of the Master Agreement. It is the
intention of the parties hereto that, insofar as the same may lawfully be done,
Lessor shall be, except as specifically provided for herein, free from all
expenses in any way related to the Leased Properties and the use and occupancy
thereof. Any tax relating to a fiscal period of any taxing authority falling
partially within and partially outside the Lease Term, shall be apportioned and
adjusted between Lessor and Lessee. Lessee covenants to furnish Lessor and the
Agent, upon the Agent's request, within forty-five (45) days after the last date
when any tax must be paid by Lessee as provided in this Section 3.6, official
receipts of the appropriate taxing, authority or other proof satisfactory to
Lessor, evidencing the payment thereof.
So long as no Event of Default has occurred and is continuing, Lessee may
defer payment of a tax so long as the validity or the amount thereof is
contested by Lessee with diligence and in good faith; provided, however, that
Lessee shall pay the tax in sufficient time to prevent delivery of a tax deed.
Such contest shall be at Lessee's sole cost and expense. Lessee covenants to
indemnify and save harmless Lessor, the Agent, each Lease Participant and each
Lender from any actual and reasonable costs or expenses incurred by Lessor, the
Agent, any Lease Participant or any Lender as a result of such contest.
Section 3.7 Utility Charges. Lessee agrees to pay or cause to be paid as
and when the same are due and payable all charges for gas, water, sewer,
electricity, lights, heat, power, telephone or other communication service and
all other utility
5
<PAGE> 10
services used, rendered or supplied to, upon or in connection with the Leased
Properties.
ARTICLE IV.
WAIVERS
During the Lease Term, Lessor's interest in the Building(s) (whether or
not completed) and the Land is demised and let by Lessor "AS IS" subject to (a)
the rights of any parties in possession thereof, (b) the state of the title
thereto existing at the time Lessor acquired its interest in the Leased
Properties, (c) any state of facts which an accurate survey or physical
inspection might show (including the survey delivered on the Closing Date), (d)
all Applicable Law, and (e) any violations of Applicable Law which may exist
upon or subsequent to the commencement of the Lease Term. LESSEE ACKNOWLEDGES
THAT, ALTHOUGH LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTIES, LESSOR
IS NOT RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF
THE BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT, ANY LEASE
PARTICIPANT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY
LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE, HABITABILITY,
CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED PROPERTIES (OR
ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTIES (OR ANY PART THEREOF), ALL
SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR, THE AGENT, ANY
LEASE PARTICIPANT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR
PATENT DEFECT THEREIN OR THE FAILURE OF ANY LEASED PROPERTY, OR ANY PART
THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that Lessor hereby represents
and warrants that each Leased Property is and shall be free of Lessor Liens. As
between Lessor and Lessee, Lessee has been afforded full opportunity to inspect
each Leased Property, is satisfied with the results of its inspections of such
Leased Property and is entering into this Lease solely on the basis of the
results of its own inspections and all risks incident to the matters discussed
in the two preceding sentences, as between Lessor, the Agent, the Lease
Participants or the Lenders on the one hand, and Lessee, on the other, are to be
borne by Lessee. The provisions of this Article IV have been negotiated, and,
except to the extent otherwise expressly stated, the foregoing provisions are
intended to be a complete exclusion and negation of any representations or
warranties by Lessor, the Agent, the Lease Participants or the Lenders, express
or implied, with respect to the Leased Properties, that may arise pursuant to
any law now or hereafter in effect, or otherwise.
6
<PAGE> 11
ARTICLE V.
LIENS; EASEMENTS; PARTIAL CONVEYANCES
Lessee shall not directly or indirectly create, incur or assume, any Lien
on or with respect to any Leased Property, the title thereto, or any interest
therein, including any Liens which arise out of the possession, use, occupancy,
construction, repair or rebuilding of any Leased Property or by reason of labor
or materials furnished or claimed to have been furnished to Lessee, or any of
its contractors or agents or by reason of the financing of any personalty or
equipment purchased or leased by Lessee from third parties and not financed by
Lessor or Alterations constructed by Lessee, except, in all cases, Permitted
Liens.
Notwithstanding the foregoing paragraph, at the request of Lessee, Lessor
shall, from time to time during the Lease Term and upon reasonable advance
written notice from Lessee, and receipt of the materials specified in the next
succeeding sentence, consent to and join in any (i) grant of easements,
licenses, rights of way and other rights in the nature of easements, including,
without limitation, utility easements to facilitate Lessee's use, development
and construction of the Leased Properties, (ii) release or termination of
easements, licenses, rights of way or other rights in the nature of easements
which are for the benefit of the Land or the Building(s) or any portion thereof,
(iii) dedication or transfer of portions of the Land, not improved with a
building, for road, highway or other public purposes, (iv) execution of
agreements for ingress and egress and amendments to any covenants and
restrictions affecting the Land or the Building(s) or any portion thereof and
(v) request to any Governmental Authority for platting or subdivision or
replatting or resubdivision approval with respect to the Land or any portion
thereof or any parcel of land of which the Land or any portion thereof forms a
part or a request for any variance from zoning or other governmental
requirements. Lessor's obligations pursuant to the preceding sentence shall be
subject to the requirements that:
(a) any such action shall be at the sole cost and expense of
Lessee and Lessee shall pay all actual and reasonable out-of-pocket costs of
Lessor and the Agent in connection therewith (including, without limitation, the
reasonable fees of attorneys, architects, engineers, planners, appraisers and
other professionals reasonably retained by Lessor or the Agent in connection
with any such action),
(b) Lessee shall have delivered to Lessor and Agent a certificate
of a Responsible Officer of Lessee stating that
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(1) such action will not cause any Leased Property,
the Land or any Building or any portion thereof to fail to comply in
any material respect with the provisions of the Lease or any other
Operative Documents, or in any material respect with Applicable Law;
and
(2) such action will not materially reduce the Fair
Market Sales Value, utility or useful life of any Leased Property, the
Land or any Building nor Lessor's interest therein; and
(c) in the case of any release or conveyance, if Lessor, the
Agent, any Lease Participant or any Lender so reasonably requests, Lessee will
cause to be issued and delivered to Lessor and the Agent by the Title Insurance
Company an endorsement to the Title Policy pursuant to which the Title Insurance
Company agrees that its liability for the payment of any loss or damage under
the terms and provisions of the Title Policy will not be affected by reason of
the fact that a portion of the real property referred to in Schedule A of the
Title Policy has been released or conveyed by Lessor.
ARTICLE VI.
MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
Section 6.1 Maintenance and Repair; Compliance With Law. Lessee, at its
own expense, shall at all times (a) maintain each Leased Property in good repair
and condition (subject to ordinary wear and tear), in accordance with prudent
industry standards and, in any event, in no less a manner as other similar
office, warehouse and distribution centers, as the case may be, owned or leased
by Lessee or its Affiliates, (b) make all Alterations in accordance with, and
maintain (whether or not such maintenance requires structural modifications or
Alterations) and operate and otherwise keep each Leased Property in compliance
in all material respects with, all Applicable Laws and insurance requirements,
and (c) make all material repairs, replacements and renewals of each Leased
Property or any part thereof which may be required to keep such Leased Property
in the condition required by the preceding clauses (a) and (b). Lessee shall
perform the foregoing maintenance obligations regardless of whether any Leased
Property is occupied or unoccupied. Lessee waives any right that it may now have
or hereafter acquire to (i) require Lessor, the Agent, any Lease Participant or
any Lender to maintain, repair, replace, alter, remove or rebuild all or any
part of any Leased Property or (ii) make repairs at the expense of Lessor, the
Agent, any Lease Participant or any Lender pursuant to any Applicable Law or
other agreements or otherwise.
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NEITHER LESSOR, THE AGENT, ANY LEASE PARTICIPANT NOR ANY LENDER SHALL BE LIABLE
TO LESSEE OR TO ANY CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN,
SUPPLIERS OR VENDORS FOR SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN
CONNECTION WITH ANY LEASED PROPERTY OR ANY PART THEREOF. Neither Lessor, the
Agent, any Lease Participant nor any Lender shall be required to maintain,
alter, repair, rebuild or replace any Leased Property in any way.
Section 6.2 Alterations. Lessee may, without the consent of Lessor, at
Lessee's own cost and expense, make Alterations which do not materially diminish
the value, utility or useful life of any Leased Property.
Section 6.3 Title to Alterations. Title to all Alterations shall without
further act vest in Lessor (subject to Lessee's right to remove trade fixtures,
personal property and equipment which were not acquired with funds advanced by
Lessor, any Lease Participant or any Lender at a time when no Event of Default
has occurred and is continuing) and shall be deemed to constitute a part of the
Leased Properties and be subject to this Lease.
ARTICLE VII.
USE
Lessee may use each Leased Property or any part thereof for any lawful
purpose, and in a manner consistent with the standards applicable to properties
of a similar nature in the geographic area in which such Leased Property is
located, provided that such use does not materially adversely affect the Fair
Market Sales Value, utility, remaining useful life or residual value of such
Leased Property, and does not materially violate or conflict with, or constitute
or result in a material default under, any Applicable Law or any insurance
policy required hereunder. In the event Lessee's use substantially changes the
character of any Building in a manner or to an extent that, in Lessor's, the
Lease Participants' or the Lenders' reasonable opinion, adversely affects the
Fair Market Sales Value and/or marketability of such Building, Lessee shall,
upon the termination or expiration of this Lease, at Lessor's request, restore
such Leased Property to its general character at the Completion Date (ordinary
wear and tear excepted). Lessee shall not commit or permit any waste of any
Leased Property or any material part thereof.
ARTICLE VIII.
INSURANCE
(a) At any time during which any part of any Building or any
Alteration is under construction and as to any part of any
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Building or any Alteration under construction, Lessee shall maintain, or cause
to be maintained, at its sole cost and expense, as a part of its blanket
policies or otherwise, "all risks" non-reporting completed value form of
builder's risk insurance.
(b) During the Lease Term, Lessee shall maintain, at its sole cost
and expense, as a part of its blanket policies or otherwise, insurance against
loss or damage to any Building by fire and other risks, including comprehensive
boiler and machinery coverage, on terms and in amounts no less favorable than
insurance covering other similar properties owned or leased by Lessee and that
are in accordance with normal industry practice, but in no event less than the
replacement cost of such Building from time to time.
(c) During the Lease Term, Lessee shall maintain, at its sole cost
and expense, commercial general liability insurance with respect to the Leased
Properties, as is ordinarily procured by Persons who own or operate similar
properties in the same geographic area. Such insurance shall be on terms and in
amounts that are no less favorable than insurance maintained by Lessee or its
Affiliates with respect to similar properties that it owns or leases and that
are in accordance with normal industry practice, but in no event less than
[$1,000,000] per occurrence. Such insurance policies shall also provide that
Lessee's insurance shall be considered primary insurance. Nothing in this
Article VIII shall prohibit Lessor, the Agent, any Lease Participant or any
Lender from carrying at its own expense other insurance on or with respect to
the Leased Properties, provided that any insurance carried by Lessor, the Agent,
any Lease Participant or any Lender shall not prevent Lessee from carrying the
insurance required hereby.
(d) Each policy of insurance maintained by Lessee pursuant to
clauses (a) and (b) of this Article IX shall provide that all insurance proceeds
in respect of any loss or occurrence shall be adjusted by Lessee, except (a)
that with respect to any loss, the estimated cost of restoration of which is in
excess of 50% of the Funded Amounts with respect to the related Leased Property,
the adjustment thereof shall be subject to the prior written approval of the
Agent (or of Lessor if the Funded Amounts have been fully paid) and the
insurance proceeds therefor shall be paid to the Agent (or to Lessor if the
Funded Amounts have been fully paid) for application in accordance with this
Lease, and (b) if, and for so long as an Event of Default exists, all losses
shall be adjusted solely by, and all insurance proceeds shall be paid solely to,
the Agent (or Lessor if the Funded Amounts have been fully paid) for application
pursuant to this Lease.
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(e) On the Closing Date for each Leased Property, on the
Completion Date and on each anniversary of the Initial Closing Date, Lessee
shall furnish Lessor with certificates showing the insurance required under this
Article VIII to be in effect and naming Lessor, the Agent, the Lease
Participants and the Lenders as additional insureds. Such certificates shall
include a provision for thirty (30) days' advance written notice by the insurer
to Lessor and the Agent in the event of cancellation or expiration or nonpayment
of premium with respect to such insurance, and shall include a customary breach
of warranty clause.
(f) Each policy of insurance maintained by Lessee pursuant to this
Article VIII shall (1) contain the waiver of any right of subrogation of the
insurer against Lessor, the Agent, the Lease Participants and the Lenders, and
(2) provide that in respect of the interests of Lessor, the Agent, the Lease
Participants and the Lenders, such policies shall not be invalidated by any
fraud, action, inaction or misrepresentation of Lessee or any other Person
acting on behalf of Lessee.
(g) All insurance policies carried in accordance with this Article
VIII shall be maintained with insurers rated at least A by A.M. Best & Company,
and in all cases the insurer shall be qualified to insure risks in the State
where such Leased Property is located.
ARTICLE IX.
ASSIGNMENT AND SUBLEASING
Lessee may not assign any of its right, title or interest in, to or under
this Lease, except as set forth in the following sentence. Lessee may assign any
of its right, title or interest in, to or under the Lease to an Affiliate of the
Lessee and may sublease all or any portion of any Leased Property, provided that
(a) all obligations of Lessee shall continue in full effect as obligations of a
principal and not of a guarantor or surety, as though no assignment or sublease
had been made; (b) such assignment or sublease, as the case may be, shall be
expressly subject to and, in the case of such sublease, subordinate to this
Lease, the Lease Participation Agreement, the Loan Agreement and the other
Operative Documents; and (c) each such sublease shall terminate on or before the
Lease Termination Date.
Except pursuant to an Operative Document, this Lease shall not be
mortgaged or pledged by Lessee, nor shall Lessee mortgage or pledge any interest
in any Leased Property or any portion thereof. Any such mortgage or pledge shall
be void.
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ARTICLE X.
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section 10.1 Event of Loss. Any event (i) which would otherwise
constitute a Casualty during the Base Term, and (ii) which, in the good-faith
judgment of Lessee, renders repair and restoration of a Leased Property
impractical or uneconomical, and (iii) as to which Lessee, within sixty (60)
days after the occurrence of such event, delivers to Lessor an Officer's
Certificate notifying Lessor of such event and of such judgment, shall
constitute an "Event of Loss". In the case of any other event which constitutes
a Casualty, Lessee shall restore such Leased Property pursuant to Section 10.3.
If an Event of Loss other than an Event of Taking shall occur, Lessee shall pay
to Lessor on the next Payment Date following delivery of the Officer's
Certificate pursuant to clause (iii) above an amount equal to the related Leased
Property Balance. Upon Lessor's receipt of such Leased Property Balance on such
date, Lessor shall cause Lessor's interest in such Leased Property to be
conveyed to Lessee in accordance with and subject to the provisions of Section
14.5 hereof; upon completion of such purchase, but not prior thereto, this Lease
and all obligations hereunder with respect to such Leased Property shall
terminate, except with respect to obligations and liabilities hereunder, actual
or contingent, that have arisen or relate to events occurring on or prior to
such date of purchase, or which are expressly stated herein to survive
termination of this Lease.
Upon the consummation of the purchase of any Leased Property pursuant to
this Section 10.1, any proceeds derived from insurance required to be maintained
by Lessee pursuant to this Lease for any Leased Property remaining after payment
of such purchase price shall be paid over to, or retained by, Lessee or as it
may direct, and Lessor shall assign to Lessee, without warranty, all of Lessor's
rights to and interest in insurance required to be maintained by Lessee pursuant
to this Lease.
Section 10.2 Event of Taking. Any event (i) which constitutes a
Condemnation of all of, or substantially all of, a Leased Property, or (ii) (A)
which would otherwise constitute a Condemnation, (B) which, in the good-faith
judgment of Lessee, renders restoration and rebuilding of a Leased Property
impossible, impractical or uneconomical, and (C) as to which Lessee, within
sixty (60) days after the occurrence of such event, delivers to Lessor an
Officer's Certificate notifying Lessor of such event and of such judgment, shall
constitute an "Event of Taking". In the case of any other event which
constitutes a Condemnation, Lessee shall restore and rebuild such Leased
Property pursuant to Section 10.4. If an Event of Taking
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shall occur, Lessee shall pay to Lessor (1) on the next Payment Date following
the occurrence of such Event of Taking, in the case of an Event of Taking
described in clause (i) above, or (2) on the next Payment Date following
delivery of the Officer's Certificate pursuant to clause (ii) above, in the case
of an Event of Taking described in clause (ii) above, an amount equal to the
related Leased Property Balance. Upon Lessor's receipt of such Leased Property
Balance on such date, Lessor shall cause Lessor's interest in such Leased
Property to be conveyed to Lessee in accordance with and subject to the
provisions of Section 14.5 hereof (provided that such conveyance shall be
subject to all rights of the condemning authority); upon completion of such
purchase, but not prior thereto, this Lease and all obligations hereunder with
respect to such Leased Property shall terminate, except with respect to
obligations and liabilities hereunder, actual or contingent, that have arisen or
relate to events occurring on or prior to such date of purchase, or which are
expressly stated herein to survive termination of this Lease.
Upon the consummation of the purchase of such Leased Property pursuant to
this Section 10.2, all Awards received by Lessor, after deducting any reasonable
costs incurred by Lessor in collecting such Awards, received or payable on
account of an Event of Taking with respect to such Leased Property during the
related Lease Term shall be paid to Lessee, and all rights of Lessor in Awards
not then received shall be assigned to Lessee by Lessor.
Section 10.3 Casualty. If a Casualty shall occur, Lessee shall rebuild
and restore the affected Leased Property, will complete the same prior to the
Lease Termination Date, and will cause the condition set forth in Section 3.5
(c) of the Master Agreement to be fulfilled with respect to such restoration and
rebuilding prior to the Lease Termination Date, regardless of whether insurance
proceeds received as a result of such Casualty are sufficient for such purpose.
Section 10.4 Condemnation. If a Condemnation shall occur, Lessee shall
rebuild and restore the affected Leased Property, will complete the same prior
to the Lease Termination Date, and will cause the condition set forth in Section
3.5 (c) of the Master Agreement to be fulfilled with respect to such restoration
and rebuilding prior to the Lease Termination Date.
Section 10.5 Verification of Restoration and Rebuilding. In the event of
Casualty or Condemnation, to verify Lessee's compliance with the foregoing
Sections 10.3 and 10.4, Lessor, the Agent and their respective authorized
representatives may, upon five (5) Business Days' notice to Lessee, make
inspections of the
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affected Leased Property with respect to (i) the extent of the Casualty or
Condemnation and (ii) the restoration and rebuilding of the related Building and
the Land. All actual and reasonable out-of-pocket costs of such inspections
incurred by Lessor and the Agent will be paid by Lessee promptly after written
request. No such inspection shall unreasonably interfere with Lessee's
operations or the operations of any other occupant of such Leased Property. None
of the inspecting parties shall have any duty to make any such inspection or
inquiry and none of the inspecting parties shall incur any liability or
obligation by reason of making or not making any such inspection or inquiry.
Section 10.6 Application of Payments. All proceeds (except for payments
under insurance policies maintained other than pursuant to Article VIII of this
Lease) received at any time by Lessor, Lessee or the Agent from any Governmental
Authority or other Person with respect to any Condemnation or Casualty to any
Leased Property or any part thereof or with respect to an Event of Loss or an
Event of Taking, plus the amount of any payment that would have been due from an
insurer but for Lessee's self-insurance or deductibles ("Loss Proceeds"), shall
(except to the extent Section 10.9 applies) be applied as follows:
(a) In the event Lessee purchases such Leased Property pursuant to
Section 10.1 or Section 10.2, such Loss Proceeds shall be applied as set
forth in Section 10.1 or Section 10.2, as the case may be;
(b) In the event of a Casualty at such time when no Event of
Default has occurred and is continuing and Lessee is obligated to repair
and rebuild such Leased Property pursuant to Section 10.3, Lessee may, in
good faith and subsequent to the date of such Casualty, certify to Lessor
and to the applicable insurer that no Event of Default has occurred and
is continuing, in which event the applicable insurer shall pay the Loss
Proceeds to Lessee, unless the estimated cost of restoration exceeds 50%
of the original cost of such Leased Property, in which case the Loss
Proceeds shall be paid to the Agent (or Lessor if the Funded Amounts have
been paid in full), and shall be promptly released to Lessee upon
certification by Lessee to Lessor and the Agent that Lessee has incurred
costs in the amount requested to be released for the repair and
rebuilding of such Leased Property;
(c) In the event of a Condemnation at such time when no Event of
Default has occurred and is continuing and Lessee is obligated to repair
and rebuild such Leased Property pursuant to Section 10.4, Lessor shall
upon
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Lessee's request assign to Lessee Lessor's interest in any applicable
Awards; and
(d) As provided in Section 10.8, if such section is applicable.
During any period of repair or rebuilding pursuant to this Article X,
this Lease will remain in full force and effect and Basic Rent shall continue to
accrue and be payable without abatement or reduction. Lessee shall maintain
records setting forth information relating to the receipt and application of
payments in accordance with this Section 10.6. Such records shall be kept on
file by Lessee at its offices and shall be made available to Lessor, the Lease
Participants, the Lenders and the Agent upon request.
Section 10.7 Prosecution of Awards. (a) If, during the continuance of any
Event of Default, any Condemnation shall occur, Lessee shall give to Lessor and
the Agent promptly, but in any event within thirty (30) days after the
occurrence thereof, written notice of such occurrence and the date thereof,
generally describing the nature and extent of such Condemnation. With respect to
any Event of Taking or any Condemnation, Lessee shall control the negotiations
with the relevant Governmental Authority as to any proceeding in respect of
which Awards are required, under Section 10.6, to be assigned or released to
Lessee, unless an Event of Default shall have occurred and be continuing, in
which case (1) the Agent (or Lessor if the Funded Amounts have been fully paid)
shall control such negotiations; and (2) Lessee hereby irrevocably assigns,
transfers and sets over to Lessor all rights of Lessee to any Award made during
the continuance of an Event of Default on account of any Event of Taking or any
Condemnation and, if there will not be separate Awards to Lessor and Lessee on
account of such Event of Taking or Condemnation, irrevocably authorizes and
empowers the Agent (or Lessor if the Funded Amounts have been fully paid) during
the continuance of an Event of Default, with full power of substitution, in the
name of Lessee or otherwise (but without limiting the obligations of Lessee
under this Article X), to file and prosecute what would otherwise be Lessee's
claim for any such Award and to collect, receipt for and retain the same;
provided, however, that in any event Lessor and the Agent may participate in
such negotiations, and no settlement will be made without the prior consent of
the Agent (or Lessor if the Funded Amounts have been fully paid), not to be
unreasonably withheld.
(b) Notwithstanding the foregoing, Lessee may prosecute, and Lessor shall
have no interest in, any claim with respect to Lessee's personal property and
equipment not financed by Lessor and Lessee's relocation expenses.
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Section 10.8 Application of Certain Payments Not Relating to an Event of
Taking. In case of a requisition for temporary use of all or a portion of any
Leased Property which is not an Event of Taking, this Lease shall remain in full
force and effect with respect to such Leased Property, without any abatement or
reduction of Basic Rent, and the Awards for such Leased Property shall, unless
an Event of Default has occurred and is continuing, be paid to Lessee.
Section 10.9 Other Dispositions. Notwithstanding the foregoing provisions
of this Article X, so long as an Event of Default shall have occurred and be
continuing, any amount that would otherwise be payable to or for the account of,
or that would otherwise be retained by, Lessee pursuant to this Article X shall
be paid to the Agent (or Lessor if the Funded Amounts have been fully paid) as
security for the obligations of Lessee under this Lease and, at such time
thereafter as no Event of Default shall be continuing, such amount shall be paid
promptly to Lessee to the extent not previously applied by Lessor or the Agent
in accordance with the terms of this Lease or the other Operative Documents.
Section 10.10 No Rent Abatement. Rent shall not abate hereunder by reason
of any Casualty, any Event of Loss, any Event of Taking or any Condemnation of
any Leased Property, and Lessee shall continue to perform and fulfill all of
Lessee's obligations, covenants and agreements hereunder notwithstanding such
Casualty, Event of Loss, Event of Taking or Condemnation until the Lease
Termination Date.
ARTICLE XI.
INTEREST CONVEYED TO LESSEE
Lessor and Lessee intend that this Lease be treated, for accounting
purposes, as an operating lease. For all other purposes, Lessee and Lessor
intend that the transaction represented by this Lease be treated as a financing
transaction; for such purposes, it is the intention of the parties hereto (i)
that this Lease be treated as a mortgage or deed of trust (whichever is
applicable in the jurisdictions in which the Leased Properties are located) and
security agreement, encumbering the Leased Property, and that Lessee, as
grantor, hereby grants to Lessor, as mortgagee or beneficiary and secured party,
or any successor thereto, a first and paramount Lien on each Leased Property,
(ii) that Lessor shall have, as a result of such determination, all of the
rights, powers and remedies of a mortgagee or deed of trust beneficiary
available under Applicable Law to take possession of and sell (whether by
foreclosure or otherwise) any Leased Property, (iii) that the effective date of
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such mortgage or deed of trust shall be the effective date of this Lease, (iv)
that the recording of this Lease or a Lease Supplement shall be deemed to be the
recording of such mortgage or deed of trust, and (v) that the obligations
secured by such mortgage or deed of trust shall include the Funded Amounts and
all Basic Rent and Supplemental Rent hereunder and all other obligations of and
amounts due from Lessee hereunder and under the Operative Documents.
ARTICLE XII.
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) Lessee shall fail to make any payment of Basic Rent when due, and
such failure shall continue for five (5) or more days;
(b) Lessee shall fail to make any payment of Rent (other than Basic Rent)
or any other amount payable hereunder or under any of the other Operative
Documents (other than Basic Rent and other than as set forth in clause (c)), and
such failure shall continue for a period of ten (10) days;
(c) Lessee shall fail to pay the Funded Amount or Lease Balance when due
pursuant to Sections 10.1, 10.2, 14.1 or 14.2, or Lessee shall fail to pay the
Recourse Deficiency Amount when required pursuant to Article XIV or Lessee shall
fail to make any Completion Costs Payment when due [under the Construction
Agency Agreement];
(d) Lessee shall fail to maintain insurance as required by Article VIII
hereof, and such failure shall continue until the earlier of (i) 15 days after
written notice thereof from Lessor and (ii) the day immediately preceding the
date on which any applicable insurance coverage would otherwise lapse or
terminate;
(e) a default shall have occurred and be continuing under any instrument
or agreement evidencing, securing or providing for the issuance of indebtedness
individually or in the aggregate in excess of $5,000,000 of, or guaranteed by,
Lessee or any Subsidiary of Lessee, which default is a failure to pay any amount
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), which default
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continues after the applicable grace period, if any, or any other default which,
if unremedied, uncured or unwaived, would permit acceleration of the maturity of
such indebtedness; or any such indebtedness shall be required to be prepaid
(other than by a regularly scheduled required prepayment) in whole or in part
prior to its stated maturity;
(f) Lessee shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or of a substantial part of its
property, (ii) be unable, or admit in writing inability, to pay its debts as
they mature, (iii) make a general assignment for the benefit of creditors, (iv)
be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy, or a petition or answer seeking reorganization or an arrangement
with creditors to take advantage of any insolvency law or an answer admitting
the material allegations of a bankruptcy, reorganization or insolvency petition
filed against it, (vi) take corporate action for the purpose of effecting any of
the foregoing, or (vii) have an order for relief entered against it in any
proceeding under any bankruptcy law;
(g) An order, judgment or decree shall be entered, without the
application, approval or consent of Lessee, by any court of competent
jurisdiction, approving a petition seeking reorganization of such entity or
appointing a receiver, trustee or liquidator of such entity or of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 60 consecutive days;
(h) any representation or warranty by Lessee in any Operative Document or
in any certificate or document delivered to Lessor, the Agent, any Lease
Participant or any Lender pursuant to any Operative Document shall have been
incorrect in any material respect when made or deemed to be made or submitted;
(i) Lessee shall repudiate or terminate the Operative Guaranty, or the
Operative Guaranty shall at any time cease to be in full force and effect or
cease to be the legal, valid and binding obligation of Lessee;
(j) Lessee shall fail to observe or perform any covenant or agreement (i)
contained in Section 5.2(h) of the Master Agreement and, if capable of being
remedied, such failure shall remain unremedied for fifteen (15) days after the
earlier of (A) an Executive Officer's obtaining knowledge thereof, or (B)
written notice thereof shall have been given to the Lessee by the Agent or any
Funding Party, (ii) contained in Section 5.2(e) and if capable of being
remedied, such failure shall remain unremedied for ten (10) days after the
earlier of (A) an Executive Officer's
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obtaining knowledge thereof, or (B) written notice thereof shall have been given
to the Lessee by the Agent or any Funding Party, or (iii) contained in Sections
2.2(d), 5.1(a), 5.1(e), 5.1(g)(v), 5.1(h) or 5.2(c) of the Master Agreement;
(k) Lessee shall fail to observe or perform any covenant or agreement
contained herein or in any other Operative Document (other than those referred
to in clauses (a) through (j) of this Article XII and other than a failure
giving rise to a Non- Completion Event) and, if capable of being remedied, such
failure shall remain unremedied for thirty (30) days after the earlier of (i) an
Executive Officer of Lessee's obtaining knowledge thereof, or (ii) written
notice thereof shall have been given to Lessee by the Agent or any Funding
Party;
(l) A judgment or order for the payment of money in excess of $5,000,000
not covered by insurance or otherwise having a Material Adverse Effect shall be
rendered against the Lessee or any other Consolidated Company and such judgment
or order shall continue unsatisfied and in effect for a period of 60 days during
which execution shall not be effectively stayed or deferred (whether by action
of a court, by agreement or otherwise);
(m) An attachment or similar action shall be made on or taken against any
of the assets of any Consolidated Company with an aggregate value (based upon
the greater of the book value of such assets as established in accordance with
GAAP or the fair market value of such assets as determined in good faith by such
Consolidated Company) exceeding $5,000,000 in aggregate and is not removed,
suspended or enjoined within 60 days of the same being made or any suspension or
injunction being lifted;
[(n) Lessee shall become a Subsidiary of any other Person and the Funded
Debt of such Person and the Consolidated Companies is 50% or more of the sum of
(i) the Funded Debt of such Person and the Consolidated Companies and (ii)
Consolidated Net Worth of such Person and the Consolidated Companies]; or
(o) any Reportable Event shall have occurred, or any finding or
determination shall be made with respect to a Plan under Section 4041 (c) or (e)
of ERISA or any fact or circumstance shall occur with respect to a Plan which,
in the opinion of the Lessor, provides for the commencement of any proceeding
under Section 4042 of ERISA, or any proceeding shall be commenced with respect
to a Plan under Section 4042 of ERISA.
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ARTICLE XIII.
ENFORCEMENT
Section 13.1 Remedies. Upon the occurrence and during the continuance of
any Event of Default, but in all respects subject to the right of Lessee to
purchase the Leased Property pursuant to Section 14.1, Lessor may do one or more
of the following as Lessor in its sole discretion shall determine, without
limiting any other right or remedy Lessor may have on account of such Event of
Default (including, without limitation, the obligation of Lessee to purchase the
Leased Properties as set forth in Section 14.3):
(a) Lessor may, by notice to Lessee, rescind or terminate this Lease as
of the date specified in such notice; however, (A) no reletting, reentry or
taking of possession of any Leased Property by Lessor will be construed as an
election on Lessor's part to terminate this Lease unless a written notice of
such intention is given to Lessee, (B) notwithstanding any reletting, reentry or
taking of possession, Lessor may at any time thereafter elect to terminate this
Lease for a continuing Event of Default, and (C) no act or thing done by Lessor
or any of its agents, representatives or employees and no agreement accepting a
surrender of any Leased Property shall be valid unless the same be made in
writing and executed by Lessor;
(b) Lessor may (i) demand that Lessee, and Lessee shall upon the written
demand of Lessor, return the Leased Properties promptly to Lessor in the manner
and condition required by, and otherwise in accordance with all of the
provisions of, Articles VI and XIV hereof as if the Leased Properties were being
returned at the end of the Lease Term, and Lessor shall not be liable for the
reimbursement of Lessee for any costs and expenses incurred by Lessee in
connection therewith and (ii) without prejudice to any other remedy which Lessor
may have for possession of the Leased Properties, and to the extent and in the
manner permitted by Applicable Law, enter upon any Leased Property and take
immediate possession of (to the exclusion of Lessee) any Leased Property or any
part thereof and expel or remove Lessee and any other person who may be
occupying such Leased Property, by summary proceedings or otherwise, all without
liability to Lessee for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise and, in addition to Lessor's other damages, Lessee shall be
responsible for the actual and reasonable costs and expenses of reletting,
including brokers' fees and the reasonable costs of any alterations or repairs
made by Lessor;
(c) Lessor may (i) sell all or any part of any Leased Property at public
or private sale, as Lessor may determine, free
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and clear of any rights of Lessee and without any duty to account to Lessee with
respect to such action or inaction or any proceeds with respect thereto (except
to the extent required by clause (ii) below if Lessor shall elect to exercise
its rights thereunder) in which event Lessee's obligation to pay Basic Rent
hereunder for periods commencing after the date of such sale shall be terminated
or proportionately reduced, as the case may be; and (ii) if Lessor shall so
elect, demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the
date of such sale, as liquidated damages for loss of a bargain and not as a
penalty (the parties agreeing that Lessor's actual damages would be difficult to
predict, but the aforementioned liquidated damages represent a reasonable
approximation of such amount) (in lieu of Basic Rent due for periods commencing
on or after the Payment Date coinciding with such date of sale (or, if the sale
date is not a Payment Date, the Payment Date next preceding the date of such
sale)), an amount equal to (a) the excess, if any, of (1) the sum of (A) all
Rent due and unpaid to and including such Payment Date and (B) the Funded
Amounts with respect to such Leased Property, computed as of such date, over (2)
the net proceeds of such sale (that is, after deducting all costs and expenses
incurred by Lessor, the Agent, any Lease Participant or any Lender incident to
such conveyance (including, without limitation, all costs, expenses, fees,
premiums and taxes described in Section 14.5(b))); plus (b) interest at the
Overdue Rate on the foregoing amount from such Payment Date until the date of
payment;
(d) Lessor may, at its option, not terminate this Lease, and continue to
collect all Basic Rent, Supplemental Rent, and all other amounts (including,
without limitation, the Funded Amount) due Lessor (together with all costs of
collection) and enforce Lessee's obligations under this Lease as and when the
same become due, or are to be performed, and at the option of Lessor, upon any
abandonment of any Leased Property by Lessee or re-entry of same by Lessor,
Lessor may, in its sole and absolute discretion, elect not to terminate this
Lease with respect thereto and may make such reasonable alterations and
necessary repairs in order to relet such Leased Property, and relet such Leased
Property or any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or rentals and upon
such other terms and conditions as Lessor in its reasonable discretion may deem
advisable; and upon each such reletting all rentals actually received by Lessor
from such reletting shall be applied to Lessee's obligations hereunder in such
order, proportion and priority as Lessor may elect in Lessor's sole and absolute
discretion; it being agreed that under no circumstances shall Lessee benefit
from its default from any increase in market rents. If such rentals received
from such reletting during any Rent Period are less than the Rent to
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be paid during that Rent Period by Lessee hereunder, Lessee shall pay any
deficiency, as calculated by Lessor, to Lessor on the Payment Date for such Rent
Period;
(e) If any Leased Property has not been sold, or if a Non- Completion
Event has occurred and Lessee has not exercised the Remarketing Option pursuant
to Section 14.6 within the time permitted thereby, Lessor may, whether or not
Lessor shall have exercised or shall thereafter at any time exercise any of its
rights under paragraph (b), (c) or (d) of this Article XIII with respect to such
Leased Property, demand, by written notice to Lessee specifying a date (the
"Final Rent Payment Date") not earlier than 30 days after the date of such
notice, that Lessee purchase, on the Final Rent Payment Date, such Leased
Property in accordance with the provisions of Sections 14.2, 14.4 and 14.5;
provided, however, that (1) such purchase shall occur on the date set forth in
such notice, notwithstanding the provision in Section 14.2 calling for such
purchase to occur on the Lease Termination Date; and (2) Lessor's obligations
under Section 14.5(a) shall be limited to delivery of a special warranty deed
and quit claim bill of sale of such Leased Property, without recourse or
warranty, but free and clear of Lessor Liens;
(f) Lessor may exercise any other right or remedy that may be available
to it under Applicable Law, or proceed by appropriate court action (legal or
equitable) to enforce the terms hereof or to recover damages for the breach
hereof. Separate suits may be brought to collect any such damages for any Rent
Period(s), and such suits shall not in any manner prejudice Lessor's right to
collect any such damages for any subsequent Rent Period(s), or Lessor may defer
any such suit until after the expiration of the Lease Term, in which event such
suit shall be deemed not to have accrued until the expiration of the Lease Term;
or
(g) Lessor may retain and apply against Lessor's damages all sums which
Lessor would, absent such Event of Default, be required to pay to, or turn over
to, Lessee pursuant to the terms of this Lease.
Section 13.2 Remedies Cumulative; No Waiver; Consents. To the extent
permitted by, and subject to the mandatory requirements of, Applicable Law, each
and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and
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the exercise or the beginning of the exercise of any power or remedy shall not
be construed to be a waiver of the right to exercise at the same time or
thereafter any right, power or remedy. No delay or omission by Lessor in the
exercise of any right, power or remedy or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
default on the part of Lessee or to be an acquiescence therein. Lessor's consent
to any request made by Lessee shall not be deemed to constitute or preclude the
necessity for obtaining Lessor's consent, in the future, to all similar
requests. No express or implied waiver by Lessor of any Event of Default shall
in any way be, or be construed to be, a waiver of any future or subsequent
Potential Event of Default or Event of Default. To the extent permitted by
Applicable Law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise that may require Lessor to sell, lease or otherwise use any
Leased Property or part thereof in mitigation of Lessor's damages upon the
occurrence of an Event of Default or that may otherwise limit or modify any of
Lessor's rights or remedies under this Article XIII.
ARTICLE XIV.
SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL
Section 14.1 Lessee's Option to Purchase. Subject to the terms,
conditions and provisions set forth in this Article XIV, Lessee shall have the
option (the "Purchase Option"), to be exercised as set forth below, to purchase
from Lessor, Lessor's interest in all of the Leased Properties; provided that
such option must be exercised with respect to all, but not less than all, of the
Leased Properties. Such option must be exercised by written notice to Lessor not
later than whichever is applicable of (i) twelve months prior to the Lease
Termination Date or (ii) [ten Business Days] after the occurrence of an Event of
Default, which notice shall be irrevocable; such notice shall specify the date
that such purchase shall take place, which date shall be a date occurring not
less than thirty (30) days after such notice or the Lease Termination Date
(whichever is earlier). If the Purchase Option is exercised pursuant to the
foregoing, then, subject to the provisions set forth in this Article XIV, on the
applicable purchase date or the Lease Termination Date, as the case may be,
Lessor shall convey to Lessee, without recourse or warranty (other than as to
the absence of Lessor Liens) and Lessee shall purchase from Lessor, Lessor's
interest in the Leased Properties.
Section 14.2 Conveyance to Lessee. Unless (a) Lessee shall have properly
exercised the Purchase Option and purchased the Leased Properties pursuant to
Section 14.1(a) hereof, or (b)
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Lessee shall have properly exercised the Remarketing Option and shall have
fulfilled all of the conditions of Section 14.6 hereof, then, subject to the
terms, conditions and provisions set forth in this Article XIV, Lessee shall
purchase from Lessor, and Lessor shall convey to Lessee, on the Lease
Termination Date all of Lessor's interest in the Leased Properties. Lessee may
designate, in a notice given to Lessor not less than ten (10) Business Days
prior to the closing of such purchase (time being of the essence), the
transferee to whom the conveyance shall be made (if other than to Lessee), in
which case such conveyance shall (subject to the terms and conditions set forth
herein) be made to such designee; provided, however, that such designation of a
transferee shall not cause Lessee to be released, fully or partially, from any
of its obligations under this Lease.
Section 14.3 Acceleration of Purchase Obligation. Lessee shall be
obligated to purchase Lessor's interest in the Leased Properties immediately,
automatically and without notice upon the occurrence of any Event of Default
specified in clause (g) of Article XII, for the purchase price set forth in
Section 14.4. Upon the occurrence and during the continuance of any other Event
of Default, Lessee shall be obligated to purchase Lessor's interest in the
Leased Properties for the purchase price set forth in Section 14.4 upon notice
of such obligation from Lessor.
Section 14.4 Determination of Purchase Price. Upon the purchase by Lessee
of Lessor's interest in the Leased Properties upon the exercise of the Purchase
Option or pursuant to Section 14.2 or 14.3, the aggregate purchase price for all
of the Leased Properties shall be an amount equal to the Lease Balance as of the
closing date for such purchase, plus any amount due pursuant to Section 7.5(f)
of the Master Agreement as a result of such purchase.
Section 14.5 Purchase Procedure. (a) If Lessee shall purchase Lessor's
interest in a Leased Property pursuant to any provision of this Lease, (i)
Lessee shall accept from Lessor and Lessor shall convey such Leased Property by
a duly executed and acknowledged special warranty deed and quit claim bill of
sale of such Leased Property in recordable form, (ii) upon the date fixed for
any purchase of Lessor's interest in Leased Property hereunder, Lessee shall pay
to the order of the Agent (or Lessor if the Lease Participant Amounts and the
Loans have been paid in full) the Lease Balance or Leased Property Balance, as
applicable, plus any amount due pursuant to Section 7.5(f) of the Master
Agreement as a result of such purchase by wire transfer of immediately available
funds, and (iii) Lessor will execute and deliver to Lessee such other documents,
including releases, termination agreements and termination statements, as may be
legally required or as may be reasonably requested by Lessee in
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order to effect such conveyance, free and clear of Lessor Liens and the Liens of
the Operative Documents.
(b) Lessee shall, at Lessee's sole cost and expense, obtain all required
governmental and regulatory approval and consents and shall make such filings as
required by Applicable Law; in the event that Lessor is required by Applicable
Law to take any action in connection with such purchase and sale, Lessee shall
pay all costs incurred by Lessor in connection therewith. In addition, all
charges incident to such conveyance, including, without limitation, Lessee's
attorneys' fees, Lessor's attorneys' fees, commissions, Lessee's and Lessor's
escrow fees, recording fees, title insurance premiums and all applicable
documentary transfer or other transfer taxes and other taxes required to be paid
in order to record the transfer documents that might be imposed by reason of
such conveyance and the delivery of such deed shall be borne entirely and paid
by Lessee.
(c) Upon expiration or termination of this Lease resulting in conveyance
of Lessor's interest in the title to the Leased Properties to Lessee, there
shall be no apportionment of rents (including, without limitation, water rents
and sewer rents), taxes, insurance, utility charges or other charges payable
with respect to the Leased Properties, all of such rents, taxes, insurance,
utility or other charges due and payable with respect to the Leased Properties
prior to termination being payable by Lessee hereunder and all due after such
time being payable by Lessee as the then owner of the Leased Properties.
Section 14.6 Option to Remarket. Subject to the fulfillment of each of
the conditions set forth in this Section 14.6, Lessee shall have the option to
market all of, but not less than all of, the Leased Properties for Lessor (the
"Remarketing Option").
Lessee's effective exercise and consummation of the Remarketing Option
shall be subject to the due and timely fulfillment of each of the following
provisions, the failure of any of which shall render the Remarketing Option and
Lessee's exercise thereof null and void, in which event, Lessee shall be
obligated to perform its obligations under Section 14.2.
(a) Not later than whichever is applicable of (i) twelve
months prior to the Lease Termination Date or (ii) [ten Business Days]
after the occurrence of a Non-Completion Event, Lessee shall give to
Lessor and the Agent written notice of Lessee's exercise of the
Remarketing Option which exercise shall be irrevocable and shall state
whether Lessee has exercised the Remarketing Option.
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(b) Not later than whichever is applicable of (i) ten (10)
Business Days prior to the Lease Termination Date or ten Business Days
after the occurrence of the Non-Completion Event, Lessee shall deliver
to Lessor and the Agent an environmental assessment of each Leased
Property dated not later than forty-five (45) days prior to the Lease
Termination Date. Such environmental assessment shall be prepared by an
environmental consultant selected by the Required Funding Parties,
shall be in form, detail and substance reasonably satisfactory to the
Required Funding Parties, and shall otherwise indicate the
environmental condition of each Leased Property to be the same as
described in the related Environmental Audit.
(c) On the date of Lessee's notice to Lessor and the Agent of
Lessee's exercise of the Remarketing Option each of the Construction
Conditions shall have been timely satisfied (except in the case of a
Non-Completion Event) and no Event of Default or Potential Event of
Default shall exist, and thereafter, no Event of Default or Potential
Event of Default shall exist under this Lease.
(d) Except in the case of a Non-Completion Event, Lessee shall
have completed all Alterations, restoration and rebuilding of the
Leased Properties pursuant to Sections 6.1, 6.2, 10.3 and 10.4 (as the
case may be) and shall have fulfilled all of the conditions and
requirements in connection therewith pursuant to said Sections, in each
case by the date on which Lessor and the Agent receive Lessee's notice
of Lessee's exercise of the Remarketing Option (time being of the
essence), regardless of whether the same shall be within Lessee's
control.
(e) Lessee shall promptly provide any maintenance records
relating to each Leased Property to Lessor, the Agent and any potential
purchaser upon request, and shall otherwise do all things necessary to
deliver possession of such Leased Property to the purchaser. Lessee
shall allow Lessor, the Agent and any potential purchaser access to any
Leased Property for the purpose of inspecting the same.
(f) On the Lease Termination Date, Lessee shall surrender the
Leased Properties in accordance with Section 14.8 hereof.
(g) In connection with any such sale of the Leased Properties,
Lessee will provide to the purchaser all customary "seller's"
indemnities, representations and warranties regarding title, absence of
Liens (except Lessor Liens) and the condition of the Leased Properties,
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including, without limitation, an environmental indemnity. Lessee shall
fulfill all of the requirements set forth in clause (b) of Section
14.5, and such requirements are incorporated herein by reference. As to
Lessor, any such sale shall be made on an "as is, with all faults"
basis without representation or warranty by Lessor, other than the
absence of Lessor Liens.
(h) In connection with any such sale of Leased Properties,
Lessee shall pay directly, and not from the sale proceeds, all
prorations, credits, costs and expenses of the sale of the Leased
Properties, whether incurred by Lessor, any Lease Participant, any
Lender, the Agent or Lessee, including without limitation, the cost of
all title insurance, surveys, environmental reports, appraisals,
transfer taxes, Lessor's and the Agent's attorneys' fees, Lessee's
attorneys' fees, commissions, escrow fees, recording fees, and all
applicable documentary and other transfer taxes.
(i) Lessee shall pay to the Agent on the Lease Termination
Date (or to such other Person as Agent shall notify Lessee in writing,
or in the case of Supplemental Rent, to the Person entitled thereto) an
amount equal to the Recourse Deficiency Amount (or, in the case of a
Non- Completion Event, the Completion Costs Payment), plus all Basic
Rent and Supplemental Rent, and all other amounts hereunder which have
accrued prior to or as of such date, in the type of funds specified in
Section 3.3 hereof.
If Lessee has exercised the Remarketing Option, the following additional
provisions shall apply: During the period commencing on the date twelve months
prior to the scheduled expiration of the Lease Term or, with respect to a
Non-Completion Event, the date of Lessee's notice pursuant to Section 14.6(a),
Lessee shall, as nonexclusive agent for Lessor, use commercially reasonable
efforts to sell Lessor's interest in the Leased Properties and will attempt to
obtain the highest purchase price therefor. All such marketing of the Leased
Properties shall be at Lessee's sole expense. Lessee shall submit all bids to
Lessor and the Agent and Lessor and the Agent will have the right to review the
same and the right to submit any one or more bids. All bids shall be on an
all-cash basis. In no event shall such bidder be Lessee or any Subsidiary or
Affiliate of Lessee. The written offer must specify the Lease Termination Date
as the closing date. If, and only if, the selling price (net of closing costs
and prorations, as reasonably estimated by the Agent) is less than the
difference between the Lease Balance at such time minus the Recourse Deficiency
Amount, then Lessor or the Agent may, in its sole and absolute discretion, by
notice to Lessee,
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reject such offer to purchase, in which event the parties will proceed according
to the provisions of Section 14.7 hereof. If neither Lessor nor the Agent
rejects such purchase offer as provided above, the closing of such purchase of
the Leased Properties by such purchaser shall occur on the Lease Termination
Date, contemporaneously with Lessee's surrender of the Leased Properties in
accordance with Section 14.8 hereof, and the gross proceeds of the sale (i.e.,
without deduction for any marketing, closing or other costs, prorations or
commissions) shall be paid directly to the Agent (or Lessor if the Funded
Amounts have been fully paid); provided, however, that if the sum of the gross
proceeds from such sale plus the Recourse Deficiency Amount (or, if a
Non-Completion Event has occurred, the Completion Costs Payment) paid by Lessee
on the Lease Termination Date pursuant to Section 14.6(i), minus any and all
costs and expenses (including broker fees, appraisal costs, legal fees and
transfer taxes) incurred by the Agent or Lessor in connection with the marketing
of the Leased Properties or the sale thereof exceeds the Lease Balance as of
such date, then the excess shall be paid to Lessee on the Lease Termination
Date. Lessee shall have no right, power or authority to bind Lessor in
connection with any proposed sale of the Leased Properties.
Section 14.7 Rejection of Sale. Notwithstanding anything contained herein
to the contrary, if Lessor or the Agent rejects the purchase offer for the
Leased Properties as provided in Section 14.6, then (a) Lessee shall pay to the
Agent the Recourse Deficiency Amount (or, if a Non-Completion Event has
occurred, the Completion Costs Payment) pursuant to Section 14.6(i), (b) Lessor
shall retain title to the Leased Properties, and (c) in addition to Lessee's
other obligations hereunder, Lessee will reimburse Lessor and the Agent, within
ten (10) Business Days after written request, for all reasonable costs and
expenses incurred by Lessor or Agent during the period ending on the first
anniversary of the Lease Termination Date in connection with the marketing,
sale, closing or transfer of the Leased Properties, which obligation shall
survive the Lease Termination Date and the termination or expiration of this
Lease.
Section 14.8 Return of Leased Property. If Lessor retains title to any
Leased Property pursuant to Section 14.7 hereof then Lessee shall, on the Lease
Termination Date, and at its own expense, return possession of such Leased
Property to Lessor for retention by Lessor or, if Lessee properly exercises the
Remarketing Option and fulfills all of the conditions of Section 14.6 hereof and
neither Lessor nor the Agent rejects such purchase offer pursuant to Section
14.6, then Lessee shall, on such Lease Termination Date, and at its own cost,
transfer possession of the Leased Property to the independent purchaser thereof,
in each case by surrendering the same into the
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possession of Lessor or such purchaser, as the case may be, free and clear of
all Liens other than Lessor Liens, in as good condition as it was on the
Completion Date (as modified by Alterations permitted by this Lease), ordinary
wear and tear excepted, and in compliance in all material respects with
Applicable Law. Lessee shall, on and within a reasonable time before and after
the Lease Termination Date, cooperate with Lessor and the independent purchaser
of such Leased Property in order to facilitate the ownership and operation by
such purchaser of such Leased Property after the Lease Termination Date, which
cooperation shall include the following, all of which Lessee shall do on or
before the Lease Termination Date or as soon thereafter as is reasonably
practicable: providing all books and records regarding the maintenance and
ownership of such Leased Property and all know-how, data and technical
information relating thereto, providing a copy of the Plans and Specifications,
granting or assigning all licenses (to the extent assignable) necessary for the
operation and maintenance of such Leased Property, and cooperating in seeking
and obtaining all necessary Governmental Action. Lessee shall have also paid the
cost of all Alterations commenced prior to the Lease Termination Date. The
obligations of Lessee under this Article XIV shall survive the expiration or
termination of this Lease.
Section 14.9 Renewal. Subject to the conditions set forth herein, Lessee
may, by written notice to Lessor and the Agent given not later than twelve
months and not earlier than sixteen months, prior to the Lease Termination Date
then in effect, renew this Lease, for up to five years commencing on the date
following the Lease Termination Date then in effect, provided that Lessee may
only exercise such renewal option once. No later than the date that is 45 days
after the date the request to renew has been delivered to each of Lessor and the
Agent, the Agent will notify Lessee whether or not Lessor, the Lease
Participants and the Lenders consent to such renewal request (which consent, in
the case of Lessor, the Lease Participants and the Lenders, may be granted or
denied in their sole discretion, and may be conditioned on such conditions
precedent as may be specified by Lessor, the Lease Participants and the
Lenders). If the Agent fails to respond within such time frame, such failure
shall be deemed to be a rejection of such request. If the Agent notifies Lessee
of Lessor's, the Lease Participants' and the Lenders' consent to such renewal,
such renewal shall be effective. Any renewal of this Lease shall be on the same
terms and conditions as are set forth herein for the original Lease Term, except
that the amount of Basic Rent to be paid by Lessee shall be as mutually agreed
upon among Lessee, Lessor, the Lease Participants and the Lenders prior to such
renewal.
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ARTICLE XV.
LESSEE'S EQUIPMENT
After any repossession of any Leased Property (whether or not this Lease
has been terminated), Lessee, at its expense and so long as such removal of such
Alteration shall not result in a violation of Applicable Law, shall, within a
reasonable time after such repossession or within sixty (60) days after Lessee's
receipt of Lessor's written request (whichever shall first occur), remove all of
Lessee's trade fixtures, personal property and equipment from such Leased
Property (to the extent that the same can be readily removed from such Leased
Property without causing material damage to such Leased Property); provided,
however, that Lessee shall not remove any such trade fixtures, personal property
or equipment that (i) has been financed by Lessor under the Operative Documents
or otherwise constituting Leased Property (or that constitutes a replacement of
such property) or (ii) with respect to which Lessor notifies Lessee that it is
exercising its purchase option (in which case, Lessor shall pay to Lessee the
fair market value of such trade fixture, personal property or equipment on such
date of repossession and Lessee shall execute and deliver a bill of sale
therefor to Lessor), provided that the purchase option set forth in this clause
(ii) shall not apply to Lessee's inventory. Any of Lessee's trade fixtures,
personal property and equipment not so removed by Lessee within such period
shall be considered abandoned by Lessee, and title thereto shall without further
act vest in Lessor, and may be appropriated, sold, destroyed or otherwise
disposed of by Lessor without notice to Lessee and without obligation to account
therefor and Lessee will pay Lessor, upon written demand, all reasonable costs
and expenses incurred by Lessor in removing, storing or disposing of the same
and all costs and expenses incurred by Lessor to repair any damage to such
Leased Property caused by such removal. Lessee will immediately repair at its
expense all damage to such Leased Property caused by any such removal (unless
such removal is effected by Lessor, in which event Lessee shall pay all
reasonable costs and expenses incurred by Lessor for such repairs). Lessor shall
have no liability in exercising Lessor's rights under this Article XV except as
set forth in clause (ii) of the first sentence hereof, nor shall Lessor be
responsible for any loss of or damage to Lessee's personal property and
equipment.
ARTICLE XVI.
RIGHT TO PERFORM FOR LESSEE
If Lessee shall fail to perform or comply with any of its agreements
contained herein, Lessor may perform or comply with such agreement (after giving
five days' prior notice thereof to
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Lessee which prior notice shall not be required if in Lessor's good faith
judgment a Material Adverse Effect could occur without earlier performance or
compliance), and Lessor shall not thereby be deemed to have waived any default
caused by such failure, and the amount of such payment and the amount of the
expenses of Lessor (including actual and reasonable attorneys' fees and
expenses) incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, shall be deemed Supplemental
Rent, payable by Lessee to Lessor within thirty (30) days after written demand
therefor.
ARTICLE XVII.
MISCELLANEOUS
Section 17.1 Reports. To the extent required under Applicable Law and to
the extent it is reasonably practical for Lessee to do so, Lessee shall prepare
and file in timely fashion, or, where such filing is required to be made by
Lessor or it is otherwise not reasonably practical for Lessee to make such
filing, Lessee shall prepare and deliver to Lessor (with a copy to the Agent)
within a reasonable time prior to the date for filing and Lessor shall file, any
material reports with respect to the condition or operation of such Leased
Property that shall be required to be filed with any Governmental Authority.
Section 17.2 Binding Effect; Successors and Assigns; Survival. The terms
and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor and Lessee, shall be binding upon their respective
successors, legal representatives and assigns (including, in the case of Lessor,
any Person to whom Lessor may transfer any Leased Property or any interest
therein in accordance with the provisions of the Operative Documents), and inure
to the benefit of their respective permitted successors and assigns, and the
rights hereunder of the Agent, the Lease Participants and the Lenders shall
inure (subject to such conditions as are contained herein) to the benefit of
their respective permitted successors and assigns. Lessee hereby acknowledges
that Lessor has assigned all of its right, title and interest to, in and under
this Lease to the Agent, the Lease Participants and the Lenders, and that all of
Lessor's rights hereunder may be exercised by the Agent.
Section 17.3 Quiet Enjoyment. Lessor covenants that it will not interfere
in Lessee's or any of its permitted sublessees' quiet enjoyment of the Leased
Properties in accordance with this Lease during the Lease Term, so long as no
Event of Default has occurred and is continuing. Such right of quiet enjoyment
is independent of, and shall not affect, Lessor's
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rights otherwise to initiate legal action to enforce the obligations of Lessee
under this Lease.
Section 17.4 Notices. Unless otherwise specified herein, all notices,
offers, acceptances, rejections, consents, requests, demands or other
communications to or upon the respective parties hereto shall be in writing and
shall be deemed to have been given as set forth in Section 8.2 of the Master
Agreement. All such notices, offers, acceptances, rejections, consents,
requests, demands or other communications shall be addressed as follows or to
such other address as any of the parties hereto may designate by written notice:
If to Lessor: SunTrust Banks, Inc.
c/o SunTrust Capital Markets
303 Peachtree Street
24th Floor
Mail Code 3943
Atlanta, Georgia 30308
If to Lessee: ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, Georgia 30005
Attn:
----------------------------
If to Agent: SunTrust Bank, Atlanta
25 Park Place
Atlanta, Georgia 30303
Attn: Center 127 Atlanta
Corporate Banking
If to a Lease Participant or Lender, to the address provided in the
Master Agreement.
Section 17.5 Severability. Any provision of this Lease that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction, and Lessee shall remain
liable to perform its obligations hereunder except to the extent of such
unenforceability. To the extent permitted by Applicable Law, Lessee hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
Section 17.6 Amendment; Complete Agreements. Neither this Lease nor any
of the terms hereof may be terminated, amended, supplemented, waived or modified
orally, except by an instrument
32
<PAGE> 37
in writing signed by Lessor and Lessee in accordance with the provisions of
Section 8.4 of the Master Agreement. This Lease, together with the other
Operative Documents, is intended by the parties as a final expression of their
lease agreement and as a complete and exclusive statement of the terms thereof,
all negotiations, considerations and representations between the parties having
been incorporated herein and therein. No course of prior dealings between the
parties or their officers, employees, agents or Affiliates shall be relevant or
admissible to supplement, explain, or vary any of the terms of this Lease or any
other Operative Document. Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement between the parties or
their Affiliates shall not be relevant or admissible to determine the meaning of
any of the terms of this Lease or any other Operative Document. No
representations, undertakings, or agreements have been made or relied upon in
the making of this Lease other than those specifically set forth in the
Operative Documents.
Section 17.7 Construction. This Lease shall not be construed more
strictly against any one party, it being recognized that both of the parties
hereto have contributed substantially and materially to the preparation and
negotiation of this Lease.
Section 17.8 Headings. The Table of Contents and headings of the various
Articles and Sections of this Lease are for convenience of reference only and
shall not modify, define or limit any of the terms or provisions hereof.
Section 17.9 Counterparts. This Lease may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 17.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES
HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN
WHICH SUCH ESTATES ARE LOCATED.
Section 17.11 Discharge of Lessee's Obligations by its Affiliates. Lessor
agrees that performance of any of Lessee's obligations hereunder by one or more
of Lessee's Affiliates or one or more of Lessee's sublessees of the Leased
Properties or any part thereof shall constitute performance by Lessee of such
33
<PAGE> 38
obligations to the same extent and with the same effect hereunder as if such
obligations were performed by Lessee, but no such performance shall excuse
Lessee from any obligation not performed by it or on its behalf under the
Operative Documents.
Section 17.12 Liability of Lessor Limited. Except as otherwise expressly
provided below in this Section 17.12, it is expressly understood and agreed by
and between Lessee, Lessor and their respective successors and assigns that
nothing herein contained shall be construed as creating any liability of Lessor
or any of its Affiliates or any of their respective officers, directors,
employees or agents, individually or personally, to perform any covenant, either
express or implied, contained herein, all such liability, if any, being
expressly waived by Lessee and by each and every Person now or hereafter
claiming by, through or under Lessee, and that, so far as Lessor or any of its
Affiliates or any of their respective officers, directors, employees or agents,
individually or personally, is concerned, Lessee and any Person claiming by,
through or under Lessee shall look solely to the right, title and interest of
Lessor in the Leased Properties and any proceeds from Lessor's sale or
encumbrance thereof (provided, however, that Lessee shall not be entitled to any
double recovery) for the performance of any obligation under this Lease and
under the Operative Documents and the satisfaction of any liability arising
therefrom.
Section 17.13 Estoppel Certificates. Each party hereto agrees that at any
time and from time to time during the Lease Term, it will promptly, but in no
event later than thirty (30) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to any prospective
purchaser (if such prospective purchaser has signed a commitment or letter of
intent to purchase any Leased Property or any part thereof or any Note or Lease
Participation), assignee or mortgagee or third party designated by such other
party, a certificate stating (a) that this Lease is unmodified and in force and
effect (or if there have been modifications, that this Lease is in force and
effect as modified, and identifying the modification agreements); (b) the date
to which Basic Rent has been paid; (c) whether or not there is any existing
default by Lessee in the payment of Basic Rent or any other sum of money
hereunder, and whether or not there is any other existing default by either
party with respect to which a notice of default has been served, and, if there
is any such default, specifying the nature and extent thereof; (d) whether or
not, to the knowledge of the signer after due inquiry and investigation, there
are any setoffs, defenses or counterclaims against enforcement of the
obligations to be performed hereunder existing in favor of the party executing
such certificate and (e) other items that may be reasonably requested; provided
that no such certificate may be
34
<PAGE> 39
requested unless the requesting party has a good faith reason for such request.
Section 17.14 No Joint Venture. Any intention to create a joint venture
or partnership relation between Lessor and Lessee is hereby expressly
disclaimed.
Section 17.15 No Accord and Satisfaction. The acceptance by Lessor of any
sums from Lessee (whether as Basic Rent or otherwise) in amounts which are less
than the amounts due and payable by Lessee hereunder is not intended, nor shall
be construed, to constitute an accord and satisfaction of any dispute between
Lessor and Lessee regarding sums due and payable by Lessee hereunder, unless
Lessor specifically deems it as such in writing.
Section 17.16 No Merger. In no event shall the leasehold interests,
estates or rights of Lessee hereunder, or of the holder of any Notes secured by
a security interest in this Lease, or of any Lease Participant, merge with any
interests, estates or rights of Lessor in or to the Leased Properties, it being
understood that such leasehold interests, estates and rights of Lessee
hereunder, and of the holder of any Notes secured by a security interest in this
Lease, and of the Lease Participants, shall be deemed to be separate and
distinct from Lessor's interests, estates and rights in or to the Leased
Properties, notwithstanding that any such interests, estates or rights shall at
any time or times be held by or vested in the same person, corporation or other
entity.
Section 17.17 Survival. The obligations of Lessee to be performed under
this Lease prior to the Lease Termination Date and the obligations of Lessee
pursuant to Article III, Articles X, XI, XIII, Sections 14.2, 14.3, 14.4, 14.5,
14.8, Articles XIV, XV, and XVI, and Sections 17.10 and 17.12 shall survive the
expiration or termination of this Lease. The extension of any applicable statute
of limitations by Lessor, Lessee, the Agent or any Indemnitee shall not affect
such survival.
Section 17.18 Chattel Paper. To the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code in any
applicable jurisdiction), no security interest in this Lease may be created
through the transfer or possession of any counterpart other than the original
counterpart, which shall be identified as the original counterpart by the
receipt of the Agent.
Section 17.19 Time of Essence. Time is of the essence of this Lease.
35
<PAGE> 40
Section 17.20 Recordation of Lease. Lessee will, at its expense, cause
this Lease or memorandum of lease (if permitted by Applicable Law) to be
recorded in the proper office or offices in the States and the municipalities in
which the Land is located.
Section 17.21 Investment of Security Funds. Any amounts not payable to
Lessee pursuant to any provision of Article VIII, X or XIV or this Section 17.21
solely because an Event of Default shall have occurred and be continuing shall
be held by the Agent (or Lessor if the Funded Amounts have been fully paid) as
security for the obligations of Lessee under this Lease and the Master
Agreement. At such time as no Event of Default shall be continuing, such
amounts, net of any amounts previously applied to Lessee's obligations hereunder
or under the Master Agreement, shall be paid to Lessee. Any such amounts which
are held by the Agent (or Lessor if the Funded Amounts have been fully paid)
pending payment to Lessee shall until paid to Lessee, as provided hereunder or,
as long as the Lease Participation Agreement or the Loan Agreement is in effect,
until applied against Lessee's obligations herein and under the Master Agreement
and distributed as provided in the Lease Participation Agreement and the Loan
Agreement or herein (after the Lease Participation Agreement and the Loan
Agreement are no longer in effect) in connection with any exercise of remedies
hereunder, be invested by the Agent or Lessor, as the case may be as directed
from time to time in writing by Lessee (provided, however, if an Event of
Default has occurred and is continuing it will be directed by the Agent or, if
the Funded Amounts have been fully paid, Lessor) and at the expense and risk of
Lessee, in Permitted Investments. Any gain (including interest received)
realized as the result of any such investment (net of any fees, commissions and
other expenses, if any, incurred in connection with such investment) shall be
applied in the same manner as the principal invested.
[Signature pages follow]
36
<PAGE> 41
IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement
to be duly executed and delivered and attested by their respective officers
thereunto duly authorized as of the day and year first above written.
[Witnessed: CHOICEPOINT INC.
as Lessee
By By
-------------------------- ---------------------------
Name: Name:
Title:
By
--------------------------
Name: ]
S-1
<PAGE> 42
SUNTRUST BANKS, INC., as Lessor
Witnessed:
By By
------------------------------ ---------------------------
Name: Name:
Title:
By
------------------------------
Name:
S-2
<PAGE> 43
Recording requested by EXHIBIT A TO
and when recorded mail to: THE LEASE
- -------------------------------------
- -------------------------------------
- -------------------------------------
- -------------------------------------
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of [ ],
between SUNTRUST BANKS, INC., as the lessor (the "Lessor"), and CHOICEPOINT
INC., a Georgia corporation, as lessee (the "Lessee").
WHEREAS Lessor is the owner of the Land described on Schedule I hereto
and wishes to lease the Land together with any Building and other improvements
thereon or which thereafter may be constructed thereon pursuant to the Lease to
Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. Definitions; Interpretation. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix A to the Lease Agreement, dated
as of _______________, 1997, between Lessee and Lessor; and the rules of
interpretation set forth in Appendix A to the Lease shall apply to this Lease
Supplement.
SECTION 2. The Properties. Attached hereto as Schedule I is the
description of certain Land (the "Subject Property"). Effective upon the
execution and delivery of this Lease Supplement by Lessor and Lessee, such Land,
together with any Building and other improvements thereon or which thereafter
may be constructed thereon pursuant to the Lease shall be subject to the terms
and provisions of the Lease and Lessor hereby grants, conveys, transfers and
assigns to Lessee those interests, rights, titles, estates, powers and
privileges provided for in the Lease with respect to the Subject Property.
A-1
<PAGE> 44
SECTION 3. Amendments to Lease with Respect to Subject Property.
Effective upon the execution and delivery of this Lease Supplement by Lessor and
Lessee, the following terms and provisions shall apply to the Lease with respect
to the Subject Property:
[Insert Applicable Sections per Local Law]
SECTION 4. Ratification; Incorporation. Except as specifically modified
hereby, the terms and provisions of the Lease are hereby ratified and confirmed
and remain in full force and effect. The terms of the Lease (as amended by this
Lease Supplement) are by this reference incorporated herein and made a part
hereof.
SECTION 5. Original Lease Supplement. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA, BUT EXCLUDING
ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE, EXCEPT AS TO
MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATE HEREUNDER, AND THE
EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATE IS
LOCATED.
SECTION 7. Counterpart Execution. This Lease Supplement may be
executed in any number of counterparts and by each of the parties hereto in
separate counterparts, all such counterparts together constituting but one and
the same instrument.
A-2
<PAGE> 45
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
SUNTRUST BANKS, INC., as the Lessor
By
----------------------------------
Name:
Title:
CHOICEPOINT INC., as the Lessee
By
----------------------------------
Name:
Title:
S-1
<PAGE> 46
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ____ ____, this
_____ day of __________, _______________, by _____________________, as
____________________ of SunTrust Banks, Inc., on behalf of such corporation.
[Notarial Seal] ---------------------------
Notary Public
My commission expires:
------------------
STATE OF _________________ )
) ss.:
COUNTY OF ________________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ______________, ___ ____, this _____
day of __________, __________, by ___________, as _____________, of ChoicePoint
Inc., a Georgia corporation, on behalf of the corporation.
[Notarial Seal] --------------------------
Notary Public
My commission expires:
--------------------
S-2
<PAGE> 47
Receipt of this original counterpart of the foregoing Lease Supplement is hereby
acknowledged as of the date hereof.
SUNTRUST BANK, ATLANTA, as the
Agent
By
-------------------------------------
Name:
Title:
By
-------------------------------------
Name:
Title:
S-3
<PAGE> 48
APPENDIX A
to
Master Agreement, Lease,
Loan Agreement, Construction Agency Agreement
and Lease Participation Agreement
DEFINITIONS AND INTERPRETATION
A. Interpretation. In each Operative Document, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by the Operative Documents;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Operative
Document), document or instrument means such agreement, document or
instrument as amended, supplemented or modified and in effect from time
to time in accordance with the terms thereof and, if applicable, the
terms of the other Operative Documents and reference to any promissory
note includes any promissory note which is an extension or renewal
thereof or a substitute or replacement therefor;
(v) reference to any Applicable Law means such Applicable Law
as amended, modified, codified, replaced or reenacted, in whole or in
part, and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of
any Applicable Law means that provision of such Applicable Law from time
to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such section or
other provision;
(vi) reference in any Operative Document to any Article,
Section, Appendix, Schedule or Exhibit means such Article or Section
thereof or Appendix, Schedule or Exhibit thereto;
(vii) "hereunder", "hereof", "hereto" and words of similar import
shall be deemed references to an Operative Document as a whole and not to
any particular Article, Section or other provision hereof;
<PAGE> 49
(viii) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding
such term;
(ix) "or" is not exclusive; and
(x) relative to the determination of any period of time, "from"
means "from and including" and "to" means "to but excluding".
B. Accounting Terms. In each Operative Document, unless expressly
otherwise provided, accounting terms shall be construed and interpreted, and
accounting determinations and computations shall be made, in accordance with
GAAP.
C. Conflict in Operative Documents. If there is any conflict between
any Operative Documents, such Operative Document shall be interpreted and
construed, if possible, so as to avoid or minimize such conflict but, to the
extent (and only to the extent) of such conflict, the Master Agreement shall
prevail and control.
D. Legal Representation of the Parties. The Operative Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring the Operative Document to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.
E. Defined Terms. Unless a clear contrary intention appears, terms
defined herein have the respective indicated meanings when used in each
Operative Document.
"A Loan" means the A Percentage of Loans made by Lenders pursuant to the
Loan Agreement and the Master Agreement.
"A Note" is defined in Section 2.2 of the Loan Agreement.
"A Percentage" means 80%.
"Acquisition" means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary).
-2-
<PAGE> 50
"Address" means with respect to any Person, its address set forth in
Schedule 8.2 to the Master Agreement or such other address as it shall have
identified to the parties to the Master Agreement in writing.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with, such Person, whether
through the ownership of voting securities or by contract or otherwise. For
purposes of this definition, the term "control" (including the correlative
meanings of the terms "controlling," "controlled by" and "under common control
with"), as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person.
"After-Tax Basis" means (a) with respect to any payment to be received by
an Indemnitee (which, for purposes of this definition, shall include any Tax
Indemnitee), the amount of such payment supplemented by a further payment or
payments so that, after deducting from such payments the amount of all Taxes
(net of any current credits, deductions or other Tax benefits arising from the
payment by the Indemnitee of any amount, including Taxes, for which the payment
to be received is made) imposed currently on the Indemnitee by any Governmental
Authority or taxing authority with respect to such payments, the balance of such
payments shall be equal to the original payment to be received and (b) with
respect to any payment to be made by any Indemnitee, the amount of such payment
supplemented by a further payment or payments so that, after increasing such
payment by the amount of any current credits or other Tax benefits realized by
the Indemnitee under the laws of any Governmental Authority or taxing authority
resulting from the making of such payments, the sum of such payments (net of
such credits or benefits) shall be equal to the original payment to be made;
provided, however, for the purposes of this definition, and for purposes of any
payment to be made to either the Lessee or an Indemnitee on an after-tax basis,
it shall be assumed that (i) federal, state and local taxes are payable at the
highest combined marginal federal and state statutory income tax rate (taking
into account the deductibility of state income taxes for federal income tax
purposes) applicable to corporations from time to time and (ii) such Indemnitee
or the Lessee has sufficient income to utilize any deductions, credits (other
than foreign tax credits, the use of which shall be determined on an actual
basis) and other Tax benefits arising from any payments described in clause (b)
of this definition.
"Agent" means SunTrust Bank, Atlanta, a Georgia banking corporation, in
its capacity as agent under the Master Agreement, the Lease Participation
Agreement and the Loan Agreement.
-3-
<PAGE> 51
"Aggregate Construction Costs" means the aggregate amount of all
development, transaction and closing costs incurred by the Lessee, including all
acquisition costs for any improvements and capitalized expenses, but excluding
the purchase price of the Land.
"Alterations" means, with respect to any Leased Property, fixtures,
alterations, improvements, modifications and additions to such Leased Property.
"Alternative Rate" means, for any period, an interest rate per annum
equal to the rate of interest most recently announced by the Agent in Atlanta,
Georgia from time to time as its prime lending rate (or other comparable
reference rate) for calculating interest on certain loans, which need not be the
lowest interest rate charged by such bank. If such prime lending rate or
equivalent of such bank changes from time to time after the date hereof, the
Alternative Rate shall be automatically increased or decreased, as the case may
be, without notice to the Lessee as of the effective time of each change in such
prime lending rate or equivalent.
"Applicable Law" means all existing and future applicable laws (including
Environmental Laws), rules, regulations (including proposed, temporary and final
income tax regulations), statutes, treaties, codes, ordinances, permits,
certificates, orders and licenses of and interpretations by, any Governmental
Authority, and applicable judgments, decrees, injunctions, writs, orders or like
action of any court, arbitrator or other administrative, judicial or
quasi-judicial tribunal or agency of competent jurisdiction (including those
pertaining to health, safety or the environment (including, without limitation,
wetlands) and those pertaining to the construction, use or occupancy of any
Leased Property) and any restrictive covenant or deed restriction or easement of
record affecting any Leased Property.
"Applicable Margin" means the percentage designated on the chart set
forth below based on Lessee's ratio of Funded Debt to Consolidated EBITDA,
measured quarterly, effective in the second fiscal quarter immediately following
the date of delivery of the Compliance Certificate to the Agent:
-4-
<PAGE> 52
<TABLE>
<CAPTION>
FUNDED DEBT TO
CONSOLIDATED APPLICABLE
EBITDA RATIO MARGIN
- ------------ ----------
<S> <C>
Greater than 3.0:1.0 0.70 %
Less than or Equal to 3.0:1.0
and Greater than 2.5:1.0 0.575 %
Less than or Equal to 2.5:1.0
and Greater than 2.0:1.0 0.45 %
Less than or Equal to 2.0:1.0
and Greater than 1.5:1.00 0.40 %
Less than or Equal to 1.5:1.0
but Greater than 1.0:1.0 0.35 %
Less than or Equal to 1.0:1.0 0.30 %
</TABLE>
For purposes of the foregoing, (i) the Applicable Margin on the initial Closing
Date is 0.__% and shall remain 0.__% through and including December 31, 1997 (by
way of example, as of the first day of the third fiscal quarter of Lessee, the
Applicable Margin shall be calculated based upon the ratio of Funded Debt to
Consolidated EBITDA of the Lessee reported in the Compliance Certificate
delivered by the Lessee for the first fiscal quarter of such fiscal year of
Lessee.); and (ii) if the Lessee fails to provide the Compliance Certificate and
related financial statements required by Section 5.1 of the Master Agreement
within the applicable time period set forth therein, the Applicable Margin shall
be adjusted to 0.70% on the first day of the following fiscal quarter until such
Compliance Certificate and related financial statements are delivered.
"Appraisal" is defined in Section 3.1 of the Master Agreement.
"Appraiser" means an MAI appraiser satisfactory to the Agent and the
Lessor.
"Architect" means with respect to any Leased Property the architect
engaged in connection with the construction of the related Building, who may be
an employee of the General Contractor for such Leased Property.
"Architect's Agreement" means, with respect to any Leased Property, the
architectural services agreement, if any, between the Lessee and the related
Architect.
-5-
<PAGE> 53
"Assignment of Lease and Rents" means, with respect to any Leased
Property, the Assignment of Lease and Rents, dated as of the related Closing
Date, from the Lessor to the Agent, substantially in the form of Exhibit B to
the Master Agreement.
"Awards" means any award or payment received by or payable to the Lessor
or the Lessee on account of any Condemnation or Event of Taking (less the actual
costs, fees and expenses incurred in the collection thereof, for which the
Person incurring the same shall be reimbursed from such award or payment).
"B Loan" means the B Percentage of Loans made by a Lender pursuant to the
Loan Agreement and the Master Agreement.
"B Note" is defined in Section 2.2 of the Loan Agreement.
"B Percentage" means 20%.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended.
"Base Term" means, with respect to any Leased Property, (a) the period
commencing on the Initial Closing Date for the first parcel of Land acquired by
the Lessor and ending on the tenth (10th) anniversary of such Closing Date or
(b) such shorter period as may result from earlier termination of the Lease as
provided therein.
"Basic Rent" means, for any Lease Term, the rent payable pursuant to
Section 3.1 of the Lease, determined in accordance with the following: each
installment of Basic Rent payable on any Payment Date shall be in an amount
equal to the sum of (A) the aggregate amount of Lender Basic Rent payable on
such Payment Date, plus (B) the aggregate amount of Lessor Basic Rent payable on
such Payment Date, in each case for the Leased Property or Properties that are
then subject to the Lease.
"Board of Directors", with respect to a corporation, means either the
Board of Directors or any duly authorized committee of that Board which pursuant
to the by-laws of such corporation has the same authority as that Board as to
the matter at issue.
"Building" means, with respect to any Leased Property, the buildings,
structures and improvements described on Appendix B of the related Lease
Supplement located or to be located on the related Land, along with all fixtures
used or useful in connection with the operation of such Leased Property,
including, without limitation, all furnaces, boilers, compressors, elevators,
fittings, pipings, connectives, conduits, ducts, partitions, equipment and
apparatus of every kind and description
-6-
<PAGE> 54
now or hereafter affixed or attached or used or useful in connection with the
Building, all equipment financed by the Lessor and/or the Lenders and the Lease
Participants and all Alterations (including all restorations, repairs,
replacements and rebuilding of such buildings, improvements and structures)
thereto (but in each case excluding trade fixtures financed other than by the
Lessor, the Lease Participant or the Lenders).
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks are required or authorized to be closed for business in Atlanta,
Georgia [or New York, New York] and, if the applicable Business Day relates to a
LIBOR Advance, on which trading is not carried on by and between banks in the
London interbank market.
"Capital Stock" means, with respect to any Person, all capital stock of
such Person, whether voting or nonvoting, including common stock and preferred
stock of such Person.
"Casualty" means an event of damage or casualty relating to all or part
of any Leased Property that does not constitute an Event of Loss.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. ss. 9601 et. seq. and its implementing regulations and
amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
"Claims" means liabilities, obligations, damages, losses, demands,
penalties, fines, claims, actions, suits, judgments, proceedings, settlements,
utility charges, costs, expenses and disbursements (including, without
limitation, reasonable legal fees and expenses) of any kind and nature
whatsoever.
"Closing Date" means, with respect to each parcel of Land, the date on
which such Land is acquired by the Lessor and the initial Funding occurs with
respect to such Land under the Master Agreement.
"Commitment" means as to each Funding Party, its obligation to make
Fundings as investments in each Leased Property, or to make Loans to the Lessor,
or to fund a Lease Participation as the case may be, in an aggregate amount not
to exceed at any one time outstanding the amount set forth for such Funding
Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time
to time pursuant to Section 6 of the Master Agreement).
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"Commitment Percentage" means as to any Funding Party, at a particular
time, the percentage of the aggregate Commitments in effect at such time
constituted by such Funding Party's Commitment, as such percentage is shown for
such Funding Party on Schedule 2.2 to the Master Agreement (as it may be
adjusted from time to time pursuant to Section 6 of the Master Agreement).
"Completion Costs Payment", which is payable upon the occurrence of a
Non-Completion Event, is an amount equal to the sum of (i) the acquisition cost
of the Land, (ii) the aggregate amount of all Completion Costs, up to but not in
excess of the Completion Costs Payment Limitation, and (iii) all Supplemental
Rent and other amounts owing by the Lessee under the Operative Documents (other
than any Completion Costs in excess of the Completion Costs Payment Limitation).
"Completion Costs" means at any time the sum of (x) the aggregate amount
of all development, transaction and closing costs, including all acquisition
costs for any improvements and capitalized expenses, but excluding the purchase
price of the Land, expended or incurred by the Lessee as of the time of a
Non-Completion Event and which it will be necessary thereafter to expend in
order to achieve Completion, plus (y) all Taxes thereon.
"Completion Costs Payment Limitation" means an amount equal to 89% of the
Aggregate Construction Costs.
"Completion Date" with respect to any Leased Property means the Business
Day on which the conditions specified in Section 3.5 of the Master Agreement
have been satisfied with respect to such property.
"Compliance Certificate" shall have the meaning set forth in Section 5.1
of the Master Agreement.
"Condemnation" means any condemnation, requisition, confiscation, seizure
or other taking or sale of the use, occupancy or title to any Leased Property or
any part thereof in, by or on account of any actual eminent domain proceeding or
other action by any Governmental Authority or other Person under the power of
eminent domain or any transfer in lieu of or in anticipation thereof, which in
any case does not constitute an Event of Taking. A Condemnation shall be deemed
to have "occurred" on the earliest of the dates that use, occupancy or title is
taken.
"Consolidated Companies" means, collectively, Lessee and all of its
Subsidiaries.
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"Consolidated EBIT" means, for any fiscal period of Lessee, an amount
equal to (A) the sum for such fiscal period of Consolidated Net Income (Loss)
and, to the extent deducted in determining such Consolidated Net Income (Loss),
provisions for (i) taxes based on income and (ii) Consolidated Interest Expense,
minus (B) any items of gain (or plus any items of loss) which were included in
determining such Consolidated Net Income (Loss) and were (x) not realized in the
ordinary course of business (whether or not classified as "ordinary" by GAAP),
(y) the result of any sale of assets, or (z) resulting from minority
investments, together in the case of (x), (y) or (z), any related provision for
taxes included in Consolidated Net Income (Loss) with respect thereto, plus (C)
non-recurring non-cash charges, including without limitation, accruals related
to any acquisition and earnouts incurred in connection with any acquisition to
the extent not paid in cash.
"Consolidated EBITDA" shall mean, for any four fiscal-quarter period of
Borrower, an amount equal to the sum of (A) Consolidated EBIT plus (B)
depreciation and amortization expense to the extent deducted in determining
Consolidated Net Income (Loss), plus (C) without duplication, the sum of the
following items to the extent not included in Consolidated EBITDA for such
period:
(1) the net income (or net loss) for such period of any
Person which became a Subsidiary during such period (a "New
Subsidiary");
(2) the net income (or net loss) derived during such period
from any assets acquired by any Consolidated Company during such period
("New Assets");
(3) the sum of (x) taxes based on income, (y) Consolidated
Interest Expense and (z) depreciation and amortization expense, in each
case to the extent deducted in determining net income of any New
Subsidiary or derived from any New Assets during such period, minus any
items of gain (or plus any items of loss) which were included in
determining such net income and were (aa) not realized in the ordinary
course of business (whether or not classified as "ordinary" by GAAP),
(bb) the result of any sale of assets, or (cc) resulting from minority
investments, together in the case of (aa), (bb) or (cc), any related
provision for taxes included in such net income with respect thereto;
and
(4) non-recurring non-cash charges of any New Subsidiary or
derived from any New Assets during such period, including without
limitation, accruals related to
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any acquisition and earnouts incurred in connection with any acquisition
to the extent not paid in cash.
"Consolidated EBITR" means, for any fiscal period of Lessee, an amount
equal to the sum of Consolidated EBIT plus Consolidated Rental Expense for such
period.
"Consolidated Fixed Charges" means, for any fiscal period of Lessee, the
sum of (A) Consolidated Interest Expense, plus (B) Consolidated Rental Expense,
plus (C) dividends and distributions on Capital Stock paid in cash during such
fiscal period by Lessee or any other Consolidated Company, but excluding the
one-time dividend paid by Lessee to Equifax as of the Spin-Off Date and any
repurchases of Capital Stock of Lessee made on a non-pro rata basis.
"Consolidated Interest Expense" means, for any fiscal period of Lessee,
total interest expense of the Consolidated Companies (including without
limitation, interest expense attributable to capitalized leases in accordance
with GAAP, all commissions, discounts and other fees and charges owed with
respect to bankers acceptance financing, and total interest expense (whether
shown as interest expense or as loss and expenses on sale of receivables) under
a receivables purchase facility) determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income (Loss)" means, for any fiscal period of Lessee,
the net income (or loss) of the Consolidated Companies for such period (taken as
a single accounting period), but excluding therefrom (to the extent otherwise
included therein) the income of any Consolidated Company to the extent that the
declaration or payment of dividends or similar distributions by such
Consolidated Company of that income is not at the time permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation; provided that the foregoing exclusion
shall not apply to CDB/Infotek so long as there is at least $1 of outstanding
intercompany debt owed by CDB/Infotek to another Consolidated Company.
"Consolidated Net Worth" means, as of any date of determination,
shareholders' equity of Lessee, determined on a consolidated basis in conformity
with GAAP.
"Consolidated Rental Expense" shall mean, for any fiscal period of
Lessee, the operating lease expense of the Consolidated Companies determined in
accordance with GAAP for leases with an initial term greater than one year, as
disclosed in the notes to Lessee's consolidated financial statements of the
Consolidated Companies, determined on a consolidated basis in accordance with
GAAP, with appropriate adjustment for New Subsidiaries, New
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Assets, Old Subsidiaries and Old Assets as is consistent with the definition of
Consolidated EBIT.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of the Lessee in its consolidated financial statements as of such
date.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Lessee are treated as a single employer
under Section 414 of the Code.
"Construction" means, with respect to any Leased Property, the
construction of the related Building pursuant to the related Plans and
Specifications.
"Construction Agency Agreement" means the Construction Agency Agreement,
dated as of __________________, between the Lessee and the Lessor.
"Construction Agent" means the Lessee in its capacity as construction
agent pursuant to the Construction Agency Agreement.
"Construction Conditions" means the conditions set forth in Section 3.5
of the Master Agreement.
"Construction Contract" means, with respect to any Leased Property, that
certain construction contract, if any, between the Lessee and a General
Contractor for the construction of the related Building, provided that such
contract shall be assigned by the Lessee to the Lessor, and such assignment
shall be consented to by such General Contractor, pursuant to an assignment of
such construction contract substantially in the form of the Security Agreement
and Assignment set forth as Exhibit D to the Master Agreement.
"Construction Force Majeure Event" means, with respect to any Leased
Property:
(a) an act of God arising after the related Closing Date, or
(b) any change in any state or local law, regulation or other legal
requirement arising after such Closing Date and relating to the
use of the Land or the construction of a building on the Land, or
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(c) strikes, lockouts, labor troubles, unavailability of materials,
riots, insurrections or other causes beyond the Lessee's control
which prevents the Lessee from completing the Construction prior to the
Scheduled Construction Termination Date and which could not have been avoided or
which cannot be remedied by the Lessee through the exercise of all commercially
reasonable efforts or the expenditure of funds and, in the case of (b) above,
the existence or potentiality of which was not known to and could not have been
discovered prior to such Closing Date through the exercise of due diligence by
the Lessee.
"Construction Land Interest" means each parcel of Land for which the
Completion Date has not yet occurred.
"Construction Term" means, with respect to any Leased Property, the
period commencing on the related Closing Date and ending on the related
Construction Term Expiration Date, or such shorter period as may result from
earlier termination of the Lease as provided therein.
"Construction Term Expiration Date" means, with respect to any Leased
Property, the earliest of the following:
(a) the related Completion Date,
(b) the date on which the aggregate Funded Amounts with respect to
such Leased Property equal (or exceed) the related Construction
Funding Limit, and
(c) the related Scheduled Construction Termination Date.
"Contractual Obligation" of any Person means any provision of any
security issued by such Person or of any agreement, instrument or undertaking
under which such Person is obligated or by which it or any of the property owned
by it is bound.
["Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases,
(v) all obligations of such Person to reimburse any bank or other Person in
respect of amounts payable under a banker's acceptance,(vi) all Redeemable
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all obligations of such Person to reimburse any bank or other Person in
respect of amounts paid or to be paid
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under a letter of credit or similar instrument, (viii) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person, and (ix) all Debt and other obligations of others
Guaranteed by such Person (other than the Debt and other obligations of the
Lessee or the Consolidated Subsidiaries of the Lessee Guaranteed by,
respectively, the Parent or the Consolidated Subsidiaries of the Parent).]
"Deed" means, with respect to any Land, a General Warranty Deed, dated
the applicable Closing Date, from the applicable Seller to the Lessor, conveying
such Land.
"Environmental Audit" means, with respect to each parcel of Land, a Phase
I Environmental Assessment, which meets or exceeds ASTM Standard EIS27-97 and is
dated no more than 60 days prior to the related Closing Date, by an
environmental services firm satisfactory to the Funding Parties.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Law.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Lessee or any Consolidated Subsidiary required by any
Environmental Law.
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental Law, whether
or not entered upon consent or written agreements with an Environmental
Authority or other entity arising from or in any way associated with any
Environmental Law, whether or not incorporated in a judgment, decree or other.
"Environmental Laws" means and include the Resource Conservation and
Recovery Act of 1976, (RCRA) 42 U.S.C. ss.ss. 6901-6987, as amended by the
Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601-9657, (CERCLA), the Clean
Air Act, 42 U.S.C. ss.ss.7401 et seq., the Occupational Safety and Health Act,
the Toxic Substances Control Act, the Emergency Planning and Community Right to
Know Act and any comparable or implementing federal, state or local
environmental laws, ordinances, rules, orders, statutes, decrees, judgments,
injunctions, codes and regulations, and any other federal, state or local laws,
ordinances, rules, codes and regulations, and any other federal, state or local
laws, ordinances, rules, codes and regulations relating to the environment,
human health or natural resources or the regulation or control of or imposing
liability or standards of conduct
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concerning human health, the environment, Hazardous Materials or the clean-up or
other remediation of any Leased Property, or any part thereof, as any of the
foregoing may have been from time to time amended, supplemented or supplanted.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Law.
"Environmental Notices" means notice from any Environmental Authority or
by any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Law, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any, violation of any
Environmental Law or any investigations concerning any violation of any
Environmental Law.
"Environmental Permits" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities required by Environmental
Law.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental Law.
"Environmental Releases" means releases as defined in CERCLA or under any
applicable Environmental Law.
"Equifax" means Equifax Inc., a Georgia corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time.
"ERISA Affiliate" means, with respect to any Person, each trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Tax Code.
"Event of Default" means any event or condition designated as an "Event
of Default" in Article XII of the Lease.
"Event of Loss" is defined in Section 10.1 of the Lease.
"Event of Taking" is defined in Section 10.2 of the Lease.
"Excepted Claims" is defined in Section 7.1 of the Master Agreement.
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"Fair Market Rental Value" means, with respect to any Leased Property,
the fair market rental value as determined by an independent appraiser chosen by
the Lessor that would be obtained in an arm's- length lease between an informed
and willing lessee and an informed and willing lessor, in either case under no
compulsion to lease, and neither of which is related to the Lessor or Lessee for
the lease of such Leased Property on the terms set forth, or referred to, in the
Lease. Such fair market rental value shall be calculated as the value for the
use of such Leased Property to be leased in place at the Land, assuming, in the
determination of such fair market rental value, that such Leased Property is in
the condition and repair required to be maintained by the terms of the related
Lease (unless such fair market rental value is being determined for the purposes
of Section 13.1 of the Lease and except as otherwise specifically provided in
the Lease, in which case this assumption shall not be made).
"Fair Market Sales Value" means, with respect to any Leased Property or
any portion thereof, the fair market sales value as determined by an independent
appraiser chosen by the Lessor or, so long as the Funded Amounts are
outstanding, the Agent that would be obtained in an arm's-length transaction
between an informed and willing buyer (other than a lessee currently in
possession) and an informed and willing seller, under no compulsion,
respectively, to buy or sell and neither of which is related to the Lessor or
Lessee, for the purchase of such Leased Property. Such fair market sales value
shall be calculated as the value for the use of such Leased Property, assuming,
in the determination of such fair market sales value, that such Leased Property
is in the condition and repair required to be maintained by the terms of the
Lease (unless such fair market sales value is being determined for purposes of
Section 13.1 of the Lease and except as otherwise specifically provided in the
Lease or the Master Agreement, in which case this assumption shall not be made).
"Final Rent Payment Date" with respect to any Leased Property is defined
in Section 13.1(e) of the Lease.
"Fiscal Quarter" means any fiscal quarter of the Lessee.
"Fiscal Year" means any fiscal year of the Lessee.
"Fixed Charge Coverage Ratio" means, as of the last day of any fiscal
quarter of Lessee, the ratio of (A) Consolidated EBITR to (B) Consolidated Fixed
Charges, in each case calculated with respect to the immediately preceding four
fiscal quarters ending on such date.
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"Foreign Plan" means any pension, profit sharing, deferred compensation,
or other employee benefit plan, program or arrangement maintained by any Foreign
Subsidiary which, under applicable local law, is required to be funded through a
trust or other funding vehicle, but shall not include any benefit provided by a
foreign government or its agencies.
"Foreign Subsidiary" means each Consolidated Company that is organized
under the laws of a jurisdiction other than the United States of America or any
State thereof.
"Funded Amount" means, as to the Lessor, the Lessor's Invested Amounts,
and, as to each Lender, the outstanding principal of such Lender's Loans.
"Funded Debt" means all Indebtedness for money borrowed, Indebtedness
evidenced or secured by purchase money Liens, capitalized leases, outstandings
under asset securitization vehicles, conditional sales contracts and similar
title retention debt instruments, including any current maturities of the
foregoing, which by its terms matures more than one year from the date of any
calculation thereof or which is renewable or extendable at the option of the
obligor to a date beyond one year from such date. The calculation of Funded Debt
shall include (i) all Funded Debt of the Consolidated Companies, plus (ii) all
Funded Debt of other Persons to the extent guaranteed by a Consolidated Company,
to the extent supported by a letter of credit issued for the account of a
Consolidated Company, or as to which and to the extent which a Consolidated
Company or its assets otherwise have become liable for payment thereof, plus
(iii) the redemption amount with respect to the stock of the Lessee required to
be redeemed during the next succeeding twelve months at the option of the holder
or its Subsidiaries. Notwithstanding the foregoing, "Funded Debt" shall exclude
the Operative Documents and all operating lease obligations.
"Funding" means any funding by the Funding Parties pursuant to Section
2.2 of the Master Agreement.
"Funding Date" means collectively, each Closing Date and each other date
during the Construction Term on which a Funding occurs under Section 2 of the
Master Agreement.
"Funding Office" means for each Funding Party the office such Funding
Party may designate in writing from time to time to the Lessee and the Agent as
its funding office.
"Funding Parties" means the Lessor, the Agent, the Lease Participant and
the Lenders, collectively.
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"Funding Party Balance" means, with respect to any Leased Property, (i)
for the Lessor as of any date of determination, an amount equal to the sum of
the outstanding related Lessor's Invested Amount (less the related Lease
Participant Amount), all accrued and unpaid Yield on such outstanding related
Lessor's Invested Amount (less the related Lease Participant Amount), all unpaid
related fees owing to the Lessor under the Operative Documents, and all other
related amounts owing to the Lessor by the Lessee under the Operative Documents,
(ii) for the Lease Participant as of any date of determination, an amount equal
to the sum of the outstanding related Lease Participant Amount, all accrued and
unpaid Yield thereon, all unpaid related fees owing to the Lease Participant
under the Operative Documents, and all other related amounts owing to the Lease
Participant by the Lessee under the Operative Documents, and (iii) for any
Lender as of any date of determination, an amount equal to the sum of the
outstanding related Loans of such Lender, all accrued and unpaid interest
thereon, all unpaid related fees owing to such Lender under the Operative
Documents, and all other related amounts owing to such Lender by the Lessee
under the Operative Documents.
"Funding Request" is defined in Section 2.2 of the Master Agreement.
"Funding Termination Date" means ______________, 1999.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"General Contractor" means with respect to any Leased Property the
general contractor under the related Construction Contract as may be selected by
the Lessee.
"Governmental Action" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgments, decrees,
licenses, exemptions, publications, filings, notices to and declarations of or
with, or required by, any Governmental Authority, or required by any Applicable
Law and shall include, without limitation, all citings, environmental and
operating permits and licenses that are required for the use, occupancy, zoning
and operation of any Leased Property.
"Governmental Authority" means any foreign or domestic federal, state,
county, municipal or other governmental or regulatory authority, agency, board,
body, commission, instrumentality, court or any political subdivision thereof.
"Guarantor" means the Lessee, in its capacity as guarantor under the
Operative Guaranty.
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"Guaranty" means any contractual obligation, contingent or otherwise, of
a Person with respect to any Indebtedness or other obligation or liability of
another Person, including without limitation, any such Indebtedness, obligation
or liability directly or indirectly guaranteed, endorsed, co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable, including contractual obligations
(contingent or otherwise) arising through any agreement to purchase, repurchase,
or otherwise acquire such Indebtedness, obligation or liability or any security
therefor, or any agreement to provide funds for the payment or discharge thereof
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), or to maintain solvency, assets, level of income, or other
financial condition, or to make any payment other than for value received. The
amount of any Guaranty shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which guaranty is
made or, if not so stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Hazardous Materials" means any pollutant, contaminant, waste, hazardous
or toxic chemical including asbestos containing materials in any form or
condition; urea formaldehyde foam insulation; polychlorinated biphenyls (PCBs)
in any form or condition; including, without limitation, any solid or hazardous
waste, as defined in the Resource Conservation and Recovery Act of 1980, 42
U.S.C. ss. 6901 et seq. and its implementing regulations and amendments, or in
any applicable state or local law or regulation, any "hazardous substance",
"pollutant", or "contaminant" as defined in CERCLA, or in any applicable state
or local law or regulation; gasoline, or any other petroleum product or
by-product, including, crude oil or any fraction thereof; toxic substances, as
defined in the Toxic Substances Control Act of 1976, or in any applicable state
or local law or regulation; or insecticides, fungicides, or rodenticides, as
defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or
in any applicable state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
"Indebtedness" of any Person means, without duplication (i) all
obligations of such Person which in accordance with GAAP would be shown on the
balance sheet of such Person as a liability (including, without limitation,
obligations for borrowed money and for the deferred purchase price of property
or services, and obligations evidenced by bonds, debentures, notes or other
similar instruments); (ii) all rental obligations under leases required to be
capitalized under GAAP; (iii) all Guaranties of such Person (including
contingent reimbursement obligations under undrawn letters of credit); (iv)
Indebtedness of others secured
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by any Lien upon property owned by such Person, whether or not assumed; and (v)
obligations or other liabilities under currency contracts, interest rate hedging
contracts, or similar agreements or combinations thereof to the extent required
to be disclosed in such Person's financial statements in accordance with GAAP.
"Indemnified Risks" is defined in Section 7.1 of the Master Agreement.
"Indemnitee" means the Agent (in its individual capacity and in its
capacity as Agent), the Lease Participant, each Lender, and the Lessor, and
their respective Affiliates, successors, permitted assigns, permitted
transferees, employees, officers, directors and agents; provided, however, that
in no event shall the Lessee be an Indemnitee.
"Indemnitee Group" means the respective Affiliates, employees, officers,
directors and agents of the Agent (in its individual capacity), the Lease
Participant, each Lender or the Lessor, as applicable; provided, however, that
in no event shall the Lessee be a member of the Indemnitee Group.
"Initial Closing Date" means the Closing Date for the first Leased
Property acquired by the Lessor.
"Investment" means, when used with respect to any Person, any direct or
indirect advance, loan or other extension of credit (other than the creation of
receivables in the ordinary course of business) or capital contribution by such
Person (by means of transfers of property to others or payments for property or
services for the account or use of others, or otherwise) to any Person, or any
direct or indirect purchase or other acquisition by such Person of, or of a
beneficial interest in, Capital Stock, partnership interests, bonds, notes,
debentures or other securities issued by any other Person. Each Investment shall
be valued as of the date made; provided that any Investment or portion of an
Investment consisting of Debt shall be valued at the outstanding principal
balance thereof as of the date of determination.
"Land" means the land described in Appendix B to the related Lease
Supplement.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, treaties or decrees of any governmental or political
subdivision or agency thereof, or of any court or similar entity established by
any thereof.
"Lease" means the Lease Agreement, dated as of ____________, 1997,
together with each Lease Supplement thereto, between the Lessee and the Lessor,
with such modifications as are
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satisfactory to the Lessor and the Agent in conformity with Applicable Law to
assure customary remedies in favor of the Funding Parties in the jurisdiction
where the Leased Property is located.
"Lease Balance" means, with respect to the Leased Properties, as of any
date of determination, an amount equal to the sum of all Funding Party Balances.
"Lease Participant" means SunTrust Bank, Atlanta and such other Persons,
if any, who may become parties to the Lease Participation Agreement as Lease
Participants, provided that, unless such other Person is an Affiliate of
SunTrust Bank, Atlanta, Lessee consents to such other Person, which consent
shall not be unreasonably withheld.
"Lease Participation Agreement" means the Lease Participation Agreement
dated as of ____________, 1997, among the Lessor, the Lease Participant and the
Agent.
"Lease Participant Amount" means the amounts funded by the Lease
Participant pursuant to Section 2.2 of the Lease Participation Agreement (as
increased during the related Construction Term by a amount equal to the Lease
Participant's Percentage of the increase in the related Lessor's Invested Amount
pursuant to Section 2.3(c) of the Master Agreement), as the purchase price for
the Lease Participation.
"Lease Participant Commitment" is defined in Section 2.2 of the Lease
Participation Agreement.
"Lease Participation" is defined in Section 2.1 of the Lease
Participation Agreement.
"Lease Supplement" is defined in Section 2.1 of the Lease.
"Lease Term" with respect to the Lease means (a) the Base Term, as it may
be renewed pursuant to Section 14.9 of the Lease or (b) such shorter period as
may result from earlier termination of the Lease as provided therein.
"Lease Termination Date" means the last day of the Lease Term, as the
same may be accelerated pursuant to the Lease.
"Leased Property" means Land and the related Building(s). For purpose of
the Lease, "Leased Property" means the property subject to a Lease Supplement,
unless the context provides otherwise.
"Leased Property Balance" means, with respect to any Leased Property, as
of any date of determination, an amount equal to
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that portion of the Lease Balance which relates to such Leased Property.
"Lender Basic Rent" means, for any Rent Period under the Lease, the
aggregate amount of interest accrued on the Loans related to the Leased Property
subject to the Lease pursuant to Section 2.5 of the Loan Agreement during such
Rent Period, plus the amount of principal of such Loans then due pursuant to
Section 2.4 of the Loan Agreement.
"Lenders" means such financial institutions as are, or who may hereafter
become, parties to the Loan Agreement as Lenders to the Lessor.
"Lessee" is defined in the preamble to the Master Agreement.
"Lessor" is defined in the preamble to the Master Agreement.
"Lessor Basic Rent" means, for any Rent Period under any Lease, the
aggregate amount of Yield accrued on the Lessor's Invested Amounts under the
Lease under Section 2.3(a) of the Master Agreement during such Rent Period.
"Lessor Liens" means Liens on or against any Leased Property, the Lease,
any other Operative Document or any payment of Rent (a) which result from any
act or omission of, or any Claim against, the Lessor unrelated to the
transactions contemplated by the Operative Documents or (b) which result from
any Tax owed by the Lessor, except any Tax for which the Lessee is obligated to
indemnify (including, without limitation, in the foregoing exception, any
assessments with respect to any Leased Property noted on the related Title
Policy or assessed in connection with any construction or development by the
Lessee).
"Lessor's Invested Amount" means the amounts funded by the Lessor
pursuant to Section 2 of the Master Agreement that are not proceeds of Loans by
a Lender, as increased during the related Construction Term pursuant to Section
2.3(c) of the Master Agreement.
"LIBOR Advance" means that portion of the Funded Amount hearing interest
based on the LIBOR Rate.
"LIBOR Rate" means, with respect to any Rent Period, the rate per annum
equal to the offered rate for deposits in U.S. Dollars of amounts equal or
comparable to the aggregate principal amount of the related LIBOR Advance
offered for a term comparable to such Rent Period, which rates appear on the
Telerate Page 3750 (if the foregoing rate is unavailable from the Telerate for
any reason, then such rate shall be determined by the Agent from the Reuters
Screen LIBO Page) as of 11:00 a.m. London time, two (2)
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Business Days prior to the first day of such Rent Period, provided that (x) if
more than one such offered rate appears on the Reuters Screen LIBO Page, the
rate used to determine the LIBOR Rate will be the arithmetic average (rounded
upward, if necessary, to the next higher 1/16th of 1%) of such offered rates),
or (y) if no such offered rates appear on such pages, the rate used for such
Rent Period will be the arithmetic average (rounded upward, if necessary, to the
next higher 1/16th of 1%) of rates quoted by not less than two major banks in
New York, New York, selected by the Agent, at approximately 10:00 a.m., New York
time, two (2) Business Days prior to the first day of such Rent Period, for
deposits in U.S. Dollars offered to leading European banks for a period
comparable to such Period in an amount comparable to the principal amount of the
Lease Participant Amounts and the Loans, the rate so determined to be rounded
upwards to the nearest multiple of 1/100th of 1%. All determinations of Yield,
interest, Lessor Basic Rent, Lender Basic Rent, LIBOR Rate, Alternative Rate,
and Overdue Rate by the Agent shall, in the absence of demonstrable error, be
binding and conclusive upon the Lessee.
"LIBOR Reserve Percentage" means, for any Rent Period and for any Funding
Party, the aggregate reserve requirement (including any basic, emergency,
supplemental, marginal or other reserve requirement) which is actually imposed
on such Funding Party during such Rent Period under Regulation D of the Board of
Governors of the Federal Reserve System with respect to liabilities or assets
consisting of or including "Eurocurrency liabilities" having a term equal to the
applicable Rent Period.
"Lien" means any mortgage, deed of trust, security deed, pledge, security
interest, encumbrance, lien, easement, servitude or charge of any kind,
including, without limitation, any irrevocable license, conditional sale or
other title retention agreement, any lease in the nature thereof, or any other
right of or arrangement with any creditor to have its claim satisfied out of any
specified property or asset with the proceeds therefrom prior to the
satisfaction of the claims of the general creditors of the owner thereof,
whether or not filed or recorded, or the filing of, or agreement to execute as
"debtor", any financing or continuation statement under the Uniform Commercial
Code of any jurisdiction or any federal, state or local lien imposed pursuant to
any Environmental Law.
"Loan" shall have the meaning specified in Section 2.1 of the Loan
Agreement.
"Loan Agreement" means the Loan Agreement, dated as of ____________,
1997, among the Lessor, the Agent and the Lenders.
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"Loan Documents" means the Loan Agreement, the Notes, the Assignments of
Lease and Rents, the Mortgages and all documents and instruments executed and
delivered in connection with each of the foregoing.
"Loan Event of Default" means any of the events specified in Section 5.1
of the Loan Agreement, provided that any requirement for the giving of notice,
the lapse of time, or both, or any other condition, event or act has been
satisfied.
"Loan Potential Event of Default" means any event, condition or failure
which, with notice or lapse of time or both, would become a Loan Event of
Default.
"Loss Proceeds" is defined in Section 10.6 of the Lease.
"Margin Regulations" means Regulation G, Regulation T, Regulation U and
Regulation X of the Board of Governors of the Federal Reserve System, as the
same may be in effect from time to time.
"Margin Stock" means "margin stock" as defined in Regulations G, T, U or
X.
"Master Agreement" means the Master Agreement, dated as of ____________,
1997, among the Lessee, the Guarantor, the Lessor, the Agent and the Lenders.
"Material Adverse Effect" means a material adverse effect upon the
financial condition, operations, performance or properties of the Lessee, or the
ability of the Lessee to perform in any material respect under the Operative
Documents or the value, utility or useful life of any Leased Property, or the
validity, enforceability or legality of any of the Operative Documents, or the
priority, perfection or status of any Funding Party's interest in any Leased
Property.
"Material Subsidiary" means each Subsidiary of Lessee, now existing or
hereafter established or acquired, that at any time prior to the Lease
Termination Date (i) has or acquires assets which constitute fifteen percent
(15%) or more of the Total Assets or (ii) accounts for or produces fifteen
percent (15%) or more of Consolidated EBITDA during the most recently completed
fiscal year of Lessee.
"Mortgage" means, with respect to any Leased Property, that certain
mortgage, deed of trust or security deed, dated as of the related Closing Date,
by the Lessor to the Agent, in the form of Exhibit D attached to the Master
Agreement, with such modifications as are satisfactory to the Lessor and the
Agent in conformity with Applicable Law to assure customary remedies in
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favor of the Agent in the jurisdiction where the Leased Property is located.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Non-Completion Event" means the failure to complete construction on any
Leased Property on the Construction Term Expiration Date therefor in accordance
with the Construction Agency Agreement.
"Notes" means the A Note and the B Note issued by the Lessor under the
Loan Agreement, and any and all notes issued in replacement or exchange therefor
in accordance with the provisions thereof.
"Obligations" means all amounts owed by, and obligations of, the Lessor
to the Lenders or the Agent under the Loan Agreement, Notes and other Operative
Documents.
"Officer's Certificate" of a Person means a certificate signed by the
Chairman of the Board or the President or any Executive Vice President or any
Senior Vice President or any other Vice President of such Person signing with
the Treasurer or any Assistant Treasurer or the Controller or any Assistant
Controller or the Secretary or any Assistant Secretary of the such Person, or by
any Vice President who is also Controller or Treasurer signing alone.
"Operative Documents" means the Master Agreement, the Operative Guaranty,
the Purchase Agreements, the Deeds, the Lease, the Lease Participation
Agreement, the Security Agreement and Assignment, the Notes, the Loan Agreement,
the Assignments of Lease and Rents, the Mortgages and the other documents
delivered in connection with the transactions contemplated by the Master
Agreement.
"Operative Guaranty" means the Guaranty dated as of ____________, 1997 by
the Guarantor in favor of the Funding Parties.
"Overdue Rate" means the lesser of (a) the highest interest rate
permitted by Applicable Law and (b)(i) during the Rent Period in which the
payment default first occurs, the LIBOR Rate for such Rent Period plus the
Applicable Margin plus 2%, and (ii) after such Rent Period, an interest rate per
annum (calculated on the basis of a 365- day (or 366-day, if appropriate) year
equal to 2.0% above the Alternative Rate in effect from time to time.
"Payment Date" means the last day of each Rent Period (and if such Rent
Period is longer than 90 days or three months, the
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day that is 90 days after the first day of such Rent Period) or, if such day is
not a Business Day, the next Business Day.
"Payment Date Notice" is defined in Section 2.3(e) of the Master
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
thereto.
"Permitted Liens" means the following with respect to any Leased
Property: (a) the respective rights and interests of the Lessee, the Lessor, the
Agent, the Lease Participant and any Lender, as provided in the Operative
Documents, (b) Liens for Taxes either not yet due or being contested in good
faith and by appropriate proceedings, so long as enforcement thereof is stayed
pending such proceedings, (c) materialmen's, mechanics', workers', repairmen's,
employees' or other like Liens arising after the related Closing Date in the
ordinary course of business for amounts either not yet due or being contested in
good faith and by appropriate proceedings, so long as enforcement thereof is
stayed pending such proceedings, (d) Liens arising after such Closing Date out
of judgments or awards with respect to which at the time an appeal or proceeding
for review is being prosecuted in good faith, so long as the enforcement thereof
has been stayed pending such appeal or review, (e) easements, rights of way,
reservations, servitudes and rights of others against the Land which do not
materially and adversely affect the value or the utility of such Leased
Property, (f) other Liens incidental to the conduct of Lessee's business which
were not incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not in the aggregate materially detract from the
value of such Leased Property or materially impair the use thereof, and (g)
assignments, leases and subleases expressly permitted by the Operative
Documents.
"Person" means any individual, limited liability company, partnership,
firm, corporation, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
"Plan" means any "employee benefit plan" (as defined in Section 3(3) of
ERISA), including, but not limited to, any defined benefit pension plan, profit
sharing plan, money purchase pension plan, savings or thrift plan, stock bonus
plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund,
program, arrangement or practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness, disability, or
life insurance benefits, but shall exclude any Foreign Plan.
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"Plans and Specifications" means with respect to any Building the final
plans and specifications for such Building prepared by the Architect, and
referred to by the Appraiser in the Appraisal, as such Plans and Specifications
may be hereafter amended, supplemented or otherwise modified from time to time.
"Potential Event of Default" means any event, condition or failure which,
with notice or lapse of time or both, would become an Event of Default.
"Properties" means all real property owned, leased or otherwise used or
occupied by the Lessee or any Consolidated Subsidiary, wherever located.
"Purchase Agreement" means with respect to any Land, the purchase
agreement with the Seller for the conveyance of such Land to the Lessor.
"Purchase Option" is defined in Section 14.1(a) of the Lease.
"Recourse Deficiency Amount" means, as of any date of determination
thereof, the sum of (i) the aggregate principal amount of the A Loans then
outstanding, plus the A Percentage of the Lessor's Invested Amounts then
outstanding, plus (ii) all accrued and unpaid Yield on the A Percentage of the
Lessor's Invested Amounts and all accrued and unpaid interest on the A Loans.
"Redeemable Preferred Stock" of any Person means any preferred stock
issued by such Person which is at any time prior to the [Termination Date]
either (i) mandatorily redeemable (by sinking fund or similar payments or
otherwise) or (ii) redeemable at the option of the holder thereof.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
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"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulations" means the income tax regulations promulgated from time to
time under and pursuant to the Code.
"Release" means the release, deposit, disposal or leak of any Hazardous
Material into or upon or under any land or water or air, or otherwise into the
environment, including, without limitation, by means of burial, disposal,
discharge, emission, injection, spillage, leakage, seepage, leaching, dumping,
pumping, pouring, escaping, emptying, placement and the like.
"Release Date" means, with respect to any Leased Property, the earlier of
(i) the date that the related Leased Property Balance has been paid in full, and
(ii) the date on which the Agent gives notice to the Lessor that the Lease
Participant and the Lenders release any and all interest they may have in such
Leased Property, and all proceeds thereof, and any rights to direct, consent or
deny consent to any action by the Lessor with respect to such Leased Property.
"Remarketing Option" is defined in Section 14.6 of the Lease.
"Rent" means Basic Rent and Supplemental Rent, collectively.
["Rental Income" shall mean the gross revenues of the Lessee and its
Subsidiaries from rentals to the public from the Lessee's furniture inventory
and rental equipment (excluding customer deposits, advance rent payments and
proceeds from the sale of inventory).]
"Rent Period" means in the case of LIBOR Advances, either a 1, 2, 3 or 6
month period; provided that:
(a) The initial Rent Period for any Funding shall commence
on the Funding Date of such Funding and each Rent Period occurring
thereafter in respect of such Funding shall commence on the day on
which the next preceding Rent Period expires;
(b) If any Rent Period would otherwise expire on a day which
is not a Business Day, such Rent Period shall
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expire on the next succeeding Business Day, provided that if any Rent
Period in respect of LIBOR Advances would otherwise expire on a day that
is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Rent Period shall expire on the
next preceding Business Day;
(c) Any Rent Period in respect of LIBOR Advances which begins on a
day for which there is no numerically corresponding day in the calendar
month at the end of such Rent Period shall, subject to paragraph (d)
below, expire on the last Business Day of such calendar month; and
(d) No Rent Period shall extend beyond the Lease Termination Date.
"Report" is defined in Section 7.6 of the Master Agreement.
"Required Lenders" means, at any time, Lenders holding an aggregate
outstanding principal amount of Loans equal to at least 66- 2/3% of the
aggregate outstanding principal amount of all Loans.
"Required Funding Parties" means, at any time, Funding Parties holding an
aggregate outstanding principal amount of Funded Amounts equal to at least
66-2/3% of the aggregate outstanding principal amount of all Funded Amounts.
"Requirements of Law" means, as to any Person, the charter and by-laws or
other organizational or governing documents of such Person, and any law, rule or
regulation, permit, approval, authorization, license or variance, order or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject, including, without
limitation, the Securities Act, the Securities Exchange Act, Regulations G, T, U
and X of the Board of Governors of the Federal Reserve System, and any building,
environmental or land use requirement or permit or occupational safety or health
law, rule or regulation.
"Responsible Financial Officer" is defined in Section 5.1(c) of the
Master Agreement.
"Responsible Officer" means the Chairman or Vice Chairman of the Board of
Directors, the Chairman or Vice Chairman of the Executive Committee of the Board
of Directors, the President, any Senior Vice President or Executive Vice
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer.
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"Scheduled Construction Termination Date" means with respect to any
Building ____________, 1998 [the eighteen-month anniversary of the initial
Closing Date].
"SEC" means the United States Securities and Exchange Commission.
"Securities" means any stock, shares, voting trust certificates, bonds,
debentures, notes or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities", or any certificates of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Agreement and Assignment" means, with respect to any Leased
Property, the Security Agreement and Assignment (Construction Contract,
Architect's Agreement, Permits, Licenses and Governmental Approvals, and Plans,
Specifications and Drawings) from the Lessee to the Lessor, substantially in the
form of Exhibit C to the Master Agreement.
"Seller" means as to any Leased Property, the seller thereof to the
Lessor on the related Closing Date.
"Solvent" means, as to Lessee at any time, that (i) each of the fair
value and the present fair saleable value of such Person's assets (including any
rights of subrogation or contribution to which such Person is entitled, under
any of the Operative Documents or otherwise) is greater than such Person's debts
and other liabilities (including contingent, unmatured and unliquidated debts
and liabilities) and the maximum estimated amount required to pay such debts and
liabilities as such debts and liabilities mature or otherwise become payable;
(ii) such Person is able and expects to be able to pay its debts and other
liabilities (including, without limitation, contingent, unmatured and
unliquidated debts and liabilities) as they mature; and (iii) such Person does
not have unreasonably small capital to carry on its business as conducted and as
proposed to be conducted.
"Spin Off" means the spinoff of stock of the Lessee by Equifax to
shareholders of Equifax.
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"Spin Off Date" means the date on which the Spin Off is consummated.
"Subsidiary" means, with respect to any Person, any corporation or other
entity (including, without limitation, partnerships, joint ventures, and
associations) regardless of its jurisdiction of organization or formation, at
least a majority of the total combined voting power of all classes of voting
stock or other ownership interests of which shall, at the time as of which any
determination is being made, be owned by such Person, either directly or
indirectly through one or more other Subsidiaries.
"SunTrust" means SunTrust Banks, Inc., a Georgia corporation.
"SunTrust Bank" is defined in the preamble to the Master Agreement.
"Supplemental Rent" means any and all amounts, liabilities and
obligations other than Basic Rent which the Lessee assumes or agrees or is
otherwise obligated to pay under the Lease or any other Operative Document
(whether or not designated as Supplemental Rent) to the Lessor, the Agent, the
Lease Participant, any Lender or any other party, including, without limitation,
amounts under Article XVI of the Lease, and indemnities and damages for breach
of any covenants, representations, warranties or agreements, and all overdue or
late payment charges in respect of any Funded Amount.
"Tax" or "Taxes" is defined in Section 7.4 of the Master Agreement.
"Tax Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
"Tax Indemnitee" means the Lessor, the Lease Participant, the Agent, any
Lender and their respective Affiliates, successors, permitted assigns, permitted
transferees, employees, officers, directors and agents thereof, provided,
however, that in no event shall the Lessee be a Tax Indemnitee.
"Telerate" means, when used in connection with any designated page and
LIBOR, the display page so designated on the Dow Jones Telerate Service (or such
other page as may replace that page on that service for the purpose of
displaying rates comparable to LIBOR).
"Title Insurance Company" means the company that has or will issue the
title policies with respect to a Leased Property, which company shall be
reasonably acceptable to the Funding Parties.
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"Title Policy" is defined in Section 3.1 of the Master Agreement.
"Total Assets" means the total assets of the Consolidated Companies,
determined in accordance with GAAP.
"Transaction" means all the transactions and activities referred to in or
contemplated by the Operative Documents.
"UCC" means the Uniform Commercial Code of Georgia, as in effect from
time to time.
"Unfunded Benefit Liabilities" means with respect to any Plan or
Multiemployer Plan at any time, the amount of unfunded benefit liabilities of
such Plan or Multiemployer Plan at such time as determined under ERISA Section
4001(a)(18) which shall not be less than the accumulated benefit obligation, as
disclosed in accordance with FAS 87, over the fair market value of Plan or
Multiemployer Plan assets.
"Voting Stock" shall mean the securities of any class or classes of the
Lessee the holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the corporate directors of the Lessee (or
persons performing similar functions).
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Lessee.
"Yield" is defined in Section 2.3 of the Master Agreement.
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EXHIBIT 10.14
EMPLOYMENT AND COMPENSATION AGREEMENT
THIS EMPLOYMENT AND COMPENSATION AGREEMENT (as the same may be amended,
modified or supplemented from time to time, this "Agreement") is made as of
August ___, 1997 (the "Effective Date"), between ChoicePoint Inc., a Georgia
corporation (together with all successors thereto, "Employer"), and
_____________________, a resident of the State of Georgia ("Executive").
STATEMENT OF TERMS
The parties hereby agree as follows:
1. Employment Term.
(a) Employer hereby employs Executive, and Executive hereby
accepts employment by Employer, upon the terms and subject
to the conditions hereinafter set forth.
(b) The term of this Agreement shall commence as of the
Effective Date and shall continue for a period of ____
years until the close of business on
________________________ (the "Initial Term"), unless
renewed as specified herein or terminated earlier under
Section 4 or Section 7 hereof. If the Agreement has not
been terminated pursuant to Section 4, the term of this
Agreement shall be automatically extended for ______ years
until the close of business on ______ (the "Renewal Term").
After the Initial Term or any additional term, Executive
understands that unless Executive and Employer have
mutually agreed to extend the Agreement and in the event
terms triggering Section 7 have not occurred, Executive:
(i) will be deemed to be an employee at will and (ii)
hereby agrees, to the extent his employment is to continue
after the expiration of the Agreement, to enter into, prior
to the expiration of the Agreement, such reasonable
employee confidentiality, non-solicitation and assignment
agreements with respect to Executive's employment, as
ChoicePoint then customarily requires of its executives and
other similarly situation employees.
<PAGE> 2
2. Title and Duties.
(a) Executive is engaged initially with the title and duties
described on Exhibit A attached hereto. Executive shall
perform and discharge well and faithfully such duties, and
such other duties which may be assigned by Employer to
Executive from time to time in connection with the conduct
of the business of Employer; however, such latter duties
shall be generally consistent with those set out in Exhibit
A hereto.
(b) In addition to the duties specifically assigned to
Executive pursuant to Section 2(a) hereof, Executive shall:
(i) diligently follow and implement all management policies
and decisions communicated to Executive by Employer; (ii)
timely prepare and forward all reports and accountings as
may be requested by Employer of Executive; (iii) devote
substantially all of Executive's time, energy and skill
during regular business hours to the performance of the
duties of Executive's employment (reasonable vacations and
reasonable absences due to illness excepted), and
faithfully and industriously perform such duties; and (iv)
not devote any time to any interest that conflicts with the
business of Employer or any of its affiliates.
(c) Executive shall have the right to make contracts binding on
Employer or any of its affiliates, but only to the extent
consistent with the duties described on Exhibit A attached
hereto.
(d) All funds and property received by Executive on behalf of
Employer or any of its affiliates shall be received and
held by Executive in trust, and Executive shall account for
and remit all such funds to Employer.
3. Compensation and Benefits.
(a) As compensation for services hereunder, during the Initial
Term, Employer shall pay to Executive an annual base salary
of _______________________________ (the "Base Salary").
Executive's performance shall be reviewed annually and
based upon such review, his Base Salary shall be subject to
increase from time-to-time in accordance with the
recommendations of the ChoicePoint
<PAGE> 3
[Executive Committee]. The Base Salary shall be paid in
accordance with the standard payroll payment practices of
Employer in effect from time to time.
(b) The Executive shall be entitled to participate in the
annual incentive program, subject to terms of the
provisions of such program as established by Employer from
time-to-time. Such annual incentive compensation program is
set forth in Exhibit B.
(c) The Executive shall also be eligible to receive annual
grants under the ChoicePoint Inc. 1997 Omnibus Stock
Incentive Plan ("Omnibus Plan") and any successor thereto.
Such grants may include stock option grants, restricted
stock grants and deferred share grants for the number of
shares, at a price and on terms and conditions then
determined by the ChoicePoint Compensation Committee.
Initial grants of stock options are reflected on Exhibit B.
Such Omnibus Plan may also include long-term incentive
grants, such as performance shares or units or stock
appreciation rights, as approved by the ChoicePoint
Compensation Committee.
(d) The Executive shall be eligible for participation in the
ChoicePoint Inc. Deferred Compensation Plan for Management
Employees which may include one or more of the following:
(i) an amount transferred from prior non-qualified plans of
Equifax Inc., (ii) voluntary deferrals of salary or bonus,
(iii) Employer contributions otherwise limited under the
Employer's qualified retirement plans on account of limits
imposed by the Internal Revenue Code, [and (iv) a
supplemental retirement contribution, as set forth in
Exhibit B].
(e) The Executive shall be entitled to fringe benefits and
prerequisites as set forth in Exhibit B consistent with the
Employer's Executive Fringe Benefit Policy.
(f) Executive shall be eligible to participate in other
executive and employee benefit plans, and arrangements as
Employer may have or establish from time to time. The
foregoing, however, shall not be construed to require
Employer to establish any such plan, program or arrangement
or prevent the modification or termination of any such
plan, program or arrangement once established. Any tax
liability which these additional fringe benefits and
prerequisites create for the Executive will be the sole
responsibility of the Executive.
(g) Executive's annual vacation benefits shall be a minimum of
________ weeks, but such benefits may be increased if
Executive is eligible for additional benefits in
<PAGE> 4
accordance with Employer's regular vacation plan applicable
to executives and other salaried employees (including
credit for service with Equifax Inc. prior to the Effective
Date).
(h) Executive shall be entitled to be reimbursed in accordance
with the policies of Employer, as adopted and amended from
time to time, for all reasonable and necessary expenses
incurred by Executive in connection with the performance of
Executive's duties of employment hereunder; provided,
however, Executive shall, as a condition of such
reimbursement, submit verification of the nature and amount
of such expenses in accordance with the reimbursement
policies from time to time adopted by Employer.
(i) The salary and benefits set forth in this Section 3 and
Exhibit B shall be the only compensation payable to
Executive with respect to his employment hereunder (except
as provided in Sections 4(e) and 7 hereof), and Executive
shall not be entitled to receive any compensation in
addition to that set forth herein for any services provided
by Executive in any capacity to Employer or any of its
affiliates unless agreed to by Employer or such affiliate.
(j) Employer may deduct from each payment of salary and other
benefits hereunder all amounts required to be deducted and
withheld in accordance with applicable federal and state
income, FICA and other withholding requirements.
4. Termination.
(a) Termination by Employer. Employer, at its sole election,
shall have the right to terminate the Agreement and
Executive's employment hereunder at any time during or
immediately after expiration of the Initial Term or
additional Term by written notice to Executive whether such
termination is a Termination With Cause (defined below) or
a Termination Without Cause (defined below).
(b) Termination by Executive. Executive, at its sole election,
shall have the right to terminate the Agreement and
Executive's employment hereunder at any time during the
Initial Term or any Additional Term by written notice to
Employer whether such
<PAGE> 5
termination is a Good Reason Resignation (defined below) or
a Voluntary Resignation (defined below).
(c) Automatic Termination. The Agreement and Executive's
employment hereunder shall automatically terminate in the
event of death of Executive or twelve months following the
Executive's Total Disability (defined below).
(d) Termination Without Payments. If this Agreement is
terminated during the Initial Term or any additional Term
by (A) the death of the Executive, (B) Executive's Total
Disability, (C) a Voluntary Resignation or (D) a
Termination With Cause, Employer shall have, except as
specified in Section 4(d)(i) and/or (ii) below, no further
obligation to Executive or his heirs or legal
representatives with respect to this Agreement, except for
salary, benefits, and other compensation accrued up to the
date of such termination and unpaid at the date of such
termination.
(i) Death. In the event of the death of the
Executive, Employer shall pay a death benefit
to the Executive's designated beneficiary or
beneficiaries, or if there is no designated
beneficiary, to his estate consistent with
the Employer's life insurance policy and will
be in the amount specified on Exhibit B.
(ii) Total Disability. In the event of the
Executive's Total Disability, Employer shall
pay the Executive short-term disability
benefits consistent with the Employer's
disability policy equal to one hundred (100%)
percent of base salary until the earlier of
the Executive's period of Total Disability or
six (6) months. If the Executive's Total
Disability continues after the end of the
expiration of six (6) months, Employer shall
pay Executive long-term disability benefits
consistent with the Employer's disability
policy [and Exhibit B]. In the event of the
Executive's Total Disability, Employer shall
have no further obligation to Executive or
his heirs or legal representatives, with
respect to this Agreement, except for the
disability benefits described herein and the
salary, benefits and other compensation
arrangements accrued and vested under the
Employer's plans and policies but unpaid at
the date of his Total Disability.
<PAGE> 6
(e) Termination With Payments. If this Agreement is terminated
during the Initial Term or any additional Term by either
(A) a Good Reason Resignation or (B) a Termination Without
Cause, then Employer shall pay to Executive the severance
amount calculated in subsection (e)(i) below; provided,
however, that Executive shall not be entitled to receive
any such severance payments until and unless Executive
executes and delivers to Employer within thirty (30) days
after the effective date of the termination of Executive's
employment a release in form and substance reasonably
satisfactory to Employer of all liability of Employer,
except for Employer's obligations to make payments under
this subsection. Such severance amount shall unless
mutually agreed by Employer and Executive be paid by
Employer to Executive in equal bi-weekly payments.
(i) If such termination occurs within the Initial
Term or any additional Term of this
Agreement, the severance amount shall be
equal to the total amount that would have
resulted from the continuance of Executive's
[Total Cash Compensation] for the period
commencing on the date of such termination
and continuing for a period of _______ years;
provided, such severance amount may be
increased if Executive is entitled to
additional benefits under the Employer's
Severance Pay Plan.
(ii) The payments provided for in this subsection
(e) are in lieu of any severance or income
continuation or protection under any plan,
program or arrangement of Employer that may
now or hereafter exist, except under any
"employee benefit plan" (as defined in
Section 3(3) of ERISA) participated in or
maintained by Employer, the Omnibus Plan or
the ChoicePoint Inc. Deferred Compensation
Plan for Management Employees. Such payments
and other benefits provided for in this
subsection (e) shall constitute liquidated
damages, and shall be deemed to satisfy and
be in full and final settlement of all
obligations of Employer and/or its affiliates
to Executive under this Agreement.
(f) Definitions. As used in this Section, 4, the following
terms shall have the following meanings:
<PAGE> 7
(i) "Voluntary Resignation" means a termination
of this Agreement by Executive which is not a
Good Reason Resignation.
(ii) "Good Reason Resignation" means termination
of this Agreement by Executive and
employment with the Employer (except in
connection with Executive's Total Disability
or a Termination With Cause) as a result of
(A) a material diminishment in, or a
material alteration of, Executive's duties
as described in Exhibit A, (B) assignment to
Executive by Employer of duties that are
materially inconsistent with Executive's
position, duties and responsibilities as
described on Exhibit A, (C) any material
reduction in the Executive's Compensation
(including incentive pay, commissions and
grants under the Omnibus Plan) or (D) a
material failure by Employer to fulfill its
obligations under this Agreement which is
not cured within ten (10) business days
after receipt by Employer of such written
notice from Executive specifying the nature
of the material failure; provided, however,
that Employer actually receives such notice
within thirty (30) days after Executive
learns or reasonably should have learned of
the occurrence of the event constituting
grounds for Good Reason Resignation.
(iii) "Termination With Cause" means termination of
this Agreement by Employer as a result of (A)
failure of the business of Employer to
perform substantially to levels identified
and as agreed by Executive and Employer in
Employer's then current "Business Plan", (B)
conduct by Executive amounting to fraud,
dishonesty, negligence or willful misconduct
in matters affecting the fiscal affairs of
Employer, (C) material inattention to, or
breach of his duties hereunder, provided such
event has not been cured within ten (10)
business days after receipt by Executive of
written notice from Employer of its
occurrence, (D) excessive absences (other
than vacation, illness or disability) by
Executive from work, (E) Executive's failure
to comply with all federal laws, or all state
or local laws involving moral turpitude or
Executive's conviction of (or plea of guilty
or nolo contendere to) a felony,
<PAGE> 8
or (F) Executive's excessive use or abuse of
drugs, alcohol or other toxic substances.
(iv) "Termination Without Cause" means a
termination of this Agreement by Employer
which is not a termination because of the
death of Executive, a Termination With Cause,
or Executive's Total Disability.
(v) "Total Cash Compensation" means the
Executive's highest annual salary earned
during the preceding three (3) years plus his
highest incentive or commission pay earned
during the three (3) years preceding the
Executive's termination date specified in
this Agreement. Total Cash Compensation shall
be determined prior to any pre-tax deferrals
under the Employer's then existing deferral
programs including, but not limited to, the
Employer's Section 125 plan, Section 401(k)
plan and deferred compensation plan.
(vi) "Total Disability" means the inability of
Executive to perform his material and
substantial duties hereunder by reason of
mental or physical illness, injury or
disease.
5. Confidentiality; Employee Non-Solicitation.
(a) Trade Secrets and Confidential Information.
(i) All Proprietary Information (defined below),
and all materials containing them, received
or developed by Executive during the term of
his employment by Employer (in this Section
5, the term "Employer" refers collectively to
Employer and/or its affiliates) are
confidential to Employer, and will remain
Employer's property exclusively. Except as
necessary to perform Executive's duties for
Employer, Executive will hold all Proprietary
Information in strict confidence, and will
not use, reproduce, disclose or otherwise
distribute the Proprietary Information, or
any materials containing them, and will take
those actions reasonably necessary to protect
any
<PAGE> 9
Proprietary Information. Executive's
obligations regarding Trade Secrets (defined
below) will continue indefinitely, while
Executive's obligations regarding
Confidential Information (defined below) will
cease two (2) years from the date of
termination of Executive's employment with
Employer for any reason.
(ii) "Trade Secret" means information, including,
but not limited to, technical and
nontechnical data, formulas, patterns,
designs, compilations, computer programs and
software, devices, inventions, methods,
techniques, drawings, processes, financial
plans, product plans, lists of actual or
potential customers and suppliers, research,
development, existing and future products and
services, and employees of Employer which (A)
derives independent economic value, actual or
potential, from not being generally known to,
and not being easily ascertainable by proper
means by, other perons who can obtain
economic value from its disclosure or use,
and (B) is the subject of Employer's efforts
that are reasonable under the circumstances
to maintain secrecy; or as otherwise defined
by applicable state law.
(iii) "Confidential Information" means any and all
knowledge, information, data, methods or
plans (other than Trade Secrets) which are
now or at any time in the future will be
developed, used or employed by Employer which
are treated as confidential by Employer and
not generally disclosed by Employer to the
public, and which relate to the business or
financial affairs of Employer, including, but
not limited to, financial statements and
information, marketing strategies, business
development plans and product or process
enhancement plans.
(iv) "Proprietary Information" means collectively
the Confidential Information and Trade
Secrets. Proprietary Information also
includes information that has been disclosed
to Employer by a third party that Employer is
obligated to treat as confidential or secret.
(v) Notwithstanding anything to the contrary in
this subsection 5(a)(v), "Proprietary
Information" does not include any information
that (A) is already known to Executive at the
time it is disclosed to Executive by
Employer; or (B) before being divulged by
Executive (1) has become
<PAGE> 10
generally known to the public through no
wrongful act of Executive; (2) has been
rightfully received by Executive from a third
party without restriction on disclosure and
without breach of an obligation of
confidentiality running directly or
indirectly to Employer; (3) has been approved
for release to the general public by a
written authorization of Employer; (4) has
been independently developed by Executive
without use, directly or indirectly, of the
Proprietary Information received from
Employer; or (5) has been furnished to a
third party by Employer without restrictions
on the third party's right to disclose the
information.
(vi) In the event Executive is required by any
court or legislative or administrative body
(by oral questions, interrogatories, requests
for information or documents, subpoena, civil
investigation demand or similar process) to
disclose any Proprietary Information of
Employer, Executive shall provide Employer
with prompt notice of such requirement in
order to afford Employer an opportunity to
seek an appropriate protective order.
However, if Employer is unable to obtain or
does not seek such protective order and
Executive is, in the opinion of its counsel,
compelled to disclose such Proprietary
Information under pain of liability for
contempt or other censure or penalty,
disclosure of such information may be made
without liability.
(vii) Executive acknowledges that Employer is
obligation under federal and state fair
credit reporting and similar laws and
regulations to hold in confidence and not
disclose certain information regarding
individuals, firms or corporations which is
obtained or held by Employer, and that
Employer is required to adopt reasonable
procedures for protecting the
confidentiality, accuracy, relevancy and
proper utilization of consumer report
information as such term is defined in such
acts. In that regard, except as necessary to
perform Executive's duties for Employer,
Executive will hold in strict confidence, and
will not use, reproduce, disclose or
otherwise distribute any information which
Employer is required to hold confidential
under applicable federal and state laws and
regulations, including the federal Fair
<PAGE> 11
Credit Reporting Act (15 U.S.C. Section 1681
et. seq.) and analogous state fair credit
reporting statutes.
(b) Employee Non-Solicitation. During the term of Executive's
employment by Employer and for two (2) years after his
termination, Executive will not, either directly or
indirectly, on his behalf or on behalf of others, solicit
for employment or hire, or attempt to solicit for
employment or hire, any employee of Employer with whom
Executive had regular contact in the course of his
employment by Employer.
(c) Customer Non-Solicitation. During the term of Executive's
employment by Employer and for two (2) years after his
termination, Executive shall not directly or indirectly,
for himself or for any person, firm or employer, divert,
interfere with, disturb, or take away, or attempt to
divert, interfere with, disturb, or take away, the
patronage of any customers of Employer with which Executive
had actual contact during the term of Executive's
employment by Employer.
(d) Return of Property. At Employer's request or on termination
of Executive's employment with Employer for any reason,
Executive will deliver promptly to Employer all property of
Employer in his possession or control, including, without
limitation, all Proprietary Information, all materials
containing them, and all originals and copies of all
documents (whether in hard copy or stored in electronic
form) which relate to or were prepared in the course of
Executive's employment (including, but not limited to,
contracts, proposals or any information concerning the
identify of customers, services provided by Executive and
the pricing of these services).
(e) Remedies. Executive agrees that the covenants and
agreements contained in this Section 5 are of the essence
of this Agreement; that each of such covenants is
reasonable and necessary to protect and preserve the
interests and properties of Employer and the business of
Employer; that immediate and irreparable injury, loss and
damage will be suffered by Employer should Executive breach
of any such covenants and agreements; and that, in addition
to other legal or equitable remedies available to it
(including but not limited to damages, royalties and
penalties pursuant to applicable law), in recognition of
the fact that Executive has special, unique,
<PAGE> 12
unusual and extraordinary qualities that provides peculiar
value to Employer's business, Employer shall be entitled to
the remedies of injunction and/or specific performance, if
available, to prevent a breach or contemplated breach by
Executive of any of such covenants or agreements.
6. Inventions.
(a) Generally.
(i) Executive agrees that all Company Inventions
(defined below) conceived or first reduced to
practice by Executive during Executive's
employment by Employer and all copyrights and
other rights to such Company Inventions shall
become the property of Employer. Executive
hereby irrevocably assigns to Employer all of
Executive's rights to all Company Inventions.
(ii) Executive agrees that if Executive conceives
an Invention (defined below) during
Executive's employment with Employer for
which there is a reasonable basis to believe
that the conceived Invention is a Company
Invention, Executive shall promptly provide a
written description of the conceived
Invention to Employer adequate to allow
evaluation thereof for a determination as to
whether the Invention is a Company Invention.
(iii) If, upon commencement of Executive's
employment with Employer under this
Agreement, Executive has previously conceived
any Invention or acquired any ownership
interest in any Invention, which: (A) is
executive's property, or of which Executive
is a joint owner with another person or
entity; (B) is not described in any issued
patent as of the Effective Date; and (C)
would be a Company Invention if such
Invention was made while Executive is an
employee of Employer, then Executive shall,
at his election, either: (1) provide Employer
with a written description of the Invention
on Exhibit ____ attached hereto, in which
case the written description (but no rights
to the Invention) shall become the property
of Employer; or (2)
<PAGE> 13
provide Employer with a license as specified
in subsection 6(a)(iv) of this Agreement.
(iv) If Executive has previously conceived or
acquired any ownership interest in an
Invention described by the criteria set forth
in the immediately preceding subsection
6(a)(iii) and Executive elects not to
disclose such Invention to Employer as
provided therein, then Executive hereby
grants to Employer a nonexclusive, paid up,
royalty-free license to use and practice such
Invention.
(v) Executive hereby represents to Employer that
he owns no patents, individually or jointly
with others.
(vi) Notwithstanding any other provision in this
Section 6, in no event shall Executive's
assignment of any Invention to Employer apply
to an Invention that Executive develops
entirely on his own time during his
employment with Employer without using
Employer's equipment, supplies, facilities,
Proprietary Information, except for any
Inventions that either: (A) relate at the
time of conception or reduction to practice
of the Invention to the "Business" (as such
term is defined in the Stock Purchase
Agreement) of Employer, or to actual or
demonstrably anticipated research or
development of Employer; or (B) result from
any work performed by Executive for Employer.
(b) Copyrights.
(i) Executive agrees that any Works (defined
below) created by Executive in the course of
performing Executive's duties as an employee
of Employer are subject to the "Work for
Hire" provisions contained in Sections 101
and 201 of the United States Copyright Law,
Title 17 of the United States Code. All
right, title and interest to copyrights in
all Works which have been or will be prepared
by Executive within the scope of Executive's
employment with Employer will be the property
of Employer. Executive further acknowledges
and agrees that, to the extent the provisions
of Title 17 of the United States
<PAGE> 14
Code do not vest in Employer the copyrights
to any such Works, Executive shall assign and
hereby do assign to Employer all right, title
and interest to copyrights which Executive
may have in such Works.
(ii) Executive agrees to promptly disclose to
Employer all Works referred to in the
immediately preceding subsection and execute
and deliver all applications for
registration, registrations, and other
documents relating to the copy rights to such
Works and provide such additional assistance,
as Employer may deem necessary and desirable
to secure Employer's title to the copyrights
in such Works. Employer shall be responsible
for all expenses incurred in connection with
the registration of all such copyrights.
(iii) Executive hereby represents to Employer that
he claims no ownership rights in any Works,
except those described on Exhibit B attached
hereto.
(c) Section 6 Definitions. As used in this Section 6, the
following terms shall have the meanings ascribed to them
below:
(i) "Company Invention" means any Invention which
is conceived by Executive alone or in a joint
effort with others during Executive's
employment by Employer which (A) may be
reasonably expected to be used in a product
or service of Employer, or a product or
service similar to a product or service of
Employer; (B) results from work that
Executive has been assigned as part of his
duties as an employee of Employer; (C) is in
an area of technology which is the same or
substantially related to the areas of
technology with which Executive is involved
in the performance of Executive's duties as
an employee of Employer; or (D) is useful, or
which Executive reasonably expects may be
useful, in any manufacturing, product or
service design process of Employer.
(ii) "Invention" means any discovery, whether or
not patentable, including, but not limited
to, any useful idea, invention, improvement,
innovation, design, process, method, formula,
technique, machine, manufacture, composition
of
<PAGE> 15
matter, algorithm or computer program, as
well as improvements thereto, which is new or
which Executive has a reasonable basis to
believe may be new.
(iii) "Work means a copyrightable work of
authorship, including without limitation, any
technical descriptions for products,
services, user's guides, illustrations,
advertising materials, computer programs
(including the contents of read only
memories) and any contribution to such
materials.
(d) Statutory Notice. In accordance with Section 2872 of the
California Labor Code, Executive is hereby notified that
the provisions of this Section 6 requiring assignment of
certain Inventions to Employer do not, in any event, apply
to any invention which qualifies under the provisions of
Section 2870 of such Code. Section 2870(a) of the
California Labor Code provides as follows:
Section 2870. Inventions on Own Time - Exemption from Agreement
(a) Any provision in an employment agreement which provides
that an employee shall assign, or offer to assign, any of
his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed
entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret
information except for those inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's
business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for
the employer.
7. Change in Control.
(a) General.
(i) In the event of a Change in Control (as
defined below), the Employer will require any
successor of the Employer, by agreement in
form and substance, expressly to assume and
agree to perform this Agreement.
<PAGE> 16
Failure of the Employer to obtain such
agreement prior to the effective date of the
Change in Control shall be a breach of this
Agreement and shall entitle the Executive to
benefits and compensation from the Employer
in the same amount and under the same terms
as the Executive would be entitled hereunder
had his employment terminated on account of a
Constructive Termination. As used in this
Section 7, "Employer" shall mean the Employer
as herein before named and any successor
which executes the Agreement or otherwise
becomes bound by all the terms and provisions
of this Agreement by operation of law.
(ii) This Change in Control Provision shall become
effective on the Effective Date and shall
continue for a period of five (5) years
thereafter (the "Change in Control Term");
provided, however, that commencing on the
first anniversary of the Effective Date and
each anniversary thereafter, the Change in
Control Term shall automatically be extended
for one (1) additional year, unless at least
sixty (60) days prior to any such anniversary
date, the Employer shall have given the
Executive written notice of the intention not
to extend the Change in Control Provision.
(b) Supplemental Benefit.
(i) In the event that the Executive is employed
by Employer at the time of a Change in
Control and the Executive's employment with
the Employer terminates during the Change in
Control Term on account of Constructive
Termination, the Executive shall be entitled
to the supplemental benefits specified in
Subsections (c), (d), (e), and (f) as
applicable.
(ii) In the event the Executive takes the position
that a Constructive Termination has occurred,
the Executive shall so notify Employer of
such position in writing within sixty (60)
days of the occurrence of the event the
Executive relies on for such Constructive
Termination determination. The Executive
shall specify the event upon which the
Executive relies and specify in reasonable
detail the facts and circumstances claimed to
provide the basis for the Constructive
Termination. For purposes of determining the
supplemental benefits under Subsections (c),
(d), (e), and (f), the Executive's Date of
Termination shall be the date on which the
written notice under this
<PAGE> 17
subparagraph is given, or in the case of the
failure of the Employer's successor to assume
this Agreement, the Date of Termination shall
be the effective date of the Change in
Control; provided, if within thirty (30) days
after receiving the Executive's notice, the
Employer notifies the Executive that a
dispute exists concerning the termination,
the Date of Termination shall be the date on
which the dispute is finally resolved, either
by mutual written agreement of the parties,
by a binding and final arbitration award if
agreed upon by the Executive and the Employer
or by a final judgment, order or decree of a
court of competent jurisdiction, the time for
appeal therefrom having expired and no appeal
having been perfected.
(iii) In the event the Executive voluntarily
terminates employment with Employer on
account of retirement or other
employee-initiated separation that does not
constitute a Constructive Termination,
Employer shall not be required to make any
payment referred to in this Section 7 to
which the Executive would otherwise be
entitled in the event of a Change in
Control, except for salary, benefits and any
other compensation arrangements which the
Executive has accrued and in which he is
vested under the Employer's plans and
policies through the date of such voluntary
termination but which remains unpaid. These
earned but unpaid amounts shall be paid to
the Executive as soon as practicable
following the Executive's voluntary
termination of employment.
(c) Compensation Continuation.
(i) The Employer shall pay the Executive all
salary, incentive, vacation pay, and other
benefits which the Executive has earned and
is entitled to as of the Date of Termination
but which remain unpaid as of the Date of
Termination.
(ii) The Employer shall pay the Executive within
thirty (30) days following this Date of
Termination a lump sum amount equal to the
Executive's Total Cash Compensation
multiplied by __________.
(d) Health-Related Benefits.
For a period of ______ years, Employer shall
maintain in full force and effect, all
health-related benefit programs (including, but not
limited to, life, health, and long-term disability
insurance and other welfare benefits) in which the
Executive was entitled to participate immediately
prior to his Date of Termination, provided that the
Executive's continued participation is possible
under the general terms
<PAGE> 18
and provisions of the benefit programs. In the event
that the Executive's continued participation in any
benefit program is restricted, the Employer shall
provide the Executive with benefits substantially
similar to those in which the Executive was entitled
to receive under such program immediately prior to
said Constructive Termination. The foregoing
benefits are not intended to be a substitute for any
available benefits under COBRA.
(e) Retirement Benefits.
(i) In the event the Executive is actively
participating in the ChoicePoint Inc. 40l(k)
Profit Sharing Plan (the "Plan") on the date
a Change in Control occurs, the Executive
shall be entitled to payment for all vested
benefits under the Plan according to the
terms of the Plan.
(ii) In the event that the vested portion of the
benefits described in Subsection (i) is not
one hundred (100%) percent, then the Employer
shall make a payment to the Executive equal
to the remaining vested benefits that the
Executive would have been entitled to had he
been one hundred (100%) percent vested in
such benefits as of the date of the Change in
Control, but which he was not vested in under
the terms of the Plan as a consequence of the
Change in Control.
(iii) The Employer shall pay the Executive a lump
sum amount representing the qualified and
non-qualified retirement benefits that would
have been paid to the Executive had his
employment continued for a period of _____
years following the Change in Control. Such
lump sum shall be calculated as the larger of
(A) or (B) as follows: (A) the sum of the
highest benefits accrued or contributions
paid during the last three (3) years
determined separately under each of the plans
described on Exhibit B, multiplied by ____,
or (B) in the event the plan specifies a
contribution amount or percentage, the
benefit calculated under such plan's terms
using Total Cash Compensation as defined
herein.
(iv) The amounts determined under Subsection (ii)
and (iii) hereof shall be paid from the
general assets of the Employer; provided,
however, the Employer reserves the right to
set aside assets to secure the payment of
benefits hereunder by establishing a
non-qualified grantor trust upon such terms
and conditions as it deems appropriate.
<PAGE> 19
(f) Tax Payments. In the event that any payments made to the
Executive under this Section 7 or any other payments made
to the Executive by the Employer are deemed to be
"parachute payments" under Section 280G of the Internal
Revenue Code of 1986 (the "Code"), the Employer agrees to
provide a gross up payment to the Executive in order to
place him in the same after-tax position he would have been
in had no excise tax become due and payable under Code
Section 4999 in the event such payments are deemed to be
"excess parachute payments" under Code Section 280G.
(g) Other Employee Benefits. The benefits under this Agreement
shall not be affected by or reduced because of any other
benefits to which the Employee may be entitled by reason of
his continuing employment with the Employer or the
termination of his employment with the Employer, and no
other such benefit by reason of such employment shall be so
affected or reduced because of the benefits bestowed by
this Agreement; provided, however, that the foregoing will
not be interpreted to require duplicative severance,
medical or other insurance benefits.
(h) Definitions. For the purposes of this Section, the
following terms shall have the meanings set forth as
follows:
(i) "Change in Control" means if, at any time,
any of the following events shall have
occurred:
a. The Employer is merged or
consolidated or reorganized into or
with another corporation or other
legal person, and as a result of
such merger, consolidation or
reorganization, less than a majority
of the combined voting power of the
then-outstanding securities of such
corporation or person immediately
after such transaction is held in
the aggregate by the holders of
Voting Shares immediately prior to
such transaction;
b. The Employer sells or otherwise
transfers all or substantially all
of its assets to any other
corporation or other legal person,
and as a result of such sale or
transfer less than a majority of the
combined voting power of the
then-outstanding securities of such
corporation or person immediately
after such sale or transfer is held
in the aggregate
<PAGE> 20
by the holders of Voting Shares
immediately prior to such sale or
transfer;
c. There is a report filed on Schedule
13D or Schedule 14D-1 (or any
successor schedule, form, or
report), each as promulgated
pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act"),
disclosing that any person (as the
term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the
beneficial owner (as the term
"beneficial owner" is defined under
Rule 13d-3 or any successor rule or
regulation promulgated under the
Exchange Act) of securities
representing twenty (20%) percent or
more of the Voting Shares;
d. Employer files a report or proxy
statement with the Securities and
Exchange Commission pursuant to the
Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any
successor schedule, form or report
or item therein) that a change in
control of the Employer has or may
have occurred or will or may occur
in the future pursuant to any
then-existing contract or
transaction; or
e. If during any period of two (2)
consecutive years, individuals who
at the beginning of any such period
constitute the Directors of the
Employer cease for any reason to
constitute at least a majority
thereof, unless the election, or the
nomination for election by the
Employer's shareholders, of each
Director of the Employer first
elected during such period was
approved by a vote of at least
two-thirds of the Directors of the
Employer then still in office who
were Directors of the Employer at
the beginning of any such period.
f. Notwithstanding the foregoing
provisions of Subparagraphs c and d
above, a "Change in Control" shall
not be deemed to have occurred for
purposes of this Agreement (i)
solely because (A) the Employer, (B)
a subsidiary of the Employer, or (C)
any Employer-sponsored employee
stock ownership plan or other
employee benefit plan of the
Employer, either files or becomes
obligated to file a report or proxy
statement under or in response to
Schedule 13D, Schedule 14D-1, Form
8-K or Schedule 14A (or any
successor schedule, form, or
<PAGE> 21
report or item therein) under the
Exchange Act, disclosing beneficial
ownership by it of shares of Voting
Shares, whether in excess of twenty
(20%) percent or otherwise, or
because the Employer reports that a
change of control of the Employer
has or may have occurred or will or
may occur in the future by reason of
such beneficial ownership or (ii)
solely because of a change in
control of any Subsidiary.
g. Notwithstanding the foregoing
provisions of this Subsection (i),
if prior to any event described in
Subparagraphs a, b, c, or d
instituted by any person who is not
an officer or director of the
Employer, or prior to any disclosed
proposal instituted by any person
who is not an officer or director of
the Employer which could lead to any
such event, management proposes any
restructuring of the Employer which
ultimately leads to an event
described in Subparagraphs a, b, c,
or d of this Subsection (i) pursuant
to such management proposal, then a
"Change in Control" shall not be
deemed to have occurred for purposes
of this Agreement.
(ii) "Constructive Termination" means termination
of this Agreement by Executive as a result of
(A) any diminishment in, or an alteration of,
Executive's duties as in effect immediately
prior to the Change in Control, (B)
assignment to Executive by Employer of duties
that are inconsistent with Executive's
position, duties and responsibilities in
effect immediately prior to the Change in
Control, (C) any removal of Executive from or
failure to re-elect him to any of such
positions, except in the case of a
termination of employment on account of the
willful and continued failure by the
Executive to substantially perform his duties
as described in Exhibit A for the Employer,
or on account of Total Disability, (D) any
reduction in the Executive's compensation
(including incentive pay, commissions, and
grants under the Omnibus Plan) in effect
immediately prior to the Change in Control,
[(E) a change in Executive's location of
employment outside of the standard
statistical metropolitan area of Atlanta,
Georgia], [(F) a failure to renew this
Agreement pursuant to Section 1], or (G)
failure by the Employer to obtain the
assumption of
<PAGE> 22
agreement to perform this Agreement by any
successor to the Employer.
(iii) "Total Cash Compensation" has the meaning
given in Section 4.
(iv) "Voting Shares" means at any time the
then-outstanding securities entitled to vote
generally in the election of directors of the
Employer.
8. Notice. All notices, requests, demands and other communications
required hereunder shall be in writing and shall be deemed to have
been duly given if delivered or if mailed, by United States
certified or registered mail, prepaid to the party to which the
same is directed at the following addresses (or at such addresses
as shall be given in writing by the parties to one another):
If to Employer, to:
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, Georgia 30005
Attention: General Counsel
If to Executive, to:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Notices delivered in person shall be effective on the date of
delivery. Notices delivered by mail as aforesaid shall be effective upon the
third calendar day subsequent to the postmark date thereof.
<PAGE> 23
9. Miscellaneous.
(a) Assignment. This Agreement may not be assigned by either
Employer or Executive without the prior written consent of
the other party.
(b) Waiver. The waiver by one party of any breach of this
Agreement by the other party shall not be effective unless
in writing, and no such waiver shall constitute the waiver
of the same or another breach on a subsequent occasion.
(c) Amendment. This Agreement may not be modified, amended,
supplemented, or terminated except by a written instrument
executed by the parties hereto.
(d) Severability. Each of the covenants and agreements
hereinabove contained shall be deemed separate, severable
and independent covenants, and in the event that any
covenant shall be declared invalid by any court of
competent jurisdiction, such invalidity shall not in any
manner affect or impair the validity or enforceability of
any other part or provision of such covenant or of any
other covenant contained herein. If a court of competent
jurisdiction shall determine that any provision contained
in this Agreement, or any part thereof, is unenforceable
for any reason, the parties hereto authorize such court to
reduce the duration or scope of such provision, or
otherwise modify such provision, so that such provision in
its reduced or modified form will be enforceable.
(e) Legal Fees. In the event (i) the Employer breaches this
Agreement, (ii) the Executive is terminated by the Employer
other than for Cause, or (iii) the Executive terminates his
employment for Good Reason or on account of a Constructive
Termination, the Employer shall reimburse the Executive for
all legal fees and expenses reasonably incurred by the
Executive as a result of such termination, including all
fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement.
<PAGE> 24
(f) Captions and Section Headings. Captions and section
headings used herein are for convenience only and are not a
part of this Agreement and shall not be used in construing
it.
(g) Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties with respect to
its subject matter and any and all prior agreements,
understandings or representations with respect to the
subject matter hereof are terminated and canceled in their
entirety and are of no further force or effect.
(h) Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance
with the laws of the State of Georgia, without regard to
the conflicts of laws provisions thereof.
(i) Exhibits. All exhibits to this Agreement are incorporated
herein by reference thereto.
(j) Survival. The covenants of Executive in Sections 5 and 6,
and the obligations of Employer in Section 4 and 7, shall
survive the termination of this Agreement and Executive's
employment hereunder and shall not be extinguished thereby.
(k) Counterparts. This Agreement may be executed in two or more
counterparts, each of which will take effect as an original
and all of which shall evidence one and the same agreement.
IN WITNESS WHEREOF, Employer and Executive have each executed and
delivered this Agreement, as of the date first shown above.
EMPLOYER:
CHOICEPOINT INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
EXECUTIVE:
-----------------------------------
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in this
registration statement on Form S-1 of our report on the financial statements of
ChoicePoint Inc. dated April 15, 1997 and our report on the financial
statements of CDB Infotek dated April 24, 1996 and to all references to our
firm included in this registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
July 17, 1997
