EX-99.1 2 a39279orexv99w1.htm EXHIBIT 99.1 Exhibit 99.1
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Exhibit 99.1
 
     
(FIS LOGO)
   
 
          , 2008
 
Dear Shareholder of Fidelity National Information Services, Inc.:
 
We are pleased to inform you that the board of directors of Fidelity National Information Services, Inc., which we refer to as FIS, has approved the distribution of all of the shares of common stock of Lender Processing Services, Inc., which we refer to as LPS, a wholly-owned subsidiary of FIS, to FIS shareholders through a stock dividend. At the time of the distribution, LPS will consist of all the assets, liabilities, businesses and employees related to FIS’s lender processing services segment as of the date of the spin-off. Upon the distribution, FIS shareholders will own 100% of the outstanding common stock of LPS. Our current business will be separated into two separate, publicly traded companies with independent ownership and dedicated management.
 
The distribution of LPS common stock is expected to occur on          , 2008 by way of a pro rata stock dividend, which is subject to certain customary conditions, to FIS shareholders. Each FIS shareholder will receive one-half share of LPS common stock for every share of FIS common stock held as of the close of business on          , 2008, the record date of the distribution.
 
As a holder of FIS common stock on the record date of the distribution, you will automatically receive shares of LPS common stock unless you sell your FIS shares before the distribution date in the “regular way” market as described in the enclosed information statement. However, if you own an odd number of shares of FIS common stock, you will receive a cash payment in lieu of a fractional share. You do not need to take any action or pay any consideration to receive the shares of LPS common stock in the distribution. Please do not send us certificates representing your shares of FIS common stock.
 
It is a condition to completing the spin-off that FIS receive a private letter ruling from the Internal Revenue Service and an opinion of our special tax advisor, Deloitte Tax LLP, together to the effect that, for United States Federal income tax purposes, the distribution of LPS common stock to FIS shareholders will qualify as a tax-free distribution to FIS, LPS and FIS shareholders, except that any cash that you receive in lieu of any fractional share of LPS common stock to which you may be entitled generally will be taxable to you.
 
Lender Processing Services, Inc. intends to apply to have its common stock listed on the New York Stock Exchange under the symbol “LPS.” The common stock of Fidelity National Information Services, Inc. will continue to trade on the New York Stock Exchange under the symbol “FIS.”
 
The enclosed information statement, which is being mailed to all FIS shareholders, describes the spin-off in detail and contains important information about LPS. We encourage you to read this information statement carefully.
 
We remain committed to working on behalf of our shareholders to build long-term value. We appreciate your interest and continued support.
 
Sincerely,
 
Lee A. Kennedy
President and Chief Executive Officer


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          , 2008
 
 
Dear Stockholder of Lender Processing Services, Inc.:
 
We are very pleased to welcome you as a stockholder of Lender Processing Services, Inc., which is expected to become a stand-alone public company following receipt of all required approvals related to its spin-off from Fidelity National Information Services, Inc., which we refer to as FIS, on or about          , 2008. Lender Processing Services, Inc., which we refer to as LPS, will consist of all the assets, liabilities, businesses and employees related to FIS’s lender processing services segment as of the date of the spin-off.
 
We are a leading provider of integrated technology and outsourced services to the mortgage lending industry, with market-leading positions in mortgage processing and default management services in the U.S. A large number of financial institutions use our services, including 41 of the 50 largest banks in the U.S. Our technology solutions include our mortgage processing system, which processes over 50% of all U.S. residential mortgage loans by dollar volume. Our outsourced services include our default management services, which are used by mortgage lenders and servicers to reduce the expense of managing defaulted loans, and our loan facilitation services, which support most aspects of the closing of mortgage loan transactions to national lenders and loan servicers. Our integrated solutions create a strong value proposition for our customers across the life cycle of a mortgage. We believe that we will continue to benefit from the opportunity to cross-sell services across our broad customer base.
 
We believe that our independence will allow us to more effectively focus on meeting our financial and business objectives and thereby will provide an opportunity to deliver more value to you as a stockholder than we could as a subsidiary of FIS. The LPS shares are expected to be listed on the New York Stock Exchange under the symbol “LPS.”
 
I encourage you to learn more about LPS and the objectives we will pursue as a stand-alone public company by reading the enclosed information statement. It describes the spin-off in detail, including the conditions to the spin-off. We look forward to your support and participation as a stockholder of LPS.
 
Sincerely,
 
Jeffrey S. Carbiener
President and Chief Executive Officer


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INFORMATION STATEMENT

Distribution of
Common Stock of

LENDER PROCESSING SERVICES, INC.
by
FIDELITY NATIONAL INFORMATION SERVICES, INC.
to Shareholders of Fidelity National Information Services, Inc.
 
We are currently a wholly-owned subsidiary of Fidelity National Information Services, Inc., which we refer to as FIS. FIS has decided to spin off its Lender Processing Services Segment by distributing all of our common stock to its shareholders. At the distribution date, our assets, liabilities, businesses and employees will consist of all the assets, liabilities, businesses and employees related to FIS’s lender processing services segment as of the date of the spin-off. Immediately after the distribution is completed, we will be a stand-alone publicly traded company.
 
For every share of FIS common stock, par value $0.01 per share, which we refer to as FIS common stock, that you hold as of the close of business on          , 2008, the record date for the distribution, you will receive one-half share of our common stock, par value $0.01 per share, which we refer to as LPS common stock or our common stock. We expect FIS to distribute shares of our common stock to its shareholders on or about          , 2008. As discussed more fully in this information statement, if you sell shares of FIS common stock in the “regular way” market, and the sale of the shares settles before the distribution date, you will be selling your right to receive shares of LPS common stock in the distribution. See “The Spin-Off — Trading Before the Distribution Date.”
 
FIS shareholders are not being requested to vote on the spin-off and you do not have to take any other action in order to receive shares of LPS common stock. You will not be required to pay anything for the LPS shares or to surrender any of your shares of FIS common stock. We are not asking you for a proxy. Please do not send us a proxy or your stock certificates.
 
Until the shares of LPS common stock begin trading on a “when issued” basis on or about          , 2008, there will be no market for trading shares of LPS common stock. We expect to list the shares of Lender Processing Services, Inc. common stock on the New York Stock Exchange under the symbol “LPS.”
 
In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 7.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
 
 
 
The date of this information statement is          , 2008.
 
This information statement was first mailed to FIS shareholders on or about          , 2008.


 

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This information statement is being furnished solely to provide information to Fidelity National Information Services, Inc. shareholders who will receive shares of our common stock in the distribution. It is not and is not to be construed as an inducement or encouragement to buy or sell any of our securities or any securities of FIS. This information statement describes our business, the relationship between FIS and us, and how the spin-off affects FIS and its shareholders, and provides other information to assist you in evaluating the benefits and risks of holding or disposing of our common stock that you will receive in the distribution. You should be aware of certain risks relating to the spin-off, our business and ownership of our common stock, which are described under the heading “Risk Factors.”
 
You should not assume that the information contained in this information statement is accurate as of any date other than the date on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information, except in the normal course of our public disclosure obligations and practices.
 
The information statement refers to certain trademarks, including Desktop, Empower!, Lender Processing Services, Lender Processing Services (LPS), LenderProcessingServices, LPS, LPS (stylized and design), Mortgage Servicing Package, RealEC, and SoftPro.


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SUMMARY
 
This summary highlights selected information from this information statement relating to Lender Processing Services, Inc., LPS’s separation from FIS and the distribution of LPS common stock by FIS to its shareholders. For a more complete understanding of our business and the separation and distribution, you should read this information statement carefully.
 
Except as otherwise indicated or unless the context otherwise requires, the information included in this statement assumes the completion of all the transactions referred to in this information statement in connection with the separation and distribution.
 
Except as otherwise indicated or unless the context otherwise requires, “LPS,” “we,” “us,” “our” and “the Company” refer to Lender Processing Services, Inc., a Delaware corporation, and its subsidiaries; all references to “FIS” are to Fidelity National Information Services, Inc., a Georgia corporation formerly known as Certegy Inc., and its subsidiaries; all references to “Certegy” are to Certegy Inc., and its subsidiaries, prior to the Certegy merger described below; all references to “Former FIS” are to Fidelity National Information Services, Inc., a Delaware corporation, and its subsidiaries, prior to the Certegy merger; all references to “Old FNF” are to Fidelity National Financial, Inc., a Delaware corporation that owned a majority of FIS’s shares through November 9, 2006; and all references to FNF are to Fidelity National Financial, Inc. (formerly known as Fidelity National Title Group, Inc.), formerly a subsidiary of Old FNF but now a stand-alone company that remains a related entity from an accounting perspective.
 
Overview
 
We are a leading provider of integrated technology and outsourced services to the mortgage lending industry, with market-leading positions in mortgage processing and default management services in the U.S. A large number of financial institutions use our services, including 41 of the 50 largest banks in the U.S. Our technology solutions include our mortgage processing system, which processes over 50% of all U.S. residential mortgage loans by dollar volume. Our outsourced services include our default management services, which are used by mortgage lenders and servicers to reduce the expense of managing defaulted loans, and our loan facilitation services, which support most aspects of the closing of mortgage loan transactions to national lenders and loan servicers. Our integrated solutions create a strong value proposition for our customers across the life cycle of a mortgage. We believe that we will continue to benefit from the opportunity to cross-sell services across our broad customer base. For the year ended December 31, 2007, we generated revenues of $1,690.6 million and operating income of $424.1 million.
 
We conduct our operations through two reporting segments, Technology, Data and Analytics and Loan Transaction Services. Our Technology, Data and Analytics segment principally includes:
 
  •  our mortgage processing services, which we conduct using our market-leading mortgage servicing platform, or MSP, and our team of experienced support personnel based primarily at our Jacksonville, Florida data center;
 
  •  our Desktop application, a workflow system that assists our customers in managing business processes, which today is primarily used in connection with mortgage loan default management but which has broader applications;
 
  •  our other software and related service offerings, including our mortgage origination software, our real estate closing and title insurance production software and our middleware application which provides collaborative network connectivity among mortgage industry participants; and
 
  •  our data and analytics businesses, the most significant of which is our alternative property valuations business, which provides a range of types of valuations other than traditional appraisals, our property records business and our advanced analytic services, which assist our customers in their loan marketing or loss mitigation efforts.
 
For the year ended December 31, 2007, this segment produced $570.1 million in revenue, of which our mortgage processing services represented $341.2 million.


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Our Loan Transaction Services segment offers a range of services used mainly in the production of a mortgage loan, which we refer to as our loan facilitation services, and in the management of mortgage loans that go into default. Our loan facilitation services include:
 
  •  settlement services, which consist of title agency services, in which we act as an agent for title insurers, and closing services, in which we assist in the closing of real estate transactions; and
 
  •  other origination services, which consist of traditional appraisal and appraisal management services, real estate tax services, which provide lenders with information about the tax status of a property, and flood zone information, which assists lenders in determining whether a property is in a federally designated flood zone.
 
Our default management services offer a full spectrum of outsourced services in connection with defaulted loans. These services include, among others:
 
  •  foreclosure services, including access to a nationwide network of independent attorneys, document preparation and recording and other services;
 
  •  property preservation services, designed to preserve the value of properties securing defaulted loans; and
 
  •  asset management services, providing REO disposition services through a network of independent real estate brokers, attorneys and other vendors to facilitate the transaction.
 
Our revenues from these services grew significantly in 2007 and tend to provide a natural hedge against the effects of high interest rates or a slow real estate market on our loan facilitation services. For the year ended December 31, 2007, revenues from our Loan Transaction Services segment were $1,125.9 million.
 
We also have a corporate segment consisting of smaller operations, overhead costs and intersegment eliminations.
 
We describe in this information statement the lender processing services operations to be contributed to us by FIS in connection with the spin-off as if it were our business for all historical periods described. The operations to be contributed to us will represent all the operations of FIS’s lender processing services segment at the date of the spin-off. However, we are a newly-formed entity that will not independently conduct any operations before the spin-off. References in this document to our historical assets, liabilities, services, businesses, employees or activities generally refer to the historical assets, liabilities, services, businesses, employees or activities of the contributed businesses as they were conducted as part of FIS and its subsidiaries before the spin-off. Our historical financial results as part of FIS, contained in this information statement, may not be indicative of our financial results in the future as a stand-alone company or reflect what our financial results would have been had we been a stand-alone company during the periods presented.
 
Our principal executive offices are located at 601 Riverside Avenue, Jacksonville, Florida 32204 and our main telephone number is (904) 854-5100. We were incorporated in Delaware in December 2007.
 
The Spin-Off
 
Assets, Liabilities and Operations Transferred to LPS In connection with the spin-off, we expect to enter into a contribution and distribution agreement with FIS that will contain the key provisions relating to the separation of our business from FIS and the distribution of our shares of common stock. The contribution and distribution agreement will identify the assets to be transferred, liabilities to be assumed and contracts to be assigned to us by FIS in the separation and describe when and how these transfers, assumptions and assignments will occur. In addition, we expect to enter into a tax disaffiliation agreement setting out each party’s rights and obligations with respect to federal, state, local, and foreign taxes for tax periods before the spin-off and related matters, certain indemnification rights and obligations with respect to taxes for tax periods before the spin-off and for any taxes and associated adverse consequences resulting from the spin-off and certain


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restrictions designed to preserve the tax-free status of the spin-off. See “Risk Factors — Risk Factors Related to the Spin-Off.” In connection with the spin-off, we also expect to enter into an employee matters agreement with FIS providing for the allocation of assets, liabilities and responsibilities with respect to certain employee benefit plans, policies and compensation programs. See “Certain Relationships and Related Party Transactions — Agreements With FIS.”
 
Relationship with FIS after the Spin-Off In connection with the spin-off, we expect to enter into a corporate and transition services agreement under which FIS and we will provide each other with certain services on an interim, and, in some cases, longer term basis. We will also enter into a corporate and transition services agreement with FNF, under which it will provide us with other corporate services on an interim and sometimes longer term basis. There are other arrangements between us and FIS or FNF that will continue following the spin-off. Although FNF and FIS are separate companies, FNF, FIS and we will have the same executive Chairman, William P. Foley, II, and will have certain overlapping directors. However, none of our executive officers, except for Mr. Foley, will be a dual employee. These arrangements with FIS and FNF may involve, or may appear to involve, conflicts of interest. See “Certain Relationships and Related Party Transactions.”
 
Management of LPS After the spin-off, we will have an initial board of directors consisting of 6 directors. William P. Foley, II will be Executive Chairman of our board of directors. See “Management — The Board.”
 
Our President and Chief Executive Officer is expected to be Jeffrey S. Carbiener, currently the Chief Financial Officer of FIS. Our Executive Vice President and Chief Financial Officer will be Francis K. Chan, currently the Senior Vice President, Chief Accounting Officer and Controller of FIS. Daniel T. Scheuble, currently the Executive Vice President of the Mortgage Processing Services division of FIS, and Eric D. Swenson, currently the Executive Vice President of the Mortgage Information Services division of FIS, will have the same titles with the Technology, Data and Analytics segment and the Loan Transaction Services segment, respectively, of our Company. See “Management — Directors and Executive Officers.”
 
Debt In the spin-off, FIS will contribute to us all of its interest in the assets, liabilities, businesses and employees related to FIS’s lender processing services operations as of the date of the spin-off in exchange for shares of our common stock and up to approximately $1.6 billion aggregate principal amount of our debt obligations. After the spin-off, FIS will exchange 100% of these debt obligations for a like amount of FIS’s existing Tranche B Term Loans (the “Existing Tranche B Loans”) issued under its Credit Agreement dated as of January 18, 2007 and held by certain lenders. Following this debt-for-debt exchange the portion of the Existing Tranche B Loans acquired by FIS will be retired.
 
We expect to have up to approximately $1.6 billion of indebtedness upon completion of the spin-off. We expect that our new debt may include covenants that, among other things, will require us to satisfy certain financial tests, maintain certain financial ratios and restrict our ability to incur additional indebtedness. To the extent permitted, we


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may also incur additional indebtedness from time to time for general corporate purposes, including working capital requirements, capital expenditures and future acquisitions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” See also “Risk Factors — Risk Factors Related to the Spin-Off — Following the spin-off, we will have substantial indebtedness, which could have a negative impact on our financing options and liquidity position” and “Risk Factors— Risk Factors Related to the Spin-Off — Our financing arrangements will subject us to various restrictions that could limit our operating flexibility.” The terms of some or all of our new debt obligations will be intended to qualify as “debt securities” for federal tax purposes.
 
Equity Awards Our Employees and Directors
 
FIS stock options held by persons who, after the spin-off, will solely be employed by or serve as directors of LPS will be replaced with LPS stock options granted under our new omnibus incentive plan, which we refer to as the “LPS omnibus incentive plan.” The LPS options will have the same terms and conditions as the FIS options, but with equitable adjustments made to the exercise prices and the number of shares underlying the options to reflect the difference in value of FIS and LPS common stock.
 
FIS restricted stock held by such persons will be replaced with awards of LPS restricted stock. These replacement awards will have the same terms and conditions as the forfeited FIS awards, and the shares will vest on the same dates the FIS awards would have vested. The number of shares subject to the awards will be adjusted to reflect the differences in stock value of FIS and LPS.
 
FIS Employees and Directors
 
The exercise price of, and number of shares of FIS common stock underlying, FIS stock options held by any current or former FIS employee or director who will not become an LPS employee or director will be adjusted, in an amount yet to be determined, pursuant to the terms of the applicable FIS equity incentive plans, taking into account the change in the value of FIS common stock as a result of the spin-off.
 
All holders of FIS restricted stock who will not become our employees or directors will receive, in lieu of receiving LPS shares in the spin-off with respect to such restricted stock, an equitable adjustment to increase the number of shares of FIS restricted stock owned by the employee or director to prevent any dilution of the participant’s rights. The additional shares of restricted stock will have the same transfer restrictions and forfeiture conditions as the original grant of FIS restricted stock.
 
Dual Employees
 
The FIS stock options held by any current FIS employee who will be employed by both FIS and us after the spin-off will be split in half. One half will be adjusted, in an amount yet to be determined, pursuant to the terms of the applicable FIS equity incentive plans, taking into account the change in the value of FIS common stock as a result of the spin-off. The other half will be replaced with LPS stock options granted under the LPS omnibus incentive plan with the same terms


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and conditions as the FIS options, but with equitable adjustments made to the exercise prices and the number of shares underlying the options to reflect the difference in value of FIS and LPS common stock.
 
The FIS restricted stock held by any current FIS employee who will be employed by both FIS and us after the spin-off will be split in half. One half will be equitably adjusted by increasing the number of shares of FIS restricted stock to prevent dilution. The additional shares of restricted stock will have the same transfer restrictions and forfeiture conditions as the original grant of FIS restricted stock. The other half will be replaced with awards of LPS restricted stock. These replacement awards will have the same terms and conditions as the forfeited FIS awards, and the shares will vest on the same dates the FIS awards would have vested. The number of shares subject to the awards will be adjusted to reflect the differences in stock value of FIS and LPS.
 
Dividend Policy We expect to pay dividends at an annual rate of approximately $      per share, but only if and to the extent dividends are declared by our board of directors and permitted by applicable law and by the terms of our financing arrangements. Dividend payments are not guaranteed and our board of directors may decide, in its absolute discretion, not to pay dividends.
 
All decisions regarding the declaration and payment of dividends, including with respect to the initial dividend, will be at the discretion of our board of directors and will be evaluated from time to time in light of our financial condition, earnings, growth prospects, funding requirements, applicable law and other factors our board of directors deems relevant. See “Dividend Policy.”
 
Certain Anti-Takeover Effects Our certificate of incorporation, bylaws, certain provisions of Delaware corporate law and certain provisions of New York insurance law will have the effect of making it more difficult for a potential acquirer to obtain control of our Company in a transaction not approved by our board of directors. See “Business — Government Regulation” and “Description of Capital Stock.”
 
Certain United States Federal Income Tax Consequences of the Spin-Off It is a condition to completing the spin-off that FIS receive a private letter ruling from the Internal Revenue Service (the “IRS”) and an opinion of FIS’s special tax advisor, Deloitte Tax LLP (“Deloitte”), together to the effect that, among other things, for United States Federal income tax purposes, the distribution of LPS common stock to FIS shareholders will qualify as a tax-free distribution under Section 355 and related provisions of the Internal Revenue Code of 1986, as amended (the “Code”) to FIS, LPS and FIS shareholders, except that any gain you realize on cash that you receive in lieu of any fractional shares of LPS common stock to which you may be entitled generally will be taxable to you. Certain United States Federal income tax consequences of the spin-off are described in more detail under “The Spin-Off — Certain United States Federal Income Tax Consequences of the Spin-Off.”
 
Risk Factors You should review the risks relating to the spin-off, our business and ownership of our common stock described in “Risk Factors.”


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Summary Historical Financial Information
 
The following table presents our summary historical financial data. The combined statement of earnings data for each of the years in the three-year period ended December 31, 2007 has been derived from our audited combined financial statements included elsewhere herein.
 
The summary historical financial data presented below should be read in conjunction with our combined financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein. Our financial information may not be indicative of our future performance and does not necessarily reflect what our financial position and results of operations would have been had we operated as a separate, stand-alone entity during the periods presented, including changes that will occur in our operations and capitalization as a result of our spin-off from FIS.
 
                         
    2007     2006     2005  
    (In thousands)  
 
Processing and services revenues
  $ 1,690,568     $ 1,484,977     $ 1,382,479  
Cost of revenues
    1,058,647       900,145       804,488  
                         
Gross profit
    631,921       584,832       577,991  
                         
Selling, general, and administrative expenses
    207,859       257,312       260,066  
                         
Operating income
    424,062       327,520       317,925  
                         
Other income (expense):
                       
Interest income
    1,690       2,606       4,124  
Interest expense
    (146 )     (298 )     (270 )
Other income (expense), net
          (106 )     (1,238 )
                         
Total other income (expense)
    1,544       2,202       2,616  
                         
Earnings before income taxes, equity in loss of unconsolidated affiliates and minority interest
    425,606       329,722       320,541  
Provision for income taxes
    164,734       127,984       124,160  
                         
Earnings before equity in loss of unconsolidated affiliates and minority interest
    260,872       201,738       196,381  
Equity in loss of unconsolidated affiliate
    (3,048 )            
Minority interest
    (1,019 )     (683 )     (676 )
                         
Net earnings
  $ 256,805     $ 201,055     $ 195,705  
                         


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RISK FACTORS
 
You should carefully consider the risks described below, together with all of the other information included in this information statement, in evaluating our Company and our common stock. If any of the risks described below actually occurs, our business, results of operations, financial condition or stock price could be materially adversely affected.
 
Risks Related to the Spin-Off
 
Our historical financial information may not be indicative of our future results as a stand-alone company.
 
The historical financial information we have included in this information statement may not reflect what our results of operations, financial condition and cash flows would have been had we been a stand-alone company during the periods presented or be indicative of what our results of operations, financial condition and cash flows may be in the future when we are a stand-alone company. This is primarily a result of the following factors:
 
  •  our historical financial information does not reflect the debt and related interest expense that we will incur as part of the spin-off, including debt we will incur in order to issue debt obligations to FIS in partial consideration of FIS’s contribution to us of our operations; and
 
  •  the historical financial information does not reflect the increased costs associated with being a stand-alone company, including changes that we expect in our cost structure, personnel needs, financing and operations of the contributed business as a result of the spin-off from FIS.
 
Historically, our business has been principally operated as one of FIS’s business units. We will need to replicate certain facilities, systems, infrastructure and personnel to which we will no longer have access after our spin-off from FIS. We will incur capital and other costs associated with developing and implementing our own support functions in these areas.
 
For additional information about the past financial performance of our business and the basis of the presentation of the historical financial statements, see “Selected Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and the accompanying notes included elsewhere in this information statement.
 
If the contribution, debt exchange or distribution do not qualify as tax-free transactions, tax could be imposed on FIS, LPS and/or FIS shareholders, and we may have to indemnify for payment of taxes and tax-related losses.
 
It is a condition to completing the spin-off that FIS receive a private letter ruling from the Internal Revenue Service and an opinion of FIS’s special tax advisor, Deloitte, together to the effect that, for United States Federal income tax purposes, the following transactions will qualify as tax-free transactions to FIS, LPS and FIS shareholders: (i) the contribution of all of FIS’s interest in all the assets, liabilities, businesses and employees related to FIS’s lender processing services operations as of the date of the spin-off in exchange for the receipt by FIS of LPS common stock and the LPS debt obligations (the “contribution”), (ii) the expected exchange by FIS of the LPS debt obligations for certain outstanding FIS debt (the “debt exchange”) and (iii) the distribution of LPS common stock to FIS shareholders, except that any gain that FIS shareholders realize on cash received in lieu of any fractional shares of LPS common stock to which such shareholders may be entitled in the distribution generally will be taxable to the shareholders (the “spin-off”). The terms of some or all of our new debt obligations will be intended to qualify as “debt securities” for federal tax purposes.
 
Notwithstanding receipt by FIS of the private letter ruling and opinion of Deloitte, the IRS could determine that the contribution, debt exchange and/or spin-off constitute taxable transactions if it determines that there was a misstatement or omission of any of the facts, representations, or undertakings that were included in the request for the private letter ruling, or if it disagrees with the conclusions in the opinion that are not covered by the IRS ruling. If the contribution, debt exchange and distribution were subject to tax, (i) FIS generally would be taxed on gain equal to as much as the full fair market value of the LPS stock and LPS debt obligations on the distribution date and (ii) the


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FIS shareholders generally would be treated as if they received dividend income equal to the full fair market value of the LPS stock on the distribution date. In addition, we could be subject to tax on certain of the preliminary asset transfers within FIS that are made in connection with the contribution transaction.
 
Even if the spin-off otherwise were to qualify for tax-free treatment for United States Federal income tax purposes, it would become taxable to FIS pursuant to Section 355(e) of the Code if 50% or more of the shares of either FIS common stock or LPS common stock were acquired, directly or indirectly, as part of a plan or series of related transactions that included the spin-off. If the IRS were to determine that acquisitions of FIS common stock or LPS common stock, either before or after the spin-off, were part of a plan or series of related transactions that included the spin-off, this determination could result in the recognition of gain by FIS under Section 355(e).
 
Although the taxes resulting from the contribution, debt exchange or spin-off not qualifying for tax-free treatment for United States Federal income tax purposes generally would be imposed on FIS shareholders and FIS, under the tax disaffiliation agreement to be entered into by FIS and us in connection with the distribution, we would be required to indemnify FIS and its affiliates against all tax related liabilities caused by the failure of any of those transactions to qualify for tax-free treatment for United States Federal income tax purposes (including as a result of Section 355(e) of the Code) to the extent these liabilities arise as a result of any action taken by us or any of our affiliates following the spin-off or otherwise result from any breach of any representation, covenant or obligation of ours or any of our affiliates under the tax disaffiliation agreement. See “Certain Relationships and Related Party Transactions — Agreements With FIS — Tax Disaffiliation Agreement.” FIS estimates that the amount of our indemnification obligation for the amount of tax could be significant.
 
We are agreeing to certain restrictions to help preserve the tax-free treatment to FIS of the distribution, which may reduce its strategic and operating flexibility.
 
In order to help preserve the tax-free treatment of the distribution, we have agreed not to take certain actions without first securing the consent of certain FIS officers or securing an opinion from a nationally recognized law firm or accounting firm that such action will not cause the distribution to be taxable. In general, such actions would include, (i) for a period of two years after the distribution, engaging in certain transactions involving (a) the acquisition of our stock or (b) the issuance of shares of our stock, and (ii) repurchasing or repaying our new debt prior to maturity other than in accordance with its terms or modifying the terms of the debt in any manner.
 
The covenants in, and our indemnity obligations under, the tax disaffiliation agreement may limit our ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of our business. These covenants and indemnity obligations might discourage, delay or prevent a change of control that could be favorable to our stockholders.
 
Following the spin-off, we will have substantial indebtedness, which could have a negative impact on our financing options and liquidity position.
 
In connection with the spin-off, we will issue to FIS shares of our common stock and up to approximately $1.6 billion principal amount of our debt obligations, in exchange for the assets to be contributed to us. As a result, following the spin-off, we will have up to approximately $1.6 billion of total debt outstanding. We also may have additional borrowing capacity available under a new revolving credit facility.
 
This high level of debt could have important consequences to us, including the following:
 
  •  the debt level makes us more vulnerable to economic downturns and adverse developments in our business, may cause us to have difficulty borrowing money in the future in excess of amounts available under our credit facility for working capital, capital expenditures, acquisitions or other purposes and will limit our ability to pursue other business opportunities and implement certain business strategies;
 
  •  we will need to use a large portion of the money we earn to pay principal and interest on our debt, which will reduce the amount of money available to finance operations, acquisitions and other business activities and pay stockholder dividends;


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  •  some or all of the debt will have a variable rate of interest, which exposes us to the risk of increased interest rates; and
 
  •  we will have a higher level of debt than certain of our competitors, which may cause a competitive disadvantage and may reduce flexibility in responding to changing business and economic conditions, including increased competition.
 
Our financing arrangements will subject us to various restrictions that could limit our operating flexibility.
 
We expect that our new debt may contain restrictions, covenants and events of default that, among other things, will require us to satisfy certain financial tests and maintain certain financial ratios and restrict our ability to incur additional indebtedness. These restrictions may include compliance with, or maintenance of, certain financial tests and ratios, including a minimum interest coverage ratio and maximum leverage ratio, and may limit or prohibit our ability to, among other things:
 
  •  create, incur or assume any additional debt and issue preferred stock;
 
  •  create, incur or assume certain liens;
 
  •  redeem and/or prepay certain subordinated debt we might issue in the future;
 
  •  pay dividends on our stock or repurchase stock;
 
  •  make certain investments and acquisitions;
 
  •  enter into or permit to exist contractual limits on the ability of our subsidiaries to pay dividends to us;
 
  •  engage in specified sales of assets; and
 
  •  enter into transactions with affiliates.
 
These restrictions on our ability to operate our business could harm our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition and other corporate opportunities.
 
Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial tests and ratios. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt and to terminate any commitments to lend. Under these circumstances, we might have insufficient funds or other resources to satisfy all our obligations.
 
Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and our results of operations.
 
If a court were to determine that, at the time of the spin-off, either FIS or our Company:
 
  •  was insolvent,
 
  •  was rendered insolvent by reason of the spin-off,
 
  •  had remaining assets constituting unreasonably small capital, or
 
  •  intended to incur, or believed it would incur, debts beyond its ability to pay as such debts matured,
 
the court might be able to void the spin-off, in whole or in part, as a fraudulent conveyance or transfer under Federal or State law. The court could then require our stockholders to return to FIS some or all of the shares of our common stock issued pursuant to the spin-off, or require FIS or us, as the case may be, to fund liabilities of the other company for the benefit of creditors. The measure of insolvency will vary depending upon the jurisdiction whose law is being applied. Generally, however, an entity would be considered insolvent if the fair value of its assets was less than the amount of its liabilities or if it incurred debt beyond its ability to repay such debt as it matures. In connection with the spin-off, we will incur substantial debt. Neither we nor FIS has obtained a solvency opinion from an independent financial advisor in connection with the spin-off.


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Risks Related to Our Business
 
In addition to the normal risks of business, we are subject to significant risks and uncertainties, including those listed below and others described elsewhere in this information statement. Any of the risks described herein could result in a significant adverse effect on our results of operation and financial condition.
 
If we fail to adapt our services to changes in technology or in the marketplace, or if our ongoing efforts to upgrade our technology are not successful, we could lose customers and have difficulty attracting new customers for our services.
 
The markets for our services are characterized by constant technological changes, frequent introductions of new services and evolving industry standards. Our future success will be significantly affected by our ability to enhance our current services, and develop and introduce new services that address the increasingly sophisticated needs of our customers and their customers. These initiatives carry the risks associated with any new service development effort, including cost overruns, delays in delivery, and performance issues. There can be no assurance that we will be successful in developing, marketing and selling new services that meet these changing demands, that we will not experience difficulties that could delay or prevent the successful development, introduction, and marketing of these services, or that our new services and their enhancements will adequately meet the demands of the marketplace and achieve market acceptance.
 
Consolidation in the banking and financial services industry could adversely affect our revenues by eliminating some of our existing and potential customers and could make us more dependent on a more limited number of customers.
 
There has been and continues to be substantial merger, acquisition and consolidation activity in the banking and financial services industry. Mergers or consolidations of banks and financial institutions in the future could reduce the number of our customers and potential customers, which could adversely affect our revenues even if these events do not reduce the aggregate activities of the consolidated entities. If our customers merge with or are acquired by other entities that are not our customers, or that use fewer of our services, they may discontinue or reduce their use of our services. In addition, it is possible that the larger banks or financial institutions resulting from mergers or consolidations would have greater leverage in negotiating terms with us or could decide to perform in-house some or all of the services which we currently provide or could provide. Any of these developments could have a material adverse effect on our business and results of operations.
 
Decreased lending and real estate activity may reduce demand for certain of our services and adversely affect our results of operations.
 
Real estate sales are affected by a number of factors, including mortgage interest rates, the availability of funds to finance purchases, the level of home prices and general economic conditions. The volume of refinancing transactions in particular and mortgage originations in general declined in 2005, 2006 and 2007 from 2004 levels, resulting in reduction of revenues in some of our businesses. The current Mortgage Bankers Association (“MBA”) forecast is for $2.0 trillion of mortgage originations in 2008 compared to $2.3 trillion in 2007. In addition, rising mortgage delinquency and default rates have negatively impacted some of our mortgage lending customers, particularly within the subprime lending market. These trends appear likely to continue. Our revenues in future periods will continue to be subject to these and other factors which are beyond our control and, as a result, are likely to fluctuate.
 
Further, in the event that levels of home ownership were to decline or other factors were to reduce the aggregate number of U.S. mortgage loans, our revenues from mortgage processing could be adversely affected.
 
We operate in a competitive business environment, and if we are unable to compete effectively our results of operations and financial condition may be adversely affected.
 
The markets for our services are intensely competitive. Our competitors vary in size and in the scope and breadth of the services they offer. We compete for existing and new customers against both third parties and in-house capabilities of our customers. Some of our competitors have substantial resources. In addition, we expect that


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the markets in which we compete will continue to attract new competitors and new technologies. There can be no assurance that we will be able to compete successfully against current or future competitors or that competitive pressures we face in the markets in which we operate will not materially adversely affect our business, financial condition and results of operations.
 
In our mortgage processing business, we face direct competition from third parties. Further, because many of our larger potential customers have historically developed their key processing applications in-house and therefore view their system requirements from a make-versus-buy perspective, we often compete against our potential customers’ in-house capacities. As a result, gaining new customers in our mortgage processing business can be difficult. For banks and other potential customers, switching from an internally designed system to an outside vendor, or from one vendor of mortgage processing services to a new vendor, is a significant undertaking. Many potential customers worry about potential disadvantages such as loss of accustomed functionality, increased costs and business disruption. As a result, potential customers often resist change. There can be no assurance that our strategies for overcoming potential customers’ reluctance to change will be successful, and this resistance may adversely affect our growth.
 
If we are unable to successfully consummate and integrate acquisitions, our results of operations may be adversely affected.
 
We anticipate that we will seek to acquire complementary businesses and services. This strategy will depend on our ability to find suitable acquisitions and finance them on acceptable terms. We may require additional debt or equity financing for future acquisitions, and doing so will be made more difficult by our substantial debt. If we are unable to acquire suitable acquisition candidates, we may experience slower growth.
 
Further, even if we successfully complete acquisitions, we will face challenges in integrating any acquired business. These challenges include eliminating redundant operations, facilities and systems, coordinating management and personnel, retaining key employees, managing different corporate cultures, and achieving cost reductions and cross-selling opportunities. There can be no assurance that we will be able to fully integrate all aspects of acquired businesses successfully or fully realize the potential benefits of bringing them together, and the process of integrating these acquisitions may disrupt our business and divert our resources.
 
We could have conflicts with FIS and FNF, and the Executive Chairman of our board of directors and other officers and directors could have conflicts of interest due to their relationships with FIS or FNF.
 
FNF and FIS were under common ownership by Old FNF until October 2006, when Old FNF distributed all its FNF shares to the stockholders of Old FNF. In November 2006, Old FNF then merged into FIS. However, FNF and FIS have remained parties to a variety of agreements, some of which will be assigned to us by FIS in the spin-off. Further, FNF and FIS have overlapping directors and officers, including certain individuals who will become officers or directors of our Company.
 
Conflicts may arise between FIS and us, or FNF and us, in each case as a result of our ongoing agreements and the nature of our respective businesses. Among other things, we will become a party to a variety of agreements with FIS and FNF in connection with the spin-off, and we may enter into further agreements with FIS or FNF after the spin-off. Certain of our executive officers and directors will be subject to conflicts of interest with respect to such agreements and other matters due to their relationships with FIS or FNF.
 
William P. Foley, II, who will become our Executive Chairman as a result of the spin-off, is currently the Executive Chairman of FIS and the executive Chairman of the board of directors of FNF. As a result, he has obligations to us as well as to FIS or FNF and will have conflicts of interest with respect to matters potentially or actually involving or affecting us, and FIS or FNF.
 
Mr. Foley owns substantial amounts of FIS and FNF stock and stock options because of his relationships with FIS and FNF. In addition, Mr. Carbiener owns a substantial amount of FIS stock, and our directors also own FIS and in some cases FNF stock and stock options due to similar current or past relationships. Such ownership could create or appear to create potential conflicts of interest when our directors and officers are faced with decisions that involve FIS or FNF or any of their respective subsidiaries.


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Matters that could give rise to conflicts between us and FIS or FNF include, among other things:
 
  •  our ongoing and future relationships with FIS or FNF, including related party agreements and other arrangements with respect to the administration of tax matters, employee benefits, indemnification, and other matters;
 
  •  the quality and pricing of services that we have agreed to provide to FIS or FNF or that it has agreed to provide to us; and
 
  •  any competitive actions by FIS or FNF.
 
Neither FIS nor FNF is limited in its ability to compete with us. Currently, although a substantial business of our loan facilitation services is acting as a title agent for FNF, FNF is under no obligation to deal exclusively with us, has business units that compete with us in title agency business and could deal with other agents that compete with us for the title agency business we operate. FNF also competes with us to a small extent in appraisal and default management services. We will seek to manage these potential conflicts through dispute resolution and other provisions of our agreements with FIS and FNF and through oversight by independent members of our board of directors. However, there can be no assurance that such measures will be effective or that we will be able to resolve all potential conflicts with FIS and FNF, or that the resolution of any such conflicts will be no less favorable to us than if we were dealing with a third party.
 
We have a long sales cycle for many of our technology solutions and if we fail to close sales after expending significant time and resources to do so, our business, financial condition, and results of operations may be adversely affected.
 
The implementation of many of our technology solutions often involves significant capital commitments by our customers, particularly those with smaller operational scale. Potential customers generally commit significant resources to an evaluation of available technology solutions and require us to expend substantial time, effort and money educating them as to the value of our technology solutions and services. We incur substantial costs in order to obtain each new customer. We may expend significant funds and management resources during the sales cycle and ultimately fail to close the sale. Our sales cycle may be extended due to our customers’ budgetary constraints or for other reasons. If we are unsuccessful in closing sales after expending significant funds and management resources or if we experience delays, it could have a material adverse effect on our business, financial condition and results of operations.
 
We may experience defects, development delays and installation difficulties with respect to our technology solutions, which would harm our business and reputation and expose us to potential liability.
 
Many of our services are based on sophisticated software and computing systems, and we may encounter delays when developing new technology solutions and services. Further, the technology solutions underlying our services have occasionally contained and may in the future contain undetected errors or defects when first introduced or when new versions are released. In addition, we may experience difficulties in installing or integrating our technologies on platforms used by our customers. Defects in our technology solutions, errors or delays in the processing of electronic transactions, or other difficulties could result in:
 
  •  interruption of business operations;
 
  •  delay in market acceptance;
 
  •  additional development and remediation costs;
 
  •  diversion of technical and other resources;
 
  •  loss of customers;
 
  •  negative publicity; or
 
  •  exposure to liability claims.


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Although we attempt to limit our potential liability through disclaimers and limitation-of-liability provisions in our license and customer agreements, we cannot be certain that these measures will be successful in limiting our liability.
 
Security breaches or computer viruses could harm our business by disrupting our delivery of services and damaging our reputation.
 
As part of our business, we electronically receive, process, store and transmit sensitive business information of our customers. In addition, we collect personal consumer data, such as names and addresses, social security numbers, driver’s license numbers and payment history records. Unauthorized access to our computer systems or databases could result in the theft or publication of confidential information or the deletion or modification of records or could otherwise cause interruptions in our operations. These concerns about security are increased when we transmit information over the Internet. Computer viruses have also been distributed and have rapidly spread over the Internet. Computer viruses could infiltrate our systems, disrupting our delivery of services and making our applications unavailable. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and terminate their agreements with us, and could inhibit our ability to attract new customers.
 
If we fail to comply with privacy regulations imposed on providers of services to financial institutions, our business could be harmed.
 
As a provider of services to financial institutions, we are bound by the same limitations on disclosure of the information we receive from our customers as apply to the financial institutions themselves. If we fail to comply with these regulations, we could be exposed to suits for breach of contract or to governmental proceedings, our customer relationships and reputation could be harmed, and we could be inhibited in our ability to obtain new customers. In addition, if more restrictive privacy laws or rules are adopted in the future on the federal or state level, that could have an adverse impact on us.
 
In the wake of the current mortgage market, there could be adverse regulatory consequences or litigation that could affect us.
 
Various aspects of our businesses are subject to federal and state regulation. The sharp rise in home foreclosures that started in the United States during the fall of 2006 and has accelerated in 2007 and 2008 has begun to result in investigations and lawsuits against various parties commenced by various governmental authorities and third parties. It has also resulted in governmental review of aspects of the mortgage lending business, which may lead to greater regulation in areas such as appraisals, default management, loan closings and regulatory reporting. Such actions and proceedings could have adverse consequences that could affect our business.
 
Over the last few months, the New York Attorney General (“NYAG”) has been conducting an inquiry into various practices in the mortgage market, including a review of the possibility that conflicts of interest have in some cases affected the accuracy of property appraisals. Recently, the NYAG announced a resolution of a portion of this inquiry with respect to Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”). Under agreements entered into with the NYAG, Fannie Mae and Freddie Mac each committed to adopt a new Home Valuation Code of Conduct. This Code establishes requirements governing appraiser selection, compensation, conflicts of interest and corporate independence, among other matters. Both Fannie Mae and Freddie Mac have agreed that they will not purchase any single family mortgage loans, other than government-insured loans, originated after January 1, 2009 from mortgage originators that have not adopted the Code with respect to such loans. Among other things, the Code prohibits mortgage lenders from utilizing any appraisal report prepared by an appraiser employed by the lender, an affiliate of the lender, a real estate settlement services provider or an affiliate of a real estate settlement services provider.
 
The Code is subject to a comment period that expires on April 30, 2008. We intend to participate in the comment process. At this time, we are unable to predict the ultimate effect of the Code on our business or results of operations.


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If we experience system failures, services we provide to our customers could be delayed or interrupted, which could harm our business and reputation and result in the loss of customers.
 
Our ability to provide reliable service in a number of our businesses depends on the efficient and uninterrupted operations of our computer network systems and data centers. Our systems and operations could be exposed to damage or interruption from fire, natural disaster, power loss, telecommunications failure, unauthorized entry and computer viruses. Further, our property and business interruption insurance may not be adequate to compensate us for all losses or failures that may occur. Any significant interruptions could:
 
  •  increase our operating expenses to correct problems caused by the interruption;
 
  •  harm our business and reputation;
 
  •  result in a loss of customers; or
 
  •  expose us to liability.
 
Any one or more of the foregoing occurrences could have a material adverse effect on our business, financial condition and results of operations.
 
Misappropriation of our intellectual property and proprietary rights could impair our competitive position.
 
Our ability to compete depends upon proprietary systems and technology. Unauthorized parties may attempt to copy aspects of our services or to obtain and use information that we regard as proprietary. Policing unauthorized use of our proprietary rights is difficult. We cannot make any assurances that the steps we have taken will prevent misappropriation of technology or that the agreements entered into for that purpose will be enforceable. Effective trademark, service mark, copyright and trade secret protection may not be available in every country in which our applications and services are made available online. Misappropriation of our intellectual property or potential litigation concerning such matters could have a material adverse effect on our results of operations or financial condition.
 
If our applications or services are found to infringe the proprietary rights of others, we may be required to change our business practices and may also become subject to significant costs and monetary penalties.
 
As our information technology applications and services develop, we may become increasingly subject to infringement claims. Any claims, whether with or without merit, could:
 
  •  be expensive and time-consuming to defend;
 
  •  cause us to cease making, licensing or using applications that incorporate the challenged intellectual property;
 
  •  require us to redesign our applications, if feasible;
 
  •  divert management’s attention and resources; and
 
  •  require us to enter into royalty or licensing agreements in order to obtain the right to use necessary technologies.
 
Provisions of our certificate of incorporation may prevent us from receiving the benefit of certain corporate opportunities.
 
Because FIS may engage in the same activities in which we engage, there is a risk that we may be in direct competition with FIS over business activities and corporate opportunities. Further, FNF does engage in some of the same businesses as we do and may in the future compete with us more significantly. To address these potential conflicts, we have adopted a corporate opportunity policy that has been incorporated into our certificate of incorporation. These provisions may limit the corporate opportunities of which we are made aware or which are


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offered to us. See “Description of Capital Stock — Provisions of our Certificate of Incorporation Relating to Corporate Opportunities.”
 
The market price and trading volume of our common stock may be volatile and may be affected by market conditions beyond our control.
 
Prior to the spin-off, there will have been no trading market for our common stock. Our common stock is expected to be listed on the New York Stock Exchange. Trading in our common stock is expected to commence on a “when issued” basis on or about          , 2008.
 
Neither we nor FIS can assure you as to the trading prices of our common stock after the spin-off. Although we intend to apply to list our common stock on the New York Stock Exchange, an active trading market in our common stock might not develop or continue. Unless and until our common stock is fully distributed and an orderly market develops, the prices at which our stock trades may fluctuate significantly. In addition, the combined trading prices of FIS common stock and our common stock after the spin-off may, in the aggregate, be less than, equal to or greater than the trading prices of FIS common stock prior to the spin-off. The market price of our common stock may fluctuate in response to many things, including but not limited to:
 
  •  quarterly variations in actual or anticipated results of our operations;
 
  •  changes in financial estimates by securities analysts;
 
  •  actions or announcements by our competitors;
 
  •  regulatory actions;
 
  •  changes in the market outlook for the lending and real estate industries;
 
  •  technology changes in our business segments;
 
  •  departure of our key personnel; and
 
  •  future sales of our common stock, including any sales of our common stock by shareholders of FIS who do not desire to own our shares following the distribution.
 
The market prices of securities of information technology and services providers have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies. These market fluctuations could result in extreme volatility in the price of our shares of common stock, which could cause a decline in the value of your investment.
 
A portion of FIS’s common stock is held by index funds tied to the Standard & Poor’s 500 Index or other stock indices. Because we may no longer be included in those indices at the time of the spin-off, those index funds may be required to sell our common stock. Consequently large amounts of our common stock could be sold in the open market in connection with the spin-off. We cannot predict the number of buyers that will be in the market at that time. In addition, our smaller size and different investment characteristics may not appeal to the current investor base of FIS, which may seek to dispose of large amounts of our common stock following the spin-off. There is no assurance that there will be sufficient buying interest to offset those sales and, accordingly, the price of our common stock could be depressed and have periods of high volatility.
 
Provisions in our charter documents, and Delaware and New York laws and tax considerations related to the distribution, may delay or prevent a change in control and may therefore prevent stockholders from receiving the benefit of potential control transactions.
 
Our certificate of incorporation, bylaws and the laws of Delaware contain provisions that may delay, deter or prevent a takeover attempt that stockholders might consider in their best interests. For example, our organizational documents provide for a classified board of directors with staggered terms, prevent stockholders from taking action by written consent, prevent stockholders from calling a special meeting of stockholders, provide for supermajority voting requirements to amend our certificate of incorporation and certain provisions of our bylaws and provide for the filling of vacancies on our board of directors by the majority of the directors then in office. These provisions will


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render the removal of the incumbent board of directors or management more difficult. In addition, these provisions may prevent stockholders from receiving the benefit of any premium over the market price of our common stock offered by a bidder in a potential takeover. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.
 
Section 203 of the General Corporation Law of Delaware, the jurisdiction in which our Company is organized, imposes some restrictions on the ability of an “interested stockholder” to engage in certain business combinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an interested stockholder. An interested stockholder is generally defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of the corporation.
 
In addition, because one of our subsidiaries is a title insurance company domiciled in New York, any person seeking to acquire, control or hold the power to vote 10% or more of our outstanding securities could face regulatory obstacles under New York insurance law that could delay, deter or prevent an acquisition that stockholders might consider in their best interests. See “Business — Government Regulation.”
 
We expect that our tax disaffiliation agreement with FIS will also provide that we will indemnify FIS for any taxes FIS incurs if the distribution fails to qualify as tax-free because of transactions involving our stock. An acquisition of us by a third party could have such an effect.
 
FORWARD-LOOKING STATEMENTS
 
The statements contained in this information statement or in our other documents or in oral presentations or other statements made by our management that are not purely historical are forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934, including statements regarding our expectations, hopes, intentions, or strategies regarding the future. These statements relate to, among other things, our future financial and operating results. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these terms and other comparable terminology. Actual results could differ materially from those anticipated in these statements as a result of a number of factors, including, but not limited to:
 
  •  general political, economic, and business conditions, including the possibility of intensified international hostilities, acts of terrorism, and general volatility in the capital markets;
 
  •  failures to adapt our services to changes in technology or in the marketplace;
 
  •  consolidation in the mortgage lending or banking industry;
 
  •  security breaches of our systems and computer viruses affecting our software;
 
  •  a decrease in the volume of real estate transactions such as real estate sales and mortgage refinancings, which can be caused by high or increasing interest rates, a shortage of mortgage funding, or a weak United States economy;
 
  •  the impact of competitive services and pricing;
 
  •  the ability to identify suitable acquisition candidates and the ability to finance such acquisitions, which depends upon the availability of adequate cash reserves from operations or of acceptable financing terms and the variability of our stock price;
 
  •  our ability to integrate any acquired business’ operations, services, customers, and personnel;
 
  •  the effect of our substantial leverage, which may limit the funds available to make acquisitions and invest in our business;
 
  •  changes in, or the failure to comply with, government regulations, including privacy regulations; and
 
  •  other risks detailed elsewhere in this information statement, including in the Risk Factors section.


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We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
 
THE SPIN-OFF
 
Background
 
On October 25, 2007, FIS announced its intention to pursue the spin-off the majority of the businesses that comprise FIS’s lender processing services operations. We expect the spin-off to occur on or about          , 2008 through a distribution by FIS of its shares of our common stock to FIS’s shareholders.
 
On          , 2008, the FIS board of directors declared a dividend on FIS common stock consisting of shares of our common stock. The dividend will be paid on or about          , 2008, the distribution date, in the amount of one-half share of our common stock for every share of FIS common stock outstanding at the close of business on the record date, as described below.
 
You will not be required to pay any cash or other consideration or to surrender or exchange your shares of FIS common stock to receive the dividend of our common stock.
 
Structure
 
In connection with the spin-off, FIS will transfer to LPS all of its interest in the assets, liabilities, businesses and employees related to FIS’s lender processing services operations as of the date of the spin-off (which we refer to collectively as the contribution). In exchange for the contribution, LPS will:
 
  •  issue to FIS additional shares of LPS common stock to be distributed to FIS’s shareholders pro rata in the spin-off; and
 
  •  issue to FIS our debt obligations in the aggregate principal amount of up to approximately $1.6 billion.
 
After the spin-off, FIS will exchange 100% of our debt obligations for a like amount of FIS’s Existing Tranche B Loans through a debt-for-debt exchange, thereby reducing FIS’s outstanding indebtedness.
 
After the contribution, FIS will spin off LPS to the shareholders of FIS by distributing all of its shares of LPS common stock to FIS shareholders on a pro rata basis.
 
As a result of the spin-off, LPS will become a stand-alone public company. No vote of FIS shareholders is required or being sought in connection with the spin-off and FIS shareholders have no appraisal rights in connection with the spin-off.
 
Reasons for the Spin-Off
 
FIS’s board of directors has determined that separating our business from FIS is in the best interests of FIS and its shareholders. FIS’s board of directors considered potential benefits in making its determination to effect the spin-off. Among other things, FIS’s board of directors considered that the spin-off may:
 
  •  allow each company to separately focus on its core business, which may facilitate the potential expansion and growth of both FIS and LPS;
 
  •  allow each company to determine its own capital structure;
 
  •  permit each company to allocate technology resources to minimize costs, which may lead to each company operating its business more efficiently;
 
  •  allow each company to more properly market its products in the market niche it occupies, thus maximizing the advantages of each business in the view of the market;
 
  •  permit each company to differentiate itself in the eyes of the market analysts, rating agencies and other members of the investment community, thus allowing the market to more accurately gauge the performance of each company;


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  •  eliminate the market’s tendency to confuse the FIS business with the real estate market’s overall performance;
 
  •  enhance LPS’s ability to execute a potential acquisition strategy more effectively; and
 
  •  permit LPS to enhance the efficiency and effectiveness of equity-based compensation programs offered to its employees.
 
Neither we nor FIS can assure you that, following the spin-off, any of these benefits will be realized to the extent anticipated or at all.
 
FIS’s board of directors also considered a number of other factors in evaluating the spin-off, including:
 
  •  the potential for significant incremental costs to LPS to replicate certain systems, infrastructure and personnel to which it will no longer have access after the spin-off;
 
  •  the impact on LPS’s business of incurring a substantial amount of debt;
 
  •  the limitations placed on LPS as a result of the tax disaffiliation and other agreements that it is expected to enter into with FIS in connection with the spin-off; and
 
  •  the risk that the combined trading prices of LPS common stock and FIS common stock after the spin-off may be lower than the trading price of FIS’s common stock before the spin-off.
 
Ultimately, FIS’s board of directors concluded that the potential benefits of the spin-off outweigh these factors.
 
The Number of Shares FIS’s Shareholders Will Receive
 
For every share of FIS common stock that you owned at the close of business on          , 2008, the record date, you will receive one-half share of our common stock on the distribution date.
 
If you sell your shares of FIS common stock and the sale of the shares settles before the distribution date in the “regular way” market, you will not receive shares of our common stock in the distribution. Please see “— Trading Before the Distribution Date” below.
 
When and How You Will Receive Our Common Stock
 
We anticipate that on          , 2008, FIS will deliver to our transfer agent shares of our common stock to be distributed. On that day, the transfer agent will credit the accounts of registered holders of FIS common stock entitled to the distribution, or if requested will mail or otherwise deliver our share certificates to registered FIS shareholders. For those holders of FIS common stock who hold their shares through a broker, bank or other nominee, the transfer agent will credit the shares of our common stock to the accounts of those nominees who are registered holders, who in turn will credit their customers’ accounts with our common stock. We anticipate that brokers, banks and other nominees will generally credit their customers’ accounts with our common stock on the same day that their accounts are credited, which is expected to be the distribution date. Following the distribution, you may request to receive any uncertificated shares of LPS common stock in certificated form.
 
Trading Before the Distribution Date
 
FIS Common Stock
 
After the Securities and Exchange Commission (the “SEC”) declares effective the registration statement of which this information statement is a part, and beginning shortly after the record date and continuing until the distribution date, there will be two markets in FIS common stock on the New York Stock Exchange: a “regular way” market and an “ex-distribution” market. If you own shares of FIS common stock on the record date and sell those shares on the regular way market before the distribution date, you will also be selling your entitlement to the shares of our common stock that would have been distributed to you and, therefore, you will not receive LPS shares. If you sell shares on the ex-distribution market, you will not sell your entitlement to the shares of our common stock and, therefore, you will receive LPS shares even though you have sold your shares of FIS common stock after the record date.


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Our Common Stock
 
On or about          , 2008, trading of shares of our common stock is expected to begin on a “when issued” basis. When issued trading refers to a sale or purchase made conditionally because the security has been authorized but has not yet been issued. The when issued trading market is a market for shares of our common stock that will be distributed to FIS shareholders on the distribution date. If you owned shares of FIS common stock on the record date and did not sell those shares in the regular way market, then you may trade your entitlement to shares of our common stock, without the shares of FIS common stock you own, on the when issued trading market. On the first trading day following the distribution date, when issued trading with respect to our common stock will end and regular way trading will begin. We expect that any when issued trades of our common stock will settle within three trading days after the distribution date. When issued trading is under the trading symbol “LPS wi” which is different from our regular way trading symbol. Following the distribution date, shares of our common stock are expected to be listed under the trading symbol “LPS.” If the spin-off does not occur, all when issued trading will be null and void.
 
Treatment of Fractional Shares
 
The transfer agent will not deliver any fractional shares of our common stock in connection with the distribution. Instead, the transfer agent will aggregate all fractional shares and sell them on behalf of those holders who otherwise would be entitled to receive a fractional share. We anticipate that these sales will occur as soon as practicable after the distribution date. Those holders will then receive a cash payment in an amount equal to their pro rata share of the total net proceeds of those sales.
 
It is expected that all fractional shares held in street name will be aggregated and sold by brokers or other nominees according to their standard procedures and that brokers or other nominees may request the transfer agent to sell the fractional shares on their behalf. You should contact your broker or other nominee for additional details.
 
None of FIS, our Company or the transfer agent will guarantee any minimum sale price for the fractional shares of our common stock. Neither we nor FIS will pay any interest on the proceeds from the sale of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient shareholders. See “The Spin-Off — Certain United States Federal Income Tax Consequences of the Spin-Off.”
 
Treatment of Outstanding FIS Stock Options and Restricted Stock
 
Our Employees and Directors
 
FIS stock options held by persons who, after the spin-off, will solely be employed by or serve as directors of LPS will be replaced with LPS stock options granted under the LPS omnibus incentive plan. The LPS options will have the same terms and conditions as the FIS options, but with equitable adjustments made to the exercise prices and the number of shares underlying the options to reflect the difference in value of FIS and LPS common stock.
 
FIS restricted stock held by such persons will be replaced with awards of LPS restricted stock. These replacement awards will have the same terms and conditions as the forfeited FIS awards, and the shares will vest on the same dates the FIS awards would have vested. The number of shares subject to the awards will be adjusted to reflect the differences in stock value of FIS and LPS.
 
FIS Employees and Directors
 
The exercise price of, and number of shares of FIS common stock underlying, FIS stock options held by any current or former FIS employee or director who will not become an LPS employee or director will be adjusted, in an amount yet to be determined, pursuant to the terms of the applicable FIS equity incentive plans, taking into account the change in the value of FIS common stock as a result of the spin-off. To avoid adverse tax treatment for option holders under the Code, the number of shares of FIS common stock subject to the adjusted options will be rounded down to the nearest whole share, and the per-share exercise price will be rounded up to the nearest whole cent.
 
All holders of FIS restricted stock who will not become our employees or directors will receive, in lieu of receiving LPS shares in the spin-off with respect to such restricted stock, an equitable adjustment to increase the


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number of shares of restricted stock owned by the employee or director to prevent dilution. The additional shares of restricted stock will have the same transfer restrictions and forfeiture conditions as the original grant of FIS restricted stock.
 
Dual Employees
 
The FIS stock options held by any current FIS employee who will be employed by both FIS and us after the spin-off will be split in half. One half will be adjusted, in an amount yet to be determined, pursuant to the terms of the applicable FIS equity incentive plans, taking into account the change in the value of FIS common stock as a result of the spin-off. The other half will be replaced with LPS stock options granted under the LPS omnibus incentive plan with the same terms and conditions as the FIS options, but with equitable adjustments made to the exercise prices and the number of shares underlying the options to reflect the difference in value of FIS and LPS common stock.
 
The FIS restricted stock held by any current FIS employee who will be employed by both FIS and us after the spin-off will be split in half. One half will be equitably adjusted by increasing the number of shares of FIS restricted stock to prevent any dilution of the participant’s rights. The additional shares of restricted stock will have the same transfer restrictions and forfeiture conditions as the original grant of FIS restricted stock. The other half will be replaced with awards of LPS restricted stock. These replacement awards will have the same terms and conditions as the forfeited FIS awards, and the shares will vest on the same dates the FIS awards would have vested. The number of shares subject to the awards will be adjusted to reflect the differences in stock value of FIS and LPS.
 
Interests of FIS Officers and Directors in the Spin-Off
 
To the extent that FIS officers and directors hold shares of FIS common stock, they will be entitled to receive shares of our common stock in the distribution on the same terms as other FIS shareholders.
 
Incurrence of Debt
 
We expect to issue an aggregate principal amount of indebtedness of up to approximately $1.6 billion and shares of our common stock to FIS in exchange for all of its interest in the assets, liabilities, businesses and employees related to our operations as of the date of the spin-off.
 
The nature, amount and terms of this debt will be determined closer to the date of the distribution. This debt may consist of one or a combination of debt under a new credit agreement, which may be secured or unsecured and issued in one or more tranches, or senior or subordinated debt securities issued under an indenture.
 
We expect that any new credit agreement will include customary covenants that, among other things, will require us to satisfy certain financial tests, maintain certain financial ratios and restrict our ability to incur additional indebtedness. To the extent permitted, we may also incur additional indebtedness, including under a revolving credit facility, from time to time for general corporate purposes, including working capital requirements, capital expenditures and future acquisitions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” The terms of some or all of our new debt obligations will be intended to qualify as “debt securities” for federal tax purposes.
 
Certain United States Federal Income Tax Consequences of the Spin-Off
 
The following is a summary of the material United States Federal income tax consequences of the distribution. This summary is based on the Code, on the Treasury Regulations promulgated thereunder, and on judicial and administrative interpretations thereof, all as in effect on the date of this summary and all of which are subject to change (possibly on a retroactive basis).
 
This summary does not address tax consequences for any holder other than a United States Holder. For purposes of this summary, a United States Holder is a beneficial owner of FIS common stock that is, for United States Federal income tax purposes:
 
  •  an individual who is a citizen or a resident of the United States;


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  •  a corporation, or other entity taxable as a corporation for United States Federal income tax purposes, created or organized under the laws of the United States or any state thereof or the District of Columbia;
 
  •  an estate, the income of which is subject to United States Federal income taxation regardless of its source; or
 
  •  a trust, if a court within the United States is able to exercise primary jurisdiction over its administration and one or more United States persons have the authority to control all of its substantial decisions.
 
Further, this summary does not discuss all of the tax considerations that may be relevant to United States Holders in light of their particular circumstances. A United States Holder does not include, and this summary does not address the tax consequences to, certain persons subject to special provisions of the United States Federal income tax law, including:
 
  •  insurance companies;
 
  •  dealers or traders in securities or currencies;
 
  •  tax-exempt organizations;
 
  •  financial institutions;
 
  •  mutual funds and real estate investments trusts;
 
  •  qualified retirement plans;
 
  •  partnerships, other entities classified as partnerships, or other pass-through entities for United States Federal income tax purposes and investors in these entities;
 
  •  holders who hold their shares as a hedge or as part of a hedging, straddle, conversion, synthetic security, integrated investment or other risk-reduction transaction;
 
  •  holders who are subject to the alternative minimum tax;
 
  •  holders who acquired their shares upon the exercise of employee stock options or otherwise as compensation; or
 
  •  holders whose functional currency is other than the United States dollar.
 
In addition, this summary is limited to stockholders that hold their FIS common stock as a capital asset. Finally, this summary does not address any estate, gift or other non-income tax consequences or any state, local or foreign tax consequences.
 
THIS SUMMARY IS FOR GENERAL INFORMATION PURPOSES ONLY AND IT IS NOT INTENDED TO BE, AND IT SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR SHAREHOLDER.
 
FIS SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL, STATE AND LOCAL AND NON-UNITED STATES TAX CONSEQUENCES OF THE SPIN-OFF TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
 
It is a condition to completing the spin-off that FIS receive a private letter ruling from the Internal Revenue Service and an opinion of FIS’s special tax advisor, Deloitte, together to the effect that, for United States Federal income tax purposes, the following transactions will qualify as tax-free transactions to FIS, LPS and FIS shareholders: (i) the contribution of all of FIS’s interest in all the assets, liabilities, businesses and employees related to FIS’s lender processing services operations as of the date of the spin-off in exchange for the receipt by FIS of LPS common stock and the LPS debt obligations (the “contribution”), (ii) the expected exchange by FIS of the LPS debt obligations for certain outstanding FIS debt (the “debt exchange”) and (iii) the distribution of LPS common stock to FIS shareholders, except that any gain that FIS shareholders realize on cash received in lieu of any fractional shares of LPS common stock to which such shareholders may be entitled in the distribution generally will be taxable to the shareholders (the “spin-off”). The terms of some or all of our new debt obligations will be intended to qualify as “debt securities” for federal tax purposes.


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FIS anticipates receiving the private letter ruling and opinion by           , 2008. Notwithstanding receipt by FIS of the private letter ruling and opinion of Deloitte, the IRS could determine that the contribution, debt exchange and/or the spin-off constitute a taxable transaction if it determines that there was a misstatement or omission of any of the facts, representations, or undertakings that were included in the request for the private letter ruling, or if it disagrees with the conclusions in the Deloitte opinion that are not covered by the IRS ruling.
 
Assuming that the spin-off qualifies as a tax-free transaction under the Code: (i) no gain or loss will be recognized by (and no amount will be included in the income of) FIS shareholders upon the receipt of shares of LPS common stock in the spin-off; (ii) any cash received in lieu of fractional share interests in LPS will give rise to capital gain or loss equal to the difference between the amount of cash received and the tax basis allocable to the fractional share interests; (iii) the aggregate tax basis of the FIS common stock and the LPS common stock in the hands of each FIS shareholder after the spin-off (including any fractional interests to which the shareholder would be entitled) will equal the aggregate tax basis of the FIS common stock held by the shareholder immediately before the spin-off, allocated between the FIS common stock and the LPS common stock in proportion to the relative fair market value of each on the date of the spin-off; and (iv) the holding period of the LPS common stock received by each FIS shareholder will include the holding period at the time of the spin-off of the FIS common stock on which the distribution is made.
 
If the spin-off were taxable for United States Federal income tax purposes, FIS shareholders and FIS would be subject to significant United States Federal income tax liability. In general, FIS shareholders would be subject to tax as if they had received a taxable distribution equal to the fair market value of the LPS common stock that was distributed to them and the gain recognized by FIS could be as much as the entire fair market value of the stock of LPS as well as the LPS debt securities. In addition, even if the spin-off otherwise were to qualify for tax-free treatment for United States Federal income tax purposes, it would become taxable to FIS pursuant to Section 355(e) of the Code, if 50% or more of the equity interest of either FIS or LPS were acquired, directly or indirectly, as part of a plan or series of related transactions that included the spin-off. In that case, the gain recognized by FIS would be as much as the entire fair market value of the stock of LPS as well as the value of the LPS debt obligations, and would be very substantial. In connection with the request for the IRS private letter ruling and the opinion of Deloitte, FIS has represented that the spin-off is not part of any plan or series of related transactions.
 
Although the taxes resulting from the spin-off not qualifying for tax-free treatment for United States Federal income tax purposes generally would be imposed on FIS shareholders and FIS, under the tax disaffiliation agreement LPS expects to enter into with FIS, LPS would be required to indemnify FIS and its affiliates against all tax related liabilities caused by the failure of the spin-off to qualify for tax-free treatment for United States Federal income tax purposes (including as a result of Section 355(e) of the Code) to the extent these liabilities arise as a result of any action taken by LPS or any of its affiliates following the spin-off or otherwise result from any breach of any representation, covenant or obligation of LPS or any of its affiliates under the tax disaffiliation agreement. See “Certain Relationships and Related Party Transactions — Agreements With FIS — Tax Disaffiliation Agreement.”
 
Results of the Distribution
 
Immediately following the spin-off, we expect to have outstanding approximately           shares of our common stock, based on the number of shares of FIS’s common stock outstanding on          , 2008. The actual number of shares of our common stock to be distributed will depend on the actual number of shares of FIS’s common stock outstanding on the record date.
 
Immediately following the spin-off, we expect to have approximately           holders of record of shares of our common stock, based on the number of record holders of FIS’s common stock on          , 2008. This number includes those FIS shareholders who are only entitled to receive a cash payment for fractional shares.
 
Listing and Trading of Our Common Stock
 
Before          , 2008, there will be no public market for our common stock. On or about          , 2008, trading of shares of our common stock is expected to begin on a when issued basis. We intend to apply to list our common stock on the New York Stock Exchange under the symbol “LPS.” Following the spin-off, FIS common stock will continue to trade on the New York Stock Exchange under the symbol “FIS.”


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The shares of our common stock distributed to FIS’s shareholders will be freely transferable, except for shares received by individuals who are our affiliates. Individuals who may be considered our affiliates after the spin-off include individuals who control, are controlled by or are under common control with us, as those terms generally are interpreted for federal securities law purposes. Individuals who are our affiliates will be permitted to sell their shares of our common stock only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, including the exemptions afforded by Section 4(1) of the Securities Act or Rule 144 thereunder.
 
As of the distribution date, based on their holdings of FIS common stock as of          , 2008, we estimate that our directors and officers will collectively hold           shares of our common stock that will be subject to these restrictions.
 
DIVIDEND POLICY
 
We expect to pay dividends at an annual rate of approximately $      per share, but only if and to the extent dividends are declared by our board of directors and permitted by applicable law and by the terms of our financing arrangements. Dividend payments are not guaranteed and our board of directors may decide, in its absolute discretion, not to pay dividends. Dividends on our common stock are not cumulative. All decisions regarding the declaration and payment of dividends, including with respect to the initial dividend, will be at the discretion of our board of directors and will be evaluated from time to time in light of our financial condition, earnings, growth prospects, funding requirements, applicable law and other factors our board of directors deems relevant. LPS is a newly-formed entity and, therefore, has not paid dividends in the past.
 
In addition, our overall leverage could require us to dedicate a significant portion of our cash flow from operations to paying the principal of and interest on our indebtedness, thereby reducing funds available for other corporate purposes, and making it more difficult for us to pay our anticipated cash dividends. Further, our new credit agreement will prohibit us from paying dividends and other restricted payments if an event of default is outstanding or would result from such payment. See “Risk Factors — Risk Factors Related to the Spin-Off — Following the spin-off, we will have substantial indebtedness, which could have a negative impact on our financing options and liquidity position” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”


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CAPITALIZATION
 
The following table describes our cash and cash equivalents and capitalization as of December 31, 2007 on an actual basis, and on an as-adjusted basis to give effect to the spin-off. The information presented below should be read in conjunction with “Pro Forma Financial Information”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our combined financial statements and the related notes included elsewhere in this information statement.
 
                 
    As of December 31, 2007  
    Actual     As Adjusted  
    (In thousands)  
 
Cash and cash equivalents
  $ 39,566     $ 39,566  
                 
Total long-term debt
          (1)
Total equity
    1,666,090          
                 
Total capitalization
  $ 1,666,090     $  
                 
 
 
(1) These amounts represent the new debt to be incurred by LPS in connection with the spin-off. The nature, amount and terms of this debt will be determined closer to the date of the distribution.


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SELECTED FINANCIAL INFORMATION
 
The following table presents our selected historical financial data. Except with respect to pro forma shares and per share amounts, the combined statement of earnings data for each of the years in the three-year period ended December 31, 2007 and the combined balance sheet data as of December 31, 2007 and 2006 have been derived from our audited combined financial statements included elsewhere herein. The combined statement of earnings data for the years ended December 31, 2004 and 2003 and the combined balance sheet data as of December 31, 2005, 2004 and 2003 are derived from our unaudited combined financial statements not included herein. The unaudited combined financial statements have been prepared on the same basis as the audited combined financial statements and, in the opinion of our management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information set forth herein.
 
The selected historical financial data presented below should be read in conjunction with our combined financial statements and accompanying notes and “Pro Forma Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein. Our financial information may not be indicative of our future performance and does not necessarily reflect what our financial position and results of operations would have been had we operated as a separate, stand-alone entity during the periods presented, including changes that will occur in our operations and capitalization as a result of our spin-off from FIS.
 
                                         
    Year Ended December 31,  
    2007     2006     2005     2004     2003  
    (In thousands, except per share data)  
 
Statement of Earnings Data:
                                       
Processing and services revenues
  $ 1,690,568     $ 1,484,977     $ 1,382,479     $ 1,312,416     $ 1,217,768  
Net earnings
  $ 256,805     $ 201,055     $ 195,705     $ 118,069     $ 138,480  
                                         
Unaudited pro forma net earnings per share — basic(1)
  $ 2.64                                  
                                         
Unaudited pro forma weighted average shares — basic(1)
    97,335                                  
                                         
 
 
(1) Unaudited pro forma net earnings per share is calculated using one-half the number of outstanding shares of FIS as of December 31, 2007 because, on completion of the spin-off, the number of shares of our outstanding common stock will equal one-half the number of FIS outstanding shares on the record date for the spin-off.
 
                                         
    As of December 31,  
    2007     2006     2005     2004     2003  
          (In thousands)        
 
Balance Sheet Data:
                                       
Cash and cash equivalents
  $ 39,566     $ 47,783     $ 59,756     $ 84,093     $ 66,119  
Total assets
  $ 1,962,043     $ 1,879,800     $ 1,542,802     $ 1,494,065     $ 1,420,896  
 
Selected Quarterly Financial Information (Unaudited)
 
                                 
    Quarter Ended  
    March 31,     June 30,     September 30,     December 31,  
          (In thousands)        
 
2007
                               
Processing and services revenues
  $ 401,428     $ 425,010     $ 425,464     $ 438,666  
Earnings before income taxes, equity in loss of unconsolidated affiliates and minority interest
    90,486       100,725       112,674       121,721  
Net earnings
    54,828       60,871       68,292       72,814  
                                 
2006
                               
Processing and services revenues
  $ 351,163     $ 357,007     $ 384,748     $ 392,059  
Earnings before income taxes, equity in loss of unconsolidated affiliates and minority interest
    72,777       82,022       94,081       80,842  
Net earnings
    44,411       49,995       57,389       49,260  
                                 


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PRO FORMA FINANCIAL INFORMATION
 
The following unaudited pro forma combined financial statements present historical financial statements of LPS with adjustments relating to LPS’s spin-off from FIS, including the incurrence of approximately $      billion in debt, interest expense related to the debt, and the related reduction in equity. The unaudited pro forma combined balance sheet as of December 31, 2007 is presented as if the spin-off of LPS had been completed on December 31, 2007. The unaudited pro forma combined statement of earnings for the year ended December 31, 2007 is presented as if the spin-off of LPS had been completed on January 1, 2007.
 
These unaudited pro forma combined financial statements should be read in conjunction with our historical combined financial statements and accompanying notes included herein. The unaudited pro forma combined financial statements are not necessarily indicative of the results of operations or financial position of LPS that would have been reported had the spin-off been completed as of the dates presented, and are not necessarily representative of the future consolidated results of operations or financial position of LPS.
 
Unaudited Pro Forma Combined Balance Sheet
December 31, 2007
 
                         
          Pro Forma
       
    Historical     Adjustments     Pro Forma  
    (In thousands)  
 
ASSETS
Current assets:
                       
Cash and cash equivalents
  $ 39,566           $ 39,566  
Trade receivables, net
    286,236             286,236  
Other receivables
    7,971             7,971  
Prepaid expenses and other current assets
    33,323             33,323  
Deferred income taxes
    40,440             40,440  
                         
Total current assets
    407,536             407,536  
                         
Property and equipment, net
    95,620             95,620  
Goodwill
    1,078,154             1,078,154  
Intangibles assets, net
    118,129             118,129  
Computer software, net
    150,372             150,372  
Other non-current assets
    112,232             112,232  
                         
Total assets
  $ 1,962,043           $ 1,962,043  
                         
 
LIABILITIES AND PARENT’S EQUITY
Current liabilities:
                       
Trade accounts payable
  $ 19,499           $ 19,499  
Accrued salaries and benefits
    22,908             22,908  
Recording and transfer tax liabilities
    10,657             10,657  
Other accrued liabilities
    62,002             62,002  
Deferred revenues
    58,076             58,076  
                         
Total current liabilities
    173,142             173,142  
                         
Deferred revenues
    23,146             23,146  
Deferred income taxes
    55,196             55,196  
Long-term debt
          (1)        
Other long-term liabilities
    34,419             34,419  
                         
Total liabilities
    285,903                  
                         
Minority interest
    10,050             10,050  
                         
Total parent’s equity
    1,666,090       (1)        
                         
Total liabilities and parent’s equity
  $ 1,962,043           $  
                         
 
 
(1) These amounts represent the new debt to be incurred by LPS in connection with the spin-off. The nature, amount and terms of this debt will be determined closer to the date of the distribution.


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Unaudited Pro Forma Combined Statement of Earnings
For the Year ended December 31, 2007
 
                         
          Pro Forma
       
    Historical     Adjustments     Pro Forma  
    (In thousands except per share data)  
 
Processing and services revenues
  $ 1,690,568     $     $ 1,690,568  
Cost of revenues
    1,058,647             1,058,647  
                         
Gross profit
    631,921             631,921  
Selling, general and administrative expenses
    207,859             207,859  
                         
Operating income
    424,062             424,062  
                         
Other income (expense):
                       
Interest income
    1,690             1,690  
Interest expense
    (146 )     (1)        
                         
Total other income (expense)
    1,544                  
                         
Earnings before income taxes, equity in loss of unconsolidated affiliate and minority interest
    425,606                  
Provision for income taxes
    164,734               164,734  
                         
Earnings before equity in loss of unconsolidated affiliate and minority interest
    260,872                  
Equity in loss of unconsolidated affiliate
    (3,048 )             (3,048 )
Minority interest expense
    (1,019 )             (1,019 )
                         
Net earnings
  $ 256,805     $       $  
                         
Unaudited pro forma net earnings per share — basic(2)
  $ 2.64     $       $  
                         
Unaudited pro forma weighted average shares outstanding — basic(2)
    97,335                  
                         
 
 
(1) This amount represents the interest expense associated with the $      billion in debt to be incurred by LPS in connection with the spin-off, calculated using a weighted average interest rate of     %.
 
(2) Unaudited pro forma net earnings per share is calculated using one-half the number of outstanding shares of FIS as of December 31, 2007 because on completion of the spin-off, the number of shares of our outstanding common stock will equal one half of the number of FIS outstanding shares on the date of the spin-off.


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with the combined financial statements and the notes thereto and selected historical financial information included elsewhere herein. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Our actual results may differ materially from these expectations due to changes in global, political, economic, business, competitive and market factors, many of which are beyond our control. See “Forward-Looking Statements.”
 
Overview
 
We are a leading provider of integrated technology and outsourced services to the mortgage lending industry, with market-leading positions in mortgage processing and default management services in the U.S. A large number of financial institutions use our services, including 41 of the 50 largest banks in the U.S. Our technology solutions include our mortgage processing system, which processes over 50% of all U.S. residential mortgage loans by dollar volume. Our outsourced services include our default management services, which are used by mortgage lenders and servicers to reduce the expense of managing defaulted loans, and our loan facilitation services, which support most aspects of the closing of mortgage loan transactions to national lenders and loan servicers. For the year ended December 31, 2007, we generated revenues of $1,690.6 million and operating income of $424.1 million.
 
The Spin-Off Transaction
 
Prior to distributing all of our common stock to its shareholders, FIS will contribute all of the assets and liabilities comprising its lender processing services businesses as of the date of the spin-off to us in exchange for additional shares of our common stock and up to approximately $1.6 billion principal amount of our new debt obligations. Following receipt of necessary approvals from the SEC, a ruling from the IRS and an opinion from FIS’s special tax advisor with respect to the tax-free nature of the spin-off, FIS will distribute 100% of our common stock to its shareholders in the spin-off and exchange the new debt for a like amount of its existing debt. The spin-off is expected to be tax-free to FIS and its shareholders, and the debt-for-debt exchange is expected be tax-free to FIS. FIS will then retire its debt received in exchange for our new debt obligations. Completion of the spin-off is expected to occur in mid-2008. FIS’s current Chief Financial Officer, Jeffrey S. Carbiener, is expected to be the President and Chief Executive Officer of LPS.
 
In January 2008, FIS filed a ruling request with the IRS regarding the tax-free nature of the spin-off. Completion of the spin-off is contingent upon the satisfaction or waiver of a variety of conditions, including final approval of the spin-off and all related arrangements by FIS’s board of directors. The completion of the proposed spin-off is also subject to risks and uncertainties including but not limited to those associated with FIS’s ability to contribute the assets and liabilities to us, our ability to complete the debt exchange in the manner and on the terms currently contemplated, the possibility that necessary governmental approvals or actions (from the IRS, the SEC or other authorities) will not be obtained, and market conditions for the spin-off.
 
Reporting Segments
 
We conduct our operations through two reporting segments, Technology, Data and Analytics and Loan Transaction Services. Our Technology, Data and Analytics segment principally includes:
 
  •  our mortgage processing services, which we conduct using our market-leading mortgage servicing platform, or MSP, and our team of experienced support personnel based primarily at our Jacksonville, Florida data center;
 
  •  our Desktop application, a workflow system that assists our customers in managing business processes, which today is primarily used in connection with mortgage loan default management but which has broader applications;


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  •  our other software and related service offerings, including our mortgage origination software, our real estate closing and title insurance production software and our middleware application which provides collaborative network connectivity among mortgage industry participants; and
 
  •  our data and analytics businesses, the most significant of which is our alternative property valuations business, which provides a range of types of valuations other than traditional appraisals, our property records business and our advanced analytic services, which assist our customers in their loan marketing or loss mitigation efforts.
 
For the year ended December 31, 2007, this segment produced $570.1 million in revenue, of which our mortgage processing services represented $341.2 million.
 
Our Loan Transaction Services segment offers a range of services used mainly in the making of a mortgage loan, which we refer to as our loan facilitation services, and in the management of mortgage loans that go into default. Our loan facilitation services include:
 
  •  settlement services, which consist of title agency services, in which we act as an agent for title insurers, and closing services, in which we assist in the closing of real estate transactions; and
 
  •  other origination services, which consist of traditional appraisal and appraisal management services, real estate tax services, which provide lenders with information about the tax status of a property, and flood zone information, which assists lenders in determining whether a property is in a federally designated flood zone.
 
Our default management services offer a full spectrum of outsourced services in connection with defaulted loans. These services include, among others:
 
  •  foreclosure services, including access to a nationwide network of independent attorneys, document preparation and recording and other services;
 
  •  property preservation services, designed to preserve the value of properties securing defaulted loans; and
 
  •  asset management services, providing REO disposition services through a network of independent real estate brokers, attorneys and other vendors to facilitate the transaction.
 
Our revenues from these services grew significantly in 2007 and tend to provide a natural hedge against the effects of high interest rates or a slow real estate market on our loan facilitation services. For the year ended December 31, 2007, revenues from our Loan Transaction Services segment were $1,125.9 million.
 
The Company also has a corporate segment that consists of the corporate overhead and other smaller operations that are not included in the other segments.
 
We were incorporated in December 2007 and are currently a wholly-owned subsidiary of FIS.
 
Separation from FIS
 
Our historical financial statements include assets, liabilities, revenues and expenses directly attributable to our operations. Our historical financial statements reflect allocations of certain corporate expenses from FIS. These expenses have been allocated to us on a basis that management considers to reflect most fairly or reasonably the utilization of the services provided to or the benefit obtained by our businesses. These expense allocations reflect an allocation to us of a portion of the compensation of certain senior officers and other personnel of FIS who will not be our employees after the distribution but who historically provided services to us. Certain of the amounts allocated to us reflect a portion of amounts charged to FIS under agreements entered into with FNF. Our historical financial statements also do not reflect the debt or interest expense we might have incurred if we had been a stand-alone entity. In addition, we will incur other expenses, not reflected in our historical financial statements, as a result of being a separate publicly traded company. As a result, our historical financial statements do not necessarily reflect what our financial position or results of operations would have been if we had been operated as a stand-alone public entity during the periods covered, and may not be indicative of our future results of operations or financial position.


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Related Party Transactions
 
We have historically conducted business with FIS and with FNF. We have various agreements with FNF under which we have provided title agency services, software development and other data services. We have been allocated corporate costs from FIS and will continue to receive certain corporate services from FIS for a period of time. We have also had other arrangements with FNF and FIS under which we have paid or been allocated expenses. Summaries of the material agreements between us and FIS and FNF are included in “Certain Relationships and Related Party Transactions” and in the notes to the combined financial statements.
 
A summary of related party items with FIS or FNF included in our revenues and expenses is as follows (in millions):
 
                         
    2007     2006     2005  
 
Title agency commissions
  $ 132.2     $ 83.9     $ 80.9  
Software development revenue
    59.5       45.4       7.7  
Other real-estate related services
    19.6       19.8       17.4  
                         
Total revenues
  $ 211.3     $ 149.1     $ 106.0  
                         
 
                         
    2007     2006     2005  
 
Title plant information expense
  $ 3.0     $ 2.6     $ 2.1  
Corporate services
    35.7       51.8       54.9  
Licensing, leasing and cost sharing agreement
    (12.2 )     (13.2 )     (10.8 )
                         
Total expenses
  $ 26.5     $ 41.2     $ 46.2  
                         
 
We have been included in FIS’s consolidated tax returns and thus any income tax liability or receivable is due to/from FIS. For purposes of our historical combined financial statements any other receivables or payables between FIS and us are treated as capital contributions.
 
Certain of the foregoing related party arrangements are set forth in agreements between us and FNF or FIS that will remain in effect for specified periods following the distribution. Other items described above in respect of which amounts have been allocated to or by us will be the subject of agreements to be entered into by us with related parties at or prior to the time of the distribution. These existing agreements and certain other agreements we will enter into at the time of the distribution are described in “Certain Relationships and Related Party Transactions.”
 
Prior to the distribution we intend to issue up to approximately $1.6 billion principal amount of our debt obligations to FIS. See “— Liquidity and Capital Resources.” FIS will exchange these debt obligations for its Existing Tranche B Loans, following which our new debt will be syndicated or otherwise distributed by FIS’s bank lenders.
 
Investment by FNF in FNRES Holdings, Inc.
 
On December 31, 2006, FNF contributed $52.5 million to FNRES Holdings, Inc. (“FNRES”), our subsidiary, for approximately 61% of the outstanding shares of FNRES. As a result, since December 31, 2006, we no longer consolidate FNRES, but record our remaining 39% interest as an equity investment in the amount of $30.5 million and $33.5 million as of December 31, 2007 and 2006, respectively. The Company recorded equity losses (net of tax), from its investment in FNRES, of $3.0 million for the year ended December 31, 2007. During 2006 and 2005, FNRES contributed revenues of $45.1 million and $43.7 million, respectively, and operating (loss) income of $(6.6) million and $1.7 million, respectively, which are reflected in the Corporate and Other segment.
 
Business Trends and Conditions
 
Our revenues in our loan facilitation businesses and certain of our data businesses are affected by the level of residential real estate activity, which depends in part on the level of interest rates. The increase in interest rates and tightening of lending standards in 2007 has resulted in a reduction in new loan originations and refinancing activity.


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Further, the current MBA forecast is for $2.0 trillion of mortgage originations in 2008 as compared to $2.3 trillion in 2007. Relatively higher interest rates are also likely to result in seasonal effects having more influence on real estate activity. Traditionally, the greatest volume of real estate activity, particularly residential resale transactions, has occurred in the spring and summer months.
 
In contrast, we believe that a rising interest rate environment or a weaker economy tends to increase the volume of consumer mortgage defaults and thus favorably affect our default management services, which provide services relating to residential mortgage loans in default. The overall strength of the economy also affects default revenues. Although our aggregate revenues are likely to be somewhat higher in periods when interest rates are lower and real estate markets are robust, our default management services provide a natural hedge against the volatility of the real estate business, as our 2007 and 2006 results demonstrate.
 
We may be affected by the consolidation trend in the banking industry. This trend may be beneficial or detrimental to our lender processing services businesses. Prior to a merger, merger partners often purchase services from competing service providers. When a mortgage processing client is involved in a consolidation, we may benefit by expanding the use of our services if such services are chosen to survive the consolidation and support the newly combined entity. In our other service lines, we are typically one of two or more vendors of the particular type of service to each of our customers. Following a merger involving a customer of ours in these service lines and a non-customer, our business may increase if the merged entity chooses to retain us as one of its preferred providers of services. Conversely, we may lose market share if a customer of ours is involved in a consolidation and our mortgage processing or other services are not chosen to survive the consolidation and support the newly combined entity.
 
The recently announced merger of Bank of America and Countrywide Financial Corporation (“Countrywide”) presents us with both potential opportunities and risks. For example, while we support Bank of America’s mortgage portfolio using our MSP, Countrywide uses its own proprietary software platform to process its mortgages. Additionally, Bank of America outsources a portion of its foreclosures to us, while Countrywide maintains its own default unit.
 
In a number of our business lines, we are affected by the decisions of potential customers to outsource the types of functions our businesses provide or perform those functions internally. Generally, demand for outsourcing solutions has increased over time as providers such as us realize economies of scale and improve their ability to provide services that improve customer efficiencies and reduce costs. Further, in a slowing economy or mortgage market, we believe that larger financial institutions may seek additional outsourcing solutions to avoid the fixed costs of operating or investing in internal capabilities.
 
Critical Accounting Policies
 
The accounting policies described below are those we consider critical in preparing our combined financial statements. These policies require management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures with respect to contingent liabilities and assets at the date of the combined financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts could differ from those estimates. See Note 2 of notes to the combined financial statements for a more detailed description of the significant accounting policies that have been followed in preparing our combined financial statements.
 
Revenue Recognition
 
We recognize revenues in accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104 (“SAB No. 104”), “Revenue Recognition” and related interpretations, Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force No. 00-21 (“EITF 00-21”), “Revenue Arrangements with Multiple Deliverables”, American Institute of Certified Public Accountant’s SOP No. 97-2 “Software Revenue Recognition” (“SOP 97-2”), SOP No. 98-9 “Modification of SOP No. 97-2, Software Revenue Recognition, with Respect to Certain Transactions” (“SOP 98-9”), and SOP No. 81-1, “Accounting for Performance of Construction Type and Certain Production-Type Contracts” (“SOP 81-1”). Recording revenues under the provisions of these pronouncements requires judgment, including determining whether or not an arrangement includes multiple


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elements, whether any of the elements are essential to the functionality of any other elements, and whether evidence of fair value exists for those elements. Customers receive certain contract elements over time and changes to the elements in an arrangement, or in our ability to identify fair value for these elements, could materially impact the amount of earned and unearned revenue reflected in our financial statements.
 
The primary judgments relating to our revenue recognition are determining when all of the following criteria are met under SAB 104: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured. Under EITF 00-21, judgment is also required to determine whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting.
 
If the deliverables under a contract are software related as determined under SOP 97-2 or SOP 98-9, we apply these pronouncements and related interpretations to determine the appropriate units of accounting and how the arrangement consideration should be measured and allocated to the separate units. This determination, as well as management’s ability to establish vendor specific objective evidence (“VSOE”) for the individual deliverables, can impact both the amount and timing of revenue recognition under these agreements. The inability to establish VSOE for each contract deliverable results in having to record deferred revenues and/or applying the residual method as defined in SOP 98-9. For arrangements where we determine VSOE for software maintenance using a stated renewal rate within the contract, we use judgment to determine whether the renewal rate represents fair value for that element as if it had been sold on a stand-alone basis. For a small percentage of revenues, we use contract accounting, as required by SOP No. 97-2, when the arrangement with the customer includes significant customization, modification, or production of software. For elements accounted for under contract accounting, revenue is recognized in accordance with SOP 81-1, “Accounting for Performance of Construction Type and Certain Production-Type Contracts,” using the percentage-of-completion method since reasonably dependable estimates of revenues and contract hours applicable to various elements of a contract can be made.
 
Occasionally, we are party to multiple concurrent contracts with the same customer. These situations require judgment to determine whether the individual contracts should be aggregated or evaluated separately for purposes of revenue recognition. In making this determination we consider the timing of negotiating and executing the contracts, whether the different elements of the contracts are interdependent and whether any of the payment terms of the contracts are interrelated.
 
Due to the large number, broad nature and average size of individual contracts we are a party to, the impact of judgments and assumptions that we apply in recognizing revenue for any single contract is not likely to have a material effect on our consolidated operations. However, the broader accounting policy assumptions that we apply across similar arrangements or classes of customers could significantly influence the timing and amount of revenue recognized in our historical and future results of operations or financial position.
 
Computer Software
 
Computer software includes the fair value of software acquired in business combinations, purchased software and capitalized software development costs. As of December 31, 2007 and 2006, computer software, net of accumulated amortization was $150.4 million and $127.1 million, respectively. Purchased software is recorded at cost and amortized using the straight line method over its estimated useful life and software acquired in business combinations is recorded at its fair value and amortized using straight line and accelerated methods. Internally developed software costs are amortized using the greater of the straight line method over the estimated useful life or based on the ratio of current revenues to total anticipated revenue over the estimated useful lives. Useful lives of computer software range from 3 to 10 years. In determining useful lives, management considers historical results and technological trends which may influence the estimate. Amortization expense for computer software was $31.1 million, $29.0 million and $28.7 million in 2007, 2006 and 2005, respectively. We also assess the recorded value of computer software for impairment on a regular basis by comparing the carrying value to the estimated future cash flows to be generated by the underlying software asset. There is an inherent uncertainty in determining the expected useful life or cash flows to be generated from computer software. We have not historically experienced significant changes in these estimates but any change in the future could have an impact on our results of operations.


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Goodwill and Other Intangible Assets
 
We have significant intangible assets that were acquired through business acquisitions. These assets consist of purchased customer relationships, contracts, and the excess of purchase price over the fair value of identifiable net assets acquired (goodwill).
 
As of December 31, 2007 and 2006, goodwill was $1,078.2 million and $1,045.8 million, respectively. The process of determining whether or not an asset, such as goodwill, is impaired or recoverable relies on projections of future cash flows, operating results and market conditions. Such projections are inherently uncertain and, accordingly, actual future cash flows may differ materially from projected cash flows. In evaluating the recoverability of goodwill, we perform an annual goodwill impairment test on our reporting units based on an analysis of the discounted future net cash flows generated by the reporting units’ underlying assets. Such analyses are particularly sensitive to changes in estimates of future net cash flows and discount rates. Changes to these estimates might result in material changes in the fair value of the reporting units and determination of the recoverability of goodwill which may result in charges against earnings and a reduction in the carrying value of our goodwill.
 
As of December 31, 2007 and 2006, intangible assets, net of accumulated amortization, were $118.1 million and $152.8 million, respectively, which consist primarily of purchased customer relationships and trademarks. The valuation of these assets involves significant estimates and assumptions concerning matters such as customer retention, future cash flows and discount rates. If any of these assumptions change, it could affect the recoverability of the carrying value of these assets. Purchased customer relationships are amortized over their estimated useful lives using an accelerated method which takes into consideration expected customer attrition rates over a period of up to ten years. All intangible assets that have been determined to have indefinite lives are not amortized, but are reviewed for impairment at least annually in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142. The determination of estimated useful lives and the allocation of the purchase price to the fair values of the intangible assets require significant judgment and may affect the amount of future amortization on the intangible assets other than goodwill. Amortization expense for intangible assets other than goodwill was $42.4 million, $51.5 million and $56.0 million in 2007, 2006 and 2005, respectively. Definite-lived intangible assets are amortized over their estimated useful lives ranging from 5 to 10 years using accelerated methods. There is an inherent uncertainty in determining the expected useful life or cash flows to be generated from intangible assets. We have not historically experienced significant changes in these estimates but could be subject to them in the future.
 
Accounting for Income Taxes
 
As part of the process of preparing the combined financial statements, we were required to determine income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax expense together with assessing temporary differences resulting from differing recognition of items for income tax and accounting purposes. These differences result in deferred income tax assets and liabilities, which are included within our combined balance sheets. We must then assess the likelihood that deferred income tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within income tax expense in the statement of earnings. Determination of the income tax expense requires estimates and can involve complex issues that may require an extended period to resolve. Further, changes in the geographic mix of revenues or in the estimated level of annual pre-tax income can cause the overall effective income tax rate to vary from period to period.


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Results of Operations for the Years Ended December 31, 2007, 2006 and 2005
 
Combined Results of Operations
 
                         
    2007     2006     2005  
    (In thousands)  
 
Processing and services revenues
  $ 1,690,568     $ 1,484,977     $ 1,382,479  
Cost of revenues
    1,058,647       900,145       804,488  
                         
Gross profit
    631,921       584,832       577,001  
                         
Selling, general, and administrative expenses
    207,859       257,312       260,066  
                         
Operating income
    424,062       327,520       317,925  
                         
Other income (expense):
                       
Interest income
    1,690       2,606       4,124  
Interest expense
    (146 )     (298 )     (270 )
Other income (expense), net
          (106 )     (1,238 )
                         
Total other income (expense)
    1,544       2,202       2,616  
                         
Earnings before income taxes, equity in loss of unconsolidated affiliates and minority interest
    425,606       329,722       320,541  
Provision for income taxes
    164,734       127,984       124,160  
                         
Earnings before equity in loss of unconsolidated affiliates and minority interest,
    260,872       201,738       196,381  
Equity in loss of unconsolidated affiliates
    (3,048 )            
Minority interest
    (1,019 )     (683 )     (676 )
                         
Net earnings
  $ 256,805     $ 201,055     $ 195,705  
                         
 
Processing and Services Revenues
 
Processing and services revenues totaled $1,690.6 million, $1,485.0 million and $1,382.5 million for 2007, 2006 and 2005, respectively. The overall increase of $205.6 million, or 13.8%, in 2007 as compared to 2006 resulted from an increase in our TDA segment revenues of $23.2 million and an increase in our LTS segment revenues of $224.9 million partially offset by a reduction in Corporate and Other segment revenues due to the deconsolidation of FNRES, which had revenues in 2006 of approximately $45.1 million. The increase in TDA revenue resulted primarily from an increase of $16.7 million in revenues relating to mortgage processing services and the growth in transactions processed by Desktop primarily resulting from increased foreclosure activity. These increases were partially offset by a decrease in revenues in 2007 from our alternative valuation services relating to the overall slowdown of real estate activity. The increase in LTS revenue related primarily to accelerating demand for services within our default management businesses, which contributed an increase of $186.5 million, and market share gains in our traditional appraisal services, which increased $75.3 million despite the declining real estate market. These increases were partially offset by decreased demand for loan facilitation services, including tax services and our property exchange services. The overall increase of $102.5 million, or 7.4%, in 2006 compared to 2005 was driven primarily by growth of $21.7 million in the TDA segment and $80.9 million in the LTS segment. The growth from 2005 to 2006 in the TDA segment was driven by a $10.7 million increase in revenues from mortgage processing services. The growth from 2005 to 2006 in the LTS segment was largely due to an increase in revenues from default management services of $64.4 million and a $43.9 million increase relating to our traditional appraisal services.
 
Cost of Revenues
 
Cost of revenues totaled $1,058.6 million, $900.1 million and $804.5 million for 2007, 2006 and 2005, respectively. The overall increase of $158.5 million, or 17.6%, in 2007 as compared to 2006, as well as the increase of $95.7 million, or 11.9%, in 2006 as compared to 2005, exceeded the pace of our increases in revenues due primarily to the increases in revenues, especially within the LTS segment, being concentrated within certain lower margin businesses.


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Gross Profit
 
Gross profit as a percentage of revenues (“gross margin”) was 37.4%, 39.4% and 41.7% for 2007, 2006 and 2005, respectively. The decrease in gross margin in 2007 as compared to 2006, as well as in 2006 as compared to 2005, was primarily due to significant growth in lower margin service lines within the LTS segment, particularly our appraisal services along with declining revenues and margins in loan facilitation services, including in tax services and our tax deferred exchange businesses due to lower volumes.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses totaled $207.9 million, $257.3 million and $260.1 million for 2007, 2006 and 2005, respectively. The decrease of $49.5 million, or 19.2%, in 2007 as compared to 2006 was primarily the result of the deconsolidation of FNRES which resulted in a reduction of $22.6 million, a reduction in stock based compensation of $10.0 million and other cost control measures. Stock based compensation in 2006 included $16.9 million in acceleration charges relating to performance based options and options vested due to FIS’s merger with FNF. Selling, general and administrative expenses stayed relatively constant in 2006 and 2005.
 
Operating Income
 
Operating income totaled $424.1 million, $327.5 million and $317.9 million for 2007, 2006 and 2005 respectively. Operating margin was 25.1%, 22.1% and 23.0% for 2007, 2006 and 2005, respectively. The increase in operating income in 2007 as compared to 2006 primarily results from our increased revenue and lower selling, general and administrative costs, partially offset by our decreasing gross margin.
 
Income Tax Expense
 
Income tax expense totaled $164.7 million, $128.0 million and $124.2 million for 2007, 2006 and 2005, respectively. This resulted in an effective tax rate of 38.7%, 38.8% and 38.7% for 2007, 2006 and 2005, respectively. The increase in tax expense for 2007 as compared to 2006 is attributable to increased operating income.
 
Net Earnings
 
Our net earnings totaled $258.0 million, $201.1 million and $195.7 million for 2007, 2006 and 2005, respectively.
 
Segment Results of Operations
 
Technology, Data and Analytics Segment Results of Operations
 
                         
    2007     2006     2005  
    (In thousands)  
 
Processing and services revenues
  $ 570,146     $ 546,961     $ 525,259  
Cost of revenues
    313,747       299,696       281,974  
                         
Gross profit
    256,399       247,265       243,285  
Selling, general, and administrative expenses
    64,770       67,732       81,143  
                         
Operating income
    191,629       179,533       162,142  
                         
 
Processing and Services Revenues
 
Processing and services revenues for the TDA segment totaled $570.1 million, $547.0 million and $525.3 million for 2007, 2006 and 2005, respectively. The overall increase of $23.2 million, or 4.2%, in 2007 as compared to 2006 resulted primarily from an increase of $16.7 million in revenues relating to mortgage processing services and the growth in transactions processed by Desktop primarily resulting from increased foreclosure activity. These increases were partially offset by a decrease in revenues in 2007 from our alternative valuation services due to the overall slowdown of mortgage originations. The overall increase of $21.7 million, or


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4.1%, in 2006 compared to 2005 was driven primarily by $10.7 million relating to revenues from mortgage processing services and increases in our other technology offerings.
 
Cost of Revenues
 
Cost of revenues for the TDA segment totaled $313.7 million, $299.7 million, and $282.0 million for 2007, 2006 and 2005, respectively. The overall increase of $14.0 million, or 4.7%, in 2007 as compared to 2006 and the increase of $17.7 million, or 6.3%, in 2006 as compared to 2005 resulted from increased personnel, data processing, and other variable costs associated with increased business.
 
Gross Profit
 
TDA gross margin was 45.0%, 45.2% and 46.3% for 2007, 2006 and 2005, respectively. The decrease in gross margin in 2007 and 2006 as compared to 2005 was driven by increased contribution from services having lower margins than our mortgage processing services.
 
Selling, General and Administrative Expenses
 
TDA selling, general and administrative expenses totaled $64.8 million, $67.7 million, and $81.1 million for 2007, 2006 and 2005, respectively. These were 11.4%, 12.4% and 15.4% of revenues in 2007, 2006 and 2005, respectively. The improvement is primarily the result of keeping fixed costs down while increasing the revenue base within this segment, particularly through expansion of Desktop.
 
Operating Income
 
TDA operating income totaled $191.6 million, $179.5 million and $162.1 million for 2007, 2006 and 2005, respectively. Operating margin was 33.6%, 32.8% and 30.9% for 2007, 2006 and 2005, respectively. The increase in operating margin is driven by increased contribution from Desktop and mortgage processing services, as described above, and management of selling, general and administrative costs.
 
Loan Transaction Services Segment Results of Operations
 
                         
    2007     2006     2005  
    (In thousands)  
 
Processing and services revenues
  $ 1,125,879     $ 900,951     $ 820,098  
Cost of revenues
    750,174       587,040       505,607  
                         
Gross profit
    375,705       313,911       314,491  
Selling, general, and administrative expenses
    110,132       107,555       103,693  
                         
Operating income
    265,573       206,356       210,798  
                         
 
Processing and Services Revenues
 
Processing and services revenues for the LTS segment totaled $1,125.9 million, $900.9 million and $820.1 million for 2007, 2006 and 2005, respectively. The increase of $225.0 million, or 25.0%, in revenue in 2007 as compared to 2006 is primarily due to revenue growth of $186.5 million in our default management group resulting from increased foreclosure activity and market share gains in our traditional appraisal services despite the declining real-estate market, and as a result increased $75.3 million. These increases were partially offset by decreased demand for other loan facilitation services, including tax and tax-deferred exchange services. The overall increase of $80.9 million, or 9.9%, in 2006 compared to 2005 was driven primarily by an increase in our default services totaling $64.4 million and $43.9 million, respectively and market share gains in our traditional appraisal services.


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Cost of Revenues
 
Cost of revenues for the LTS segment totaled $750.2 million, $587.0 million, and $505.6 million for 2007, 2006 and 2005, respectively. The overall increase of $163.2 million, or 27.8%, in 2007 as compared to 2006, as well as the increase of $81.4 million, or 16.1%, in 2006 as compared to 2005, resulted from increased personnel, data processing, and other variable costs associated with increased revenues.
 
Gross Profit
 
LTS gross margin was 33.4%, 34.8% and 38.3% for 2007, 2006 and 2005, respectively. The decrease in gross margin in 2007 as compared to 2006, as well as in 2006 as compared to 2005, was primarily due to a decrease in revenues and margins from loan facilitation services partially offsetting revenue and margin expansion from our default management services in both 2007 and 2006.
 
Selling, General and Administrative Expenses
 
LTS selling, general and administrative expenses totaled $110.1 million, $107.6 million and $103.7 million for 2007, 2006 and 2005, respectively. These were 9.8%, 11.9% and 12.6% of revenues in 2007, 2006 and 2005, respectively. The improvement is primarily the result of keeping fixed costs down while increasing the revenue base within this segment, particularly through expansion of our default management businesses.
 
Operating Income
 
LTS operating income totaled $265.6 million, $206.4 million and $210.8 million for 2007, 2006 and 2005, respectively. Operating margin was 23.6%, 22.9% and 25.7% for 2007, 2006 and 2005, respectively, for the reasons set forth above.
 
Corporate and Other Segment
 
The Corporate and Other segment consists of corporate overhead costs that are not included in the other segments and in 2006 and 2005, 100% of the operating results of FNRES. During 2006 and 2005, FNRES contributed revenues of $45.1 million and $43.7 million, respectively, and operating (loss) income of $(6.6) million and $1.7 million, respectively. Excluding the operating results of FNRES, the Corporate and Other segment included selling, general and administrative costs of $33.0 million, $56.6 million and $56.2 million in 2007, 2006 and 2005, respectively. These costs are based on allocations from FIS for the years presented and the decrease in 2007 is partially caused by these businesses making up a smaller percentage of overall FIS revenues in 2007 as compared to the prior years. Also, included in these costs were stock based compensation costs of $14.1 million, $24.1 million and $11.0 million, in 2007, 2006 and 2005, respectively. The increased stock based compensation cost in 2006 primarily related to the $12.6 million in expense recorded in the first quarter of 2006 for the vesting of the FIS performance based options granted in March 2005 held by our employees for which the performance criteria were met during 2006 and a $4.3 million charge related to the acceleration of vesting of stock options recorded in the fourth quarter.
 
Liquidity and Capital Resources
 
Cash Requirements
 
Our cash requirements include cost of revenues, selling, general and administrative expenses, income taxes, capital expenditures, systems development expenditures, and business acquisitions. Our principal sources of funds are cash generated by operations. Going forward, our cash requirements will also include servicing our outstanding debt and paying dividends.
 
At December 31, 2007, we had cash on hand of $39.6 million. As described below, in connection with the spin-off we intend to incur up to approximately $1.6 billion in long-term debt. We expect that cash flows from operations over the next twelve months will be sufficient to fund our operating cash requirements and pay principal and interest on our outstanding debt absent any unusual circumstances or adverse changes in the business environment.


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Following the spin-off, we intend to pay quarterly cash dividends to our shareholders of $      per share, although the payment of any dividends is at the discretion of our Board and subject to any limits in our debt or other agreements. See “Dividend Policy” and “— Financing” below.
 
Capital Expenditures
 
Our principal capital expenditures are for computer software (purchased and internally developed) and additions to property and equipment. In 2007, 2006 and 2005, we spent approximately $70.6 million, $70.2 million and $92.5 million, respectively, on capital expenditures.
 
Financing
 
In connection with the spin-off, we expect to enter into new agreements providing for an aggregate principal amount of indebtedness of up to approximately $1.6 billion. The nature, amount and terms of this debt will be determined closer to the date of the distribution. This debt may consist of one or a combination of debt instruments under a new credit agreement, which may be secured or unsecured and issued in one or more tranches, or senior or subordinated debt securities issued under an indenture.
 
In the spin-off, FIS will contribute to us all of its interest in the assets, liabilities, businesses and employees related to FIS’s lender processing services operations as of the date of the spin-off in exchange for shares of our common stock and up to approximately $1.6 billion principal amount of our new debt. After the spin-off, FIS will exchange 100% of such debt obligations for an equal principal amount of its Existing Tranche B Term Loans. Following such exchange the portion of the Existing Tranche B Loans acquired by FIS will be retired.
 
We also expect to have available a revolving capital facility to provide working capital and for other purposes. The amount and terms of this facility will be determined closer to the date of the distribution.
 
Contractual Obligations
 
Our long-term contractual obligations generally include our operating lease payments on certain of our property and equipment. As of December 31, 2007, our required annual payments relating to these contractual obligations were as follows:
 
                                                         
    2008   2009   2010   2011   2012   Thereafter   Total
 
Operating leases
  $ 16,776     $ 12,734     $ 6,160     $ 3,378     $ 2,049     $     $ 41,097  
 
The maturities of the debt obligations we will incur in connection with the spin-off will be described in the preceding section prior to the distribution.
 
Off-Balance Sheet Arrangements
 
We do not have any material off-balance sheet arrangements other than operating leases and the escrow and Section 1031 tax deferred exchange arrangements described below.
 
In conducting our title agency, closing and Section 1031 tax deferred exchange operations, we routinely hold customers’ assets in escrow and investment accounts, pending completion of real estate and exchange transactions. Certain of these amounts are maintained in segregated bank accounts and have not been included in the accompanying Consolidated Balance Sheets. We have a contingent liability relating to proper disposition of these balances, which amounted to $1.9 billion at December 31, 2007. For the customers’ assets that we hold in escrow, we have ongoing programs for realizing economic benefits through favorable borrowing and vendor arrangements with various banks. We had no borrowings outstanding as of December 31, 2007, under these arrangements with respect to these assets in escrow. At that date, our customers’ tax deferred assets that were held in investment accounts were largely invested in short-term, high grade investments that minimize risk to principal.
 
Recent Accounting Pronouncements
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”), requiring an acquirer in a business combination to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at their fair values at the acquisition date, with limited exceptions. The costs of the acquisition and any related restructuring costs will be expensed separately. Assets and liabilities arising from


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contingencies in a business combination are to be recognized at their fair value at the acquisition date and adjusted prospectively as new information becomes available. When the fair value of assets acquired exceeds the fair value of consideration transferred plus any noncontrolling interest in the acquiree, the excess will be recognized as a gain. Under SFAS 141(R), all business combinations will be accounted for prospectively by applying the acquisition method, including combinations among mutual entities and combinations by contract alone. SFAS 141(R) is effective for periods beginning on or after December 15, 2008, and will apply to business combinations occurring after the effective date.
 
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”), requiring noncontrolling interests (sometimes called minority interests) to be presented as a component of equity on the balance sheet. SFAS 160 also requires that the amount of net income attributable to the parent and to the noncontrolling interests be clearly identified and presented on the face of the consolidated statement of income. This statement eliminates the need to apply purchase accounting when a parent company acquires a noncontrolling ownership interest in a subsidiary and requires that, upon deconsolidation of a subsidiary, a parent company recognize a gain or loss in net income after which any retained noncontrolling interest will be reported at fair value. SFAS 160 requires expanded disclosures in the consolidated financial statements that identify and distinguish between the interests of the parent’s owners and the interest of the noncontrolling owners of subsidiaries. SFAS 160 is effective for periods beginning on or after December 15, 2008 and will be applied prospectively except for the presentation and disclosure requirements, which will be applied retrospectively for all periods presented. Management is currently evaluating the impact of this statement on our statements of financial position and operations.
 
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities to choose to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 mandates certain financial statement presentation and disclosure requirements when a company elects to report assets and liabilities at fair value under SFAS 159. SFAS 159 is effective as of the beginning of January 1, 2008 for calendar year entities. Management does not believe the impact of adopting SFAS 159 will have a material impact on our statements of financial position and operations.
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
In the normal course of business, we are routinely subject to a variety of risks, as described in the Risk Factors section of this Information Statement on Form 10. For example, we are exposed to the risk that decreased lending and real estate activity, which depend in part on the level of interest rates, may reduce demand for certain of our services and adversely affect our results of operations.
 
Following the spin-off, the risks related to our business will also include certain market risks that may affect our debt and other financial instruments. In particular, we will face the market risks associated with interest rate movements on our outstanding debt. We expect to regularly assess market risks and to establish policies and business practices to protect against the adverse effects of these exposures.
 
Following the spin-off, we will be highly leveraged. We expect to incur up to approximately $1.6 billion in long-term debt in connection with the spin-off. This debt will bear interest at a floating rate, and therefore will be subject to an element of market risk from changes in interest rates. A one percent increase or decrease in interest rates would result in up to a $16 million increase or decrease, as applicable, in our annual interest expense.


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BUSINESS
 
Overview
 
We are a leading provider of integrated technology and outsourced services to the mortgage lending industry, with market-leading positions in mortgage processing and default management services in the U.S. A large number of financial institutions use our services, including 41 of the 50 largest banks in the U.S. Our technology solutions include our mortgage processing system, which processes over 50% of all U.S. residential mortgage loans by dollar volume. Our outsourced services include our default management services, which are used by mortgage lenders and servicers to reduce the expense of managing defaulted loans, and our loan facilitation services, which support most aspects of the closing of mortgage loan transactions to national lenders and loan servicers. Our integrated solutions create a strong value proposition for our customers across the life cycle of a mortgage. We believe that we will continue to benefit from the opportunity to cross-sell services across our broad customer base.
 
Most of our businesses were originally started or acquired by Fidelity National Financial, Inc., the former parent of FIS, which we refer to in this information statement as Old FNF. In 2005, Fidelity National Financial, Inc. contributed these businesses, along with certain other operations, to FIS. Of our businesses acquired in the last five years, the most significant were Fidelity National Financial, Inc.’s purchase in 2003 of ALLTEL Information Services, Inc., which added our mortgage processing business; its acquisition in 2003 of Lender’s Services, Inc., a provider of vendor management services to the residential mortgage industry; and its 2003 purchase of the outstanding minority interest in Fidelity National Information Solutions, Inc., a provider of data and technology solutions to lenders and real estate professionals.
 
Our Strategy
 
Our strategies for achieving profitable growth include the following:
 
  •  Expand and Leverage our Market Leading Technology.  At the core of our service offerings is our technological capability. Our mortgage servicing platform, or MSP, is the leading mortgage processing software in the U.S. MSP offers a comprehensive, state-of-the-art set of mortgage servicing functions within a single system and can be provided on an integrated basis with many of our other services. Our Desktop application, which is a workflow information system that can be used to manage a range of different workflow processes, is currently the leading mortgage default management application in the United States. Despite all the changes that have occurred in the lender processing services industry in recent years, the lending process is still complex, encompassing many steps that remain paper-driven. These steps, and similar steps in the servicing and default areas, are ripe for further systems and process automation. We have been an innovator in developing applications and systems that automate these processes and we intend to continue to build on the reputation, reliability and functionality of our software applications and services.
 
  •  Provide Fully Integrated Service Offerings.  Our strategy to integrate our technology, data and outsourcing services has differentiated us in the marketplace, and resulted in our growing market share. Unlike our principal competitors, we offer services from end to end across the mortgage continuum, from facilitating the origination of loans through closing, post-closing servicing and default management. Our technology applications such as MSP and Desktop are offered on an integrated basis with many of our other services, such as default management. We will continue to improve the value proposition that we offer our customers by ensuring that our software applications are also able to integrate with existing and new add-on third-party applications used by our customers.
 
  •  Maximize our Cross-Selling Opportunities.  We have a broad customer base, including relationships with a large number of financial institutions, but we focus our sales and marketing efforts on the 50 largest banks in the U.S. We have relationships with 41 of these institutions, and provide each of these customers with an average of 8 of the 29 separate categories of service we offer. We coordinate our sales efforts to our top-tier financial institution customers through a part of our organization called our Office of the Enterprise to take advantage of information we obtain about the needs of these customers in order to cross-sell our services. Our leading-edge technology and the broad range of services we offer provide us with the opportunity to expand sales to our existing and potential customers across all of our service lines. In addition, we seek to


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  increase our sales by expansion of existing customer relationships within our operating businesses, such as by selling additional default services to customers that do not currently use all of our offerings, thus providing a greater level of efficiency, service and quality.
 
  •  Maintain a Balanced Revenue Base Across the Mortgage Cycle.  Revenue from our mortgage processing business is largely unaffected by year to year changes in interest rates and the level of mortgage originations. While revenues from our loan facilitation services and certain data and analytics businesses tend to increase when interest rates are lower, increases in interest rates tend to result in greater demand for our default management services. Although, due to the nature of these businesses, such offset can never be perfect, we believe our model provides us with a natural hedge against the volatility of the real estate industry.
 
  •  Take Advantage of Increased Outsourcing by our Customers.  In the current mortgage market environment, our customers see outsourcing as a way to save money by converting high fixed costs to variable costs. Our customers also view outsourcing as a potential solution to increased regulatory oversight and compliance requirements. Our solutions allow our customers to focus on their business, while we handle their outsourcing needs across all of our lines of business. We work with our customers to set specific parameters regarding the services they require, so that they are able to utilize our outsourcing services in a manner that we believe provides a greater level of consistency in service, pricing and quality than if these customers were to contract separately for similar services. We will continue providing a wide range of flexible solutions tailored to the needs of each of our clients by further investing in and expanding our outsourcing efforts.
 
  •  Broaden our Portfolio of Services and Market Opportunities through Strategic Acquisitions.  While we will continue to invest in developing and enhancing our existing business solutions, we also intend to continue to acquire technologies and capabilities that will allow us to further broaden our service offerings and continue to enhance the functionality and efficiency of our business solutions. We may also consider acquisitions that would expand our existing customer base for a service, or acquiring businesses that have capabilities or a customer base in markets in which we do not currently compete, particularly if these acquisitions would allow us to obtain revenue growth through leveraging our existing capabilities or scale. We will continue to utilize our ability to integrate newly acquired businesses and we will continue to be disciplined and strategic in making acquisitions.
 
Competitive Strengths
 
We believe that our competitive strengths include the following:
 
  •  Market Leading Mortgage Processor.  Our mortgage servicing platform, MSP, is the leading mortgage processing software in the United States. Over 50% of all U.S. residential mortgage loans by dollar volume are processed using MSP. Because our bank customers utilize MSP as the core application through which they keep the primary records of their mortgage loans, MSP is critical to the successful and efficient operation of their businesses. Our mortgage processing software and services give us access to key decision makers at a number of major financial institutions. In addition, MSP is a core offering into which many of our other services, such as default management and our Desktop application, can be integrated. This capability allows us to streamline and simplify the process of making and administering loans for our financial institution customers. For these reasons, along with the efficiencies and cost-savings our significant scale provides, our customer relationships tend to be long-term.
 
  •  Comprehensive Set of Integrated Applications and Services.  We have high quality software applications and services that have been developed over many years with a focus on meeting the needs of our customers. We offer a suite of applications and services in 29 categories of service across the mortgage continuum and we constantly seek to integrate our software and services to better meet the needs of our customers. We have made, and continue to make, substantial investments in our applications and services to ensure that they remain competitive in the marketplace.
 
  •  Broad and Long-Term Relationships with our Customers.  A large number of financial institutions use our services, including 41 of the 50 largest U.S. banks. We provide these 41 banks with an average of 8 out of the 29 separate categories of service that we offer. In order to more effectively manage the strategic


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  opportunities presented by our increased access across business lines to key personnel at our financial institution customers, we actively coordinate these significant relationships on an executive and operational level through our Office of the Enterprise. We have the size and expertise that lead institutions to trust us with the management and outsourcing of their critical applications. Additionally, we have had long-term relationships with many of our customers.
 
  •  Strong Value Proposition for our Customers.  We provide our customers with services and applications that enhance their competitive position and provide them with additional revenue opportunities. We also understand the needs of our customers and have successfully created innovative services that enable our customers to meet their compliance requirements and also reduce their operating costs. We believe that our high quality services and our innovative approach to meeting the needs of our customers allow us to provide a compelling value proposition to our customers.
 
  •  Experienced Management Team.  Our President and Chief Executive Officer, Mr. Carbiener, has been employed by FIS and its predecessors for 17 years and has been a member of their senior leadership for more than 10 years. The Executive Vice Presidents of each of our reporting segments, Mr. Scheuble and Mr. Swenson, currently run those businesses for FIS, have been employed by FIS and its predecessors for 5 and 13 years, respectively, and have been involved in our industries for 27 and 25 years, respectively.
 
Information about Reporting Segments
 
We offer a suite of applications and services across the mortgage continuum. Our two reportable segments are Technology, Data and Analytics and Loan Transaction Services. A significant focus of our marketing efforts is the top 50 U.S. banks, while we also provide our services to a number of other financial institutions, mortgage lenders and mortgage loan servicers, and real estate professionals. We have processing and technology relationships with 41 of the top 50 U.S. banks, including each of the top ten and 18 of the top 20. Over 50% of all U.S. residential mortgages by dollar volume are processed using our mortgage processing platform.
 
In our Technology, Data and Analytics segment, our principal technology offerings are mission-critical applications provided to mortgage lenders and other lending institutions, together with related support and services. Our technology services primarily consist of mortgage processing and workflow management. The long term nature of most of our contracts in this business provides us with substantial recurring revenues. Our revenues from mortgage processing are generally based on the number of mortgages processed on our software. As a result, revenue from this business is largely not affected by year to year changes in the residential mortgage market. Our technology services include, among others, our Desktop application, which at present is deployed primarily to customers utilizing our default management services but has broader applications. The Desktop application generally earns revenues on a per transaction basis. Our data and analytics services primarily consist of our property records data businesses, our alternative valuation services and our applied analytical tools. For 2007, the Technology, Data and Analytics segment produced $570.1 million, or 33.7%, of our combined revenues.
 
Our Loan Transaction Services segment consists principally of our loan facilitation services and our default management services. Our loan facilitation services consist primarily of settlement services provided through centralized facilities in accordance with a lender’s specific requirements, regardless of the geographic location of the borrower or property, traditional property appraisals provided through our nationwide network of independent appraisers, and certain other origination and real estate-related services. Our default management services are provided to national lenders and loan servicers. These services allow our customers to outsource some or all of the business processes necessary to take a loan and the underlying property through the default and foreclosure process. Unlike our loan facilitation businesses and certain of our data and analytics businesses, in our default businesses higher interest rates may tend to increase revenues as the level of defaults increases. Our revenues from our Loan Transaction Services segment in 2007 were $1,125.9 million, or 66.3%, of our combined revenues.
 
In 2007, 2006 and 2005, all of our revenues were from sources within the U.S. and Puerto Rico.
 
For further historical financial information about our segments, see Note 13 to our combined financial statements.


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Services
 
Technology, Data and Analytics
 
Our Technology, Data and Analytics segment offers leading software systems and information solutions that facilitate and automate many of the business processes across the life cycle of a mortgage. Our customers use our technology and services to reduce their operating costs, improve their customer service and enhance their competitive position. We continually work with our customers to customize and integrate our software and services in order to assist them in achieving the value proposition that we offer to them.
 
Technology.  We sell the most widely used mortgage loan servicing platform in the U.S., which offers a comprehensive set of mortgage servicing functions within a single system. We also offer our Desktop application, which is a middleware information system that we have deployed primarily for use with our default management services. The primary applications and services of our technology businesses include:
 
  •  MSP.  Our mortgage servicing platform, or MSP, is an application that automates loan servicing, including loan setup and ongoing processing, customer service, accounting and reporting to the secondary mortgage market, and federal regulatory reporting. MSP serves as the core application through which our bank customers keep the primary records of their mortgage loans, and as a result is an important part of the bank’s underlying processing infrastructure. MSP processes a wide range of loan products, including fixed-rate mortgages, adjustable-rate mortgages, construction loans, equity lines of credit and daily simple interest loans. We believe a substantial opportunity exists to expand the use of MSP in processing home equity lines of credit, or HELOCs. Traditionally, the software systems that many banks use to process HELOCs are based on credit card systems, and we believe, as a result, are less robust than MSP in areas such as escrow tracking and regulatory reporting. We believe the banking industry is now beginning to realize that it needs better processing systems for HELOCs than most banks currently employ. We have also integrated some of our analytic tools into MSP, which can assist our customers’ loan marketing or loss mitigation efforts.
 
When a bank hires us to process its mortgage portfolio, we provide the hardware and the skilled personnel whose role is to keep the system up and running 24 hours a day, seven days a week; to keep the programs and interfaces running smoothly; and to make the system and application changes needed to upgrade the processes and ensure compliance with regulatory changes. We also undertake to perform the processing securely. The bank customer is responsible for all external communications and all keying or other data input, such as reflecting when checks or other payments are received from its loan customers. While MSP can be purchased on a stand-alone, licensed basis, the substantial majority of our MSP customers by both number of customers and loan volume choose to use us as their processing partner and engage us to perform all data processing functions in our technology center in Jacksonville, Florida. We believe that we achieve higher economies of scale than our customers could on their own and provide them with better margins because of the greater number of mortgages we service in our data center.
 
  •  Desktop.  We have developed a web-based workflow information system, which we refer to as Desktop. The Desktop application can be used for managing a range of different workflow processes. It can be used to organize images of paper documents within a particular file, to capture information from imaged documents, to manage invoices and to provide multiple constituencies access to key data needed for various types of process management. We originally developed Desktop for use in our default management businesses, although it is an enterprise workflow application that is used to handle a wide range of other processes. The Desktop application enables our customers to seamlessly manage different processes through a single application and thus reduces our customers’ processing time and application maintenance costs. We provide electronic access for all our default management customers through Desktop application that allows them to monitor the status of our services over the Internet. We can also create an automated interface between MSP and the Desktop that allows default services pre-selected by our customers to automatically begin at a pre-determined stage in the default of any loan which is serviced by our MSP application. The Desktop application was originally developed to serve as a core application for tracking all stages of the default management process, and managing a defaulted loan through our Desktop application offers a faster, more efficient handling of such loan.


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  •  Other Software Applications.  We offer various software applications and services that facilitate the origination of mortgage loans in the U.S. For example, we offer a loan origination software system, known as Empower!, which is used by banks, savings & loans, mortgage bankers and sub-prime lenders to automate the loan origination process. Empower provides seamless credit bureau access and interfaces with MSP, automated underwriting systems used by Freddie Mac and Fannie Mae and various vendors providing settlement services. We also offer a software system, known as SoftPro, which is a leading real estate closing and title insurance production application. SoftPro is used by over 12,500 customers to create the appropriate forms necessary for the closing of residential and commercial real estate transactions in the U.S. Finally, we are the majority owner of RealEC Technologies, Inc., or RealEC, which is a provider of collaborative network solutions to the mortgage industry. RealEC’s applications enable lenders and their business partners to electronically connect, collaborate and automate their business processes to eliminate paper, manual processing and other obstacles in the origination and servicing of mortgage loans. RealEC provides partner connectivity, automated vendor management, advanced data capture, document management services, integration services, intelligent product decision tools, vendor sourcing tools and a B2B exchange to more than 2,000 mortgage originators (including 17 of the top 20).
 
We build all of our technology platforms to be scalable, highly secure, flexible, standards-based, and web connected. Standards and web connectivity ensure that our products are easy to use for our customers. Further, we can bring solutions to market quickly due to investments that we have made in integrating our technology.
 
Data and Analytics.  In addition to our technology applications, this segment provides data and analytics that are used in different steps in the life cycle of a mortgage. Our primary data and analytics services are:
 
  •  Enhanced Property Data and Information.  We acquire and aggregate real estate property data on a national level and we have been a leader in making such data available to our customers in a single database with a standard national format. Our property database currently covers areas where approximately 89% of the U.S. population resides. We distribute this data through bulk sales, customized XML feeds and our web portal SiteX.com. We also offer a number of value added services that enable our customers to utilize this data to assess risk, determine property values, track market performance, generate leads and mitigate risk. Our customers include realtors, investors, mortgage brokers, title companies, direct marketers, appraisers, and lenders.
 
  •  Alternative Valuation Services.  In recent years, the increasing availability of reliable information related to real estate and real estate transactions has encouraged lenders and other real estate professionals to use alternatives to traditional appraisals. We offer our customers a broad range of property valuation services beyond the traditional appraisals offered by our Loan Transaction Services segment that allow them to match their risk of loss with alternative forms of property valuations, depending upon their needs and regulatory requirements. These include, among others, automated valuation models, broker price opinions, collateral risk scores, appraisal review services and valuation reconciliation services. To deliver these services, we utilize artificial intelligence software, detailed real estate statistical analysis, and modified physical property inspections.
 
  •  Advanced Analytic and Capital Markets Services.  We offer advanced analytic tools that enable our customers to take proactive steps with respect to their loan portfolios. For example, we provide pre-payment and default propensity tools as well as due diligence and property valuation services in connection with the marketing and sale of loan portfolios in the secondary market. Our due diligence services consist of a review of a loan pool’s data files for accuracy and completeness, analysis of the physical loan files to determine compliance with internal underwriting guidelines and various regulatory disclosure requirements and the preparation and presentation of reports reflecting our findings.
 
For the year ended December 31, 2007, this segment produced $570.1 million in revenue, of which our mortgage processing services represented $341.2 million.


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Loan Transaction Services
 
Our Loan Transaction Services segment offers customized outsourced business process and information solutions. We work with our customers to set specific parameters regarding the services they require, and where practicable, provide a single point of contact with us for these services no matter where the property is located. As a result, our customers are able to utilize our services in a manner that we believe provides a greater level of consistency in service, pricing and quality than if these customers were to contract separately for similar services.
 
Loan Facilitation Services.  This segment includes the following services, which we refer to as our loan facilitation services:
 
  •  Settlement Services.  We offer centralized title agency and closing services to our financial institution clients. Our title agency services include conducting title searches and preparing an abstract of title, reviewing the status of title in a title commitment, resolving any title exceptions, verifying the payment of existing loans secured by a subject property, verifying the amount of prorated expenses and arranging for the issuance of a title insurance policy by a title insurer. Our closing management services are currently available in 46 states and the District of Columbia and include preparing checks, deeds and affidavits and recording appropriate documents in connection with the closing. We maintain a network of independent closing agents that are trained to close loans in accordance with the lender’s instructions. We also maintain a network of independent notaries who are available to promptly assist with the closing.
 
  •  Appraisal Services.  This segment provides traditional appraisals, as opposed to the alternative property valuations our Technology, Data and Analytics segment offers. Traditional property appraisals involve labor intensive inspections of the real property in question and of comparable properties in the same and similar neighborhoods, and typically take weeks to complete. We have developed processes and technologies that allow our lender customers to outsource their appraisal management function to us and we provide our customers with access to a nationwide network of over 19,000 independent, fully licensed appraisers. Our traditional appraisal services are typically provided in connection with first mortgages.
 
  •  Other Origination Services.  We offer lenders real estate tax information and federal flood zone certifications in connection with the origination of new mortgage loans. We also offer monitoring services that will notify a lender of any change in tax or flood zone status during the life of a loan. Additionally, we provide complete outsourcing of tax escrow services, including the establishment of a tax escrow account that is integrated with the lender’s mortgage servicing system and the processing of tax payments to taxing authorities. Finally, we act as a qualified exchange intermediary for those customers who seek to engage in qualified exchanges under Section 1031 of the Internal Revenue Code, which allows capital gains tax deferral on the sale of certain investment assets.
 
We frequently combine and customize our loan facilitation services to meet the specific requirements of our customers. For example, we have developed an automated process combining certain of our services that enables selected customers to offer special lending programs to their customers, such as expedited refinance transactions. This process includes an automated title search, which ultimately permits us to deliver our services in a substantially shorter period of time compared to the delivery of traditional services in the industry.
 
For 2007, we recorded $661.5 million, or 39.1% of our combined revenues, from our loan facilitation services.
 
Default Management Services.  In addition to loan facilitation services, our Loan Transaction Services segment offers default management services. These services allow our customers to outsource the business processes necessary to take a loan and the underlying real estate securing the loan through the default and foreclosure process. Based in part on the range and quality of default management services we offer and our focus on customer service, our default management business has grown significantly and we are now the largest mortgage default management outsourced service provider in the U.S. We offer a full spectrum of outsourcing services relating to the management of defaulted loans, from initial property inspection to recording the final release of a mortgage lien.


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  •  Foreclosure Services.  As our lender and servicing customers proceed toward the foreclosure of properties securing defaulted loans, we provide services that facilitate completing the foreclosure process. For example, we offer our customers a national network of independent attorneys, as well as comprehensive posting and publication of foreclosure and auction notices, and conduct mandatory title searches, in each case as necessary to meet state statutory requirements for foreclosure. We provide document preparation and recording services, including mortgage assignment and release preparation, and due diligence and research services. We also provide various other title services in connection with the foreclosure process.
 
  •  Property Preservation Services.  At the onset of a loan default, our services are designed to assess and preserve the value of the property securing the loan. For example, through a nationwide network of independent inspectors, we provide inspection services, including daily reports on vacant properties, occupancy inspections and disaster and insurance inspections. We also offer a national network of independent contractors to perform property preservation and maintenance services, such as lock changes, window replacement, lawn service and debris removal.
 
  •  Asset Management, Default Title and Settlement Services.  After a property has been foreclosed, we provide services that aid our customers in managing their real estate owned, or REO, properties, including title services and property preservation field services that assist the lender in managing its REO properties. We also offer a variety of title and settlement services relating to the lender’s ownership and eventual sale of REO properties. Finally, we offer nationwide advisory and management services to facilitate a lender’s REO sales.
 
Similar to our loan facilitation services, in our default management services we work with our customers to identify specific parameters regarding the services they require and to provide a single point of contact for these services. Based on a customer’s needs, our services can be provided individually or, more commonly, as part of a solution that integrates one or more of the services with our technology applications, such as the Desktop or MSP. Despite our large market share, we generally provide only some of our default management services to each customer. We believe that by combining the use of our Desktop application and a number of our default services, a lender can reduce its losses by better controlling timeline management of a defaulted loan. As a result, our customers are able to utilize our outsourcing services in a manner that we believe provides a greater level of consistency in service, pricing and quality than if these customers were to contract separately for similar services.
 
For 2007, we recorded $464.4 million, or 27.5% of our combined revenues from our default management services.
 
Corporate
 
In addition to our two reporting segments, we also have a corporate segment, which includes costs and expenses not allocated to other segments as well as certain smaller investments or operations.
 
Customers
 
We have numerous customers in each of the 29 categories of service that we offer across the mortgage continuum. A significant focus of our marketing efforts is on the top 50 U.S. banks, although we also provide our services to a number of other financial institutions, mortgage lenders, mortgage loan service providers and real estate professionals. We have processing and technology relationships with 41 of the top 50 U.S. banks, including each of the top ten and 18 of the top 20. Additionally, over 50% of all U.S. residential mortgages by dollar volume are processed using our mortgage processing platform.
 
Our most significant customer relationships tend to be long-term in nature and are characterized by the extensive number of services that we provide to each customer. For example, in 2007 we provided an average of approximately 16 of the 29 separate categories of service that we offer to each of our top ten customers in terms of aggregate revenue.


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Sales and Marketing
 
Sales Force
 
We have teams of experienced sales personnel with subject matter expertise in particular services or in the needs of particular types of customers. These individuals have important contacts with their counterparts at our lending institution customers and play an important role in prospecting for new accounts. They work collaboratively and are compensated for sales they generate both within their areas of expertise and outside of those areas. These individuals also support the efforts of our Office of the Enterprise, discussed below.
 
A significant portion of our potential customers in each of our business lines is targeted via direct and/or indirect field sales, as well as inbound and outbound telemarketing efforts. Marketing activities include direct marketing, print advertising, media relations, public relations, tradeshow and convention activities, seminars, and other targeted activities. As many of our customers use a single service, or a combination of services, our direct sales force also targets existing customers to promote cross-selling opportunities. Our strategy is to use the most efficient delivery system available to successfully acquire customers and build awareness of our services.
 
Office of the Enterprise
 
The broad range of services we offer provides us with the opportunity to expand our sales to our existing customer base through cross-selling efforts. The importance of MSP to the mortgage departments of our financial institution customers gives us better access to senior management in those areas than if we offered facilitation, default or other services alone. We have established a core team of senior managers to lead account management and cross-selling of the full range of our services to existing and potential customers at the top 50 U.S. lending institutions. The individuals who participate in this effort, which we coordinate through our Office of the Enterprise, spend a significant amount of their time on sales and marketing efforts.
 
Prior to the spin-off, the Office of the Enterprise also sought to cross-market our services with the bank core processing services FIS offers. Although FIS had some success with this approach, it frequently found that the bank personnel responsible for core processing lacked authority to make decisions on the services we offer. The Office of the Enterprise approach has historically been much more successful across our services lines. We do not believe that our loss of the ability to cross-market the service businesses FIS will retain following the spin-off will have a significant adverse effect on our revenues.
 
As part of the Office of the Enterprise operations, we engage in strategic account reviews, during which our executives share their knowledge of clients and the market in order to determine the best sales approach on a client-by-client basis. This enterprise approach benefits our clients in the following ways:
 
  •  Our clients are better able to leverage the strength of all of our solutions. When lenders are introduced to our enterprise sales approach, they are able to take advantage of streamlined processes to increase efficiencies, which reduce their internal costs, shorten cycle time and, most importantly, create a better borrower experience.
 
  •  We eliminated the multiple silos that existed across all of our operating divisions. By offering a centralized point of contact at an executive level, combined with access to subject matter experts across the business lines, we were able to reduce confusion among our clients and more effectively communicate the power of our solutions.
 
The benefit to us is a more cohesive sales force, with a compensation plan that supports the sale of products across all channels. This eliminates internal competition and confusion over client responsibility. As a result, we have created a cross-sell culture within our organization that we believe has become a differentiator between us and our competitors.
 
Intellectual Property
 
We rely on a combination of contractual restrictions, internal security practices, and copyright and trade secret law to establish and protect our software, technology, and expertise. Further, we have developed a number of brands that have accumulated goodwill in the marketplace, and we rely on trademark law to protect our rights in that area. We intend to continue our policy of taking all measures we deem necessary to protect our copyright, trade secret, and trademark rights.


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Competition
 
A number of the businesses in which we engage are highly competitive. In our technology businesses, we compete with internal technology departments within banks and with third party data processing or software development companies. In our expansion efforts in home equity line of credit processing, we also compete against vendors of software and related services to credit card companies. Competitive factors in processing businesses include the quality of the technology-based application or service, application features and functions, ease of delivery and integration, ability of the provider to maintain, enhance, and support the applications or services, and cost. We believe that due to our integrated technology and economies of scale in the mortgage processing business we have a competitive advantage in each of these categories.
 
In our Loan Transaction Services segment, key competitive factors include quality of the service, convenience, speed of delivery, customer service and price. Our principal competitors are title companies such as First American and LandAmerica, in-house services performed directly by our customers, and vendors that offer similar applications and services.
 
Research and Development
 
Our research and development activities have related primarily to the design and development of our processing systems and related software applications. We expect to continue our practice of investing an appropriate level of resources to maintain, enhance and extend the functionality of our proprietary systems and existing software applications, to develop new and innovative software applications and systems in response to the needs of our customers, and to enhance the capabilities surrounding our outsourcing infrastructure. We work with our customers to determine the appropriate timing and approach to introducing technology or infrastructure changes to our applications and services.
 
Government Regulation
 
Various aspects of our businesses are subject to federal, state, and foreign regulation. Our failure to comply with any applicable laws and regulations could result in restrictions on our ability to provide our services, as well as the imposition of civil fines and criminal penalties.
 
As a provider of electronic data processing to financial institutions such as banks and credit unions we are subject to regulatory oversight and examination by the Federal Financial Institutions Examination Council, an interagency body of the Federal Deposit Insurance Corporation, the National Credit Union Administration and various state regulatory authorities. In addition, independent auditors annually review several of our operations to provide reports on internal controls for our customers’ auditors and regulators. We also may be subject to possible review by state agencies that regulate banks in each state in which we conduct our electronic processing activities.
 
Our financial institution clients are required to comply with various privacy regulations imposed under state and federal law, including the Gramm-Leach-Bliley Act. These regulations place restrictions on the use of non-public personal information. All financial institutions must disclose detailed privacy policies to their customers and offer them the opportunity to direct the financial institution not to share information with third parties. The regulations, however, permit financial institutions to share information with non-affiliated parties who perform services for the financial institutions. As a provider of services to financial institutions, we are required to comply with the privacy regulations and are bound by the same limitations on disclosure of the information received from our customers as apply to the financial institutions themselves.
 
The Real Estate Settlement Procedures Act, or RESPA, and related regulations generally prohibit the payment or receipt of fees or any other item of value for the referral of a real estate-secured loan to a loan broker or lender and prohibit fee shares or splits or unearned fees in connection with the provision of residential real estate settlement services, such as mortgage brokerage and real estate brokerage. Notwithstanding these prohibitions, RESPA permits payments for goods furnished or for services actually performed, so long as those payments bear a reasonable relationship to the market value of the goods or services provided. RESPA and related regulations may to some extent restrict our real estate-related businesses from entering into certain preferred alliance arrangements. The U.S. Department of Housing and Urban Development is responsible for enforcing RESPA.


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Real estate appraisers are subject to regulation in most states, and some state appraisal boards have sought to prohibit our automated valuation applications. Courts have limited such prohibitions, in part on the ground of preemption by the federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989, but we cannot assure you that our valuation and appraisal services business will not be subject to regulation.
 
The title agency and related services we provide are conducted through an underwritten title company, title agencies, and individual escrow officers. Our underwritten title agency is domiciled in California and is generally limited to requirements to maintain specified levels of net worth and working capital, and to obtain and maintain a license in each of the counties in California in which it operates. The title agencies and individual escrow officers are also subject to regulation by the insurance or banking regulators in many jurisdictions. These regulators generally require, among other items, that agents and individuals obtain and maintain a license and be appointed by a title insurer. We also own a title insurer which issues policies generated by our agency operations in relatively limited circumstances. This insurer is domiciled in New York and is therefore subject to regulation by the insurance regulatory authorities of that state. Among other things, no person may acquire 10% or more of our common stock without the approval of the New York insurance regulators.
 
The California Department of Insurance has recently proposed implementing rate reductions in the title insurance industry in California. Florida, New Mexico, and Texas have also announced reviews of title insurance rates and other states could follow. At this stage, we are unable to predict what the outcome will be of these or any similar processes. Any such rate reductions could adversely affect our revenues from our title agency services.
 
The IRS has proposed regulations under Section 468B regarding the taxation of the income earned on escrow accounts, trusts and other funds used during deferred exchanges of like-kind property and under Section 7872 regarding below-market loans to facilitators of these exchanges. The proposed regulations affect taxpayers that engage in like-kind exchanges and escrow holders, trustees, qualified intermediaries, and others that hold funds during like-kind exchanges. We currently do not know what effect these changes will have on our 1031 exchange businesses.
 
Although we do not believe that compliance with future laws and regulations related to our businesses, including future consumer protection laws and regulations, will have a material adverse effect on our Company, enactment of new laws and regulations may increasingly affect the operations of our business, directly or indirectly, which could result in substantial regulatory compliance costs, litigation expense, adverse publicity, and/or loss of revenue.
 
Employees
 
As of December 31, 2007, we had approximately 7,000 employees. None of our workforce currently is unionized. We have not experienced any work stoppages, and we consider our relations with employees to be good. We believe that our future success will depend, in part, on our ability to continue to attract, hire and retain skilled and experienced personnel.
 
Properties and Facilities
 
Our corporate headquarters will be located in Jacksonville, Florida, in a facility owned by us. We also own one facility in Sharon, Pennsylvania, and we lease 71 others listed by state as of December 31, 2007 as follows:
 
         
    Number of
 
State
  Locations  
 
California
    25  
Texas
    8  
Florida
    7  
Other
    31  
 
In connection with the spin-off, we intend to align our and FIS’s properties in the most cost-effective manner. Where commercially and practically feasible, facilities that can be divided for joint occupancy by the two companies will be made available to both companies, and we will lease additional space as needed. We believe our properties will be suitable and adequate, and we believe we have sufficient capacity to meet our current needs.


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Legal Proceedings
 
In the ordinary course of business, we are involved in various pending and threatened litigation matters related to our operations, some of which include claims for punitive or exemplary damages. We believe that no actions, other than the matters listed below, depart from customary litigation incidental to our business. As background to the disclosure below, please note the following:
 
  •  These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities.
 
  •  In these matters, plaintiffs seek a variety of remedies including equitable relief in the form of injunctive and other remedies and monetary relief in the form of compensatory damages. In some cases, the monetary damages sought include punitive or treble damages. None of the cases described below includes a specific statement as to the dollar amount of damages demanded. Instead, each of the cases includes a demand in an amount to be proved at trial.
 
  •  For the reasons specified above, it is not possible to make meaningful estimates of the amount or range of loss that could result from these matters at this time. We review these matters on an on going basis and follow the provisions of SFAS No. 5, Accounting for Contingencies, (“SFAS 5”) when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, we base our decision on our assessment of the ultimate outcome following all appeals.
 
  •  We intend to vigorously defend each of these matters.
 
Barton, Lynn v. National Title Insurance of New York, Inc. et al. and Gentilcore, Lisa v. National Title Insurance of New York, Inc. et al.
 
Two putative class actions were filed by the same plaintiffs’ counsel in the U.S. District Court for the Northern District of California with identical allegations. Both actions name sixteen title insurance underwriters, including our subsidiary, National Title Insurance of New York, Inc. (“National”), as defendants. The complaints seek treble damages and injunctive relief under the Sherman Antitrust Act and various California statutes. The primary allegation is that the title insurance underwriters engaged in illegal pricing fixing as well as market allocation and division that resulted in higher title insurance prices in California.
 
Harris, Ernest and Mattie v. FIS Foreclosure Solutions, Inc.
 
A putative class action was filed on January 16, 2008 as an adversary proceeding in the Bankruptcy Court in the Southern District of Texas. The complaint alleges that LPS engaged in unlawful attorney fee-splitting practices in its default management business. The complaint seeks declaratory and equitable relief reversing all attorneys fees charged to debtors in bankruptcy court and disgorging any such fees we collected. We filed a motion to dismiss and a motion to withdraw the reference which are set for hearing towards the end of March 2008.


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MANAGEMENT
 
Directors and Executive Officers
 
The following table sets forth the information as of March 31, 2008 regarding the individuals who are expected to serve as our executive officers following the spin-off. All ages are as of March 31, 2008.
 
             
Name
 
Age
 
Position
 
William P. Foley, II
    63     Executive Chairman of the Board
Jeffrey S. Carbiener
    45     President and Chief Executive Officer
Francis K. Chan
    38     Executive Vice President and Chief Financial Officer
Daniel T. Scheuble
    49     Executive Vice President, Technology, Data and Analytics
Eric D. Swenson
    48     Executive Vice President, Loan Transaction Services
Todd C. Johnson
    42     General Counsel and Corporate Secretary
 
The following sets forth certain biographical information with respect to our executive officers and directors listed above.
 
William P. Foley, II will be the Executive Chairman of our board of directors. He has served as a director of FIS since February 2006 and is the Executive Chairman of the board of directors of FIS. Mr. Foley has also served as the executive Chairman of the board of directors of FNF since October 2006. Mr. Foley served as Chief Executive Officer of FNF from October 2006 until May 2007. Mr. Foley served as Chairman of the board and Chief Executive Officer of Old FNF from that company’s formation in 1984 until the FNF Merger.
 
Jeffrey S. Carbiener will be our President and Chief Executive Officer. He has served as Executive Vice President and Chief Financial Officer of FIS since February 2006, and served as the Executive Vice President and Group Executive, Check Services, from June 2001 until February 2006. Prior to joining FIS, Mr. Carbiener served as Senior Vice President, Equifax Check Solutions, a unit of Equifax Inc., from February 1998 until June 2001.
 
Francis K. Chan will be our Executive Vice President and Chief Financial Officer. He has served as FIS’s Senior Vice President, Chief Accounting Officer and Controller since December 2005 and manages the accounting and financial reporting functions of FIS. Additionally, Mr. Chan is responsible for FIS’s Sarbanes-Oxley 404 compliance. From July 1995 through December 2005, Mr. Chan served in various management roles including Vice President and Controller of Old FNF. Prior to that, Mr. Chan was employed by KPMG LLP.
 
Daniel T. Scheuble will be the Executive Vice President of our Technology, Data and Analytics segment. He has served as Executive Vice President of the Mortgage Processing Services division of FIS since April 2006. Mr. Scheuble joined Former FIS in 2003 as Chief Information Officer of the Mortgage Servicing Division. Before joining Former FIS, Mr. Scheuble was Chief Information Officer at GMAC Residential and prior to that, he was the Executive Vice President and Chief Information Officer of Loan Operations for HomeSide Lending.
 
Eric D. Swenson will be the Executive Vice President of our Loan Transaction Services segment. He has served as Executive Vice President of the Mortgage Information Services division of FIS since April 2006. Prior to that time, Mr. Swenson was an Executive Vice President of Old FNF and served as the President of the Lender Outsourcing Division of Former FIS from January 2004 until April 2006. From August 2001 through December 2003, Mr. Swenson held several positions with Fidelity National Information Solutions, Inc., which was a majority-owned subsidiary of Old FNF, including Executive Vice President, Chief Operating Officer and President. Prior to August 2001, Mr. Swenson was an Executive Vice President and Regional Manager with Old FNF.
 
Todd C. Johnson will be our General Counsel and Corporate Secretary. He has served as Assistant General Counsel and Corporate Secretary of FIS since February 2006 and of FNF since October 2005. Mr. Johnson also previously served as Assistant General Counsel and Corporate Secretary of Former FNF from July 2003 until November 2006. Prior to joining Former FNF, Mr. Johnson was a partner in the Corporate and Securities practice group of Holland & Knight LLP.
 
Additional directors will be appointed prior to the spin-off.


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The Board
 
Our directors will be divided into three classes of approximately equal size and serve for staggered three-year terms. At each annual meeting of stockholders, directors will be elected to succeed the class of directors whose term has expired. Class I’s term will expire at the 2009 annual meeting, Class II’s term will expire at the 2010 annual meeting and Class III’s term will expire at the 2011 annual meeting. Our director nominees will be allocated to classes upon their election to the board of directors. We intend to appoint independent directors to serve on our board as required by the rules of the NYSE.
 
For a description of requirements of our bylaws with respect to stockholder proposals and director nominations by stockholders, see “Description of Capital Stock — Certain Provisions of our Certificate of Incorporation, Bylaws and Delaware Law — Notice Provisions Relating to Stockholder Proposals and Nominees.”
 
Committees of the Board
 
Following the spin-off, the standing committees of our board of directors will include the audit committee, the nominating and corporate governance committee, and the compensation committee. These committees are described below. Our board of directors may also establish various other committees to assist it in its responsibilities.
 
Audit committee.  This committee will be primarily concerned with the accuracy and effectiveness of the audits of our financial statements by our internal audit staff and by our independent auditors. This committee is responsible for assisting the board of directors’s oversight of:
 
  •  the quality and integrity of our financial statements and related disclosure;
 
  •  our compliance with legal and regulatory requirements;
 
  •  the independent auditor’s qualifications and independence; and
 
  •  the performance of our internal audit function and independent auditor.
 
The rules of the NYSE require that each issuer have an audit committee of at least three members, and that one independent director (as defined in those rules) be appointed to the audit committee at the time of listing, one within 90 days after listing and the third within one year after listing. We expect to appoint at least one independent director to our audit committee effective as of our listing. We intend to appoint additional independent directors to serve on our board and the audit committee as soon as practicable, but in any event within the time periods prescribed by the listing rules.
 
Nominating and corporate governance committee.  This committee’s responsibilities will include the selection of potential candidates for our board of directors and the development and annual review of our governance principles.
 
Compensation committee.  This committee will have two primary responsibilities:
 
  •  to monitor our management resources, structure, succession planning, development and selection process as well as the performance of key executives; and
 
  •  to review and approve executive compensation and broad-based and incentive compensation plans.
 
We intend to appoint independent directors (as defined in the applicable NYSE listing rules) to serve on the compensation committee and the nominating and corporate governance committee as soon as practicable, but in any event within the time period prescribed by the listing rules.
 
Executive and Director Compensation
 
Compensation Discussion and Analysis
 
The following compensation discussion and analysis may contain statements regarding corporate performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs


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and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.
 
Introduction
 
In this compensation discussion and analysis, we discuss the compensation objectives and decisions, and the rationale behind those decisions, relating to the compensation provided to certain of our named executive officers in 2007. Our named executive officers are:
 
     
Name
 
Position
 
William P. Foley, II
  Executive Chairman of the Board
Jeffrey S. Carbiener
  President and Chief Executive Officer
Francis K. Chan
  Executive Vice President and Chief Financial Officer
Daniel T. Scheuble
  Executive Vice President, Technology, Data and Analytics
Eric D. Swenson
  Executive Vice President, Loan Transaction Services
 
We also discuss in this section the ways in which our approach to compensating our named executive officers might differ, or not differ, from FIS’s after we become a stand-alone public company.
 
Background
 
Each of our named executive officers is currently employed by FIS. With the exception of Mr. Foley, our named executive officers’ employment with FIS will terminate at the time of the spin-off. It is anticipated that Mr. Foley will remain an employee of FIS and LPS. Although only Messrs. Foley and Carbiener were named executive officers of FIS for 2007, the FIS compensation committee approved the base salary, annual incentives and long-term equity-based incentives of all our named executive officers. Accordingly, except where we indicate otherwise, this compensation discussion and analysis relates to compensation decisions made by FIS’s compensation committee. At least initially, we anticipate that most of the plans and programs under which we compensate our named executive officers will be largely the same as the plans and programs maintained by FIS. Consequently, we anticipate that our compensation programs, including the programs’ objectives, will be substantially similar to those of FIS immediately following the distribution. We also anticipate that, at least initially, the rationale for each element of compensation for our named executive officers will be substantially similar to the rationale behind the compensation decisions made by FIS and FIS’s compensation committee.
 
In 2007, Messrs. Scheuble and Swenson provided services exclusively to the LPS business. Messrs. Foley, Carbiener and Chan provided services to FIS and to us. In preparing our audited financial statements for 2007, we determined the compensation paid to these “shared executives” for services provided to FIS and to us, and allocated a portion of that compensation to us based on the proportion of each executive’s time estimated to have been spent providing services to us. However, the amounts we report in this “Management” section reflect all of the compensation paid by FIS in 2007, whether or not allocable to services provided to us.
 
Objectives of our Compensation Program
 
FIS’s compensation programs are designed to attract and motivate high performing executives with the objective of delivering long-term shareholder value and financial results. Retaining our key employees also is a high priority, as there is significant competition in our industry for talented managers. Following the spin-off, our compensation programs will have the same objectives. We think the most effective way of accomplishing these objectives is to link the compensation of our named executive officers to specific annual and long-term strategic goals, thereby aligning the interests of the executives with those of the stockholders. FIS has a history of delivering strong results for its shareholders, and we believe FIS’s practice of linking compensation with corporate performance has contributed significantly to FIS’s track record. We are hopeful that, following the spin-off, this practice of linking compensation with corporate performance will also help us succeed.
 
Following the spin-off, we anticipate that a significant portion of each named executive officer’s total annual compensation will be linked to performance goals that are intended to deliver measurable results. Executives will generally be rewarded only when and if the pre-established performance goals are met or exceeded. We also believe


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that material stock ownership by executives assists in aligning executive’s interests with those of stockholders and strongly motivates executives to build long-term stockholder value. We expect that our stock-based compensation programs will assist in creating this link. Finally, we desire to provide our executives with total compensation that is competitive relative to the compensation paid to similarly situated executives from similarly sized companies, and which is sufficient to motivate, reward and retain those individuals with the leadership abilities and skills necessary for achieving our ultimate objective: the creation of long-term stockholder value.
 
Role of Compensation Committee and Executive Officers in Determining Executive Compensation
 
After the spin-off, our compensation committee will be responsible for approving and monitoring the compensation of all our named executive officers. Our President and Chief Executive Officer will also play an important role in determining executive compensation levels, by making recommendations to our compensation committee regarding salary adjustments and incentive awards for his direct reports. We anticipate that our Executive Chairman may also make recommendations with respect to equity-based incentive compensation awards. These recommendations will be based on a review of an executive’s performance and job responsibilities and potential future performance. Our compensation committee may exercise its discretion in modifying any recommended salary adjustments or incentive awards for our executives. Our Executive Chairman and our President and Chief Executive Officer will not make recommendations to the compensation committee with respect to their own compensation.
 
Establishing Executive Compensation Levels
 
Historically
 
FIS operates in a highly competitive industry, and competes with its peers and competitors to attract and retain highly skilled executives within that industry. In order to attract talented executives with the leadership abilities and skills necessary for building long-term shareholder value, motivate its executives to perform at a high level, reward outstanding achievement and retain its key executives over the long-term, FIS’s compensation committee sets total compensation at levels it determines to be competitive in its market.
 
When determining the overall compensation of its executive officers, including base salaries and annual and long-term incentive amounts, FIS’s compensation committee considers a number of factors it deems important. These factors include financial performance, individual performance, and an executive’s experience, knowledge, skills, level of responsibility and expected impact on the future success of FIS. FIS’s compensation committee also considers corporate governance and regulatory factors related to executive compensation and marketplace compensation practices.
 
When considering marketplace compensation practices, FIS’s compensation committee considers data on base salary, annual incentive targets and long-term incentive targets, focusing on levels of compensation from the 50th to the 75th percentiles of market data. These levels of total compensation provide a point of reference for the committee, but the FIS compensation committee ultimately makes compensation decisions based on all of the factors described above.
 
Role of Compensation Consultants
 
To further the objectives of FIS’s compensation program, FIS’s compensation committee engaged Strategic Apex Group, an independent compensation consultant, to conduct an annual review of FIS’s compensation programs for its named executive officers, as well as for other key executives, including our named executive officers. Strategic Apex Group provided FIS’s compensation committee with relevant market data and alternatives to consider when making compensation decisions for FIS’s key executives, including our named executive officers.
 
To assist FIS’s compensation committee in determining 2007 compensation levels, Strategic Apex Group gathered marketplace compensation data on total compensation, which consisted of annual salary, annual incentives, long-term incentives and pay mix. Strategic Apex Group used two different marketplace data sources:


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(1) surveys prepared by Hewitt Associates and Towers Perrin, which together contain data on approximately 700 companies, and (2) a group of 14 publicly-traded companies. The 14 companies were:
 
  •  Affiliate Computer Services, Inc.
 
  •  Automatic Data Processing, Inc.
 
  •  CA, Inc.
 
  •  DST Systems, Inc.
 
  •  First Data Corporation
 
  •  Fiserv, Inc.
 
  •  Intuit Inc.
 
  •  MasterCard Incorporated
 
  •  NCR Corporation
 
  •  SunGard Data Systems Inc.
 
  •  Symantec Corporation
 
  •  The Western Union Company
 
  •  Telephone & Data Systems, Inc.
 
  •  Unisys Corporation
 
These companies are all in the same general industry as FIS and were selected either because they have comparable annual revenues or because they compete directly with FIS for key employees. This compensation information provided by Strategic Apex Group provided a basis for the evaluation of total executive compensation paid to FIS’s executive officers, including our named executive officers, but as stated before many other factors were considered by FIS’s compensation committee.
 
Going Forward
 
We anticipate taking the same approach when establishing compensation levels for our named executive officers after the spin-off. Specifically, we anticipate consideration of marketplace compensation data, but we also believe decisions regarding compensation should take into account subjective factors, including assessments of an executive’s performance and the executive’s experience, level of responsibility and expected impact on our future success.
 
Allocation of Total Compensation
 
Historically
 
FIS compensates its executives through a mix of base salary, annual cash incentives and long-term equity-based incentives. FIS also maintains standard employee benefit plans for its employees and executive officers and provides some limited perquisites. These benefits and perquisites are described later. FIS’s compensation committee generally allocates its executive officers’ compensation based on its determination of the appropriate ratio of performance-based compensation to other forms of regularly-paid compensation. In making this determination, the compensation committee considers how other companies allocate compensation, based on the marketplace data provided by its compensation consultant, and each executive’s level of responsibility, the individual skills, experience and contribution of each executive, and the ability of each executive to impact company-wide performance and create long-term shareholder value.
 
In 2007, our named executive officers’ compensation was allocated among annual salary, annual cash incentives and long-term equity-based incentives, with a heavy emphasis on the at-risk, performance-based components of annual cash incentives and long-term equity-based incentives.


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FIS’s compensation committee believes performance-based incentive compensation comprising 60% to 90% of total target compensation is appropriate. FIS’s compensation committee also believes a significant portion of an executive officer’s compensation should be allocated to equity-based compensation in order to effectively align the interests of FIS’s executives with the long-term interests of its shareholders. Consequently, for 2007, a majority of FIS’s named executive officers’ total compensation was provided in the form of nonqualified stock options.
 
When allocating Mr. Foley’s compensation among base salary and annual and long-term incentives, FIS’s compensation committee considers that Mr. Foley is not employed exclusively by FIS. Specifically, because Mr. Foley does not dedicate 100% of his time on a day-to-day basis to FIS matters, FIS’s compensation committee has allocated a smaller portion of his annual compensation to base salary. Rather, because of Mr. Foley’s unique experience and his contributions to and impact on FIS’s long-term strategy and success, FIS’s compensation committee has heavily weighted Mr. Foley’s compensation toward at-risk, performance-based annual and long-term incentive opportunities.
 
Going Forward
 
Although we have not yet approved compensation arrangements or established compensation policies or procedures, we anticipate that our compensation committee will approach compensation decisions in much the same way as FIS’s compensation committee. Performance-based compensation will likely continue to comprise the majority of our named executive officers’ compensation following the spin-off. However, we will regularly consider the allocation of compensation among annual base salary, annual incentives and long-term incentives to ensure that our compensation structure and allocation of compensation among guaranteed payments and at-risk, performance-based compensation is furthering our compensation objectives and goals.
 
Executive Compensation Components
 
Historically
 
For 2007, the principal components of compensation for FIS’s named executive officers consisted of:
 
  •  base salary;
 
  •  performance-based annual cash incentives; and
 
  •  long-term equity-based incentive awards in the form of stock options.
 
FIS also provided its executives with retirement and employee benefit plans as well as limited perquisites, although these items are not significant components of FIS’s compensation programs.
 
Going Forward
 
Following the spin-off, we anticipate that the principal components of compensation for our named executive officers will be substantially similar to those of FIS.
 
Base Salary
 
Historically
 
FIS seeks to provide each of its named executive officers with a level of assured cash compensation for services rendered during the year sufficient, together with performance-based incentive awards, to motivate the executive to consistently perform at a high level. However, base salary is a relatively small component of the total compensation package, as FIS’s emphasis is on performance-based, at-risk pay. FIS’s compensation committee typically reviews salary levels at least annually as part of its performance review process, as well as in the event of promotions or other changes in executive officers’ positions with FIS.
 
Going Forward
 
In connection with the spin-off, the FIS compensation committee will review the base salaries of our named executive officers to determine if any adjustments would be advisable in light of the fact that we would become a


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separate public company as of the spin-off and any additional responsibilities they may assume in connection with their positions with us. Following the spin-off, our compensation committee will review and approve our named executive officers’ base salaries, including any further adjustments it deems appropriate.
 
We anticipate that following the spin-off, our compensation committee will determine annual base salary levels in the same manner as FIS’s compensation committee determined annual base salary levels. In the first quarter of each year, as was the case at FIS, our compensation committee will review and, if applicable, adjust the base salary of each of our named executive officers.
 
Annual Performance-Based Cash Incentives
 
Historically
 
FIS awards annual cash incentives based upon the achievement of performance goals that are specified in the first quarter of the year. FIS provides the annual incentives to its executive officers under an annual incentive plan that is designed to allow the annual incentives to qualify as deductible performance-based compensation, as that term is used in Section 162(m) of the Code. The annual incentive plan includes a set of performance goals that can be used in setting incentive awards under the plan. FIS uses its annual incentive plan to provide a material portion of the executives’ total compensation in the form of at-risk, performance-based pay.
 
In the first quarter of 2007, annual incentive award targets were established by FIS’s compensation committee as described above for FIS’s named executive officers as a percentage of the individual’s base salary. For 2007, Mr. Foley’s annual incentive target was 250% of base salary, Mr. Carbiener’s target was 150% of base salary, Mr. Chan’s target was 50% of base salary, and Messrs. Scheuble’s and Swenson’s targets were 100% of base salary.
 
Actual payout could range from one-half to two times (three times for Mr. Foley) the target incentive opportunity, depending on achievement of the pre-established goals. However, no annual incentive payments are payable to an executive officer if the pre-established, minimum performance thresholds are not met. The ranges of possible payments under FIS’s annual incentive plan are set forth in the Grants of Plan-Based Awards table under the column Estimated Possible Payouts Under Non-Equity Incentive Plan Awards.
 
During the first quarter of 2007, FIS’s compensation committee established performance goals relating to the incentive targets described above and set a threshold performance level that needed to be achieved before any awards could be paid. These performance goals were specific, table driven measures, and FIS’s compensation committee did not retain discretion to increase the amount of the incentive awards, but did retain discretion to reduce such amounts.
 
Annual incentive awards for 2007 for the named executive officers were based on meeting weighted objectives for revenue growth (2007 target of 7.95% growth) and earnings before interest and taxes, or EBIT (2007 target of 17.56% growth), two key measures in evaluating the performance of FIS’s business. Each of these targets was equally weighted. For 2007, FIS’s actual financial results relating to the performance goals exceeded the target level but fell just short of the maximum level with respect to revenue growth (2007 revenue growth was 9.14%), and met the threshold level with respect to EBIT growth (2007 EBIT growth was 14.6%). FIS met but did not exceed threshold performance levels on the EBIT performance measures, and the compensation committee exercised its discretion and determined to pay only for exceeding target on the revenue growth performance measure. Accordingly, the incentive awards earned by FIS’s named executive officers for 2007, when combined, exceeded their threshold levels, but were less than the target levels. The annual incentive amounts earned under the annual incentive plan were approved by FIS’s compensation committee and are reported in the Summary Compensation Table under the column Non-Equity Incentive Plan Compensation.
 
EBIT is calculated by taking GAAP net income and adding back interest expense, interest income, other non-operating expense, equity in earnings of unconsolidated subsidiaries, minority interest expense and income tax expense. For purposes of determining whether the targets under the annual incentive plan have been met, FIS also adjusts its revenue and EBIT results for the financial impact of certain events and activities, including merger, acquisition and divestiture activities, certain integration activities, and other restructuring charges, and for the impact of changes in foreign currency from budgeted rates.


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Going Forward
 
We plan to adopt an annual incentive plan that is similar to FIS’s plan and we anticipate that annual performance-based cash incentives under the plan will constitute a substantial portion of the executive’s total compensation. Our compensation committee will determine the performance measures upon which the annual incentives will be based. All of our named executive officers will participate under the plan following the spin-off.
 
Long-Term Equity Incentive Awards
 
Historically
 
FIS uses its shareholder-approved amended and restated Certegy Inc. Stock Incentive Plan, or the Certegy stock plan, for long-term incentive awards. FIS has historically used nonqualified stock options as its primary form of equity compensation, although the plan is an omnibus plan that authorizes FIS to grant stock appreciation rights, restricted stock and restricted stock units. FIS believes stock options assist in its goal of creating long-term shareholder value by linking the interests of named executive officers, who are in positions to directly influence shareholder value, with the interests of its shareholders. A descriptions of the Certegy stock plan can be found under the heading “Stock Incentive Plans” following the Grants of Plan-Based Awards table.
 
FIS’s general practice is to make awards during the fourth quarter of each year at a meeting of its compensation committee held following the release of third quarter earnings. FIS also grants awards in connection with significant new hires or promotions.
 
In 2007, FIS’s compensation committee approved grants of nonqualified stock options to each of FIS’s named executive officers pursuant to the Certegy stock plan. The exercise prices and number of shares subject to these grants are disclosed in the Grants of Plan-Based Awards table.
 
The stock option award amounts were determined based on the following:
 
  •  an analysis of competitive marketplace compensation data provided to the compensation committee by Strategic Apex Group;
 
  •  the executive’s level of responsibility and ability to influence the company’s performance;
 
  •  the executive’s level of experience and skills;
 
  •  the need to retain and motivate highly talented executives; and
 
  •  FIS’s business environment, objectives and strategy.
 
In each case, the stock options were awarded with an exercise price equal to the fair market value of a share on the date of grant, vest proportionately each year over three years based on continued employment with FIS, and have a seven year term. In addition to aligning the executive’s interest with the interests of its shareholders, FIS believes these stock option awards aid in retention, because the executive must remain with FIS for three years before the options become fully exercisable.
 
FIS’s compensation committee also approved a grant of 5,500 shares of restricted stock to Mr. Carbiener. The restricted stock award was granted in March 2007 as a merit award for his performance in 2006. This award vests on the first anniversary of the date of grant.
 
In addition, in May 2007, certain of FIS’s executive officers, including Mr. Foley, were awarded options to purchase shares of FNRES Holdings, Inc., or FNRES, an affiliate of FIS in which it holds a minority interest. The options were granted under the FNRES Holdings, Inc. 2007 Stock Incentive Plan, or the FNRES stock plan, with performance-based vesting conditions. The grant was approved by the FNRES board and by the FIS compensation committee. The options were granted in consideration of services to be provided by the executive officers to FNRES and to encourage the executive officers to work toward increasing FNRES’s stock price and to achieve the performance goals upon which the vesting of the stock options was contingent. Mr. Foley was awarded an option to purchase 400,000 shares. Further details of Mr. Foley’s 2007 FNRES option grant is provided in the Grants of Plan- Based Awards table and the related footnote. A description of the FNRES Stock Plan can be found in the narrative following the Grants of Plan-Based Awards table.


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Further details concerning the stock option grants made by FIS in 2007 to our named executive officers are provided in the Grants of Plan-Based Awards table and the related footnotes.
 
Going Forward
 
In general, the outstanding stock-based awards held by our named executive officers will be treated in the same manner as stock-based awards held by all of our employees.
 
Effective as of the spin-off, with the exception of Mr. Foley, our named executive officers’ FIS stock options will be converted into stock options to purchase shares of our common stock. The exercise prices and numbers of shares subject to each option grant will be adjusted to reflect the differences in FIS’s and LPS’s common stock prices. The LPS stock options will be granted under the LPS omnibus incentive plan, which we anticipate will be approved by the FIS compensation committee in connection with the distribution, and ratified by our compensation committee and board of directors following completion of the spin-off. The plan will allow us to provide our eligible employees, including each of our named executive officers, grants of equity-based incentive awards based on our shares in the future if our compensation committee determines that it is in the best interest of LPS and our stockholders to do so.
 
Mr. Foley’s FIS stock options will be split in half. One half will be adjusted, in an amount yet to be determined, pursuant to the terms of the applicable FIS equity incentive plans, taking into account the change in the value of FIS common stock as a result of the spin-off. The other half will be replaced with LPS stock options granted under the LPS omnibus incentive plan with the same terms and conditions as the FIS options, but with equitable adjustments made to the exercise prices and the number of shares underlying the options to reflect the difference in value of FIS and LPS common stock.
 
Effective as of the spin-off, with the exception of Mr. Foley, our named executive officers’ restricted stock awards will be forfeited as a result of the named executive officers’ termination of employment with FIS and they will receive replacement awards of LPS restricted stock under the LPS omnibus incentive plan. These replacement awards will have the same terms and conditions as the forfeited FIS awards, and the shares will vest on the same dates the FIS awards would have vested. The number of shares subject to the awards will be adjusted to reflect the differences in stock value of FIS and LPS.
 
Mr. Foley’s restricted stock will be split in half. One half will be equitably adjusted by increasing the number of shares of FIS restricted stock to prevent dilution. The additional shares of restricted stock will have the same transfer restrictions and forfeiture conditions as the original grants. The other half will be replaced with awards of LPS restricted stock. These replacement awards will have the same terms and conditions as the forfeited FIS awards, and the shares will vest on the same dates the FIS awards would have vested. The number of shares subject to the awards will be adjusted to reflect the differences in stock value of FIS and LPS.
 
While we anticipate granting equity-based awards after the spin-off, we have not yet approved grants or determined the size, type or terms of grants or when they might be made. These decisions will be made by our compensation committee. For performance-based equity grants, we will use performance metrics that are appropriate for the timing, size, scope and industry of LPS. From time to time, we may grant equity awards to LPS’s executive officers outside the annual award process, such as in connection with the hiring of a new executive, for retention purposes, to reward exemplary performance, and/or in connection with a promotion.
 
Retirement and Other Employee Benefit Plans:
 
Introduction
 
FIS provides retirement and other benefits to its U.S. employees under a number of compensation and benefit plans. Our named executive officers participated in the same compensation and benefit plans that were provided to FIS employees generally. All of FIS’s employees in the United States, including our named executive officers, were eligible to participate in FIS’s 401(k) plan and FIS’s Employee Stock Purchase Plan. In addition, LPS’s named executive officers generally participated in the same health and welfare plans as FIS’s other employees. In addition, Mr. Carbiener participated in FIS’s frozen Fidelity National Information Services, Inc. Pension Plan.


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Pension Plan
 
Historically.  Executive pensions are not a significant component of FIS’s compensation program. However, FIS maintained a pension plan, which it froze effective May 31, 2006. No pension benefits accrued and no pensions were offered to new employees after the freeze date. In July 2007, FIS received a determination letter from the Internal Revenue Service permitting it to distribute all pension plan benefits in the form of lump sums and annuity contracts, and to terminate the plan effective as of May 31, 2006. Of our named executive officers, only Mr. Carbiener participated in the FIS pension plan in 2007. We discuss material terms of the FIS pension plan in the narrative following the Pension Benefits table.
 
Going Forward.  We do not anticipate maintaining a pension plan.
 
Executive Life and Supplemental Retirement Benefit Plan and Special Supplemental Executive Retirement Plan
 
Historically.  FIS also maintains the Executive Life and Supplemental Retirement Benefit Plan, which we refer to as the FIS split dollar plan, and the Special Supplemental Executive Retirement Plan, which we refer to as the FIS special plan. The purpose of the FIS split dollar plan is to reward executives for their service to the company and to provide an incentive for future service and loyalty. The plan provides benefits through life insurance policies on the lives of participants. Mr. Carbiener retains death benefits under the split dollar plan, but does not have deferred cash accumulation benefits under the plan as a result of amendments made to the plan to comply with applicable law resulting from the Sarbanes-Oxley Act of 2002. To replace the lost cash accumulation benefits, FIS adopted the FIS special plan. The FIS special plan provides participants with a benefit opportunity comparable to the deferred cash accumulation benefit opportunity that would have been available had they been able to continue participation in the split dollar plan. Information regarding Mr. Carbiener’s benefits under the FIS special plan, as well as material terms of the FIS special plan, can be found in the Nonqualified Deferred Compensation table and accompanying narrative.
 
Going Forward.  We do not anticipate maintaining any similar supplemental plans.
 
401(k) Plan
 
Historically.  FIS sponsors a defined contribution savings plan that is intended to be qualified under Section 401(a) of the Internal Revenue Code. The plan contains a cash or deferred arrangement under Section 401(k) of the Internal Revenue Code, as well as an employee stock ownership plan feature. Participating employees may contribute up to 40% of their eligible compensation, but not more than statutory limits (generally $15,500 in 2007). FIS contributes an amount equal to 50% of each participant’s voluntary contributions under the plan, up to a maximum of 6% of eligible compensation for each participant. Matching contributions are initially invested in shares of FIS common stock, although a participant may subsequently direct the trustee to invest those funds in any other investment option available under the plan. A participant may receive the value of his or her vested account balance upon termination of employment. A participant is always 100% vested in his or her voluntary contributions. Vesting in matching contributions occurs on a pro rata basis over a period of three years.
 
Going Forward.  We anticipate that we will maintain a 401(k) plan with similar features.
 
Deferred Compensation Plans
 
Historically.  FIS provides its named executive officers, as well as other key employees, with the opportunity to defer receipt of their compensation under a non-qualified deferred compensation plan. Mr. Chan is the only named executive officer who has deferred compensation under the plan. A description of the plan and information regarding Mr. Chan’s deferrals under the plan can be found in the Nonqualified Deferred Compensation table and accompanying narrative.
 
Going Forward.  We anticipate that we will maintain a deferred compensation plan with similar features and that the plan balances of participants who will be solely employed by us following the spin-off, including Mr. Chan, will be distributed into our deferred compensation plan in connection with the distribution.


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Employee Stock Purchase Plan
 
Historically.  FIS sponsors an employee stock purchase plan, which provides a program through which FIS’s executives and employees can purchase shares of FIS’s common stock through payroll deductions and through matching employer contributions. Participants may elect to contribute between 3% and 15% of their salary into the employee stock purchase plan through payroll deduction. At the end of each calendar quarter, FIS makes a matching contribution to the account of each participant who has been continuously employed by it or a participating subsidiary for the last four calendar quarters. For most employees, matching contributions are equal to 1/3 of the amount contributed during the quarter that is one year earlier than the quarter in which the matching contribution is made. For certain officers, including FIS’s named executive officers, and for employees who have completed at least ten consecutive years of employment with FIS, the matching contribution is 1/2 of such amount. The matching contributions, together with the employee deferrals, are used to purchase shares of FIS’s common stock on the open market.
 
Going Forward.  We anticipate that we will maintain an employee stock purchase plan with similar features.
 
Health and Welfare Benefits
 
Historically.  FIS sponsors various broad-based health and welfare benefit plans for its employees. Certain executives, including FIS’s named executive officers, are provided with additional life insurance. The taxable portion of the premiums on this additional life insurance is reflected in the Summary Compensation Table under the column All Other Compensation and the related footnote.
 
Going Forward.  We anticipate that we will maintain similar, broad-based, health and welfare benefit plans.
 
Perquisites and Other Benefits
 
Historically.  FIS provides few perquisites to its executives. In general, the perquisites provided are intended to help FIS’s executives be more productive and efficient and to protect FIS and the executive from certain business risks and potential threats. In 2007, certain executive officers received the following perquisites: personal use of corporate airplane; club membership fees; assistance with financial planning; and car allowance. FIS’s compensation committee regularly reviews the perquisites granted to FIS’s executive officers. It recently stopped providing club membership fees, car allowances and, except with respect to Mr. Foley, financial planning assistance. FIS’s compensation committee believes its perquisites are reasonable and within market practice. Further detail regarding executive perquisites in 2007 can be found in the Summary Compensation Table under the column All Other Compensation and the related footnote.
 
Going Forward.  We intend to take a minimalist approach to perquisites as well. We do not expect the financial planning, reimbursement of club membership fees or car allowance to be instituted at LPS. The elimination of these perquisites will be considered when determining the base salaries of our named executive officers as of the spin-off date. Also, LPS does not currently have a corporate airplane; however, we will have a partial lease of our own airplane upon completion of the spin-off and will enter into agreements with FIS and FNF pursuant to which we will share use of each other’s airplanes, including for personal use by our respective executives. See “Certain Relationships and Related Party Transactions.”
 
Post-Termination Compensation and Benefits
 
Historically.  FIS has employment agreements with each of its named executive officers that provide the company and the executives with certain rights and obligations following a termination of employment, and in some instances, following a change in control. FIS believes these agreements are necessary to protect its legitimate business interests, as well as to protect the executives in the event of certain termination events.
 
Going Forward.  We anticipate that we will enter into employment agreements with each of our named executive officers, and that the employment agreements will contain terms and conditions similar to those contained in the FIS employment agreements.


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Stock Ownership Guidelines
 
Following the spin-off, we anticipate that our compensation committee will adopt stock ownership guidelines for our executive officers and directors in order to ensure that our executive officers maintain an equity interest in LPS at a level sufficient to assure our stockholders of their commitment to value creation, while satisfying an individual’s needs for portfolio diversification. We expect that the guidelines will encourage our executives to hold a multiple of their base salary (or annual retainer, in the case of our directors) in our common stock, and will call for the executive to reach the ownership multiple within a specified time period.
 
Tax and Accounting Considerations
 
FIS’s compensation committee considers the impact of tax and accounting treatment when determining executive compensation.
 
Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount that can be deducted in any one year for compensation paid to certain executive officers. There is, however, an exception for certain performance-based compensation. The compensation committee takes the deduction limitation under Section 162(m) into account when structuring and approving awards under its annual incentive plan and its stock plan. Compensation paid under its annual incentive plan and awards granted under its stock plan are generally intended to qualify as performance-based compensation. However, in certain situations, the compensation committee may approve compensation that will not meet these requirements.
 
We will also consider Section 162(m) when structuring and approving awards. There will be a transition period following the distribution during which we will not be subject to all of the requirements of Section 162(m). We intend to take all actions required, including seeking stockholder approval of our plans as necessary, so that we will be able to provide performance-based compensation after the transition period expires.
 
FIS considers accounting impact when structuring and approving awards. FIS accounts for stock-based payments, including stock option grants, in accordance with the Statement of Financial Accounting Standards No. 123 (revised), which we refer to as FAS 123(R). We will account for stock-based payments in accordance with FAS 123(R).
 
Executive Compensation
 
The following table sets forth information concerning the 2007 and, for Messrs. Foley and Carbiener, 2006 cash and non-cash compensation awarded by FIS to or earned by our named executive officers. The 2006 compensation of the named executive officers (other than Messrs. Foley and Carbiener) is not shown because they were not named executive officers in 2006 and their compensation information has not previously been disclosed. The information in this table includes compensation earned by the individuals for services with FIS. The amounts we report reflect all of the compensation paid by FIS, whether or not allocable to services provided to us. The amounts of compensation shown below do not necessarily reflect the compensation such person will receive in the future, which could be higher or lower.
 
Summary Compensation Table
 
                                                                         
                            Change in
       
                            Pension
       
                        Non-Equity
  Value and
       
                        Incentive
  Nonqualified
       
                        Plan
  Deferred
       
Name and
              Stock
  Option
  Compensation
  Compensation
  All Other
   
Principal
  Fiscal
  Salary
  Bonus
  Awards
  Awards
  Earnings
  Earnings
  Compensation
  Total
Position
  Year   ($)(1)   ($)(2)   ($)(3)   ($)(4)   ($)(5)   ($)(6)   ($)(7)   ($)
 
William P. Foley, II
    2007       537,500             729,329       10,050,710       913,913             186,776       12,418,228  
Executive Chairman
    2006       417,535             152,598       13,007,899       2,407,821             161,774       16,147,627  
Jeffrey S. Carbiener
    2007       485,897             188,547       1,257,496       375,887       61,754       14,888       2,384,469  
President and Chief Executive Officer
    2006       359,627       500,000             1,111,763       600,000       61,595       329,100       2,962,085  
Francis K. Chan
    2007       259,375                   125,511       68,143             24,019       477,047  


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                            Change in
       
                            Pension
       
                        Non-Equity
  Value and
       
                        Incentive
  Nonqualified
       
                        Plan
  Deferred
       
Name and
              Stock
  Option
  Compensation
  Compensation
  All Other
   
Principal
  Fiscal
  Salary
  Bonus
  Awards
  Awards
  Earnings
  Earnings
  Compensation
  Total
Position
  Year   ($)(1)   ($)(2)   ($)(3)   ($)(4)   ($)(5)   ($)(6)   ($)(7)   ($)
 
Executive Vice President and Chief Financial Officer
                                                                       
Daniel T. Scheuble
    2007       425,000             16,517       574,713       224,213             12,385       1,252,828  
Executive Vice President, Technology, Data and Analytics
                                                                       
Eric D. Swenson
    2007       497,740             99,099       658,960       250,591             51,975       1,558,365  
Executive Vice President, Loan Transaction Services
                                                                       
 
 
(1) Amounts shown are not reduced to reflect the named executive officers’ elections, if any, to defer receipt of salary into FIS’s 401(k) plan, employee stock purchase plan or deferred compensation plans.
 
(2) Represents a contractual bonus paid in 2006 in connection with the Certegy Merger.
 
(3) With respect to Messrs. Foley, Scheuble and Swenson, represents the dollar amount recognized for financial statement reporting purposes in accordance with FAS 123(R) for the fiscal years ended December 31, 2007 and 2006, of restricted stock awards granted by Old FNF in 2003 and assumed by FIS in the FNF Merger. With respect to Mr. Carbiener, 2007 amounts represent the dollar amount recognized for financial statement reporting purposes in accordance with FAS 123(R) with respect to a restricted stock award granted by FIS as a merit bonus in 2007.
 
(4) Represents the dollar amount recognized for financial statement reporting purposes in accordance with FAS 123(R) for the fiscal years ended December 31, 2007 and 2006, of stock option awards granted in and prior to fiscal years 2007 and 2006. These awards consisted of options granted by FIS and options granted to acquire shares of Old FNF under Old FNF plans that FIS assumed in the FNF Merger. Assumptions used in the calculation of these amounts are included in Note 11 to our combined financial statements included in this information statement. For Mr. Foley, 2006 amounts include $8.9 million recorded relating to FIS’s performance-based stock option awards for which the vesting criterion was met during 2006 after the Certegy Merger.
 
(5) Represents amounts paid pursuant to FIS’s annual incentive plan which were earned in 2006 and paid in 2007, and earned in 2007 and paid in 2008, respectively.
 
(6) Represents the change in pension value for Mr. Carbiener under the special plan.
 
(7) Amounts shown for 2007 include matching contributions to FIS’s 401(k) plan and employee stock purchase plan; dividends paid on restricted stock; life insurance premiums paid by FIS; dividends from the split dollar plan, which are reinvested in the plan; personal use of a company airplane; club membership fees; financial planning services; and car allowance as set forth below:
 
                                         
    Foley     Carbiener     Chan     Scheuble     Swenson  
 
401(k) Matching Contributions
        $ 6,750     $ 6,750     $ 6,750     $ 6,750  
ESPP Matching Contributions
  $ 15,000           $ 17,188     $ 3,984     $ 30,000  
Restricted Stock Dividends
  $ 2,217     $ 825           $ 1,515     $ 9,095  
Life Insurance Premiums
  $ 371     $ 93     $ 81     $ 135     $ 129  
Dividends from Split Dollar Plan
        $ 7,220                    
Personal Airplane Use
  $ 71,276                          
Club Membership Fees
  $ 56,756                          
Financial Planning Services
  $ 41,156                          
Car Allowance
                          $ 6,000  


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Grants of Plan-Based Awards Table
 
The following table sets forth information concerning awards granted by FIS during the fiscal year ended December 31, 2007 to our named executive officers who were employed by FIS:
 
                                                                 
                            (d)
    (e)
          (g)
 
                            All Other
    All Other
          Grant Date
 
                            Stock
    Option
    (f)
    Fair
 
          Estimated Possible Payouts Under
    Awards:
    Awards:
    Exercise
    Value
 
          Non-Equity Incentive Plan
    Number of
    Number of
    or Base
    of Stock
 
          Awards (1)     Shares of
    Securities
    Price of
    and
 
          (a)
    (b)
    (c)
    Stock or
    Underlying
    Option
    Option
 
    Grant
    Threshold
    Target
    Maximum
    Units
    Options
    Awards
    Awards
 
Name
  Date     ($)     ($)     ($)     (#)(2)     (#)(3)     ($)     ($)  
 
William P. Foley, II
    12/20/2007                               600,000     $ 42.56       7,710,120  
      5/14/2007                               400,000     $ 10.00       208,100  
      N/A       671,875       1,343,750       4,031,251                          
Jeffrey S. Carbiener
    12/20/2007                               300,000     $ 42.56       3,855,060  
      3/30/2007                         5,500                   250,030  
      N/A       356,250       712,500       1,425,000                          
Francis K. Chan
    12/20/2007                               37,500     $ 42.56       481,883  
      N/A       64,583       129,166       258,332                          
Daniel T. Scheuble
    12/20/2007                               200,000     $ 42.56       2,570,040  
      N/A       212,500       425,000       849,999                          
Eric D. Swenson
    12/20/2007                               200,000     $ 42.56       2,570,040  
      N/A       237,500       474,999       949,999                          
 
 
(1) The amounts shown in column (a) reflect the minimum payment level under FIS’s annual incentive plan which is 50% of the target amount shown in column (b). The amount shown in column (c) for everyone except Mr. Foley is 200% of such target amount. For Mr. Foley, the amount in column (c) is 300% of the target amount. These amounts are based on the individual’s 2007 salary.
 
(2) The amounts shown in column (d) reflect the number of shares of our restricted stock granted under the Certegy plan to Mr. Carbiener as a merit bonus.
 
(3) The amounts shown in column (e) reflect (i) the number of stock options granted to each named executive officer under the Certegy plan on December 20, 2007 (grant date fair value per option is $12.85 per option granted); and (ii) with respect to Mr. Foley, the number of options granted to him under the FNRES stock plan on May 14, 2007 (grant date fair value per option is $0.52 per option granted). FIS owns approximately 39% of FNRES’s common stock and accounts for it under the equity method.
 
Effective as of the spin-off, Messrs. Carbiener’s, Chan’s, Scheuble’s and Swenson’s FIS stock options will be converted into stock options to purchase shares of our common stock. The exercise prices and numbers of shares subject to each option grant will be adjusted to reflect the differences in FIS’s and LPS’s common stock prices.
 
Mr. Foley’s FIS stock options will be split in half. One half will be adjusted, in an amount yet to be determined, pursuant to the terms of the applicable FIS equity incentive plans, taking into account the change in the value of FIS common stock as a result of the spin-off. The other half will be replaced with LPS stock options granted under the LPS omnibus incentive plan with the same terms and conditions as the FIS options, but with equitable adjustments made to the exercise prices and the number of shares underlying the options to reflect the difference in value of FIS and LPS common stock.
 
Employment Agreements
 
FIS has entered into employment agreements with a limited number of its senior executives, including our named executive officers. Additional information regarding post-termination benefits provided under these employment agreements can be found in the “Potential Payments Upon Termination or Change in Control” section. The following descriptions are based on the terms of the agreements as of December 31, 2007.


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William P. Foley, II
 
FIS entered into a three-year employment agreement with Mr. Foley, effective October 24, 2006, to serve as its Executive Chairman, with a provision for automatic annual extensions beginning on the first anniversary of the effective date and continuing thereafter unless either party provides timely notice that the term should not be extended. Under the terms of the agreement, Mr. Foley’s minimum annual base salary is $500,000, with an annual cash bonus target equal to 250% of his annual base salary, with higher or lower amounts payable depending on performance relative to targeted results. Mr. Foley is entitled to supplemental disability insurance sufficient to provide at least 2/3 of his pre-disability base salary, and Mr. Foley and his eligible dependents are entitled to medical and other insurance coverage FIS provides to its other top executives as a group. Mr. Foley is also entitled to the payment of initiation and membership dues in any social or recreational clubs that FIS deems appropriate to maintain its business relationships, and he is eligible to receive equity grants under FIS’s equity incentive plans, as determined by FIS’s compensation committee.
 
Jeffrey S. Carbiener
 
FIS entered into a three-year employment agreement with Mr. Carbiener, effective as of the consummation of the Certegy Merger on February 1, 2006, to serve in an executive and managerial capacity. Mr. Carbiener presently serves as FIS’s Executive Vice President and Chief Financial Officer. Under the terms of the agreement, Mr. Carbiener’s minimum annual base salary is $400,000, with an annual cash bonus target equal to 150% of his annual base salary, with higher or lower amounts payable depending on performance relative to targeted results. Mr. Carbiener is entitled to our standard benefits available to FIS’s other executives. Pursuant to the agreement, Mr. Carbiener was granted stock options to purchase 350,000 shares of FIS common stock as of the effective date of the consummation of the Certegy Merger, vesting in four annual installments beginning on the first anniversary of the effective date.
 
Eric D. Swenson
 
FIS entered into a three-year employment agreement with Mr. Swenson, effective March 9, 2005, to serve in an executive and managerial capacity. Mr. Swenson currently serves as Executive Vice President of mortgage outsourcing and information services for FIS. Under the terms of the agreement, Mr. Swenson’s minimum annual base salary is $400,000 and he is entitled to an annual incentive each year pursuant to a formula determined by FIS’s compensation committee. Mr. Swenson is entitled to FIS’s standard benefits available to FIS’s other executives. Pursuant to the agreement, Mr. Swenson was granted stock options to purchase 500,000 shares of FIS common stock. Mr. Swenson’s employment agreement expired on March 9, 2008.
 
Stock Incentive Plans
 
In 2007, FIS used its shareholder-approved amended and restated Certegy Inc. Stock Incentive Plan for long-term incentive compensation of its executive officers. FIS’s compensation committee administers the Certegy stock plan. The plan permits the granting of stock options, including incentive and nonqualified stock options, restricted stock, and restricted stock units. The awards may be subject to time-based and/or performance-based vesting, and if specified in the award agreement, may become fully vested if FIS experiences a change in control. Further details are set forth in the “Potential Payments Upon Termination or Change in Control” section.
 
FIS also maintains a long-term incentive plan that it assumed in connection with the Certegy Merger, the Former FIS 2005 Stock Incentive Plan, or Former FIS plan. Certain of our named executive officers continue to hold outstanding stock options under the Former FIS plan, which options FIS assumed in connection with the Certegy Merger and converted into options to purchase its stock. Although the outstanding awards remain subject to the terms of the Former FIS plan, no further awards may be granted under this plan.
 
In addition, FIS maintains several long-term incentive plans that it assumed in connection with the FNF Merger, including the FNF 2004 Omnibus Incentive Plan and the amended and restated FNF 2001 Stock Incentive Plan, collectively the assumed FNF stock plans. Prior to the FNF Merger, the compensation committee of Old FNF granted awards of stock options and restricted stock to certain officers and non-employee directors of Old FNF pursuant to the terms of these plans. Messrs. Foley, Chan and Swenson continue to hold outstanding awards under


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the assumed FNF stock plans, which awards were assumed by FIS in connection with the FNF Merger and converted into options to purchase FIS stock and shares of FIS restricted stock, as the case may be. Although the outstanding awards remain subject to the terms of the assumed FNF stock plans, the plans have been frozen with respect to new awards and no future awards may be granted under these plans.
 
FNRES Stock Plan
 
The FNRES stock plan was adopted in 2007 and is maintained by FNRES and administered by the FNRES board, or by one or more committees appointed by the FNRES board. The plan permits the granting of stock options or stock awards of FNRES stock. Eligible participants are selected by the FNRES board, or designated committee, and include employees, directors and consultants of FNRES and its affiliates. The FNRES board, or designated committee, has full authority and sole discretion to take actions to administer, operate, and interpret the plan, or to amend, suspend, or terminate the plan.
 
The options granted under the FNRES stock plan vest upon the earliest to occur of (i) a change in control or (ii) following an initial public offering, provided that, in each case the options vest only if the equity value of a share of FNRES common stock equals at least $20.00 per share (subject to adjustment) and optionee’s service with FNRES has not been terminated. If the equity value target is not met at the time of a change in control, FNRES will use commercially reasonable efforts to have the acquirer or the surviving or continuing company assume or continue, as the case may be, the unvested options on the same (or nearly as practicable) terms and conditions as set forth herein. If the acquirer does not agree to assume or continue the options, then the options will terminate. For purposes of the FNRES plan, the term “equity value” means (i) in the event of a change in control, the aggregate amount of per share net proceeds (other than any taxes) of cash or readily marketable securities and the discounted expected value of any other deferred consideration received or to be received by the holders of FNRES common stock (including all shares issuable upon exercise of in-the-money options, whether or not exercisable); or (ii) at any time after an initial public offering, the average price of FNRES common stock over a consecutive 45-day trading period; provided, however, that the full 45-day trading period must conclude on or prior to the expiration date of the option. The term “change in control” for this purpose means a transaction or related series of transactions through which a person or group other than certain current stockholders and their affiliates become the direct or indirect beneficial owners of more than the greater of (i) 35% of the outstanding shares of FNRES stock or (ii) the percentage of outstanding voting stock owned directly or indirectly by these stockholders.
 
Because the vesting of the options is contingent upon performance and market criteria which were not met in 2007, FIS did not incur any expense for financial statement reporting purposes for fiscal year 2007 pursuant to FAS 123(R). Therefore, the Summary Compensation Table does not include any amounts associated with the FNRES options.


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The following table sets forth information concerning FIS’s unexercised stock options, stock that has not vested and equity incentive plan awards for each of our named executive officers outstanding as of December 31, 2007:
 
Outstanding Equity Awards at Fiscal Year-End Table
 
                                                         
    Option Awards              
          Number of
    Number of
                Stock Awards  
          Securities
    Securities
                Number of
    Market Value
 
          Underlying
    Underlying
                Shares or
    of Shares or
 
          Unexercised
    Unexercised
    Option
    Option
    Units of Stock
    Units of Stock
 
    Option
    Options (#)
    Options (#)
    Exercise
    Expiration
    That Have
    That Have
 
Name
  Grant Date     Exercisable     Unexercisable     Price ($)     Date     Not Vested (#)     Not Vested ($)  
 
William P. Foley, II
    10/15/2004       417,946 (1)           29.18       10/15/2012              
      3/9/2005       213,186       426,374 (2)     15.63       3/9/2015              
      8/19/2005       83,590 (1)     83,589 (1)     30.97       8/19/2015              
      11/9/2006       276,667       553,333 (2)     41.35       11/9/2013              
      12/20/2007             600,000 (2)     42.56       12/20/2014              
Jeffrey S. Carbiener
    6/1/1998       1,340             27.78       6/1/2008              
      1/27/1999       4,492             27.50       1/27/2009              
      12/10/1999       13,410             17.15       12/10/2009              
      1/31/2000       20,320             16.03       1/31/2010              
      1/29/2001       6,680             21.68       1/29/2011              
      10/31/2001       11,552             26.04       10/31/2011              
      2/12/2002       5,632             31.94       2/12/2012              
      2/12/2002       38,459             31.94       2/12/2012              
      2/4/2004       18,982             29.74       2/4/2011              
      2/4/2005       24,175             32.20       2/4/2012              
      2/1/2006       87,500       262,500 (2)     39.48       2/1/2013              
      3/30/2007                               5,500 (3)     228,745  
      12/20/2007             300,000 (2)     42.56       12/20/2014              
Francis K. Chan
    4/16/2001       5,548 (1)           8.42       4/16/2011              
      9/10/2004       16,677 (1)           22.38       9/10/2012              
      3/9/2005       4,093       2,729 (2)     15.63       3/9/2015              
      3/9/2005       5,970             15.63       3/9/2015              
      12/22/2006       6,250       18,750 (2)     40.25       12/22/2016              
      12/20/2007             37,500 (2)     42.56       12/20/2014              
Daniel T. Scheuble
    3/9/2005       5,117       20,466 (2)     15.63       3/9/2015              
      12/22/2006       25,000       50,000 (2)     40.25       12/22/2016              
      12/20/2007             200,000 (2)     42.56       12/20/2014              
Eric D. Swenson
    3/9/2005       17,055       68,220 (2)     15.63       3/9/2015              
      12/22/2006       25,000       50,000 (2)     40.25       12/22/2016              
      11/18/2003                               1,773 (1)     73,739  
      12/20/2007             200,000 (2)     42.56       12/20/2014              
 
 
(1) These options and restricted shares were originally granted by Old FNF under plans assumed by FIS in the FNF Merger. All unvested options vest ratably over a three-year period from the original date of grant. Mr. Swenson’s remaining restricted shares vest on November 18, 2008.
 
(2) The unvested options listed above that FIS granted in 2005 vest quarterly over a 4-year period from the date of grant. The unvested options listed above that FIS granted in 2006 and 2007 vest annually over 3 years from the date of grant, except for those granted to Mr. Carbiener in 2006 which vest annually over four years from the date of grant.
 
(3) The restricted stock granted to Mr. Carbiener was made as a merit bonus and vests on the first anniversary of the date of grant.


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Outstanding FNRES Option Awards at Fiscal Year End
 
                                         
        Option Awards        
        Number of
  Number of
       
        Securities
  Securities
       
        Underlying
  Underlying
       
        Unexercised
  Unexercised
  Option
  Option
        Options (#)
  Options (#)
  Exercise
  Expiration
Name
  Grant Date   Exercisable   Unexercisable   Price ($)   Date
 
William P. Foley, II
    5/14/2007             400,000       10.00       5/14/2017  
 
Option Exercises and Stock Vested Table
 
The following table sets forth information concerning each exercise of FIS’s stock options, SARs and similar instruments, and each vesting of stock, including restricted stock, restricted stock units and similar instruments, during the fiscal year ended December 31, 2007 for each of our named executive officers on an aggregated basis:
 
                                 
    Option Awards     Stock Awards  
    Number of
    Value
    Number of
    Value
 
    Shares Acquired
    Realized on
    Shares Acquired
    Realized on
 
Name
  on Exercise (#)     Exercise ($)     on Vesting (#)     Vesting ($)  
 
William P. Foley, II
    2,558,440       81,274,422       14,779       635,054  
Jeffrey S. Carbiener
                       
Francis K. Chan
                       
Daniel T. Scheuble
    7,675       219,725       296       12,719  
Eric D. Swenson
    30,525       1,002,394       1,773       76,186  
 
Pension Benefits
 
The following table summarizes the accumulated FIS pension value for Mr. Carbiener as of December 31, 2007:
 
                             
            Present
   
        Number of
  Value of
  Payments
        Years Credited
  Accumulated
  During Last
Name
 
Plan Name
  Service (#)   Benefit ($)   Fiscal Year ($)
 
Jeffrey S. Carbiener
  Fidelity National Information     15             157,464  
    Services, Inc. Pension Plan                        
 
 
(1) We received a determination letter from the Internal Revenue Service in July 2007 permitting us to distribute all pension plan benefits by purchasing an annuity contract or paying a lump sum benefit to each participant, and to terminate the plan effective May 31, 2006. Amounts reflected in the table with respect to Mr. Carbiener represent the lump sum payment received by him in 2007 with respect to his pension plan benefit. Additional information concerning the termination of the pension plan is set forth below.
 
In 2007, FIS maintained a pension plan that provided benefits for certain of its employees, including Mr. Carbiener. The FIS pension plan was a tax-qualified defined benefit pension plan. This plan became effective in July 2001, and is a successor plan to the Equifax Inc. U.S. retirement income plan, from which it was spun off. As a successor plan, it carried forward rights and benefits that derived from participants’ employment with Equifax Inc., and was based on the restatement of the Equifax Inc. U.S. retirement income plan that was generally effective January 1, 1997. As previously discussed, FIS assumed the pension plan in connection with the Certegy Merger and froze it effective May 31, 2006, and no pension benefits accrued after the freeze date or will accrue in the future. Full vesting occurred for all active pension plan participants when FIS froze the plan. In July 2007, FIS received a determination letter from the Internal Revenue Service permitting it to distribute all pension plan benefits in the form of lump sums and annuity contracts and to terminate the plan effective as of May 31, 2006. All plan benefits have been distributed and FIS has no further obligation under its pension plan. Mr. Carbiener elected to receive a lump sum under the plan, and received a payment of $157,464 on October 31, 2007.


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Nonqualified Deferred Compensation Table
 
The following table sets forth information as of December 31, 2007, with respect to each FIS defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified:
 
                                             
        Executive
  Registrant
  Aggregate
  Aggregate
  Aggregate
        Contributions
  Contributions
  Earnings in
  Withdrawals/
  Balance at
        in Last FY
  in Last FY
  Last FY
  Distributions
  Last FYE
Name
 
Plan
  ($)   ($)(1)   ($)(2)   ($)   ($)(3)
 
Jeffrey S. Carbiener
  Special Plan           55,000       61,754             198,419  
Francis K. Chan
  Non-Qualified Deferred Compensation Plan     50,938       471       27,822             348,990  
 
 
(1) With respect to Mr. Carbiener, amounts reflect premium paid on life insurance policy in 2007. Mr. Carbiener’s benefit under the special plan is based on the excess of the cash surrender value in the policy over the total premiums paid.
 
(2) Represents the increase in the executive’s participant interest in 2007.
 
(3) Represents the executive’s participant interest as of December 31, 2007.
 
FIS Special Plan
 
The FIS special plan provides participants with a benefit opportunity comparable to the deferred cash accumulation benefit that would have been available had they been able to continue participation in the FIS split dollar plan. Participants’ interests under the special plan are based on the excess of the cash surrender value of a life insurance policy on the executive over the total premium payments paid by FIS. A participant’s interest fluctuates based on the performance of investments in which the participant’s interest is deemed invested. The FIS special plan provides that following a change in control, the participants may select investments; however, their right to select investments is forfeited if they violate the plan’s non-competition provisions within one year after termination of employment. Mr. Carbiener’s post-spin-off employment with LPS is not regarded as being in competition with FIS and is not in violation of the non-competition provisions. Therefore, their right to select investments is preserved under the special plan. To date, investment decisions regarding Mr. Carbiener’s participant interests have been made by a third party investment advisor. The table below shows the investments available for selection, as well as the rates of return for those investments for 2007.
 
         
    2007
 
    Rate of
 
Name of Fund
  Return  
 
International Value
    6.24 %
International Small-Cap
    4.73 %
Equity Index
    5.23 %
Small-Cap Index
    (2.02 )%
Diversified Research
    1.19 %
Equity
    6.27 %
American Funds Growth-Income
    4.66 %
American Funds Growth
    11.93 %
Large-Cap Value
    3.54 %
Technology
    23.03 %
Short Duration Bond
    4.47 %
Floating Rate Loan
    (1.86 )%
Diversified Bond
    1.32 %
Growth LT
    15.63 %
Focused 30
    31.84 %
Health Sciences
    16.47 %
Mid-Cap Value
    (2.15 )%
Large-Cap Growth
    21.63 %
Small-Cap Growth
    15.10 %
International Large-Cap
    9.26 %
Small-Cap Value
    3.14 %
Multi-Strategy
    4.34 %
Main Street Core
    4.40 %
Emerging Markets
    33.09 %
Managed Bond
    8.53 %
Inflation Managed
    10.14 %
Money Market
    4.99 %
High Yield Bond
    2.44 %
Comstock
    (3.01 )%
Mid-Cap Growth
    22.92 %
Real Estate
    (16.16 )%
Small-Cap Equity
    6.04 %


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    2007
 
    Rate of
 
Name of Fund
  Return  
 
BlackRock Basic Value V.I. Fund Class III
    1.53 %
BlackRock Global Allocation V.I. Fund Class III
    16.75 %
Fidelity VIP Freedom 2010 Service Class 2
    8.42 %
Fidelity VIP Freedom 2015 Service Class 2
    9.07 %
Fidelity VIP Freedom 2020 Service Class 2
    9.97 %
Fidelity VIP Freedom 2025 Service Class 2
    10.26 %
Fidelity VIP Freedom 2030 Service Class 2
    11.08 %
Fidelity VIP Freedom Income Service Class 2
    5.92 %
Fidelity VIP Contrafund Service Class 2
    17.30 %
Fidelity VIP Growth Service Class 2
    26.66 %
Fidelity VIP Mid-Cap Service Class 2
    15.34 %
Fidelity VIP Value Strategies Service Class 2
    5.36 %
Janus Aspen Series International Growth Portfolio Service Shares
    28.02 %
Janus Aspen Series Mid Cap Growth Portfolio Service Shares
    21.74 %
Janus Aspen Series Risk-Managed Core Portfolio Service Shares
    6.13 %
Lazard Retirement U.S. Strategic Equity Portfolio
    (0.95 )%
LMPV Aggressive Growth Portfolio Class II
    (1.66 )%
LMPV Mid Cap Core Portfolio Class II
    (5.72 )%
MFS VIT New Discovery Series Service Class
    2.25 %
MFS VIT Utilities Series Service Class
    27.56 %
Premier VIT Op Cap Small Cap Portfolio
    0.58 %
T. Rowe Price Blue Chip Growth Portfolio-II
    12.49 %
T. Rowe Price Equity Income Portfolio-II
    3.03 %
Van Eck Worldwide Hard Assets Fund
    45.36 %
XTF Advisors Trust — ETF 2010 Portfolio
    (0.90 )%
XTF Advisors Trust — ETF 2015 Portfolio
    (0.30 )%
XTF Advisors Trust — ETF 2020 Portfolio
    (1.10 )%
XTF Advisors Trust — ETF 2025 Portfolio
    (0.20 )%
XTF Advisors Trust — ETF 2030 Portfolio
    (1.60 )%
XTF Advisors Trust — ETF 2040+ Portfolio
    (2.60 )%
Brandes International Equity
    8.01 %
Turner Core Growth
    22.43 %
Frontier Capital Appreciation
    11.92 %
Business Opportunity Value
    5.44 %
 
Mr. Carbiener is fully vested in his special plan benefits, except that his benefits are forfeited if he dies or if his employment is terminated by FIS for cause. For this purpose, the term “cause” means the participant’s willful and continued failure to do his duties even after FIS makes a written demand for performance, or willful actions by the participant that injure FIS. Benefits are distributed after the plan administrator declares a rollout event, which can be done no sooner than the latest of (1) fifteen years after the participant’s commencement date under the FIS split dollar plan, (2) the participant’s sixtieth birthday or (3) after the participant retires or becomes permanently disabled. For this purpose, the term “retire” means the participant’s termination of employment after (1) turning age sixty-five, (2) turning age fifty-five and having five years of vesting service or (3) turning age fifty and having the participant’s age plus years of benefit service equal at least seventy-five. The administrator may also declare a rollout event if payments under the plan have not yet begun and a participant violates the plan’s non-competition provisions within a one-year period after termination of employment.
 
If a participant terminates employment for good reason, or if the participant’s job is eliminated, payments must begin fifteen years after the participant’s commencement date under the FIS split dollar plan or after the participant turns sixty years old, whichever is later. The spin-off is treated as an elimination of Mr. Carbiener’s job for purposes of the plan. Participants can also elect to get payments earlier if both (1) seven years have passed since the participant’s commencement date under the split dollar plan and (2) the participant retires or turns sixty years old.
 
A participant can elect to get the payments in either a single lump sum or in installments over a period of between two and ten years. If the participant elects installment payments, FIS will credit the undistributed principal amount with 5% simple annual interest. If a participant elects to receive a lump sum distribution, FIS can make the distribution either in cash or by transferring an interest in the policy. If the benefit is less than $10,000, or the participant violates the plan’s non-competition provisions within a one-year period after termination of employment, then the administrator can force a lump sum distribution. Unless a participant violates the plan’s non-competition provisions within one-year after termination of employment, FIS will pay an additional gross up based on the administrator’s estimate of the tax savings realized by it by being able to deduct the payments from its

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federal, state and local taxes. Participants’ benefits derive solely from the terms of the special plan and are unsecured. Participants do not have rights under the insurance policies.
 
In connection with the Certegy Merger, FIS funded a rabbi trust with sufficient monies to pay all future required insurance premiums under the FIS split-dollar plan and to pay all of the participant interests as defined in the FIS special plan, including with respect to Mr. Carbiener.
 
FIS Non-Qualified Deferred Compensation Plan
 
Under FIS’s non-qualified deferred compensation plan, participants can defer up to 75% of their base salary and 100% of their annual incentives, subject to a minimum deferral of $15,500. Deferral elections are made in December for amounts to be earned in the following year. Deferrals and related earnings are not subject to vesting conditions.
 
Participants’ accounts are bookkeeping entries only and participants’ benefits are unsecured. Participant’s accounts are credited or debited daily based on the performance of hypothetical investments selected by the participant, and may be changed on any business day. The funds from which participants may select hypothetical investments, and the 2007 rates of return on these investments, are listed in the following table:
 
                     
    2007
        2007
 
    Rate of
        Rate of
 
Name of Fund
  Return    
Name of Fund
  Return  
 
Nationwide NVIT Money Market V
    4.87 %   American Funds IS Growth     12.35 %
PIMCO VIT Real Return Portfolio
    10.66 %   Goldman Sachs VIT Mid Cap Value     3.20 %
PIMCO VIT Total Return Portfolio
    8.76 %   T. Rowe Price Mid Cap Growth II Portfolio     17.22 %
LASSO Long and Short Strategic Opportunities
    4.08 %   Royce Capital Small Cap Portfolio     (2.14 )%
T. Rowe Price Equity Income II Portfolio
    3.03 %   Vanguard VIF Small Company Growth Portfolio     3.77 %
Dreyfus Stock Index
    5.26 %   AllianceBernstein VPS International Value Portfolio     5.84 %
Fidelity VIP II Contrafund Portfolio
    17.51 %   American Funds IS International     20.02 %
 
Upon retirement, which generally means separation of employment after attaining age sixty, an individual may elect either a lump-sum withdrawal or installment payments over 5, 10 or 15 years. Similar payment elections are available for pre-retirement survivor benefits. In the event of a termination prior to retirement, distributions are paid over a 5-year period. Account balances less than $15,500 will be distributed in a lump-sum. Participants can elect to receive in-service distributions in a plan year that is at least three plan years after the amounts are actually deferred, and these amounts will be paid within sixty days from the close of the plan year in which they were elected to be paid. The participant may also petition us to suspend elected deferrals, and to receive partial or full payout under the plan, in the event of an unforeseeable financial emergency, provided that the participant does not have other resources to meet the hardship.
 
Plan participation continues until termination of employment. Participants will receive their account balance in a lump-sum distribution if employment is terminated within two years after a change in control.
 
In 2004, Section 409A of the Internal Revenue Code was passed. Section 409A changed the tax laws applicable to nonqualified deferred compensation plans, generally placing more restrictions on the timing of deferrals and distributions. The deferred compensation plan contains amounts deferred before and after the passage of Section 409A. For amounts subject to Section 409A, which in general terms includes amounts deferred after December 31, 2004, a modification to a participant’s payment elections may be made upon the following events:
 
  •  Retirement: A participant may modify the distribution schedule for a retirement distribution from a lump-sum to annual installments or vice versa, however, a modification to the form of payment requires that the payment(s) commence at least five years after the participant’s retirement, and this election must be filed with the administrator at least 12 months prior to retirement.
 
  •  In-service Distributions: Participant’s may modify each in-service distribution date by extending it by at least five years; however, participants may not accelerate the in-service distribution date and this election must be filed with the administrator at least 12 months prior to the scheduled in-service distribution date.


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Deferral amounts that were vested on or before December 31, 2004 are generally not subject to Section 409A and are governed by more liberal distribution provisions that were in effect prior to the passage of Section 409A. For example, a participant may withdraw these grandfathered amounts at any time, subject to a withdrawal penalty of ten percent, or may annually change the payment elections for these grandfathered amounts.
 
Potential Payments Upon Termination or Change in Control
 
In this section, we discuss the nature and estimated value of payments and benefits FIS would provide to our named executive officers in the event of termination of employment or a change in control. The amounts described in this section reflect amounts that would have been payable under FIS’s plans and the named executive officer’s FIS agreements if the named executive officer’s employment had terminated on December 31, 2007. The types of termination situations include a voluntary termination by the executive, with and without good reason, a termination by FIS either for cause or not for cause, termination after a change in control, and termination in the event of disability or death. We also describe the estimated payments and benefits that would be provided upon a change in control without a termination of employment.
 
The estimates described in this section are considered forward-looking information that fall within the safe harbors for disclosure of such information. The actual payments and benefits that would be provided upon a termination of employment or a change in control would be based on the named executive officers’ compensation and benefit levels at the time of the termination of employment or change in control and the value of accelerated vesting of stock-based awards is dependent on the value of the underlying stock.
 
For each type of employment termination, our named executive officers would have been entitled to benefits that are available generally to FIS domestic salaried employees, such as distributions under the FIS 401(k) savings plan, certain disability benefits and accrued vacation. We have not described or provided an estimate of the value of these or other payments or benefits under plans or arrangements that do not discriminate in scope, terms or operation in favor of a named executive officer and that are generally available to all salaried employees of FIS. In addition to these generally available plans and arrangements, as of December 31, 2007, Mr. Carbiener also had benefits under the FIS split dollar plan and FIS special plan. These plans, and Mr. Carbiener’s benefits under them, are discussed in the Compensation Discussion and Analysis section, the Pension Benefits table and the Nonqualified Deferred Compensation table and accompanying narratives.
 
Potential Payments Under Employment Agreements
 
As discussed previously, Messrs. Foley, Carbiener and Swenson have employment agreements with FIS. These agreements provide for the payment of severance benefits following certain termination events. Following is a summary of the payments and benefits these named executive officers would receive in connection with various employment termination scenarios.
 
Mr. Foley’s Employment Agreement
 
Under Mr. Foley’s employment agreement, if his employment is terminated other than due to death and the termination is by FIS for any reason other than for cause or due to disability, or by the executive for good reason or for any reason during the six month period following a change in control, then the executive is entitled to receive:
 
  •  any earned but unpaid base salary and any expense reimbursement payments owed and any earned but unpaid annual bonus payments relating to the prior year, which we refer to as “accrued obligations,”
 
  •  a prorated annual bonus,
 
  •  a lump-sum payment equal to 300% of the sum of the executive’s (1) annual base salary and (2) the highest annual bonus paid to the executive within the three years preceding his termination or, if higher, the target bonus opportunity in the year in which the termination of employment occurs,
 
  •  immediate vesting and/or payment of all equity awards, and
 
  •  continued receipt of life and health insurance benefits for a period of 3 years, reduced by comparable benefits he may receive from another employer.


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If Mr. Foley’s employment terminates due to death or disability, FIS will pay him, or his estate:
 
  •  any accrued obligations, and
 
  •  a prorated annual bonus based on (a) the target annual bonus opportunity in the year in which the termination occurs or the prior year if no target annual bonus opportunity has yet been determined and (b) the fraction of the year the executive was employed.
 
In addition, Mr. Foley’ employment agreement provides for supplemental disability insurance sufficient to provide at least 2/3 of the executive’s pre-disability base salary. For purposes of this agreement, Mr. Foley will be deemed to have a “disability” if he is entitled to receive long-term disability benefits under FIS’s long-term disability plan.
 
Under Mr. Foley’s agreement, “cause” means:
 
  •  persistent failure to perform duties consistent with a commercially reasonable standard of care,
 
  •  willful neglect of duties,
 
  •  criminal or other illegal activities,
 
  •  material breach of the employment agreement or
 
  •  impeding or failing to materially cooperate with an investigation authorized by FIS’s board.
 
Under Mr. Foley’s agreement, “good reason” means:
 
  •  an adverse change in the executive’s title, the assignment of duties materially inconsistent with the executive’s position of Executive Chairman, or a substantial diminution in authority,
 
  •  FIS’s material breach of any of FIS’s other obligations under the employment agreement,
 
  •  FIS giving notice of its intent not to extend the employment term any time during the 1 year period immediately following a change in control,
 
  •  following a change in control, the relocation of the executive’s primary place of employment, or
 
  •  FIS’s failure to obtain an assumption of the employment agreement by a successor.
 
To qualify as a “good reason” termination, Mr. Foley must provide notice of the termination within 90 days of the date he first knows the event has occurred. FIS has 30 days to cure the event.
 
For purposes of Mr. Foley’s agreement, “change in control” means:
 
  •  an acquisition by an individual, entity or group of 50% or more of FIS’s voting power,
 
  •  a merger or consolidation in which FIS is not the surviving entity, unless FIS’s shareholders immediately before the transaction hold more than 50% of the combined voting power of the resulting corporation after the transaction,
 
  •  a reverse merger in which FIS is the surviving entity but in which more than 50% of the combined voting power is transferred to persons different from those holding the securities immediately before the merger,
 
  •  during any period of two consecutive years during the employment term, a change in the majority of FIS’s board, unless the changes are approved by 2/3 of the directors then in office,
 
  •  a sale, transfer or other disposition of FIS’s assets that have a total fair market value equal to or more than 1/3 of the total fair market value of all of FIS’s assets immediately before the sale, transfer or disposition, other than a sale, transfer or disposition to an entity (1) which immediately after the sale, transfer or disposition owns 50% of FIS’s voting stock or (2) 50% of the voting stock of which is owned by FIS after the sale, transfer or disposition, or
 
  •  FIS’s shareholders approve a plan or proposal for the complete liquidation or dissolution of FIS.


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Employment Agreements with Messrs. Carbiener and Swenson
 
Under the employment agreements with Messrs. Carbiener and Swenson, if the executive’s employment is terminated other than due to death and the termination is by FIS for any reason other than for cause or due to disability, or by the executive for good reason, then the executive is entitled to receive:
 
  •  annual base salary through the last day of the term of the agreement and, for Mr. Swenson only, an amount equal to the prior year’s annual bonus if termination is for good reason or a prorated annual bonus if termination is by FIS without cause, and
 
  •  immediate vesting of options granted pursuant to the terms of the employment agreement.
 
The last day of the term of Mr. Carbiener’s agreement is February 1, 2009 and the last day of the term of Mr. Swenson’s agreement was March 9, 2008.
 
For purposes of the agreements with Messrs. Carbiener and Swenson, “cause” means the executive’s:
 
  •  failure to perform duties consistent with a commercially reasonable standard of care,
 
  •  willful neglect of duties,
 
  •  criminal or other illegal activities, or
 
  •  material breach of the employment agreement.
 
For purposes of the agreements with Messrs. Carbiener and Swenson, “good reason” means a “change in control,” which is defined as:
 
  •  the consummation of a consolidation or merger of FIS other than a consolidation or merger of FIS in which its shareholders immediately prior to the merger hold more than 50% of the combined voting power of the surviving corporation after the merger,
 
  •  sale or other disposition of all or substantially all of FIS’s assets,
 
  •  FIS’s shareholders approve a plan or proposal for the complete liquidation or dissolution of FIS, or
 
  •  an acquisition by any person, entity or group of 30% or more of FIS’s voting power.
 
To qualify as a “good reason” termination, the executive must terminate employment during the period commencing 60 days and ending 1 year after the change in control.
 
If Mr. Carbiener’s or Mr. Swenson’s employment is terminated due to death or disability, FIS will pay the executive, or his estate, his annual base salary through the last day of the term of his agreement.
 
For purposes of the agreements with Messrs. Carbiener and Swenson, the executive will be deemed to have a “disability” if he fails to perform his employment duties due to illness or other incapacity for a period of ninety (90) consecutive days.
 
Excise Tax Gross-Up Payment
 
The employment agreements with Messrs. Foley and Carbiener also provide for a tax gross-up if the total payments and benefits made under the agreement or under other plans or arrangements are subject to the federal excise tax on excess parachute payments and the total of such payments and benefits exceeds 103% of the safe harbor amount for that tax. A gross-up payment is not made if the total parachute payments are not more than 103% of the safe harbor amount. In that case, the executive’s payments and benefits would be reduced to avoid the tax. In general terms, the safe harbor amounts for this purpose are $1 less than 3 times the named executive officer’s average W-2 income for the five years before the year in which the change in control occurs. If a change in control had occurred on December 31, 2007, neither Mr. Foley nor Mr. Carbiener would have incurred the excise tax or been entitled to gross-up payments.


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The agreements also provide FIS and its shareholders with important protections and rights, including the following:
 
  •  severance benefits under Mr. Foley’s agreement are conditioned upon the executive’s execution of a full release of FIS and related parties, thus limiting exposure to law suits from the executive;
 
  •  the executive is prohibited from competing or soliciting employees or customers during employment and for one year thereafter if the executive’s employment terminates for a reason that does not entitle him to severance payments and the termination is not due to FIS’s decision not to extend the employment agreement term; and
 
  •  The executive is prohibited during employment and at all times thereafter from sharing confidential information and trade secrets.
 
Messrs. Chan and Scheuble did not have employment or severance agreements as of December 31, 2007 and FIS did not maintain a severance plan or policy that would cover Messrs. Chan and Scheuble. Any severance payment or benefits that would have been provided to Messrs. Chan and Scheuble that are not provided under the plans or awards described below would have been determined in the sole discretion of FIS and are not determinable at this time.
 
Potential Payments Under Stock Plans
 
FIS’s stock incentive plans, including the Certegy stock plan, the assumed FNF stock plans and the Former FIS plan, provide for the potential acceleration of vesting and, if applicable, payment of equity awards in connection with a change in control. Under the Certegy stock plan, a participant’s award agreement may specify that upon the occurrence of a change in control outstanding stock options will become immediately exercisable and any restriction imposed on restricted stock or restricted stock units will lapse. The stock option award agreements held by our named executive officers provide for accelerated vesting upon a change in control. Under the assumed FNF stock plans, outstanding options become immediately exercisable and any restrictions imposed on restricted stock lapse upon a change in control. The Former FIS plan provides that if FIS is consolidated with or acquired by another entity in a merger, sale of all or substantially all of its assets or otherwise, or in the event of a change in control, the treatment of FIS’s stock options is determined by the merger or consolidation agreement, which may provide for, among other things, accelerated vesting of stock options. For purposes of the Former FIS plan, a “change in control” would occur if a person or group other than FIS or other prior shareholders of FIS acquires more than 50% of FIS’s voting stock or all or substantially all of its assets and the assets of its subsidiaries.
 
For purposes of the Certegy stock plan, the term “change in control” means the occurrence of any of the following events:
 
  •  the accumulation by any person, entity or group of 20% or more of FIS’s combined voting power,
 
  •  consummation of a reorganization, merger or consolidation, which we refer to as a “business combination” of FIS, unless, immediately following such business combination, (i) the persons who were the beneficial owners of FIS’s voting stock immediately prior to the business combination beneficially own more than 662/3% of FIS’s then outstanding shares, (ii) no person, entity or group beneficially owns 20% or more of the then outstanding shares of common stock of the entity resulting from that business combination, and (iii) at least a majority of the members of the board of directors of the entity resulting from the business combination were members of FIS’s incumbent board,
 
  •  a sale or other disposition of all or substantially all of FIS’s assets, or
 
  •  FIS’s shareholders approve a plan or proposal for the complete liquidation or dissolution of FIS.
 
For purposes of the assumed FNF stock plans, the term “change in control” means the occurrence of any of the following events:
 
  •  an acquisition by an individual, entity or group of 50% or more of FIS’s voting power,
 
  •  a merger in which FIS is not the surviving entity, unless FIS’s shareholders immediately prior to the merger hold more than 50% of the combined voting power of the resulting corporation after the merger,


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  •  a reverse merger in which FIS is the surviving entity but in which more than 50% of the combined voting power is transferred to persons different from those holding the securities immediately prior to such merger,
 
  •  a sale or other disposition of all or substantially all of FIS’s assets, or
 
  •  FIS’s shareholders approve a plan or proposal for the liquidation or dissolution of FIS.
 
Mr. Carbiener’s Potential Death Benefits under the FIS Split Dollar Plan
 
The FIS Split Dollar Plan provides that Mr. Carbiener’s designated beneficiaries would be entitled to $2,000,000 in death benefits upon his death.
 
Estimated Payments and Benefits upon Termination of Employment
 
Our estimate of the payments and benefits that would be provided to the named executive officers assumes that their employment terminated on December 31, 2007 and that a change in control occurred on December 31, 2007. In general, any cash severance payments would be paid in a lump sum within 30 days from the termination date. However, to the extent required by Section 409A of the Internal Revenue Code, the payments would be deferred for six months following termination. If the payments are deferred, the amounts that would otherwise have been paid during the six month period would be paid in a lump sum after the six month period has expired.
 
With respect to Messrs. Foley, Carbiener and Swenson, upon a termination of employment by FIS not for cause, a termination by the executive for good reason or, in the case of Mr. Foley, a termination within six months after a change in control, the following payments would have been made under the employment agreements: Mr. Foley $8,873,463; Mr. Carbiener $541,667; and Mr. Swenson $341,633. Mr. Foley would also be entitled to continuation of health and life insurance benefits provided by FIS for three years. The estimated value of these benefits is $24,398. Upon a termination of these executives’ employment due to death or disability, the following payments would have been made: Mr. Foley $1,343,750; Mr. Carbiener $541,667; and Mr. Swenson $91,042. The amounts shown for Mr. Carbiener exclude $2,000,000 for death benefits provided under the FIS split dollar plan.
 
It is not possible to estimate the severance payments or benefits, if any, that would have been provided to Messrs. Chan and Scheuble. Any severance payments or benefits provided to these named executive officers would have been determined in the sole discretion of FIS.
 
Estimated Equity Values
 
As disclosed in the Outstanding Equity Awards at Fiscal Year-End table, as of December 31, 2007, Messrs. Carbiener and Swenson had outstanding unvested stock options and restricted stock awards and Messrs. Foley, Chan and Scheuble had outstanding unvested stock options granted by FIS. Under the terms of the Certegy stock plan and award agreements and the assumed FNF stock plans, these stock options and restricted stock awards would vest upon a change in control. In addition, we have assumed for purposes of this disclosure that any unvested stock options granted under the Former FIS plan held by our named executive officers would vest upon a change in control. Mr. Carbiener’s restricted stock award agreement also provides that his award vests upon termination of his employment by reason of his death or disability or upon his termination by FIS without cause. In addition, under Mr. Foley’s employment agreement, unvested stock options and restricted stock awards would vest upon any termination of employment by FIS not for cause, a termination by the executive for good reason or a termination by Mr. Foley for any reason within six months after a change in control. Under the FIS employment agreements with Messrs. Carbiener and Swenson, the option grants made pursuant to the employment agreements would vest upon a termination by FIS without cause or a termination by the executive for good reason. In any other termination event, all of these unvested stock options and restricted stock awards would expire at the employment termination date. The following estimates are based on a stock price of $41.59 per share, which was the closing price of FIS’s common stock on the last business day of FIS’s 2007 fiscal year. The stock option amounts reflect the excess of this share price over the exercise price of the unvested stock options that would vest. The restricted stock amounts were determined by multiplying the number of shares that would vest by $41.59.
 
The estimated value of the stock options held by our named executive officers that would vest upon a change in control would be as follows: Mr. Foley $12,089,195; Mr. Carbiener $553,875; Mr. Chan $95,970; Mr. Scheuble


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$598,297; and Mr. Swenson $1,837,991. These same amounts would vest upon a termination of Messrs. Foley’s and Carbiener’s employment by FIS not for cause, a termination by Messrs. Foley and Carbiener for good reason or a termination by Mr. Foley within six months after a change in control. The estimated value of stock options held by Mr. Swenson that would vest upon a termination of his employment by FIS not for cause or a termination by him for good reason is $1,770,991. The estimated value of restricted stock awards held by Messrs. Carbiener and Swenson that would vest upon a change in control or, with respect to Mr. Carbiener, upon termination of his employment by reason of his death or disability or by FIS without cause, would be $228,745 and $73,739, respectively.
 
Compensation Committee Interlocks and Insider Participation
 
Our compensation committee will be composed of three independent directors. We anticipate that no member of our compensation committee will be a former or current officer or employee of our Company or any of our subsidiaries. In addition, we anticipate that none of our executive officers will serve (i) as a member of the compensation committee or board of directors of another entity, one of whose executive officers serves on our compensation committee, or (ii) as a member of the compensation committee of another entity, one of whose executive officers serves on our board of directors.
 
Director Compensation
 
Historically.  Directors who are FIS’s salaried employees receive no additional compensation for services as a director or as a member of a committee of FIS’s board. In 2007, all non-employee directors of FIS received an annual retainer of $40,000, payable quarterly, plus $1,500 for each board or committee meeting he attends. The chairman and each member of FIS’s audit committee received an additional annual fee (payable in quarterly installments) of $24,000 and $12,000, respectively, for their service on FIS’s audit committee. The chairman and each member of FIS’s compensation committee and FIS’s corporate governance and nominating committee received an additional annual fee (payable in quarterly installments) of $15,000 and $6,000, respectively, for their service on such committees. In addition, each director received long-term incentive awards of 12,000 options. The options were granted under the Certegy stock plan, have a seven-year term, have an exercise price equal to the fair market value of a share on the date of grant, and vest proportionately each year over three years from the date of grant based upon continued service on FIS’s board of directors. FIS also reimburses each non-employee director for all reasonable out-of-pocket expenses incurred in connection with attendance at board and committee meetings. Finally, each member of FIS’s board is eligible to participate in FIS’s deferred compensation plan to the extent he elects to defer any board or committee fees.
 
Going Forward.  We anticipate that our board of directors will provide for comparable compensation and benefits arrangements for our directors after the distribution.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
FIS currently owns all of our outstanding shares of common stock. None of our director nominees or the persons expected to become our executive officers currently owns any shares of our common stock, but those who own shares of FIS common stock will be treated as other holders and, accordingly, will receive shares of our common stock in the distribution. After the spin-off, FIS will not directly or indirectly own any of our common stock.
 
The following table provides information with respect to the beneficial ownership of FIS’s common stock and the expected beneficial ownership of our common stock by (i) each person whom we believe will be a beneficial owner of more than 5% of our outstanding common stock, (ii) each of the persons nominated to serve as our directors, (iii) each officer named in the Summary Compensation Table and (iv) all of our executive officers and directors nominees as a group. We based the share amounts on each person’s beneficial ownership of FIS’s common stock and stock options as of March 20, 2008, unless we indicate some other date or basis for the share amounts in the applicable footnotes. Following the spin-off, LPS will have outstanding an aggregate of approximately           shares of common stock based upon approximately shares of FIS common stock outstanding on          , 2008, assuming no exercise of FIS options, and applying the distribution ratio of share of our common stock for every share of FIS common stock held as of the record date. Except as otherwise noted in the footnotes below, each person or entity identified below has sole voting and investment power with respect to such securities.
 
The mailing address of each director and executive officer shown in the table below is c/o Lender Processing Services, Inc., 601 Riverside Avenue, Jacksonville, Florida 32204.
 
                                         
          Shares Beneficially Owned  
    Number of
                Number of
       
    Shares of
    Number of
          Shares of
       
    FIS
    Exercisable
          LPS
       
Name and Address of
  Common
    FIS
    Percentage
    Common
    Percentage
 
Beneficial Owner
  Stock     Options(1)     of Class(2)     Stock(3)     of Class  
 
Non-Employee Director Nominees:
                                       
Named Executive Officers:
                                       
William P. Foley, II
    2,501,325 (4)     991,389       2.13                  
Jeffrey S. Carbiener
    76,570       320,042       *                  
Francis K. Chan
    11,321       38,538       *                  
Daniel T. Scheuble
    13,804       30,117       *                  
Eric D. Swenson
    16,803       42,055       *                  
All directors and executive officers as a group
    2,631,820       1,452,141       2.89                  
Greater than 5% Stockholders
                                       
Capital World Investors(5)
    13,265,000               6.82 %                
Glenview Capital Management, LLC(6)
    15,230,512                               7.83 %
 
 
Represents less than 1% of class of common stock.
 
(1) Represents shares subject to stock options that were exercisable on March 20, 2008, or become exercisable within 60 days of March 20, 2008.
 
(2) Based on 194,479,421 shares of common stock of FIS outstanding on February 1, 2008.
 
(3) The LPS column will be filled in before the distribution when more information is available about the adjustments to be made to the restricted stock and options held by the individuals named above.
 
(4) Included in this amount are 1,316,404 share held by Folco Development Corporation, of which Mr. Foley and his spouse are the sole stockholders, and 311,222 shares held by the Foley Family Charitable Foundation.
 
(5) According to a Schedule 13G filed February 11, 2008, Capital World Investors, a division of Capital Research Management Company (“CRMC”) whose address is 333 South Hope Street, Los Angeles, CA 90071, is deemed to be the beneficial owner of 13,265,000 shares as a result of CRMC acting as investment advisor to various investment companies registered under Section 8 of the Investment Company Act of 1940.


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(6) According to a Schedule 13G filed December 6, 2007, Glenview Capital Management, LLC and Lawrence M. Robbins, whose address is 767 Fifth Avenue, 44th Floor, New York, NY 10153, may be deemed to be the beneficial owner of 15,230,512 shares. This amount consists of: (A) 419,890 shares held for the account of Glenview Capital Partners; (B) 6,109,456 shares held for the account of Glenview Capital Master Fund; (C) 2,883,017 shares held for the account of Glenview Institutional Partners; (D) 700,719 shares held for the account of the GCM Little Arbor Master Fund; (E) 124,304 shares held for the account of GCM Little Arbor Institutional Partners; (F) 3,078,965 shares held for the account of Glenview Capital Opportunity Fund; (G) 1,797,019 shares held for the account of Glenview Offshore Opportunity Master Fund; (H) 9,427 shares held for the account of GCM Little Arbor Partners; and (I) 107,715 shares held for the account of GCM Opportunity Fund.
 
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
Certain Relationships with FIS and FNF
 
Our Executive Chairman, William P. Foley, II, is also the Executive Chairman of FIS and the executive Chairman of the board of directors of FNF. Mr. Foley also owns common stock, and options to buy additional common stock, of our Company, FIS and FNF. In addition, Mr. Foley has employment agreements with FIS and FNF, and we anticipate that we will enter into an employment agreement with him in connection with the distribution. For information regarding the FIS stock and options held by Mr. Foley, and our expectations with respect to our stock and options we expect to award to Mr. Foley, please refer to the sections of this information statement entitled “Management — Executive and Director Compensation” and “Security Ownership of Certain Beneficial Owners and Management.”
 
We also expect that, following the spin-off, one or more of our other directors may also serve as a director of FIS or FNF. We refer to these directors as the dual-service directors. For their services as our director, each of the dual-service directors will receive compensation from us, in addition to any compensation that they may receive from FIS or FNF. We expect that each of the dual-service directors will also own common stock, and options to buy additional common stock, of both our Company and of FIS or FNF.
 
Arrangements with FIS and FNF
 
Since 2005, the business groups that will be transferred to us as part of the contribution were operated by FIS as internal divisions or separate subsidiaries within the FIS family of companies. There have been inter-company arrangements between our operations and operations remaining with FIS for payment and reimbursement for corporate services and administrative matters as well as for services that we and FIS provided to each other in support of our respective customers and businesses. In addition, because our business groups were part of FIS, we also received and provided services from and to FNF under its arrangements with FIS, including corporate administrative and other services. Finally, certain of our subsidiaries have been parties to agreements directly with FNF covering various matters.
 
In connection with the spin-off, we will enter into written agreements with FIS or FNF under which we will continue to receive and provide certain of these services. The new agreements will cover situations where the prior agreement was oral or we were covered by a group agreement to which FIS was a party. In cases where a written agreement already exists to which we are a party, such agreements will continue in effect. Finally, we will enter into certain agreements with FIS specifically to effectuate the spin-off, including a Contribution and Distribution Agreement, Tax Disaffiliation Agreement and Employee Matters Agreement.
 
Arrangements with FIS
 
Overview
 
There are various agreements that will govern various interim and ongoing relationships between FIS and us following the closing date of the spin-off. These agreements include:
 
  •  the contribution and distribution agreement
 
  •  the tax disaffiliation agreement;


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  •  the employee matters agreement;
 
  •  the corporate and transition services agreements;
 
  •  the interchange agreement for use of corporate aircraft;
 
  •  the lease agreement for office space for FIS in Jacksonville, Florida;
 
  •  the intellectual property cross license; and
 
  •  the third party customer services support agreements.
 
Contribution and Distribution Agreement
 
Transfer of Assets and Assumption of Liabilities.  The Contribution and Distribution Agreement will generally provide that, subject to the terms and conditions contained therein:
 
  •  FIS will transfer all right, title and interest of FIS in and to (i) all of the shares and other securities of the subsidiaries of FIS specified in the Contribution and Distribution Agreement and (ii) all other properties, assets and rights of any nature, kind and description held by FIS immediately prior to the asset contribution that primarily relate to, arise out of or are held in connection with the lender processing services operations of FIS.
 
  •  In exchange, (i) FIS will receive shares of LPS common stock, (ii) FIS will receive one or more notes issued by LPS to and in favor of FIS or its assigns in the aggregate original principal amount of up to approximately $1.6 billion and (iii) LPS will assume all liabilities and obligations of FIS, its subsidiaries and affiliates, required to be paid or performed or otherwise arising under certain agreements or in connection with transferred assets relating to lender processing services operations.
 
FIS will not make any representations or warranties regarding the assets, businesses or liabilities transferred or assumed, any consents or approvals that may be required in connection with such transfers or assumptions, the value or freedom from any lien or other security interest of any assets transferred, or the legal sufficiency of any conveyance documents. Except as expressly set forth in the Contribution and Distribution Agreement or in any ancillary agreement, all assets will be transferred on an “as is,” “where is” basis.
 
The Distribution.  The Contribution and Distribution Agreement will provide that FIS will cause its transfer agent to distribute to record stockholders of FIS all of the shares of our common stock as determined by the board of directors of FIS in its board action approving the spin-off dividend.
 
Additionally, the Contribution and Distribution Agreement will provide that we agree to take any and all actions and enter into any and all agreements and arrangements reasonably requested by FIS to facilitate the spin-off and to cooperate with FIS in connection with the spin-off.
 
Access to Information.  Under the Contribution and Distribution Agreement, during the retention period (such period of time as required by a retention policy, any government entity, or any applicable agreement or law) we and FIS will be obligated to provide each other access to certain information, subject to confidentiality obligations and other restrictions. Additionally, we and FIS will make reasonably available to each other our respective employees to explain all requested information. We and FIS will be entitled to reimbursement for reasonable expenses incurred in providing requested information. We also agree to cooperate fully with FIS to the extent requested in preparation of any filings made by FIS with the SEC, any national securities exchange or otherwise made publicly available. Furthermore, we and FIS will use commercially reasonable efforts to make reasonably available to each other our respective past and present representatives as witnesses in any legal, administrative or other proceedings in which the other party may become involved. We and FIS will each retain all proprietary information within each company’s respective possession relating to the other party’s respective businesses for an agreed period of time and, prior to destroying the information, each of us must give the other notice and an opportunity to take possession of the information. We and FIS will each agree to hold in confidence all information concerning or belonging to the other for a period of three years following the date of the distribution.


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Indemnification.  We will indemnify, hold harmless and defend FIS and its subsidiaries, affiliates and representatives from and against all liabilities arising out of or resulting from:
 
  •  The ownership or operation of the assets or properties, or the operations or conduct, of the business transferred to us in connection with the spin-off, whether arising before or after the contribution;
 
  •  Any guarantee, indemnification obligation, surety bond or other credit support arrangement by FIS or any of its affiliates for our benefit;
 
  •  Any untrue statement of, or omission to state, a material fact in FIS’s public filings to the extent it was a result of information that we furnished to FIS, if that statement or omission was made or occurred after the contribution; and
 
  •  Any untrue statement of, or omission to state, a material fact in any of our public filings, except to the extent the statement was made or omitted in reliance upon information about the FIS group provided to us by FIS or upon information contained in any FIS public filing.
 
FIS will indemnify, hold harmless and defend us and each of our subsidiaries, affiliates and representatives from and against all liabilities arising out of or resulting from:
 
  •  The ownership or operation of the assets or properties, or the operations or conduct, of FIS or any of its subsidiaries and affiliates (other than us and our subsidiaries and the business transferred to us), whether arising before or after the date of the contribution;
 
  •  Any guarantee, indemnification obligation, surety bond or other credit support arrangement by us or any of our affiliates for the benefit of FIS;
 
  •  Any untrue statement of, or omission to state, a material fact in any of our public filings about the FIS group to the extent it was as a result of information that FIS furnished to us or which was contained in FIS’s public filings; and
 
  •  Any untrue statement of, or omission to state, a material fact in any FIS public filing, other than to the extent we are responsible as set forth above.
 
The Contribution and Distribution Agreement will also specify procedures with respect to claims subject to indemnification and related matters and provide for contribution in the event that indemnification is not available to an indemnified party. All indemnification amounts will be reduced by any insurance proceeds and other offsetting amounts recovered by the party entitled to indemnification.
 
Expenses of the Contribution and Distribution.  In general, we will pay all costs incurred in connection with the Contribution and Distribution Agreement.
 
Tax Disaffiliation Agreement
 
We will enter into the Tax Disaffiliation Agreement with FIS as a condition to completion of the spin-off. The purpose of this agreement is to set out each party’s rights and obligations with respect to federal, state, local, and foreign taxes for tax periods before the spin-off and related matters. Our subsidiaries currently are members of the FIS consolidated federal tax return. In addition, certain of our subsidiaries are included with FIS companies in state combined income tax returns. From and after the time of the distribution, our subsidiaries will no longer be included in the FIS consolidated federal income tax return or in any state combined return with any FIS company, and the tax sharing agreements that we and companies in our group have entered into in the past with FIS and its subsidiaries will be terminated. This agreement allocates responsibility between FIS and us for filing tax returns and paying taxes to the appropriate taxing authorities for periods prior to the distribution, subject to the indemnification provisions set forth in the Tax Disaffiliation Agreement, which generally allocate tax costs to the company earning the income giving rise to the tax. This agreement also includes indemnifications for any adjustments to taxes for periods prior to the distribution and any related interest and penalties, and for any taxes and for any adverse consequences that may be imposed on the parties as a result of the distribution, as a result of actions taken by the parties or otherwise.


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Filing of Returns, Payment of Taxes, and Indemnifications
 
Under this agreement:
 
  •  FIS will file all FIS federal consolidated income tax returns, which will include our subsidiaries as members of the FIS group through the distribution date. FIS will pay all the tax due on those returns, but we will indemnify FIS for the portion of the tax that is attributable to our income and that of our subsidiaries.
 
  •  FIS will share responsibility with us for filing and paying tax on combined state returns that include both our companies and FIS group companies. We will file the return and pay the tax when one of our subsidiaries has the responsibility under applicable law for filing such return. FIS will indemnify us with respect to any state income tax paid by us or any member of our group that is attributable to the income of FIS or its subsidiaries. FIS will file the return and to pay the tax for all other combined returns. We will indemnify FIS for any state income taxes paid by FIS but attributable to our income or that of our subsidiaries.
 
  •  We will indemnify FIS for all taxes and associated adverse consequences FIS incurs (including shareholder suits) associated with the distribution, the preliminary restructuring transactions effected prior to the spin-off, or the debt-for-debt exchange if FIS’ liability for taxes and adverse consequences arising from the imposition of taxes is the result of a breach or inaccuracy of any representation or covenant of any member of our group or is a result of any action taken by any member of our group.
 
  •  FIS will indemnify us for all taxes and associated adverse consequences we incur (including shareholder suits) associated with the distribution, the preliminary restructuring transactions effected prior to the spin-off, or the debt-for-debt exchange if our liability for taxes and adverse consequences arising from the imposition of taxes is the result of a breach or inaccuracy of any representation or covenant of any member of the FIS group or is a result of any action taken by any member of the FIS group.
 
  •  There are limitations on each group’s ability to amend tax returns if amendment would increase the tax liability of the other group.
 
Restrictions on Stock Acquisitions and Redemptions of Debt.  In order to help preserve the tax-free nature of the distribution, we have agreed that we will not engage in any direct or indirect acquisition, issuance or other transaction involving our stock. In addition, we have agreed not to reacquire any of our debt instruments that FIS exchanged in the debt-for-debt exchange. These restrictions are subject to various exceptions, including that (i) we may engage in such transactions involving our stock or debt if we obtain an opinion from a nationally recognized law firm or accounting firm that the transaction will not cause the distribution to be taxable or (ii) we may obtain the consent of certain officers of FIS to engage in such transactions.
 
Employee Matters Agreement
 
We will enter into an employee matters agreement with FIS to allocate responsibility and liability for certain employee-related matters. Our employees will continue to participate in certain of FIS’s employee benefit plans for an interim period following the spin-off while we establish plans and benefit arrangements for our employees. Under the employee matters agreement, we agree to contribute to those plans (or reimburse FIS) the portions of the employer contributions and other employer-paid costs under those plans that are attributable to our employees. Such costs will include, for example, payment of 401(k) matching contributions for our employees and payment of the employer portion of the cost of health, dental, disability and other welfare benefits provided to our employees. The services provided by FIS to us under the employee matters agreement will terminate as our plans and benefits are established and made available to our employees, but in any event the agreement will terminate no later than 24 months following the spin-off.
 
Corporate and Transition Services Agreements
 
FIS historically has provided certain corporate services to us relating to general management, accounting, finance, legal, payroll, human resources, corporate aviation and information technology support services, and we have provided certain leased space and information technology support to FIS. In 2007, 2006 and 2005, FIS allocated a net amount of $35.7 million, $51.8 million and $54.9 million, respectively, to us in respect of these


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services. Following the spin-off, we and FIS will continue to provide certain of these services to each other under new agreements, including new corporate and transition services agreements and other agreements described below.
 
The pricing for the services to be provided by us to FIS, and by FIS to us, under the corporate and transition services agreements will be on a cost-only basis, with each party in effect reimbursing the other for the costs and expenses (including allocated staff costs) incurred in providing these corporate services to the other party. We expect that the corporate and transition services agreements between FIS and us will terminate at various times specified in the agreement, generally ranging from 12 months to 24 months after the completion of the spin-off, but in any event generally will be terminable by either party on 90 days’ notice, other than certain IT infrastructure and data processing services, for which the notice of termination may be longer. When the services under these agreements are terminated, we and FIS will arrange for alternate suppliers or hire additional employees for all the services important to our respective businesses.
 
Interchange Agreement for Corporate Aircraft
 
We will enter into an interchange agreement with FIS with respect to our continued use of the corporate aircraft leased by FIS, and FIS’s use of the corporate aircraft leased by us. This arrangement will provide us with access from time to time to additional corporate aircraft that we can use for our business purposes, including personal use by our executives. The interchange agreement will be for a term of not less than 3 years, but may be terminated at any time by either party upon 90 days’ prior written notice. The interchange agreement will provide that we will reimburse FIS, or FIS will reimburse us, for the net cost differential of our aggregate use of FIS’s aircraft and FIS’s aggregate use of our aircraft. The interchange use and the amounts for which each of us can be reimbursed are subject to Federal Aviation Authority regulations and are the same as would apply to any third party with whom we would enter into an aircraft interchange arrangement.
 
Lease Agreement
 
We will enter into a lease agreement pursuant to which we will lease to FIS certain portions of our Jacksonville, Florida headquarters campus for use by FIS’s personnel. This lease arrangement will relate solely to office space and will continue for a term to be agreed. Under the lease, in addition to paying base rent, FIS will be obligated to pay us for its share of the reasonable estimated operating expenses for the entire Jacksonville headquarters campus that are in excess of the operating expenses (subject to certain exclusions) applicable to the 2005 base year.
 
Third Party Customer Services Support Agreements
 
So that we and FIS can continue to provide services seamlessly to our respective existing customers, in certain limited circumstances we and FIS will enter into service support agreements pursuant to which we will subcontract with FIS, and FIS will subcontract with us, to provide support services required under our contracts with our respective customers. The term of these agreements will be for the period required to provide uninterrupted service to the customer under the relevant customer contract.
 
Arrangements with FNF
 
Overview
 
There are various agreements that will govern various interim and ongoing relationships between FNF and us following the closing date of the spin-off. These agreements include:
 
  •  the corporate and transition services agreement;
 
  •  the master information technology services agreement;
 
  •  the interchange agreement for use of corporate aircraft;
 
  •  the real estate management, lease and sublease agreements;
 
  •  the eLender services and “Aqua Rate” agreements;


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  •  the software license agreement;
 
  •  the issuing agency agreements;
 
  •  the tax services agreements; and
 
  •  the real estate data and support services agreements.
 
Corporate and Transition Services Agreement
 
Through agreements with FIS, FNF historically has provided certain corporate services to us relating to general management, accounting, finance, legal, payroll, human resources, corporate aviation and information technology support services. In 2007, 2006 and 2005, FIS allocated $0.9 million, $3.4 million and $14.5 million, respectively, to us in respect of these services. Following the spin-off, FNF will continue to provide certain of these services for us under a new corporate and transition services agreement.
 
The pricing for the services to be provided by FNF to us under the corporate and transition services agreement is on a cost-only basis, in effect reimbursing FNF for the costs and expenses (including allocated staff costs) incurred in providing these corporate services to us. We expect that the corporate and transition services agreements will terminate at various times specified in the agreement, generally ranging from 12 months to 24 months after the completion of the spin-off, but in any event generally will be terminable by either party on 90 days’ notice, other than limited services for which the notice of termination may be longer. When the services under these agreements are terminated, we will arrange for alternate suppliers or hire additional employees for all the services important to our businesses.
 
Master Information Technology Services Agreement
 
Through agreements with FIS, FNF historically has received from us certain software development services. In 2007 and 2006, we earned $42.3 million and $29.3 million, respectively, for our provision of these services to FNF. Following the spin-off, we will continue to provide these services to FNF under a new master information technology services agreement.
 
The Master Information Technology Services Agreement sets forth the specific services to be provided and provides for statements of work and amendment as necessary. We may provide the services ourselves or through one or more subcontractors that are approved by FNF, but we are responsible for compliance by each subcontractor with the terms of the agreement. The agreement provides for specified levels of service for each of the services to be provided. If we fail to provide service in accordance with the applicable service levels, then we are required to correct our failure as promptly as possible at no cost to FNF.
 
Under the Master Information Technology Services Agreement, FNF is obligated to pay us for the services that FNF and its subsidiaries utilize, calculated under a specific and comprehensive pricing schedule. Although the pricing includes some minimum usage charges, most of the service charges are based on actual usage, specifically related to the particular service and the complexity of the technical analysis and technology support provided by FIS.
 
The Master Information Technology Services Agreement is effective for a term of five years unless earlier terminated in accordance with its terms. FNF has the right to renew the agreement for a single one-year period or a single two-year period, by providing a written notice of its intent to renew at least six months prior to the expiration date. Upon receipt of a renewal notice, the parties will begin discussions regarding the terms and conditions that will apply for the renewal period, and if the parties have not reached agreement on the terms by the time the renewal period commences, then the agreement will be renewed for only one year on the terms as in effect at the expiration of the initial term. FNF may also terminate the agreement or any particular statement of work or base services agreement on six months’ prior written notice. In addition, if either party fails to perform its obligations under the agreement, the other party may terminate after the expiration of certain cure periods.


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Interchange Agreement for Corporate Aircraft
 
We will enter into an interchange agreement with FNF with respect to our continued use of the corporate aircraft owned and leased by FNF, and FNF’s use of the corporate aircraft leased by us. This arrangement will provide us with access from time to time to additional corporate aircraft that we can use for our business purposes, including personal use by our executives. The interchange agreement will be for a term of not less than 3 years, but may be terminated at any time by either party upon 90 days’ prior written notice. The interchange agreement will provide that we will reimburse FNF, or FNF will reimburse us, for the net cost differential of our aggregate use of FNF’s aircraft and FNF’s aggregate use of our aircraft. The interchange use and the amounts for which each of us can be reimbursed are subject to Federal Aviation Authority regulations and are the same as would apply to any third party with whom we would enter into an aircraft interchange arrangement.
 
Real Estate Management Services and Lease and Sublease Agreements
 
Historically, through agreements with FIS, FNF received certain real estate management services from us. In addition, in connection with the use of the Jacksonville campus headquarters, we have received revenue from building management services (including telecommunications services) provided to FNF, and from rental income paid by FNF. The aggregate net amounts we received in 2007, 2006 and 2005 were $2.5 million, $3.9 million and $3.6 million, respectively.
 
Property Management for FNF.  Following the distribution, we will continue to provide these services under a property management agreement and a telecommunication services agreement with FNF. Pursuant to these agreements, we will continue to act as property manager for “Building V” and receive an annual management fee equal to $20.19 per rentable square foot per annum, payable in arrears and paid in monthly installments of $0.4 million, and provide telecommunications services and support and receive fees equal to FNF’s pro rata share of the telecommunications costs at the Jacksonville campus headquarters. Both the property management agreement and the telecommunications services agreement expired on December 31, 2007, and are expected to be extended for a term to be agreed.
 
Lease and Sublease at Jacksonville Headquarters Campus.  After the spin-off we will also continue to lease space to FNF pursuant to their lease agreement, and will sublease space (including furnishings) in Building V from FNF pursuant to a new sublease agreement. Both the lease and the sublease were originally entered into in March 2005 with a term ended December 31, 2007, and are expected to be extended for a term to be agreed. The lease and the sublease each provides that the rentable square footage that is leased to FNF, in the case of the lease, or leased to us, in the case of the sublease, may, by mutual agreement, increase or decrease from time to time during the term of the lease. Under the lease, FNF pays rent for the space that it leases, initially approximately 89,754 rentable square feet, at an annual rate of $23.05 per rentable square foot, in