FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ended _________________________
Commission File Number 1-6605
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EQUIFAX INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-0401110
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(State or other jurisdiction of I.R.S.Employer
incorporation or organization) Identification No.)
1550 Peachtree Street, N.W. Atlanta, Georgia
P.O. Box 4081, Atlanta, Georgia 30302
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(Address of principal executive offices) (Zip Code)
404-885-8000
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(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 2000
- ----------------------------- -----------------------------
Common Stock, $1.25 Par Value 141,154,302
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INDEX
<TABLE>
<CAPTION>
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets --
March 31, 2000 and December 31, 1999 2 - 3
Consolidated Statements of Income --
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statement of Shareholders'
Equity -- Three Months Ended March 31, 2000 5
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 - 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
(In thousands) 2000 1999
- -------------------------------------------------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 108,542 $ 136,596
Trade accounts receivable, net 299,605 302,809
Other receivables 90,505 87,873
Deferred income tax assets 27,237 28,015
Other current assets 55,980 54,140
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Total current assets 581,869 609,433
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PROPERTY AND EQUIPMENT:
Land, buildings and improvements 34,385 39,140
Data processing equipment and furniture 260,985 258,314
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295,370 297,454
Less accumulated depreciation 189,311 181,964
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106,059 115,490
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GOODWILL 625,245 612,551
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PURCHASED DATA FILES 165,554 157,701
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OTHER ASSETS 357,964 344,606
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$1,836,691 $1,839,781
========== ==========
The notes on pages 7 through 9 are an integral part of these consolidated
balance sheets.
2
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
(In thousands, except par value) 2000 1999
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(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current maturities of long-term debt $ 78,198 $ 79,866
Accounts payable 177,302 177,427
Accrued salaries and bonuses 23,053 38,203
Income taxes payable 20,603 12,005
Other current liabilities 190,851 197,294
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Total current liabilities 490,007 504,795
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LONG-TERM DEBT, LESS CURRENT MATURITIES 913,342 933,708
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LONG-TERM DEFERRED REVENUE 19,948 22,547
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DEFERRED INCOME TAX LIABILITIES 76,071 73,132
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OTHER LONG-TERM LIABILITIES 86,617 89,974
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COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par value; shares authorized -
300,000; issued - 174,586 in 2000 and 174,259 in 1999;
outstanding - 134,040 in 2000 and 134,001 in 1999 218,233 217,824
Preferred stock, $0.01 par value; shares authorized -
10,000; issued and outstanding - none in 2000 or 1999 -- --
Paid-in capital 308,572 304,532
Retained earnings 756,011 726,827
Accumulated other comprehensive loss (Note 4) (154,164) (161,982)
Treasury stock, at cost, 33,432 shares in 2000
and 34,640 shares in 1999 (787,298) (816,213)
Stock held by employee benefits trusts, at cost,
7,115 shares in 2000 and 5,619 shares in 1999 (90,648) (55,363)
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Total shareholders' equity 250,706 215,625
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$ 1,836,691 $ 1,839,781
=========== ===========
</TABLE>
The notes on pages 7 through 9 are an integral part of these consolidated
balance sheets.
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
(In thousands, except per share amounts) 2000 1999
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<S> <C> <C>
Operating revenue $ 451,081 $ 421,504
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Costs of services 270,087 248,758
Selling, general and administrative expenses 93,390 83,936
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Total operating expenses 363,477 332,694
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Operating income 87,604 88,810
Other income, net 953 482
Interest expense (16,374) (15,135)
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Income before income taxes 72,183 74,157
Provision for income taxes 29,956 30,256
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Net income $ 42,227 $ 43,901
========= =========
Per common share (basic):
Net income $ 0.32 $ 0.32
========= =========
Shares used in computing basic earnings per share 133,917 139,127
========= =========
Per common share (diluted):
Net income $ 0.31 $ 0.31
========= =========
Shares used in computing diluted earnings per share 135,150 141,656
========= =========
Dividends per common share $ 0.0925 $ 0.0900
========= =========
</TABLE>
The notes on pages 7 through 9 are an integral part of these consolidated
statements.
4
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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
THREE MONTHS ENDED
(In thousands) MARCH 31, 2000
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COMMON STOCK:
Balance at beginning of period $ 217,824
Shares issued under stock plans 409
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Balance at end of period $ 218,233
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PAID-IN CAPITAL:
Balance at beginning of period $ 304,532
Shares issued under stock plans 3,525
Dividends from employee benefits trusts 515
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Balance at end of period $ 308,572
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RETAINED EARNINGS:
Balance at beginning of period $ 726,827
Net income 42,227
Cash dividends (13,043)
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Balance at end of period $ 756,011
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ACCUMULATED OTHER COMPREHENSIVE LOSS (Note 4):
Balance at beginning of period $(161,982)
Adjustment during period 7,818
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Balance at end of period $(154,164)
=========
TREASURY STOCK:
Balance at beginning of period $(816,213)
Cost of shares repurchased (6,517)
Shares issued under stock plans 108
Cost of shares transferred to employee benefits trusts 35,324
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Balance at end of period $(787,298)
=========
STOCK HELD BY EMPLOYEE BENEFITS TRUSTS:
Balance at beginning of period $ (55,363)
Cost of shares transferred from treasury stock (35,324)
Cost of shares reissued under stock plans 39
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Balance at end of period $ (90,648)
=========
The notes on pages 7 through 9 are an integral part of this consolidated
statement.
5
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED
MARCH 31,
(In thousands) 2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,227 $ 43,901
Adjustments to reconcile net income to net cash
cash provided by operating activities:
Depreciation and amortization 35,230 29,675
Changes in assets and liabilities:
Accounts receivable, net 608 (5,091)
Current liabilities, excluding debt (9,661) (704)
Other current assets (5,401) 1,489
Deferred income taxes 2,406 2,163
Other long-term liabilities, excluding debt (5,229) (5,226)
Other assets (689) 3,282
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Net cash provided by operating activities 59,491 69,489
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (5,558) (8,845)
Additions to other assets, net (15,787) (20,041)
Acquisitions, net of cash acquired (35,951) (5,253)
Investments in unconsolidated affiliates (4,000) --
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Net cash used in investing activities (61,296) (34,139)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on short-term debt (58) (22)
Net (payments) borrowings on long-term debt (11,424) 68,032
Dividends paid (13,043) (13,039)
Treasury stock purchases (6,517) (60,834)
Proceeds from exercise of stock options 3,586 1,858
Other 718 694
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Net cash used in financing activities (26,738) (3,311)
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Effect of foreign currency exchange rates on cash 489 (5,178)
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Net cash (used) provided (28,054) 26,861
Cash and cash equivalents, beginning of period 136,596 90,617
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Cash and cash equivalents, end of period $ 108,542 $ 117,478
========= =========
</TABLE>
The notes on pages 7 through 9 are an integral part of these consolidated
statements.
6
<PAGE>
EQUIFAX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
1. BASIS OF PRESENTATION:
The financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
This information reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of the statement of financial
position of the Company as of March 31, 2000, and the results of operations and
cash flows for the three month periods ending March 31, 2000 and 1999. All
adjustments made have been of a normal recurring nature. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. The Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1999.
2. NATURE OF OPERATIONS:
The Company principally provides information services to businesses to help them
grant credit and authorize and process credit card and check transactions. The
principal lines of business are information services and payment services (see
Note 7 for segment information). The principal markets for both information and
payment services are retailers, banks, and other financial institutions, with
information services also serving the telecommunications and utility industries.
The Company's operations are predominately located within the United States,
with foreign operations principally located within Canada, the United Kingdom
and Brazil.
3. 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.
4. SHAREHOLDERS' EQUITY:
Treasury Stock. During the first three months of 2000, the Company repurchased
- --------------
296,000 of its common shares through open market transactions at an aggregate
cost of $6,517,000. As of March 31, 2000, approximately $94 million remained
authorized for future share repurchases.
Stock Held by Employee Benefits Trusts. During the first quarter of 2000, the
- ----------------------------------------
Company established its third employee benefits trust and transferred 1.5
million treasury shares into that trust. The shares were transferred at the
average cost of shares in treasury, and totaled $35,324,000.
Comprehensive Income. For the three-month periods ending March 31, 2000 and
- --------------------
1999, comprehensive income (loss) is as follows:
Three Months Ended
March 31
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(in thousands) 2000 1999
- -------------- ---- ----
Net income $ 42,227 $ 43,901
Change in cumulative foreign
currency translation adjustment 7,818 (118,576)
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Comprehensive income (loss) $ 50,045 $ (74,675)
========= =========
7
<PAGE>
Accumulated other comprehensive loss at March 31, 2000 and December 31, 1999
consists of the following components:
<TABLE>
<CAPTION>
(in thousands) March 31, 2000 December 31, 1999
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<S> <C> <C>
Cumulative foreign currency
translation adjustment $(149,462) $(157,280)
Adjustment for minimum liability
under supplemental retirement plan (4,702) (4,702)
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Accumulated other comprehensive loss $(154,164) $(161,982)
========= =========
</TABLE>
5. AGREEMENT WITH COMPUTER SCIENCES CORPORATION:
The Company has an agreement with Computer Sciences Corporation (CSC) under
which CSC-owned credit bureaus and certain CSC affiliate bureaus utilize the
Company's credit database service. CSC and these affiliates retain ownership of
their respective credit files and the revenues generated by their credit
reporting activity. The Company receives a processing fee for maintaining the
database and for each report supplied. The initial term of the agreement expired
in July 1998, and was renewable at the option of CSC for successive ten-year
periods. CSC has renewed the agreement for the ten-year period beginning August
1, 1998. The agreement provides CSC with an option to sell its credit reporting
businesses to the Company, and provides the Company with an option to purchase
CSC's credit reporting businesses if CSC does not elect to renew the agreement
or if there is a change in control of CSC while the agreement is in effect. Both
options expire in 2013. As of August 1, 1998, the option price is determined by
appraisal.
6. ACQUISITIONS:
During the first three months of 2000, the Company acquired the credit files of
three affiliates located in the United States and seven affiliates in Canada, as
well as a card processing business in Chile. These acquisitions were accounted
for as purchases, had a total purchase price of $35.9 million, and were acquired
for cash. They resulted in $22.1 million of goodwill and $11.6 million of
purchased data files. Their results of operations have been included in the
consolidated statements of income from the dates of acquisition and were not
material.
On May 1, 2000, the Company acquired the Consumer Information Services group
from R.L. Polk & Co. for approximately $260 million in cash. This acquisition
will be accounted for as a purchase and is not expected to be material to the
Company's results of operations.
7. SEGMENT INFORMATION:
Operating revenue and operating income by segment for the first quarter of 2000
and 1999 are as follows (in thousands):
First Quarter
Operating Revenue: 2000 1999
- ------------------ ---- ----
North American Information Services $ 196,917 $ 191,992
Payment Services 177,384 151,129
Equifax Europe 45,428 46,053
Equifax Latin America 28,943 29,921
Other 2,409 2,409
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$ 451,081 $ 421,504
========= =========
Operating Income (Loss):
- ------------------------
North American Information Services $ 65,103 $ 65,679
Payment Services 26,485 28,637
Equifax Europe 587 (1,688)
Equifax Latin America 4,703 4,187
Other 2,217 2,217
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Operating Contribution 99,095 99,032
General Corporate Expense (11,491) (10,222)
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$ 87,604 $ 88,810
========= =========
8
<PAGE>
Total assets by segment at March 31, 2000 and December 31, 1999 are as follows:
March 31, December 31,
(in thousands) 2000 1999
- -------------- ---- ----
North American Information Services $ 637,159 $ 612,002
Payment Services 508,883 499,646
Equifax Europe 277,066 297,048
Equifax Latin America 269,997 277,015
Other 3,736 3,951
Corporate 139,850 150,119
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$1,836,691 $1,839,781
========== ==========
The decline in total assets within the Equifax Europe segment was due primarily
to declines in the U.K. and Spain currency exchange rates between periods. The
decline in General Corporate assets related primarily to a decrease in cash and
cash equivalents.
8. EARNINGS PER SHARE (EPS):
The income amount used in the numerator of the Company's EPS calculations is the
same for both basic and diluted EPS. A reconciliation of the average outstanding
shares used in the denominator of the calculations is as follows:
First Quarter
(in thousands) 2000 1999
- -------------- ---- ----
Weighted average shares
outstanding (basic) 133,917 139,127
Effect of dilutive securities:
Stock options 1,043 2,232
Performance share plan 190 297
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Weighted average shares
outstanding (diluted) 135,150 141,656
======= =======
9. RECENT ACCOUNTING PRONOUNCEMENT:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities, and is
effective (as amended by SFAS No. 137) on January 1, 2001 for the Company. Based
on its current level of derivative instruments and hedging activities, the
Company does not believe the adoption of SFAS 133 will have a significant impact
on its financial statements or reported earnings.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations - (first quarter of 2000 compared to the first quarter of
1999)
Revenue for the first quarter of 2000 increased 7.0% over the prior year.
Acquisitions, net of divestitures, contributed approximately 0.4 percentage
points of the increase, while changes in foreign currency exchange rates
negatively impacted revenue growth by about 0.5 percentage points. Operating
income of $87.6 million declined $1.2 million, or 1.4% from the prior year. The
first quarter of 2000 includes $11.0 million of losses related to investments in
emerging businesses within the North American Information Services and Payment
Services segments, compared with $4.0 million of losses in the first quarter of
1999. The 1999 quarter also includes non-recurring "year 2000" expenses of
approximately $3.5 million, and $7.0 million of pretax profit from software
license sales in the Payment Services segment.
Net income declined 3.8% to $42.2 million in the first quarter due primarily to
lower operating income and $1.2 million of higher interest expense. Diluted
earnings per share were $0.31 in both periods. Average outstanding diluted
shares declined 4.6% between quarters, primarily the result of 1999 share
repurchases.
The following discussion analyzes operating results for the Company's reportable
segments, general corporate expense, and consolidated other income and interest
expense.
North American Information Services
- -----------------------------------
Revenue in North American Information Services, which includes U.S. Credit
Information and Marketing Services, U.S. Risk Management Services, Mortgage
Information Services, Canadian Operations, and three emerging businesses
(Knowledge Engineering, Consumer Direct, and Equifax Secure) increased 2.6% with
growth tempered by lower revenue within U.S. Risk Management Services and
Mortgage Services. Acquisitions and divestitures had only a minimal impact on
this segment's revenue growth in the quarter.
U.S. Credit Information and Marketing Services revenue was up 6.1% in the
quarter driven by growth in both marketing services and credit information
services. The growth in marketing services revenue was due to higher volume from
financial services and telecommunication industry customers, while the growth in
credit information services revenue was driven by increased volume from
telecommunications and automotive industry customers. Within credit information
services, unit volumes increased 11% compared with the first quarter of 1999,
while average prices declined 7.5%. The decline in average prices resulted from
a change in the mix of customer business, as the majority of unit growth was
generated by large volume customers at lower than average unit prices.
Revenue in U.S. Risk Management Services was down 13.0% in the quarter due to
the June 1999 sale of three non-strategic offices as well as lower revenue from
the receivables outsourcing business resulting from reduced volumes and the
attrition of a customer that took its business in house in 1999. Mortgage
Information Services revenue declined 24.5% in the quarter due to higher
interest rates, which adversely impacted refinancing activity. Canadian revenues
were up 5.7% (1.6% in local currency).
Emerging business revenue increased $2.1 million in the quarter, with 74% of
this growth coming from the Internet related activities of Consumer Direct and
Equifax Secure.
Operating income for North American Information Services was down .9% in the
quarter due to $5.2 million of increased losses in emerging businesses. These
losses included developmental expenses within Equifax Secure related to remote
authentication and digital certificate services, as well as increased
investments in Knowledge Engineering and Consumer Direct. Absent these three
emerging businesses, this segment's operating income increased 6.7%, driven by a
10.2% increase in profit from U.S. Credit Information and Marketing Services and
a 15.8% increase in Canadian profits. These increases were partially offset by
lower operating income within U.S. Risk Management and Mortgage Services due to
their revenue declines.
10
<PAGE>
Payment Services
- ----------------
Revenue in Payment Services, which consists of Card Solutions, Check Solutions
and Card Software, increased 17.4% in the first quarter. In January 2000,
Payment Services expanded its operations in Latin America by acquiring a card
processing business in Chile. Exclusive of this acquisition, this segment's
revenue was up 16.5% in the first quarter, with the June 1999 start-up of a card
processing operation in the U.K contributing 4.0 percentage points of the
increase. First quarter revenue growth, however, was tempered by a $7.0 million
reduction in license sales within Card Software.
Excluding the effects of the acquisition in Chile, revenue within Card Solutions
increased 28.1%, with 6.8 percentage points of the increase attributable to the
card processing operation in the U.K. The remaining growth was driven by higher
revenue within the U.S. card business, which increased 21.5% in the quarter due
to growth in processing of both merchant and cardholder transactions. Revenue
from the Brazilian card processing operation was up 20.5% (23.9% in local
currency) due to growth in the cardholder account base.
Revenue in Check Solutions was up 15.3% in the quarter, driven by an 18.1%
increase in revenue from the U.S. check business. The increase in U.S. check
revenue was due to volume growth, with approximately one half of the increase
due to new business from Sears, Roebuck and Co. resulting from a 1999 agreement
to provide check authorization services at the retailer's U.S. locations. This
contract will become comparable on a year-to-year basis in the last half of
2000. Revenue from the U.K. check business was up 5.0% (6.7% in local currency),
while revenue from Canadian operations increased 17.7% (13.1% in local
currency).
Revenue in Card Software was down in the quarter due to a $7.0 million reduction
in license sales between quarters. Going forward, the Company is de-emphasizing
card software sales as it grows its global card processing operations which will
utilize this proprietary software to generate a recurring revenue stream.
However, future software sales are likely to occur from time to time, as
circumstances arise.
Payment Services operating income declined 7.5% in the first quarter. Operating
income benefited from a 13.9% increase in profit from the U.S. card operations
and a 45.8% profit improvement from Check Solutions. These increases resulted
from the revenue improvements as well as continued cost management. However,
this segment's operating income was adversely affected by the $7.0 million
reduction in software license sales between periods and $1.8 million increased
operating loss attributable to emerging international card operations,
substantially related to start-up costs associated with the U.K. card operation.
Equifax Europe
- --------------
Equifax Europe consists of operations primarily in the United Kingdom and Spain.
First quarter revenue declined 1.4% from the prior year. Excluding the impact of
exchange rate declines in the U.K. and Spain, revenue increased 2.4%, with
improvements in U.K. consumer and commercial information services and Spain
partially offset by lower U.K. auto lien and risk management revenue. The
decline in auto lien information services resulted from increased competition
within that market.
This segment reported operating income of $.6 million in the first quarter, a
$2.3 million improvement from 1999's $1.7 million operating loss as a result of
continued cost management. The first quarter operating income marks the third
consecutive quarter of profitable results in this segment, and profits are
expected to continue to improve.
Equifax Latin America
- ---------------------
Equifax Latin America consists of a commercial information company in Brazil as
well as credit information companies in Chile and Argentina and majority
interests in credit information companies in Peru and El Salvador. This
segment's first quarter revenue declined $1.0 million or 3.3% from the prior
year due primarily to moderate exchange rate declines in Brazil and Chile. In
local currency, Brazil revenue increased 7.7%, while revenue in Chile and
Argentina continued to be negatively impacted by their economies. Operations in
Mexico were shut down during the quarter due to its poor outlook for future
returns. The shut down had only a minimal financial impact in the quarter.
This segment's operating income increased 12.3% in the first quarter, as higher
income from Brazil and lower losses from Mexico resulting from its shutdown were
partially offset by lower income from Argentina and Chile due to from their
declines in revenue.
11
<PAGE>
Other
- -----
This segment's revenue and operating income remained comparable between periods.
Its operations consist solely of a subcontract expiring in 2002 related to HISI,
the Company's lottery subsidiary.
General Corporate Expense
General corporate expense increased $1.3 million in the first quarter versus the
prior year. This increase resulted primarily from higher administrative,
marketing, and technology expenses.
Other Income and Interest Expense
- ---------------------------------
The increase in other income between years resulted primarily from increased
interest income from invested funds in Latin America. Interest expense increased
$1.2 million in the quarter due to the higher level of borrowing associated with
1999 share repurchases.
FINANCIAL CONDITION
Net cash provided by operations for the first three months of 2000 totaled $59.5
million. Dividend payments and capital expenditures, exclusive of acquisitions,
were met with these internally generated funds.
Other significant outlays in the first three months of 2000 included $6.5
million of treasury stock purchases (Note 4) and $40.0 million for acquisitions
(Note 6) and equity investments, as well as $11.5 million in debt repayments.
These items were principally financed by excess cash from operations and the use
of existing cash reserves.
Capital expenditures for 2000 are currently estimated to be approximately $120
million, with $21.3 million spent in the first three months. Additional
expenditures may occur as opportunities arise. In February 2000, the Company
signed an agreement to purchase the Consumer Information Solutions (CIS) Group
from R.L. Polk & Co. for approximately $260 million in cash. The CIS Group
provides consumer marketing information services to a wide range of industries.
The transaction was completed on May 1, 2000, and the CIS Group operations are
expected to be slightly dilutive to the Company's earnings in the year 2000 and
accretive to earnings thereafter.
At March 31, 2000, approximately $94 million remained authorized under the
Company's share repurchase program. However, the Company does not expect to
repurchase additional shares during 2000. The remaining 2000 capital
expenditures, exclusive of acquisitions, are expected to be met with internally
generated funds. At March 31, 2000, $440 million remained available under the
Company's $750 million revolving credit facility to fund future capital
requirements, including the CIS Group acquisition mentioned above. Should CSC
exercise its option to sell its credit reporting business to the Company (Note
5), additional sources of financing would be required. However, the CSC
agreement calls for a six-month notice period, and management believes the
Company would have alternative sources of liquidity available to fund this
potential purchase through the public debt markets and bank lines of credit.
Management believes that the Company's liquidity will remain strong in both the
short and long terms, and that the Company has sufficient sources of external
funding to finance all of its capital needs, if necessary.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, primarily from changes in
foreign currency exchange rates and interest rates.
In the normal course of business, the balance sheets and results of
operations of foreign subsidiaries can be impacted by changes in exchange rates.
The Company's position is to not hedge against this risk due to the significant
cost involved. At March 31, 2000, the Company had no material intercompany
balances with foreign affiliates that were short-term in nature or material
obligations in a foreign currency. From time to time, as such balances or
obligations arise, the Company may consider hedging to minimize its exposure for
these transactions.
12
<PAGE>
The Company chooses to have a mix of fixed-rate and variable-rate debt
in its portfolio of debt obligations. Accordingly, the Company's earnings can be
affected by the impact that changes in interest rates have on its variable-rate
obligations. At March 31, 2000, approximately $379 million (38%) of the
Company's short-term and long-term debt was in variable-rate facilities. At this
level, if market interest rates increased 1%, interest expense would increase
approximately $3.8 million per year (pre-tax).
PART II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
A list of exhibits included as part of this report is set forth
in the Exhibit Index appearing elsewhere in this report, and is
incorporated by reference.
(b) Reports on Form 8-K
Registrant did not file any reports on Form 8-K during the
quarter for which this report is filed.
13
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized officers.
EQUIFAX INC.
(Registrant)
Date: May 11, 2000 /s/Thomas F. Chapman
--------------------------
Thomas F. Chapman, Chairman
and Chief Executive Officer
Date: May 11, 2000 /s/Philip J. Mazzilli
---------------------------
Philip J. Mazzilli
Executive Vice President and
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Index
-------------- --------------------
10.1 Equifax Inc. Executive Life and Supplemental
Retirement Benefit Plan (U.S.)
10.2 Form of Equifax Inc. Executive Life and
Supplemental Retirement Benefit Plan (U.S.)
Split Dollar Life Insurance Agreement
10.3 Equifax Inc. Stock Option Exchange Program
Terms and Conditions
10.4 Grantor Trust Agreement
27 Financial Data Schedule, submitted to the
Securities and Exchange Commission in
electronic format
EQUIFAX INC.
EXECUTIVE LIFE AND SUPPLEMENTAL
RETIREMENT BENEFIT PLAN (U.S.)
This document constitutes the Executive Life and Supplemental
Retirement Benefit Plan (U.S.) (the "Plan") adopted by Equifax Inc. (the
"Company") to be effective January 1, 2000. The Plan incorporates by reference
those certain Questions and Answers dated December 1999 and subsequent updates
thereto, each Split Dollar Life Insurance Agreement entered into with a Plan
Participant and each Collateral Assignment executed by a Plan Participant.
1. PURPOSE
The purpose of the Plan is to reward certain specified executives of
the Company (the "Participants") for their service to the Company and to provide
an incentive to the Participants, including newly hired executives, for future
service and loyalty to the Company. The benefits of participation consist of
contributions made by the Company to purchase life insurance policies on the
lives of Participants, which policies shall be owned by Participants subject to
the provisions of this Plan and the documents incorporated herein.
2. PLAN OPERATION
Participants shall be designated by the Company's Chief Executive Officer and
shall be informed in writing of the Commencement Date of their participation in
the Plan. In order to participate, the Participants must complete certain
enrollment documents and must execute (i) an Agreement which specifies, among
other matters, the respective interests of the Participant and the Company in
the life insurance policies in question, and (ii) a Collateral Assignment of
certain rights in those policies in favor of the Company.
3. DEFINED TERMS
The following terms shall have the meanings ascribed to them below for
purposes of the Plan and the documents incorporated herein:
CAUSE. Termination by the Company of the Participant's employment for "Cause"
means termination by the Company of the Participant's employment upon (a) the
Participant's willful and continued failure to substantially perform the
Participant's duties with the Company (other than any failure resulting from the
Participant's incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to Participant by the Chief
Executive Officer of the Company (or if Participant is the Chief Executive
Officer, the Chairman of the Compensation and Human Resources Committee of the
Board of Directors) that specifically identifies the manner in which the Chief
Executive Officer believes that Participant has not substantially performed the
Participant's duties, or (b) the Participant's willfully engaging in misconduct
that is materially injurious to the Company, monetarily or otherwise. For
purposes of this paragraph 3.1, no act, or failure to act, on the Participant's
part will be considered "willful" unless done, or omitted to be done, by
Participant not in good faith and without reasonable belief that the
<PAGE>
Participant's action or omission was in the best interest of the Company.
Notwithstanding the above, Participant will not be deemed to have been
terminated for Cause unless and until Participant has been given a copy of a
Notice of Termination from the Chief Executive Officer of the Company (of if
Participant is the Chief Executive Officer, the Chairman of the Compensation and
Human Resources Committee of the Board of Directors), after reasonable notice to
Participant and an opportunity for Participant, together with the Participant's
counsel, to be heard before (i) the Chief Executive Officer, or (ii) if
Participant is an elected officer of the Company, the Board of Directors of the
Company, finding that in the good faith opinion of the Chief Executive Officer,
or, in the case of an elected officer, finding that in the good faith opinion of
two-thirds of the Board of Directors, Participant committed the conduct set
forth above in clauses (a) or (b) of this paragraph 3.1, and specifying the
particulars of that finding in detail.
CHANGE IN CONTROL. A "Change in Control" of the Company means the occurrence of
any of the following events during the period in which the Plan remains in
effect:
(a) VOTING STOCK ACCUMULATIONS. The accumulation by any Person
of Beneficial Ownership of twenty percent (20%) or more of the combined
voting power of the Company's Voting Stock; provided that for purposes
of this subparagraph 3.2(a), a Change in Control will not be deemed to
have occurred if the accumulation of twenty percent (20%) or more of
the voting power of the Company's Voting Stock results from any
acquisition of Voting Stock (a) directly from the Company that is
approved by the Incumbent Board, (b) by the Company, (c) by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, or (d) by any Person pursuant to a Business
Combination that complies with clauses (i), (ii) and (iii) of
subparagraph 3.2(b), or
(b) BUSINESS COMBINATIONS. Consummation of a Business
Combination, unless, immediately following that Business Combination,
(i) all or substantially all of the Persons who were the beneficial
owners of Voting Stock of the Company immediately prior to that
Business Combination beneficially own, directly or indirectly, more
than sixty-six and two-thirds percent (66 2/3%) of the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of Directors of the entity resulting from that Business
Combination (including, without limitation, an entity that as a result
of that transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions relative to each other as their
ownership, immediately prior to that Business Combination, of the
Voting Stock of the Company, (ii) no Person (other than the Company,
that entity resulting from that Business Combination, or any employee
2
<PAGE>
benefit plan (or related trust) sponsored or maintained by the Company,
any Eighty Percent (80%) Subsidiary or that entity resulting from that
Business Combination) beneficially owns, directly or indirectly, twenty
percent (20%) or more of the then outstanding shares of common stock of
the entity resulting from that Business Combination or the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of that entity, and (iii) at
least a majority of the members of the Board of Directors of the entity
resulting from that Business Combination were members of the Incumbent
Board at the time of the action of the Board providing for that
Business Combination; or
(c) SALE OF ASSETS. A sale or other disposition of all or
substantially all of the assets of the Company; or
(d) LIQUIDATIONS OR DISSOLUTIONS. Approval by the shareholders
of the Company of a complete liquidation or dissolution of the Company,
except pursuant to a Business Combination that complies with clauses
(i), (ii) and (iii) of subparagraph 3.2(b).
For purposes of this paragraph 3.2, the following definitions will apply:
"Beneficial Ownership" means beneficial ownership as that term is used
in Rule 13d-3 promulgated under the Exchange Act.
"Business Combination" means a reorganization, merger or consolidation
of the Company.
"Eighty Percent (80%) Subsidiary" means an entity in which the Company
directly or indirectly beneficially owns eighty percent (80%) or more
of the outstanding Voting Stock.
"Exchange Act" means the Securities Exchange Act of 1934, including
amendments, or successor statutes of similar intent.
"Incumbent Board" means a Board of Directors at least a majority of
whom consist of individuals who either are (a) members of the Company's
Board of Directors as of January 1, 2000, or (b) members who become
members of the Company's Board of Directors subsequent to said date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds (2/3) of
the directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which that
person is named as a nominee for director, without objection to that
nomination), but excluding, for that purpose, any individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest (within the meaning of Rule 14a-11 of the
Exchange Act) with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors.
"Person" means any individual, entity or group (within the meaning of
Section 13(d)(3) or 14 (d)(2) of the Exchange Act).
"Subsidiary" means an entity more than fifty percent (50%) of whose
equity interests are owned directly or indirectly by the Company.
"Voting Stock" means the then outstanding securities of an entity
entitled to vote generally in the election of members of that entity's
Board of Directors.
3
<PAGE>
COMPETITIVE ACTIVITY. A Participant or former Participant will be deemed to
engage in "Competitive Activity" if he/she:
(a) directly or indirectly owns, operates, controls,
participates in, performs services for, or otherwise carries on, a
business substantially similar to or competitive with the business
conducted by the Company or any Subsidiary (without limit to any
particular region, because Participant acknowledges that such business
may be engaged in effectively from any location in the United States or
Canada); provided that nothing set forth in this section will prohibit
Participant from owning not in excess of 5% of any class of capital
stock of any corporation if such stock is publicly traded and listed on
any national or regional stock exchange or on the NASDAQ Stock Market;
or
(b) directly or indirectly attempts to persuade any employee
or customer of the Company or any Subsidiary to terminate such
employment or business relationship in order to enter into any such
relationship on behalf of Participant or any third party in competition
with the business conducted by the Company or any Subsidiary; or
(c) directly or indirectly engages in any activity that is
harmful to the interests of the Company or any Subsidiary, as
determined by the Compensation and Human Resources Committee in its
sole discretion, including the disclosure or misuse of any confidential
information or trade secrets of the Company or a Subsidiary.
GOOD REASON. Termination by the Participant of the Participant's employment for
"Good Reason" means termination by Participant of the Participant's employment
based on:
(a) The assignment to Participant of duties inconsistent with
the Participant's position and status with the Company as they existed
immediately prior to a Change in Control, or a substantial change in
the Participant's title, offices or authority, or in the nature of the
Participant's responsibilities, as they existed immediately prior to a
Change in Control, except in connection with the termination of the
Participant's employment for Cause or Disability or as a result of the
Participant's death or by Participant other than for Good Reason;
(b) A reduction by the Company in the Participant's base
salary as in effect on the date of this Letter or as the Participant's
salary may be increased from time to time;
(c) A failure by the Company to continue the Company's
incentive compensation plan(s), as it may be modified from time to
time, substantially in the form in effect immediately prior to a Change
in Control (the "Plan"), or a failure by the Company to continue
Participant as a participant in the Plan on at least the basis of the
Participant's participation immediately prior to a Change in Control or
to pay Participant the amounts that Participant would be entitled to
receive in accordance with the Plan;
(d) The Company's requiring Participant to be based more than
thirty-five (35) miles from the location where Participant is based
immediately prior to a Change in Control, except for required travel on
the Company's business to an extent substantially consistent with the
4
<PAGE>
Participant's business travel obligations prior to the Change in
Control, or if Participant consents to that relocation, the failure by
the Company to pay (or reimburse Participant for) all reasonable moving
expenses incurred by Participant or to indemnify Participant against
any loss realized in the sale of the Participant's principal residence
in connection with that relocation;
(e) The failure by the Company to continue in effect any
retirement or compensation plan, performance share plan, stock option
plan, life insurance plan, health and accident plan, disability plan or
another benefit plan in which Participant is participating immediately
prior to a Change in Control of the Company (or provide plans providing
Participant with substantially similar benefits), the taking of any
action by the Company that would adversely affect the Participant's
participation or materially reduce the Participant's benefits under any
of those plans or deprive Participant of any material fringe benefit
enjoyed by Participant immediately prior to a Change in Control, or the
failure by the Company to provide Participant with the number of paid
vacation days to which Participant is then entitled in accordance with
the Company's normal vacation practices in effect immediately prior to
a Change in Control;
(f) Any purported termination of the Participant's employment
that is not effected pursuant to a Notice of Termination satisfying the
following requirements:
A "Notice of Termination" means a notice that indicates the
specific provision in the definition of Cause relied upon and
setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the
Participant's employment under the provision so indicated. Any
purported termination not effected pursuant to a Notice of
Termination meeting the requirements set forth in this
subparagraph will not be effective.
4. ERISA PROVISIONS
4.1 The following provisions are part of this Plan and are intended to meet the
requirements Part 4 of Title I of the ERISA:
(a) The named fiduciary: Equifax Inc.
(b) The funding policy under this Plan is that all premiums on
the Policy be remitted to the Insurer when due.
(c) Direct payment by the Insurer is the basis of payment of
benefits under the Plan, with those benefits in turn being based on the
payment of premiums as provided in the Plan.
4.2 The following provisions are part of this Plan and are intended to meet the
requirements of Part 5 of Title I of ERISA:
(a) For claims procedure purposes, the "Claims Manager" shall
be the Senior Vice President, Compensation and Benefits of the Company.
5
<PAGE>
(b) If for any reason a claim for benefits under the Plan is
denied by the Company, the Claims Manager shall deliver to the claimant
a written explanation setting forth the specific reasons for the
denial, pertinent references to the Plan or Agreement section on which
the denial is based, such other data as may be pertinent and
information on the procedures to be followed by the claimant in
obtaining a review of his claim, all written in a manner calculated to
be understood by the claimant. For this purpose:
(1) The claimant's claim shall be deemed filed when
presented orally or in writing to the Claims Manager.
(2) The Claims Manager's explanation shall be in
writing delivered to the claimant within 90 days of the date the claim is filed.
(c) The claimant shall have 60 days following his receipt of
the denial of the claim to file with the Claims Manager a written
request for review of the denial. For such review, the claimant or his
representative may submit pertinent documents and written issues and
comments.
(d) The Claims Manager shall decide the issue on review and
furnish the claimant with a copy within 60 days following his receipt
of the claimant's request for review of his claim. The decision on
review shall be in writing and shall include specific reasons for the
decision written in a manner calculated to be understood by the
claimant, as well as specific references to the pertinent Plan
provisions on which the decision is based. If a copy of the decision is
not so furnished to the claimant within such 60 days, the claim shall
be deemed denied on review.
5. EFFECT OF CHANGE IN CONTROL
In the event of a Change in Control of the Company, the trustee of any
trust which has been established for purposes of making payments of
contributions to insurance policies required by the Agreement shall, as provided
in such trust, deliver to the appropriate insurance company said contributions
as required.
6. AMENDMENT OF PLAN
The Plan may be amended by the Company at any time in its sole
discretion, except that the definition of Change in Control and the provisions
of Section 5 above may not be amended without the written consent of all
Participants in the event that a Change in Control has occurred.
6
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Plan to be
effective January 1, 2000.
EQUIFAX INC.
By: /s/ Richard D. Gapen
Title: Sr. Vice President
Compensation and Benefits
Plan Administrator
FORM OF
EQUIFAX INC.
EXECUTIVE LIFE AND SUPPLEMENTAL
RETIREMENT BENEFIT PLAN (U.S.)
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
This Split Dollar Life Insurance Agreement is established and effective
between Equifax Inc., a corporation organized and existing under the laws of the
State of Georgia (the "Company"), ______________________ and (the
"Participant"), a Key Employee and Executive of the Company as of the 1st day of
January, 2000 (the "Commencement Date").
WITNESSETH:
WHEREAS, in the course of the Participant's employment, the Participant
has acquired experience and knowledge of considerable value to the Company; and,
WHEREAS, the Company wishes to continue this employment relationship
and, as an inducement thereto, is willing to make contributions to a life
insurance policy (the "Policy") issued by Pacific Life Insurance Company (the
"Insurer") as an additional form of compensation to the Participant as its
employee; and,
WHEREAS, the Participant is willing to receive and own a life insurance
policy on the Participant's life; and,
WHEREAS, in exchange for such contributions, the Participant has agreed
to participate in the Equifax Inc. Executive Life and Supplemental Retirement
Benefit Plan (U.S.) (the "Plan"), which consists of the Plan document, Questions
and Answers, this Agreement and the Collateral Assignment, to the extent
provided herein; and,
WHEREAS, the Participant shall freely undertake such reasonable steps
necessary to institute his participation in the Plan, including the assignment
to the Company of an interest in the Policy as provided herein.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the Company and the Participant mutually agree as
follows:
ARTICLE I
PURPOSE OF THE PLAN
The Plan is intended to qualify as a life insurance employee benefit
plan as described in Revenue Ruling 64-328, C.B. 1964-2, 11. The Plan is
established for the purpose of providing life insurance protection and is
intended to be an employee welfare benefit plan of the Employee Retirement
Income Security Act of 1974 ("ERISA"). The Plan is established for the purpose
of providing life insurance protection for a member of a select group of
<PAGE>
management or highly compensated employees of the Company and is intended to be
an unfunded or insured welfare benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974 ("ERISA").
ARTICLE II
POLICY AMOUNT
The Participant shall purchase the Policy on [his/her] life from the
Insurer in the face amount appropriate to provide at least the sum of the
Scheduled Death Benefit and an amount equal to the Company's Contributions to
the Policy as identified in Exhibit "A" attached hereto and made a part hereof.
ARTICLE III
POLICY INTERESTS
III.1 The Participant shall be the owner of the Policy and shall assign to
the Company an interest in the Policy as determined in Paragraph 3.3
(the "Company's Collateral Interest").
III.2 For purposes of this Plan, the term "Cash Value" shall mean the cash
surrender value of the Policy as defined in the Insurer's policy form
(the "Insurer's Policy") as identified in Exhibit "A" attached hereto
and made a part hereof.
III.3 Except as provided in the following sentence, for purposes of
termination of this Agreement prior to the Rollout Date (in accordance
with Paragraph 12.1), the Company's Collateral Interest shall be the
Cash Value, but not in excess of the Company's contributions to the
Policy. Notwithstanding the foregoing, in the event of termination of
the Participant's employment by the Company for Cause, or termination
prior to the third anniversary of the Commencement Date, the Company's
Collateral Interest shall be the entire Cash Value of the Policy.
III.4 For purposes of termination of this Agreement by reason of the
Participant's death (in accordance with Paragraph 12.2), the Company
shall be entitled to the Policy death benefit in an amount equal to the
Company's Collateral Interest, which in such event shall be the excess
of the Policy Death benefit over the Participant's Scheduled Death
Benefit described in Exhibit A.
III.5 The existence of the Company's Collateral Interest shall be evidenced
by filing with the Insurer an assignment in a form accepted and
required by the Insurer (the "Assignment").
III.6 The Participant's Policy Interest shall be the Cash Value or the death
benefit, as appropriate, in excess of the Company's Collateral
Interest.
2
<PAGE>
ARTICLE IV
INCIDENTS OF OWNERSHIP
IV.1 The Participant shall have full incidents of ownership over the
Participant's Policy Interest as provided in the Insurer's Policy;
nonetheless, the Participant has agreed in this Agreement and confirmed
by the Assignment that the Company has certain rights with respect to
the Policy.
IV.2 The Participant hereby assigns to the Company the right to exercise
certain incidents of ownership over the Policy to protect the Company's
Collateral Interest, including the right to borrow or withdraw from the
Policy to the extent of its Collateral Interest until the third
anniversary of the Participant's Commencement Date, and thereafter, as
provided in this Agreement and in the Assignment, including the right
to receive all or a portion of the death benefit equal to its
Collateral Interest, so long as those incidents of ownership are not in
contradiction to, or in addition to, the incidents of ownership
provided in the Insurer's Policy. In the event of termination of
employment by the Company for Cause, either before, or after said third
anniversary, the Company shall nonetheless be entitled to recover its
entire Collateral Interest to the extent of any Cash Value.
IV.3 Neither the Company nor the Participant shall take any action that
would jeopardize the interests of the other party under the Plan,
except that the Company shall have total discretion to amend or
terminate the Plan, including this Agreement, at any time as provided
in Article X below, regardless of its potential future effect on the
Participant's interest.
ARTICLE V
PAYMENT OF PREMIUMS
During the continuation of this Agreement and the Plan, the
Company agrees to remit to the Insurer the scheduled annual premium due
in a timely manner at the beginning of each Policy year and before the
expiration of the grace period.
ARTICLE VI
ASSIGNMENT OF THE AGREEMENT
Either of the parties to this Agreement may assign their rights,
interest and/or obligations under this Agreement, provided, however, that any
assignment shall be made subject to all terms and provisions of the Plan and
this Agreement.
3
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ARTICLE VII
INVESTMENT OF POLICY ASSETS
VII.1 The Company shall have the authority to exercise all investment
direction rights under the Policy as to the Policy's cash surrender
value until the third anniversary of the Participant's Commencement
Date.
VII.2 Commencing on the third anniversary of the Participant's Commencement
Date, the Participant shall have the authority to exercise all
investment direction rights under the Policy as to the Policy's Cash
Value. In the event that the Company, in its sole discretion,
determines that it is necessary to do so in order to protect its
Collateral Interest, the Company may assume said investment authority
with respect to its Collateral Interest after ten (10) days written
notice to Participant.
ARTICLE VIII
POLICY LOANS
VIII.1 The Company may borrow from the Cash Value of the Policy, or pledge the
Policy, according to the Policy provisions, provided that after the
third anniversary of the Participant's commencement of participation in
the Plan, the amount which may be borrowed or pledged by the Company
shall not exceed the Company's Collateral Interest.
VIII.2 Commencing on the third anniversary of the Participant's Commencement
Date, the Participant may borrow against the Cash Value of the Policy,
but not in excess of 50% of the Cash Value in excess of the Company's
Collateral Interest, determined at the time of the loan.
ARTICLE IX
RECOVERY OF COMPANY CONTRIBUTIONS
IX.1 The Company shall have the right to recover its contributions to the
Policy at any time to the extent of the Cash Value. It is the Company's
intention, however, to withdraw an amount equal to its contributions,
unadjusted for earnings or losses, on the "Rollout Date," which shall
be the earliest to occur of the following events:
(a) The later of (i) the fifteenth anniversary of the
Participant's Commencement Date, or (ii) Participant's
attainment of age sixty (60);
(b) The Participant's voluntary termination of employment from the
Company other than for (i) retirement or (ii) Good Reason
after a Change in Control of the Company;
(c) Termination of the Participant's employment by the Company for
Cause;
4
<PAGE>
(d) The Participant's engagement in Competitive Activity or other
activity harmful to the Company during the year following his
termination of employment; or
(e) Termination of the Plan or this Agreement.
The terms Change in Control, Competitive Activity, Good Reason, and Cause are
defined in the Plan document.
ARTICLE X
AMENDMENT OF THE AGREEMENT
This Agreement and the Plan may be amended by the Company at any time
in its sole discretion, subject to any restrictions on the power of amendment
contained in the Plan document; provided, however, that any amendment to this
Agreement which imposes new responsibilities on the Participant must be by
mutual agreement of the Participant and the Company and such amendment shall be
in writing and signed by the Participant and the Company.
ARTICLE XI
MERGER AND REORGANIZATION OF COMPANY
In the event of the Company's merger, consolidation, or reorganization
of its business activities with any other company or organization, the Company
will use its best efforts to insure that the other company or organization
agrees to assume all obligations of the Company under the Plan and this
Agreement.
ARTICLE XII
TERMINATION OF AGREEMENT
XII.1 This Agreement may be terminated, subject to Paragraphs (a) and (b) of
this Section 12.1 below, at the Rollout Date, or, in the Company's sole
discretion, at any earlier or later date. Termination of this Agreement
shall be evidenced by a writing signed by the Company and delivered to
the Participant.
(a) In the event of termination of this Agreement as provided in
this Paragraph 12.1, the Participant shall have the obligation
to repay the Company within 60 days of the date of termination
an amount equal to the Company's Collateral Interest less any
Policy indebtedness to the Insurer, or other indebtedness,
incurred by the Company and secured by the Company's
Collateral Interest and less any partial surrender, or
withdrawal, taken by the Company from the Company's Collateral
Interest.
If this Agreement is terminated under this Paragraph (a) of
this Paragraph 12.1, upon receipt of an amount equal to its
Collateral Interest from the Participant, the Company shall
5
<PAGE>
take all steps necessary to release the Assignment such that
the Company's Collateral Interest comes under the full control
of the Participant and the Company no longer has any rights,
interest, and/or obligations, whatsoever, under the Policy.
(b) If the Participant fails to repay said amount to the Company
within 30 days of the date of termination of this Agreement
pursuant to the provisions of Paragraph 12.1(a), the Company
may execute its rights pursuant to the Collateral Assignment
to recover the entire amount of its Collateral Interest.
XII.2 This Plan may be terminated in the event of the death of the Insured by
the receipt by the Company of an amount of death benefit equal to (i)
the Company's Collateral Interest (less any Policy indebtedness, or
other indebtedness, incurred by the Company and secured against the
Company's Collateral Interest and less any partial surrender, or
withdrawal, taken by the Company from the Company's Collateral
Interest) plus (ii) any amount of the remaining death benefit which
exceeds the Participant's scheduled death benefit referenced on Exhibit
A.
ARTICLE XIII
NOT AN EMPLOYMENT CONTRACT
The Plan, which includes this Agreement, is strictly voluntary
undertakings on the part of the Company and shall not be deemed to constitute an
employment contract between the Company and the Participant. Nothing contained
in the Plan shall be deemed to give the Participant the right to be retained in
the employ of the Company or to interfere with the right of the Company to
discharge the Participant at any time.
ARTICLE XIV
INSURER PROTECTION
XIV.1 The Insurer shall be bound only by the terms and provisions of its
Policy and by the terms and provisions of the Assignment, but only if
that Assignment is made in a form acceptable and required by the
Insurer and duly filed with the Insurer. Any payments made or actions
taken by the Insurer in accordance with the Policy and the Assignment
shall fully discharge it from all claims, suits and demands of all
persons whatsoever. The Insurer shall in no way be bound by or be
deemed to have notice of the terms and provisions, or any other rights,
duties, obligations, or conditions of the Plan or this Agreement.
XIV.2 No term or provision herein shall be construed or deemed to grant any
right to the Insurer to demand payment of any premium as a third-party
beneficiary of the Plan or otherwise.
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ARTICLE XV
PAROL EVIDENCE AND GOVERNING LAW
The Plan, including this Agreement, sets forth the entire agreement of
the Company and the Participant. Any and all prior and contemporaneous
agreements, to the extent inconsistent herewith, are superseded. Where not
superseded by federal law, the law of the state of Georgia shall govern the
Plan, which includes this Agreement.
ARTICLE XVI
INTERPRETATION
Words and phrases herein shall be construed as in the singular or
plural as masculine, feminine or neuter gender, as appropriate. The Article
titles used herein are for organizational purposes only and shall have no
determinative effect upon the rights, interests, and/or duties created in this
Agreement.
ARTICLE XVII
SEVERABILITY
In the event that a court of competent jurisdiction determines that any
provision of the Plan or this Agreement is unenforceable, the remaining
provisions of the Plan and this Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto acknowledge that each has
carefully read this Agreement and executed the original thereof as of the 1st
day of January, 2000, and that, upon execution, each has received a confirming
copy.
______________________________________ ____________________________________
(WITNESS) EQUIFAX INC.
By:_________________________________
Title
______________________________________ ____________________________________
(WITNESS) (PARTICIPANT)
By:_________________________________
Title
7
<PAGE>
EXHIBIT "A"
PART I - LIFE INSURANCE POLICY
Insurer: Pacific Life Insurance Company
Policy Number:
Date of Policy:
Scheduled Death Benefit: $_________________
PART II - BENEFICIARY
- ------------------------
This Exhibit "A" is a part of the Collateral Assignment Split Dollar
Life Insurance Agreement, entered into by and between Equifax Inc., _________
_________________ and as of January 1, 2000.
Equifax Inc. Stock Option Exchange Program
Terms and Conditions
o Eligibility to participate is limited to Vice Presidents and above or
as otherwise determined by the Compensation and Human Resources
Committee ("the Committee").
o The election to defer is voluntary, must be made each year, and is
irrevocable as of March 15 (or other date as prescribed by the
Committee each year).
o Election must be made in the form of a percentage of annual incentive
award earned, and if participating, may be in any amount between 10%
and 100%, in whole 5% increments.
o Grant will be Equifax Inc. non-qualified stock options.
o Options are immediately vested in full on the grant date.
o Grant date will be the date of the Committee meeting in January or
February following the end of the fiscal year for which the annual
incentive award was earned.
o Option price will be at fair market value at the close of the NYSE on
the day of the Committee meeting.
o If applicable, currency conversion rates will be established at the
close of business on the day of the Committee meeting.
o Option term is 10 years from grant date or expires sooner as follows:
- Terminates 5 years following retirement, death or disability
termination, or after termination, other than for cause,
following a change in control of the Company (unless 10-year
option term expires sooner);
- Terminates one year following termination due to job
elimination (unless 10-year option term expires sooner);
- Terminates immediately following grantee's voluntary
termination;
- Terminates immediate following grantee's termination for
cause.
o Option is non-transferable.
o Option grant will be determined as follows:
% of Cash Incentive Dollar Value of Stock
Exchanged Option Grant
------------------- ---------------------
10% -- 20% 6 x Cash Incentive Exchanged
25% -- 45% 8 x Cash Incentive Exchanged
50% -- 100% 10 x Cash Incentive Exchanged
GRANTOR TRUST AGREEMENT
This Grantor Trust Agreement (the "Trust Agreement") is made this 4th day of
February, 2000, by and between Equifax Inc. (the "Company") and Wachovia Bank,
N.A. ("the Trustee").
Recitals
(a) WHEREAS, the Company has adopted the Executive Life and Supplemental
Retirement Benefit Plan (the "Plan");
(b) WHEREAS, the Company has incurred or expects to incur liability under
the terms of the Plan with respect to the individuals participating in
the Plan and their designated beneficiaries (the "Participants and
Beneficiaries");
(c) WHEREAS, the Company hereby establishes a Trust (the "Trust") and shall
contribute to the Trust assets that shall be held therein, subject to
the claims of the Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to Participants and their
Beneficiaries in such manner and at such times as specified in the Plan
and in this Trust Agreement;
(d) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of
the Plan as an unfunded plan maintained for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees for purposes of Title I of the Employee
Retirement Income Security Act of 1974; and
(e) WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds (the "Fund") to
assist it in satisfying its liabilities under the Plan in the
circumstances described herein.
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the
Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of The Trust
--------------------------
(a) The Trust is intended to be a Grantor Trust, of which the Company is
the Grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended,
and shall be construed accordingly.
(b) The Company shall be considered a Grantor for the purposes of the
Trust.
(c) The Trust hereby established is revocable by the Company; it shall
become irrevocable upon a Change of Control, as defined herein.
<PAGE>
(d) The Company hereby deposits with the Trustee in the Trust one-thousand
dollars and zero cents ($1,000.00) which shall become the initial
principal of the Trust to be held, administered and disposed of by the
Trustee as provided in this Trust Agreement. The Company intends to
contribute additional assets to the Trust, consisting of approximately
One Million Five Hundred Thousand (1,500,000) shares of Company stock,
within a reasonable period from the date of execution of this Trust.
(e) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Participants and general
creditors as herein set forth. Participants and their Beneficiaries
shall have no preferred claim on, or any beneficial ownership interest
in, any assets of the Trust. Any rights created under the Plan and this
Trust Agreement shall be unsecured contractual rights of Participants
and their Beneficiaries against the Company. Any assets held by the
Trust will be subject to the claims of the general creditors of the
Company under federal and state law in the event the Company is
Insolvent, as defined in Section 3(a) herein.
(f) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property, including
Company stock, acceptable to the Trustee to the Trust to augment the
principal to be held, administered and disposed of by the Trustee as
provided in this Trust Agreement. Prior to a Change of Control, neither
the Trustee nor any Participant or Beneficiary shall have any right to
compel additional deposits.
(g) Upon a Potential Change of Control, the Company shall, as soon as
possible, but in no event longer than thirty (30) days following the
occurrence of a Potential Change of Control, as defined herein, make an
additional contribution to the Trust, if required, in an amount that is
sufficient, when aggregated with the other assets of the Trust, to fund
the Trust in an amount equal to no less than 100% but no more than 120%
of the amount necessary to pay the insurance premiums required on
policies purchased pursuant to the Plan, until said policies have been
fully paid, in accordance with Section 2(c) below.
(h) In the event a Change of Control does not occur within one year of a
Potential Change of Control, the Company shall have the right to
recover any amounts contributed to and remaining on hand in the Trust.
(i) Upon a Change of Control, the Company shall, as soon as possible, but
in no event longer than thirty (30) days following the occurrence of a
Change of Control, as defined herein, make an irrevocable contribution
to the Trust in any additional amount which is necessary to be
sufficient to fund the Trust in an amount equal to no less than 100 %
but no more than 120% of the amount necessary to pay the insurance
premiums required on policies purchased pursuant to the Plan, until
said policies have been fully paid, in accordance with Section 2(c)
below. The Company shall also fund a cash expense reserve for the
Trustee in the amount of $125,000.00.
<PAGE>
Section 2. Payments from the Trust
-----------------------
(a) Prior to a Change of Control, distributions from the Trust shall be
made by the Trustee to the insurance company identified in or pursuant
to Section 2(e) below ("Insurance Company") at the direction of the
Company.
(b) For the initial premium payment due in January 2000, the Company will
make payment of insurance premiums directly to the Insurance Company.
As subsequent payments become due under the terms of the Plan, the
Company will transfer to the Trustee, and the Trustee will pay directly
to the Insurance Company, the premiums due. The Company will make said
transfer no less than thirty (30) days prior to the scheduled premium
due date.
(c) (1) After a Potential Change of Control and before a Change of
Control, the Company shall deliver to the Trustee a schedule of
insurance premiums due under the Plan. Subsequent to a Change of
Control, the Trustee shall pay insurance premiums due in accordance
with such schedule. If the Company has not transfered the required
amounts at least thirty (30) days prior to each due date, the Trustee
shall make such payments from the assets of the fund. If the principal
of the Trust, and any earnings thereon, are not sufficient to make
payments of benefits in accordance with the terms of the Plan, the
Company shall make the balance of each such payment as it falls due in
accordance with the Plan. The Trustee shall notify the Company in the
event that principal and earnings are not sufficient. Nothing in this
Agreement shall relieve the Company of its liabilities to pay benefits
due under the Plan except to the extent such liabilities are met by
application of assets of the Trust.
(2) Subsequent to a Change of Control, if the Company borrows any
portion of the Cash surrender value of any policy purchased pursuant to
the Plan, the Trustee shall immediately repay to the Insurance Company
any amount that has been so borrowed, as certified to it by the
participant whose policy is the subject of the loan. The Trustee may
request any further reasonable evidence of such a loan.
(3) Subsequent to a Change of Control, if the Trustee becomes aware
that the Company withdraws any portion of the cash surrender value of
any policy purchased pursuant to the Plan, the Trustee shall consult
with the Insurance Company or the broker of record, as it deems
appropriate, to determine the maximum premiums which may be paid on an
annual basis to restore any such withdrawal and to retain the life
insurance nature of the policy, and shall make said payments.
(d) The Trustee may institute an action to collect a contribution due the
Trust following a Change of Control or in the event that the Trust
should ever experience a short-fall in the amount of assets necessary
to make current premium payments pursuant to the terms of the Plan.
(e) The primary purposes of this Trust are to insure (i) that, following a
Change of Control, premiums will continue to be paid to Pacific Life
Insurance Company, or such successor company as the Company may
3
<PAGE>
identify to the Trustee in writing, as required pursuant to all
split-dollar life insurance agreements with employees of the Company or
its subsidiaries which have been entered into by the Company pursuant
to the Plan, which was effective January 1, 2000, and (ii) that any
successor to the Company, or its successor management, does not
withdraw cash values from the policies purchased pursuant to the Plan
prior to the respective distribution dates of said policies. Prior to a
Change of Control, it is contemplated that the Company will pay such
premiums directly, although it may direct the Trustee to pay them from
the Fund. Subsequent to a Change of Control, the Trustee shall make
such payments unless the Company has previously certified to having
made them, according to the provisions hereof. In order to make such
payments, the Trustee may be required to sell all or a portion of the
Company stock held in the Fund, and the Company hereby agrees (i) to
promptly, and in any event within sixty (60) days of a request for
registration by the Trustee, take all actions necessary to cause the
registration of the Company Stock held in the fund for sale, and (ii)
to maintain on a continuous basis any registrations required to permit
said sales pursuant to applicable federal and state laws, until all
Company stock has been sold. In connection with any such securities
registrations, the Company shall take any and all actions necessary in
connection therewith, including without limitation: (i) causing any
special audits to be performed, if required and (ii) if requested by
the Trustee, entering into an underwriting agreement with underwriters
selected by the Trustee in customary form including providing
indemnification for the underwriters and the Trustee. Any and all costs
arising in connection with the filing of any securities registrations,
including the fees and disbursements of counsel for the Trustee, shall
be borne entirely by the Company other than underwriting discounts and
commissions or commissions of broker dealers which shall be payable by
the Trustee from the assets of the Trust. The Company consents that an
action may be brought in equity or in law by the Trustee or by any
participant in the Plan, to compel its compliance with the provisions
of this Trust, including but not limited to the foregoing sentence and
the provisions of paragraph (d) of this Section 2.
Section 3. Trustee Responsibility Regarding Payments When The Company Is
-------------------------------------------------------------
Insolvent
---------
(a) The Trustee shall cease payment of insurance premiums to the Insurance
Company if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is
unable to pay its debts as they become due, or (ii) the Company is
subject to a pending proceeding as a debtor under the United States
Bankruptcy Code or (iii) the Company is determined to be insolvent by
the Federal Deposit Insurance Corporation, the Federal Reserve, or the
Office of the Comptroller of Currency.
(b) At all times during the continuance of this Trust, the principal and
income of the Trust shall be subject to claims of general creditors of
the Company under federal and state law as set forth below.
4
<PAGE>
(1) The Board of Directors and the Chief Executive Officer of the
Company shall have the duty to inform the Trustee in writing
that the Company is Insolvent. If a person claiming to be a
creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of
insurance premiums to the Insurance Company.
(2) Unless the Trustee has actual knowledge that the Company is
Insolvent, or has received notice from the Company or a person
claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether
the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the
Company's solvency.
(3) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue paying insurance
premiums to the Insurance Company and shall hold the assets of
the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Participants or their Beneficiaries to pursue their
rights as general creditors of the Company with respect to
payments due under the Plan or otherwise.
(4) The Trustee shall resume the payment of insurance premiums to
the Insurance Company in accordance with Section 2 of this
Trust Agreement only after the Trustee has determined that the
Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee discontinues
the payment of insurance premiums from the Trust pursuant to Section
3(b) hereof and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all
payments due to the Insurance Company under the terms of the Plan for
the period of such discontinuance, less the aggregate amount of any
payments made to the Insurance Company by the Company in lieu of the
payments provided for hereunder during any such period of
discontinuance.
Section 4. Payments When a Short-Fall of The Trust Assets Occurs
-----------------------------------------------------
(a) If there are not sufficient assets for the payment of insurance
premiums pursuant to Section 2 or Section 3(c) hereof and the Company
does not otherwise make such payments within a reasonable time after
demand from the Trustee, the Trustee shall make payment of insurance
premiums from the Trust to the Insurance Company for the benefit of
Participants and their Beneficiaries in the following order of
priority:
(1) All policies should be funded based on original expected
performance, with premiums adequate to keep the policies in
force until the insured attains age 100; and
5
<PAGE>
(2) Any remaining funding should be made pro-rata based upon
remaining scheduled premium payments.
It is understood that it is not possible to anticipate precisely future
financial status of the policies, and the contingencies that could
occur both before and after a Change of Control. Therefore, the Trustee
will have discretion to implement any reasonable method of allocating
Trust assets that are, in its sole discretion, determined to be
inadequate to ensure complete funding of the Policies pursuant to the
premium schedule provided. The Trustee may rely solely on the services
of the Broker of Record as well as any other resources in making this
determination.
(b) Upon receipt of a contribution from the Company necessary to make up
for a shortfall in the payments due, the Trustee shall resume payments
to the Insurance Company under the Plan. Following a Change of Control,
the Trustee shall have the right to compel a contribution to the Trust
from the Company to make-up for any short-fall.
Section 5. Payments to the Company
-----------------------
Except as provided in Section 3 hereof, after the Trust has become irrevocable,
the Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust assets before all payment of
insurance premiums have been made to the Insurance Company pursuant to the terms
of the Plan.
Section 6. Investment Authority
--------------------
(a) Consistent with the provisions of Section 10(a) below, the Trustee
shall not be liable in discharging its duties hereunder, including
without limitation its duty to invest and reinvest the Fund, if it acts
for the exclusive benefit of the Participants and their Beneficiaries,
in good faith and as a prudent person would act in accomplishing a
similar task and in accordance with the terms of this Trust Agreement
and any applicable federal or state laws, rules or regulations.
(b) Subsequent to a Change of Control, the Trustee shall have the following
power, in investing and reinvesting the Fund, in its sole discretion:
(1) To invest and reinvest in any readily marketable common and
preferred stocks, bonds, notes, debentures (including
convertible stocks and securities but not including any stock
or security of the Trustee other than a de minimis amount held
in a collective or mutual fund), certificates of deposit or
demand or time deposits (including any such deposits with the
Trustee) and shares of investment companies and mutual funds,
without being limited to the classes or property in which the
Trustee is authorized to invest by any law or any rule of
court of any state and without regard to the proportion any
such property may bear to the entire amount of the Fund.
Without limitation, the Trustee may invest the Trust in any
investment company (including any investment company or
companies for which Wachovia Bank, N.A. or an affiliated
6
<PAGE>
company acts as the investment advisor ("Special Investment
Companies")) or, any insurance contract or contracts issued by
an insurance company or companies in each case as the Trustee
may determine provided that the Trustee may in its sole
discretion keep such portion of the Trust in cash or cash
balances for such reasonable periods as may from time to time
be deemed advisable pending investment or in order to meet
contemplated payments of benefits;
(2) To commingle for investment purposes all or any portion of the
Fund with assets of any other similar trust or trusts
established by the Company with the Trustee for the purpose of
safeguarding deferred compensation or retirement income
benefits of its employees and/or directors;
(3) To retain any property at any time received by the Trustee;
(4) To sell or exchange any property held by it at public or
private sale, for cash or on credit, to grant and exercise
options for the purchase or exchange thereof, to exercise all
conversion or subscription rights pertaining to any such
property and to enter into any covenant or agreement to
purchase any property in the future;
(5) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan
relating to property held by it and to consent to or oppose
any such plan or any action thereunder or any contract, lease,
mortgage, purchase, sale or other action by any person;
(6) To deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary
power thereto, and to pay part of the expenses and
compensation thereof any assessments levied with respect to
any such property to be deposited;
(7) To extend the time of payment of any obligation held by it;
(8) To hold uninvested any moneys received by it, without
liability for interest thereon, but only in anticipation of
payments due for investments, reinvestments, expenses or
disbursements;
(9) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or
otherwise;
(10) For the purposes of the Trust, to borrow money from others, to
issue its promissory note or notes therefor, and to secure the
repayment thereof by pledging any property held by it;
(11) To employ suitable contractors and counsel, who may be counsel
to the Company or to the Trustee, and to pay their reasonable
expenses and compensation from the Fund to the extent not paid
by the Company;
7
<PAGE>
(12) To register investments in its own name or in the name of a
nominee; to hold any investment in bearer form; and to combine
certificates representing securities with certificates of the
same issue held by it in other fiduciary capacities or to
deposit or to arrange for the deposit of such securities with
any depository, even though, when so deposited, such
securities may be held in the name of the nominee of such
depository with other securities deposited therewith by other
persons, or to deposit or to arrange for the deposit of any
securities issued or guaranteed by the United States
government, or any agency or instrumentality thereof,
including securities evidenced by book entries rather than by
certificates, with the United States Department of the
Treasury or a Federal Reserve Bank, even though, when so
deposited, such securities may not be held separate from
securities deposited therein by other persons; provided,
however, that no securities held in the Fund shall be
deposited with the United States Department of the Treasury or
a Federal Reserve Bank or other depository in the same account
as any individual property of the Trustee, and provided,
further, that the books and records of the Trustee shall at
all times show that all such securities are part of the Trust
Fund;
(13) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust,
respectively, to commence or defend suits or legal proceedings
to protect any interest of the Trust, and to represent the
Trust in all suits or legal proceedings in any court or before
any other body or tribunal; provided, however, that the
Trustee shall not be required to take any such action unless
it shall have been indemnified by the Company to its
reasonable satisfaction against liability or expenses it might
incur therefrom;
(14) To hold and retain policies of life insurance, annuity
contracts, and other property of any kind which policies are
contributed to the Trust by the Company or any subsidiary of
the Company or are purchased by the Trustee;
(15) To hold any other class of assets which may be contributed by
the Company and that is deemed reasonable by the Trustee,
unless expressly prohibited herein;
(16) To loan any securities at any time held by it to brokers or
dealers upon such security as may be deemed advisable, and
during the terms of any such loan to permit the loaned
securities to be transferred into the name of and voted by the
borrower or others; and
(17) Generally, to do all acts, whether or not expressly
authorized, that the Trustee may deem necessary or desirable
for the protection of the Fund.
(c) Prior to a Change of Control, the Company shall have the right, subject
to this Section, to direct the Trustee with respect to investments.
Absent any such direction, the Trustee shall continue the investment of
the Fund solely in Company Stock. The Trustee may hold up to $125,000
of the Fund in cash or cash equivalents to constitute the cash expense
8
<PAGE>
reserve referred to in Section 1(i) above, and the Company shall from
time to time contribute any cash required to maintain said reserve.
(1) The Company may at any time direct the Trustee to segregate
all or a portion of the Fund in a separate investment account
or accounts and may appoint one or more investment managers
and/or an investment committee established by the Company to
direct the investment and reinvestment of each such investment
account or accounts. In such event, the Company shall notify
the Trustee of the appointment of each such investment manager
and/or investment committee. No such investment manager shall
be related, directly or indirectly, to the Company, but
members of the investment committee may be employees of the
Company.
(2) Thereafter, the Trustee shall make every sale or investment
with respect to such investment account as directed in writing
by the investment manager or investment committee. It shall be
the duty of the Trustee to act strictly in accordance with
each direction. The Trustee shall be under no duty to question
any such direction of the investment manager or investment
committee, to review any securities or other property held in
such investment account or accounts acquired by it pursuant to
such directions or to make any recommendations to the
investment managers or investment committee with respect to
such securities or other property.
(3) Notwithstanding the foregoing, the Trustee, without obtaining
prior approval or direction from an investment manager or
investment committee, shall invest cash balances held by it
from time to time in short term cash equivalents including,
but not limited to, through the medium of any short term
common, collective or commingled trust fund established and
maintained by the Trustee subject to the instrument
establishing such trust fund, U.S. Treasury Bills, commercial
paper (including such forms of commercial paper as may be
available through the Trustee's Trust Department),
certificates of deposit (including certificates issued by the
Trustee in its separate corporate capacity), and similar type
securities, with a maturity not to exceed one year; and,
furthermore, sell such short term investments as may be
necessary to carry out the instructions of an investment
manager or investment committee regarding more permanent type
investment and directed distributions.
(4) The Trustee shall neither be liable nor responsible for any
loss resulting to the Fund by reason of any sale or purchase
of an investment directed by an investment manager or
investment committee nor by reason of the failure to take any
action with respect to any investment which was acquired
pursuant to any such direction in the absence of further
directions of such investment manager or investment committee.
(5) Notwithstanding anything in this Agreement to the contrary,
the Trustee shall be indemnified and saved harmless by the
Company from and against any and all personal liability to
which the Trustee may be subjected by carrying out any
9
<PAGE>
directions of an investment manager or investment committee
issued pursuant hereto or for failure to act in the absence of
directions of the investment manager or investment committee
including all expenses reasonably incurred in its defense in
the event the Company fails to provide such defense; provided,
however, the Trustee shall not be so indemnified if it
participates knowingly in, or knowingly undertakes to conceal,
an act or omission of an investment manager or investment
committee, having actual knowledge that such act or omission
is a breach of a fiduciary duty; provided further, however,
that the Trustee shall not be deemed to have knowingly
participated in or knowingly undertaken to conceal an act or
omission of an investment manager or investment committee with
knowledge that such act or omission was a breach of fiduciary
duty by merely complying with directions of an investment
manager or investment committee or for failure to act in the
absence of directions of an investment manager or investment
committee. The Trustee may rely upon any order, certificate,
notice, direction or other documentary confirmation purporting
to have been issued by the investment manager or investment
committee which the Trustee believes to be genuine and to have
been issued by the investment manager or investment committee.
The Trustee shall not be charged with knowledge of the
termination of the appointment of any investment manager or
investment committee until it receives written notice thereof
from the Company.
(d) Following a Change of Control, the Trustee shall have the sole and
absolute discretion in the management of the Trust assets and shall
have all the powers set forth under Section 6(b). In investing the
Trust assets, the Trustee shall consider:
(1) the needs of the Plan;
(2) the need for matching of the Trust assets with the liabilities
of the Plan; and
(3) the duty of the Trustee to act solely in the best interests of
the Participants and their Beneficiaries.
(e) The Trustee shall have the right, in its sole discretion, to delegate
its investment responsibility to an investment manager who may be an
affiliate of the Trustee. In the event the Trustee shall exercise this
right, the Trustee shall remain, at all times responsible for the acts
of an investment manager. The Trustee shall have the right to purchase
an insurance policy or an annuity to fund the benefits of the Plan.
(f) Prior to a Change of Control, the Company shall have the right at any
time, and from time to time in its sole discretion, to substitute
assets of equal fair market value for any asset held by the Trust. This
right is exercisable by the Company in a nonfiduciary capacity without
the approval or consent of any person in a fiduciary capacity.
10
<PAGE>
Section 7. Insurance Contracts
-------------------
(a) To the extent that the Trustee is directed by the Company prior to a
Change of Control to make payments from part or all of the Trust Fund
in insurance contracts, the type and amount thereof shall be specified
by the Company. The Trustee shall be under no duty to make inquiry as
to the propriety of the type or amount so specified.
(b) Each insurance contract issued shall provide that the owner thereof
shall have the power to exercise all rights, privileges, options and
elections granted by or permitted under such contract or under the
rules of the insurer.
(c) The Trustee shall have no power to name a beneficiary of the policy to
assign the policy (as distinct from conversion of the policy to a
different form), or to loan to any person the proceeds of any borrowing
against such an insurance policy.
(d) No insurer shall be deemed to be a party to the Trust and an insurer's
obligations shall be measured and determined solely by the terms of
contracts and other agreements executed by the insurer.
Section 8. Disposition of Income
---------------------
(a) Prior to a Change of Control, all income received by the Trust, net of
expenses and taxes, may be returned to the Company or accumulated and
reinvested within the Trust at the direction of the Company.
(b) Following a Change of Control, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested within the
Trust.
11
<PAGE>
Section 9. Accounting by The Trustee
-------------------------
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee within forty-five (45) days following the close of each
calendar year and within forty-five (45) days after the removal or resignation
of the Trustee. The Trustee shall deliver to the Company a written account of
its administration of the Trust during such year or during the period from the
close of the last preceding year to the date of such removal or resignation
setting forth all investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and investments
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the end of such year or
as of the date of such removal or resignation, as the case may be. The Company
may approve such account by an instrument in writing delivered to the Trustee.
In the absence of the Company's filing with the Trustee objections to any such
account within ninety (90) days after its receipt, the Company shall be deemed
to have so approved such account. In such case, or upon the written approval by
the Company of any such account, the Trustee shall, to the extent permitted by
law, be discharged from all liability to the Company for its acts or failures to
act described by such account. The foregoing, however, shall not preclude the
Trustee from having its accounting settled by a court of competent jurisdiction.
Section 10. Responsibility of The Trustee
-----------------------------
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in
like capacity and familiar with such matters would use in the conduct
of an enterprise of a like character and with like aims, provided,
however, that the Trustee shall incur no liability to any person for
any action taken pursuant to a direction, request or approval given by
the Company which is contemplated by, and in conformity with, the terms
of the Plan or this Trust Agreement and is given in writing by the
Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the
dispute, subject, however to Section 2(d) hereof.
(b) The Company hereby indemnifies the Trustee against losses, liabilities,
claims, costs and expenses in connection with the administration of the
Trust, unless resulting from the gross negligence or misconduct of
Trustee. To the extent the Company fails to make any payment on account
of an indemnity provided in this paragraph 10(b), in a reasonably
timely manner, the Trustee may obtain payment from the Trust. If the
Trustee undertakes or defends any litigation arising in connection with
this Trust or to protect a Participant's or Beneficiary's rights under
the Plan, the Company agrees to indemnify the Trustee against the
Trustee's costs, reasonable expenses and liabilities (including,
without limitation, attorneys' fees and expenses) relating thereto and
to be primarily liable for such payments. If the Company does not pay
such costs, expenses and liabilities in a reasonably timely manner, the
Trustee may obtain payment from the Trust.
12
<PAGE>
(c) Prior to a Change of Control, the Trustee may consult with legal
counsel (who may also be counsel for the Company generally) with
respect to any of its duties or obligations hereunder. Following a
Change of Control the Trustee shall select legal counsel independent
from the Company's counsel and may consult with counsel or other
experts with respect to its duties and with respect to the rights of
Participants or their Beneficiaries under the Plan.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder and may rely on
any determinations made by such agents and information provided to it
by the Company.
(e) The Trustee shall have, without exclusion, all powers conferred on the
Trustee by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of
section 301.7701-2 of the Procedure and Administrative Regulations
promulgated pursuant to the Internal Revenue Code.
Section 11. Compensation and Expenses of The Trustee
----------------------------------------
The Trustee's compensation shall be as agreed in writing from time to time by
the Company and the Trustee. The Company shall pay all administrative expenses
and the Trustee's fees and shall promptly reimburse the Trustee for any fees and
expenses of its agents or such other costs as the Trustee is entitled to incur
hereunder. If not so paid, the fees and expenses shall be paid from the Trust.
Section 12. Resignation and Removal of The Trustee
--------------------------------------
(a) Prior to a Change of Control, the Trustee may resign at any time by
written notice to the Company, which shall be effective sixty (60) days
after receipt of such notice unless the Company and the Trustee agree
otherwise. Following a Change of Control, the Trustee may resign only
after the appointment of a successor Trustee.
(b) The Trustee may be removed by the Company on sixty days (60) days
notice or upon shorter notice accepted by the Trustee prior to a Change
of Control. Subsequent to a Change of Control, the Trustee may only be
removed by the Company with the consent of a majority of the
Participants, after they have been informed of the identity of a
successor trustee.
(c) If the Trustee resigns within two years after a Change of Control, as
defined herein, the Company, or if the Company fails to act within a
reasonable period of time following such resignation, the Trustee shall
apply to a court of competent jurisdiction for the appointment of a
successor Trustee or for instructions.
13
<PAGE>
(d) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within sixty (60)
days after receipt of notice of resignation, removal or transfer,
unless the Company extends the time limit.
(e) If the Trustee resigns or is removed, a successor shall be appointed by
the Company, in accordance with Section 13 hereof, by the effective
date of resignation or removal under paragraphs (a) or (b) of this
section. If no such appointment has been made, the Trustee may apply to
a court of competent jurisdiction for appointment of a successor or for
instructions. All expenses of the Trustee in connection with the
proceeding shall be allowed as administrative expenses of the Trust.
Section 13. Appointment of Successor
------------------------
(a) If the Trustee resigns or is removed in accordance with Section 12
hereof, the Company may appoint, subject to Section 12, another bank,
not an affiliate of the Company or any other grantor, any third party
national banking association with a market capitalization exceeding
$100,000,000 to replace the Trustee upon resignation or removal. The
successor Trustee shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust. The former Trustee
shall execute any instrument necessary or reasonably requested by the
Company or the successor Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets,
subject to Section 8 and 9 hereof. The successor Trustee shall not be
responsible for and the Company shall indemnify and defend the
successor Trustee from any claim or liability resulting from any action
or inaction of any prior Trustee or from any other past event, or any
condition existing at the time it becomes successor Trustee.
Section 14. Amendment or Termination
------------------------
(a) Prior to a Change of Control, this Trust Agreement may be amended by a
written instrument executed by the Trustee and the Company.
Notwithstanding the foregoing, no such amendment shall conflict with
the terms of the Plan or shall make the Trust revocable after it has
become irrevocable in accordance with Section 1 hereof.
(b) The Trust shall not terminate until the date on which all insurance
premiums listed on the schedule referred to in Section 2(c)(1) have
been paid or otherwise satisfied, and any payments required under
Section 2(c)(3) are completed, or until the Company terminates the
Trust (if prior to a Change of Control).
(c) Prior to a Change of Control, the Company may terminate this Trust
prior to the time all benefit payments under the Plan have been made.
All assets in the Trust at termination shall be returned to the
Company.
14
<PAGE>
(d) This Trust Agreement may not be amended or terminated by the Company
for seven (7) years following a Change of Control without the written
consent of a majority of the Participants except, if in the opinion of
counsel satisfactory to the Trustee, such amendment is necessary to
maintain the tax status of this Trust or the inapplicability of the
Employee Retirement Income Security Act of 1974 as amended to this
Trust.
Section 15. Change of Control
-----------------
(a) For purposes of this Trust, the following terms shall be defined as set
forth below:
(1) Potential Change of Control shall mean:
(i) the purchase or other acquisition by any person,
entity or group of persons, within the meaning of
Section 13(d) or 14(d) of the Exchange Act, or any
comparable successor provisions, other than the
trustee of any other trust or plan maintained for the
benefit of employees of the Company, of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 5 percent or more of
either the outstanding shares of common stock or the
combined voting power of the Company's then
outstanding voting securities entitled to vote
generally;
(ii) the announcement by any person of an intention to
take actions which might reasonably result in a
Change of Control of the Company;
(iii) the issuance of a proxy statement by the Company with
respect to an election of directors for which there
is proposed one or more directors who are not
recommended by the Board of Directors of the Company
or its nominating committee, where the election of
such proposed director or directors would result in a
Change of Control as defined in Section
15(a)(2)(ii)(c); or
(iv) submission to the Incumbent Board (as defined below)
of nominations which, if approved, would change the
Executive Officer configuration of the Company (at
the Executive Vice President level and above) by 50%
or more.
(2) Change of Control shall mean:
(i) Voting Stock Accumulations. The accumulation by any
---------------------------
Person of Beneficial Ownership of twenty percent
(20%) or more of the combined voting power of the
Company's Voting Stock; provided that for purposes of
this subparagraph 15(a)(2)(i), a Change of Control
will not be deemed to have occurred if the
accumulation of twenty percent (20%) or more of the
voting power of the Company's Voting Stock results
from any acquisition of Voting Stock (a) directly
from the Company that is approved by the Incumbent
15
<PAGE>
Board, (b) by the Company, (c) by any employee
benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, or (d)
by any Person pursuant to a Business Combination that
complies with clauses (a), (b) and (c) of
subparagraph 15(a)(2)(ii), or
(ii) Business Combinations. The consummation of a Business
---------------------
Combination, unless, immediately following that
Business Combination, (a) all or substantially all of
the Persons who were the beneficial owners of Voting
Stock of the Company immediately prior to that
Business Combination beneficially own, directly or
indirectly, more than sixty-six and two-thirds
percent (66"%) of the then outstanding shares of
common stock and the combined voting power of the
then outstanding voting securities entitled to vote
generally in the election of Directors of the entity
resulting from that Business Combination (including,
without limitation, an entity that as a result of
that transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions relative to each
other as their ownership, immediately prior to that
Business Combination, of the Voting Stock of the
Company, (b) no Person (other than the Company, that
entity resulting from that Business Combination, or
any employee benefit plan (or related trust)
sponsored or maintained by the Company, any Eighty
Percent (80%) Subsidiary or that entity resulting
from that Business Combination) beneficially owns,
directly or indirectly, twenty percent (20%) or more
of the then outstanding shares of common stock of the
entity resulting from that Business Combination or
the combined voting power of the then outstanding
voting securities entitled to vote generally in the
election of directors of that entity, and (c) at
least a majority of the members of the Board of
Directors of the entity resulting from that Business
Combination were members of the Incumbent Board at
the time of the execution of the initial agreement or
of the action of the Board providing for that
Business Combination; or
(iii) Sale of Assets. A sale or other disposition of all or
--------------
substantially all of the assets of the Company; or
(iv) Liquidations or Dissolutions. Approval by the
--------------------------------
shareholders of the Company of a complete liquidation
or dissolution of the Company, except pursuant to a
Business Combination that complies with clauses (a),
(b) and (c) of subparagraph 15(a)(2)(ii).
For purposes of this paragraph 15(a), the following definitions will apply:
"Beneficial Ownership" means beneficial ownership as that term is used
in Rule 13d-3 promulgated under the Exchange Act.
16
<PAGE>
"Business Combination" means a reorganization, merger or consolidation
of the Company.
"Eighty Percent (80%) Subsidiary" means an entity in which the Company
directly or indirectly beneficially owns eighty percent (80%) or more
of the outstanding Voting Stock.
"Exchange Act" means the Securities Exchange Act of 1934, including
amendments, or successor statutes of similar intent.
"Incumbent Board" means a Board of Directors at least a majority of
whom consist of individuals who either are (a) members of the Company's
Board of Directors as of January 1, 2000, or (b) members who become
members of the Company's Board of Directors subsequent to said date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least two-thirds (") of the
directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which that
person is named as a nominee for director, without objection to that
nomination), but excluding, for that purpose, any individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest (within the meaning of Rule 14a-11 of the
Exchange Act) with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors.
"Person" means any individual, entity or group (within the meaning of
Section 13(d)(3) or 14 (d)(2) of the Exchange Act).
"Subsidiary" means an entity more than fifty percent (50%) of whose
equity interests are owned directly or indirectly by the Company.
"Voting Stock" means the then outstanding securities of an entity
entitled to vote generally in the election of members of that entity's
Board of Directors.
For purposes of this Section 15(a), the Incumbent Board, by a majority vote,
shall have the power to determine on the basis of information known to them (a)
the number of shares beneficially owned by any person, entity or group; (b)
whether there exists an agreement, arrangement or understanding with another as
to matters referred to in this Section 15(a); and (c) such other matters with
respect to which a determination is necessary under this Section 15(a).
(b) The General Counsel of the Company shall have the specific authority to
determine whether a Potential Change of Control or Change of Control
has transpired under the guidance of this Section 15(a) and shall be
required to give the Trustee notice of a Change of Control or Potential
Change of Control. The Trustee shall be entitled to rely upon such
notice, but if the Trustee receives notice of a Change of Control from
another source, the Trustee shall be required to make its own
independent determination.
17
<PAGE>
Section 16. Miscellaneous
-------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating
the remaining provisions hereof.
(b) The Company hereby represents and warrants that the Plan has been
established, maintained and administered in accordance with all
applicable laws, including without limitation, ERISA. The Company
hereby indemnifies and agrees to hold the Trustee harmless from all
liabilities, including attorney's fees, relating to or arising out of
the establishment, maintenance and administration of the Plan. To the
extent the Company does not pay any of such liabilities in a reasonably
timely manner, the Trustee may obtain payment from the Trust.
(c) Benefits payable to Participants and their Beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(d) This Agreement is binding upon the successors and assigns of the
Company and the Trustee.
(e) This Trust Agreement shall be governed by and construed in accordance
with the laws of North Carolina.
IN WITNESS WHEREOF, this Grantor Trust Agreement has been executed on behalf of
the parties hereto on the day and year first above written.
EQUIFAX INC.
By: /s/John T. Chandler
-----------------------
Title: Corporate V.P.
Attest
/s/Charles Bowen
- ----------------------
Title: Assistant V.P.
[Corporate Seal]
18
<PAGE>
WACHOVIA BANK, N.A.
By: /s/Joe O. Long
--------------------------
Attest SVP/GE
/s/John N. Smith, III
- ---------------------------
Title: Assistant Secretary
[Corporate Seal]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EQUIFAX
INC. FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000033185
<NAME> EQUIFAX INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 108,542
<SECURITIES> 0
<RECEIVABLES> 314,380
<ALLOWANCES> 14,775
<INVENTORY> 0
<CURRENT-ASSETS> 581,869
<PP&E> 295,370
<DEPRECIATION> 189,311
<TOTAL-ASSETS> 1,836,691
<CURRENT-LIABILITIES> 490,007
<BONDS> 913,342
0
0
<COMMON> 218,233
<OTHER-SE> 32,473
<TOTAL-LIABILITY-AND-EQUITY> 1,836,691
<SALES> 451,081
<TOTAL-REVENUES> 451,081
<CGS> 270,087
<TOTAL-COSTS> 270,087
<OTHER-EXPENSES> 93,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,374
<INCOME-PRETAX> 72,183
<INCOME-TAX> 29,956
<INCOME-CONTINUING> 42,227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,227
<EPS-BASIC> 0.32
<EPS-DILUTED> 0.31
</TABLE>
