CHOICEPOINT, INC.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES x NO o

Aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 10, 2003: $3,631,379,568 (based on the price at which the registrant’s stock was last sold as of the last business day of its second fiscal quarter).

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date; 86,685,810 shares of Common Stock, par value $.10 per share, outstanding as of March 10, 2003.

Portions of ChoicePoint Inc.’s Proxy Statement relating to the 2003 Annual Meeting of Shareholders are incorporated herein by reference in Part III, Items 10 (as related to Directors), 11, 12 and 13.

Portions of ChoicePoint Inc.’s Annual Report to Shareholders for the year ended December 31, 2002 are incorporated herein by reference in Parts II and IV.

THIS FORM 10-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY CHOICEPOINT INC. OR ITS MANAGEMENT CONTAIN STATEMENTS WHICH MAY CONSTITUTE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THOSE STATEMENTS AND INFORMATION ARE BASED ON MANAGEMENT’S BELIEFS, PLANS, EXPECTATIONS AND ASSUMPTIONS AND ON INFORMATION CURRENTLY AVAILABLE TO CHOICEPOINT. THE WORDS “MAY,” “SHOULD,” “EXPECT,” “ANTICIPATE,” “INTEND,” “PLAN,” “CONTINUE,” “BELIEVE,” “SEEK,” “ESTIMATE,” AND SIMILAR EXPRESSIONS USED IN THIS REPORT THAT DO NOT RELATE TO HISTORICAL FACTS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.

THE FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS. SUCH RISKS, UNCERTAINTIES AND ASSUMPTIONS INCLUDE, BUT ARE NOT LIMITED TO THOSE DESCRIBED IN ITEM 7, “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — RISK FACTORS.” MANY OF SUCH FACTORS ARE BEYOND CHOICEPOINT’S ABILITY TO CONTROL OR PREDICT. AS A RESULT, CHOICEPOINT’S FUTURE ACTIONS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND THE MARKET PRICE OF CHOICEPOINT’S COMMON STOCK COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY CHOICEPOINT. DO NOT PUT UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. CHOICEPOINT DOES NOT INTEND TO PUBLICLY UPDATE ANY FORWARD-LOOKING STATEMENTS THAT MAY BE MADE FROM TIME TO TIME BY, OR ON BEHALF OF, CHOICEPOINT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

ChoicePoint Inc., a Georgia corporation (“ChoicePoint” or the “Company”) incorporated in 1997, is the leading provider of identification and credential verification services for making smarter decisions in a world challenged by the reality of risks. Serving the needs of business, government, non-profit organizations and individuals, ChoicePoint works to create a safer and more secure society through the responsible use of information while ensuring the protection of personal privacy.

Based on market share, ChoicePoint is a leading provider of risk management and fraud prevention information and related technology solutions to the insurance industry. The Company also offers risk management and fraud prevention solutions to organizations in other industries. The Company operates its business through three primary service groups: Insurance Services, Business & Government Services and Marketing Services.

The Insurance Services group provides information products, software and services used in the underwriting and claims processes by property and casualty insurers. Insurance Services’ major offerings include claims history data, motor vehicle records, police records, credit information and modeling services to the personal lines property and casualty market and customized policy rating and issuance software to the commercial insurance market. The Company also provided property inspections and audits to the commercial insurance market until the sale of this business in February 2003. The Business & Government Services group provides information products and services to Fortune 1000 corporations, consumer finance companies, asset-based lenders, legal and professional service providers, health care service providers, non-profit organizations, small businesses, private investigators, consumers and federal, state and local government agencies. Major offerings include pre-employment background screenings and drug testing administration services, public record, background and relationship searches, vital records, tenant screening services, credential verification, due diligence information, Uniform Commercial Code searches and filings, people and shareholder locator information services, and DNA identification services. The Marketing Services group provides direct marketing services to Fortune 1000 corporations, insurance companies and financial institutions. Marketing Services offers a full range of products including data, print fulfillment, database and campaign management services, as well as Web-based delivery solutions.

ChoicePoint’s strategic goal is to be a leading provider of enhanced information services to a broad range of industries. The Company is continuing to expand its data distribution, data gathering and technological capabilities, and believes that it is positioned to offer a variety of new products to a diverse set of industries. The Company intends to accomplish its goals by expanding its presence in business and government markets, pursuing acquisitions and strategic alliances, developing and enhancing key technological capabilities and maintaining solid financial performance.

The Company’s acquisition strategy is to purchase or partner with organizations that add new data, markets and technology to ChoicePoint’s operations.

To add to its drug testing medical review officer offerings, in 1997 ChoicePoint acquired the assets of Drug Free, Inc., a drug testing information services company. In April 1998, ChoicePoint acquired the assets of Attest National Drug Testing, Inc., a drug testing information services company, and in June 1998 acquired Application Profiles, Inc., a full service background investigation company. In October 1998, the Company acquired Informus Corporation (“Informus”) in order to leverage their Internet technology and expand its automated offerings in the pre-employment screening market. The Informus acquisition allows the Company to provide a complete range of Web-based solutions by integrating its pre-employment background and drug testing services over the Internet to its corporate customers, and the acquisition provided further growth opportunities for the Company in the small to mid-sized company market. Also in November 1998, the Company acquired Tyler-McLennon, Inc., a provider of employment background screening services and record searches.

In October 1998, the Company acquired ChoicePoint Direct Inc., formerly known as Customer Development Corporation (“CPM”). CPM is a full-service, fully integrated database marketing company providing customized marketing programs primarily for clients in the insurance, consumer finance, publishing and banking industries.

In November 1998, the Company acquired EquiSearch Services, Inc. (“EquiSearch”). The EquiSearch acquisition allowed the Company to expand its value-added applications of Company data and to offer consumer-benefit services. EquiSearch’s primary function is to contract with companies or stock transfer agents to locate lost stockholders of Fortune 1000 and other public corporations.

In December 1998, in order to increase the Company’s presence in the personal automobile insurance market, ChoicePoint acquired DATEQ Information Network, Inc. (“DATEQ”), a provider of underwriting services to that market. The DATEQ acquisition allowed the Company to bring enhanced risk assessment products and services to its core insurance customer base.

Also in December 1998, the Company sold its life and health insurance field underwriting services and insurance claim investigation services to PMSI Services, Inc. This transaction, when combined with the December 1997 sale of the paramedical examination business to Pediatric Services of America, Inc., completed ChoicePoint’s strategy of exiting the labor-intensive life and health and investigative field businesses.

In May 1999, the Company purchased the assets of Washington Document Service, Inc., a leading nationwide court document research and retrieval company serving the legal market, which complemented the Company’s existing public record service. In July 1999, the Company acquired DataTracks Technology, Inc., a public record information company based in Sarasota, Florida. This acquisition strengthened the Company’s on-line public record data in the Florida market and brought a strong Web-based solution that is leveragable into certain markets and customers. In November 1999, the Company acquired the assets of DataMart, Inc. which provides software database services for ChoicePoint companies.

In January 2000, the Company completed the sale of its operations in the United Kingdom to Experian Limited, including the CUE UK database, a proprietary database containing home and motor insurance claims information. Also in January 2000, the Company purchased Statewide Data Services, Inc. (“SDS”), the insurance industry’s largest provider of prospecting leads and related services to property and casualty agents. Management believes that this acquisition, combined with the Company’s underwriting information and direct marketing services, provides the insurance industry with a complete and integrated suite of direct marketing products and services.

Effective February 1, 2000, the Company acquired NSA Resources, Inc. (“NSA”), one of the largest independent drug testing administration companies in the United States, to strengthen the Company’s position as a leading single-source provider of pre-employment solutions. NSA contracts with customers as a third-party administrator of drug tests used for determining employment eligibility.

On May 16, 2000, the Company completed a merger with DBT Online, Inc., a public record services provider (“DBT”) and competitor of ChoicePoint Public Records Group (“ChoicePoint PRG”), whereby DBT shareholders received .525 shares (pre-split) of newly-issued shares of ChoicePoint common stock for each share of DBT common stock owned. Headquartered in Boca Raton, Florida, DBT serves corporations and the legal, insurance and investigative markets.

In October 2000, the Company acquired RRS Police Records Management, Inc., a provider of police reports and related services to the property and casualty industry. In November 2000 the Company acquired the policy processing and interface management services assets of VIS’N Service Corporation and the data collection assets of Cat Data Group, LLC. In December 2000, the Company acquired the assets of Drug Free Consortium, to provide additional drug testing services.

In January 2001, the Company acquired BTi Employee Screening Services, Inc. (“BTi”), an employee pre-screening services company and ABI Consulting Inc., a third-party administrator of workplace drug and alcohol testing programs. In February 2001, the Company acquired Insurity Solutions, Inc., a provider of Internet-based insurance rating, underwriting and policy servicing technology.

In March 2001, the Company acquired certain assets of National Medical Review Offices, Inc., a large provider of medical review office services. In April 2001, the Company acquired The Bode Technology Group, Inc. (“Bode Labs”), a premier provider of DNA identification services.

In July 2001, the Company acquired Marketing Information & Technology, Inc. (“CPPM”), a provider of large-scale direct marketing systems for Fortune 500 clients, and the pre-employment and drug testing businesses of Pinkerton’s, Inc., a unit of Securitas AB of Sweden.

In August 2001, the Company sold the Osborn Group Inc., its laboratory services business, to LabOne, Inc., which completed the Company’s strategy to exit the life and health insurance market.

In January 2002, the Company acquired certain assets from Experian Information Solutions, Inc. consisting of on-line consumer credit reporting, marketing and pre-screen list extract services for the insurance market. In April 2002, the Company acquired Total eData Corporation, an e-mail database company to complement its direct marketing services and provide other consumer marketing opportunities.

In July 2002, the Company acquired L&S Report Service, Inc., a provider of police records, which made ChoicePoint the only police record provider with a nationwide reach, and in October 2002, the Company acquired Resident Data, Inc., a residential screening services provider to apartment manager companies, allowing the Company to better leverage the criminal and evictions data across a larger customer base.

In December 2002, the Company acquired Vital Chek Network, Inc. (“Vital Chek”), a provider of proprietary technology and data management services that facilitate the remote ordering of certified birth, death, marriage and divorce certificates and in December 2002, the Company purchased Accident Report Services, Inc., a provider of police records to complement its current police records business.

In January 2003, the Company acquired National Data Retrieval, Inc., a leading provider of public records information for bankruptcies, civil judgments and federal and state tax liens, which allows the Company to expand its civil record collection business and The List Source, Inc., d/b/a Kramer Lead Marketing Group, a marketing company serving the life and health insurance and financial services markets.

In February 2003, the Company sold its CP Commercial Specialists division, a provider of property inspections and audits to the commercial insurance market.

As indicated above, the Company operates through three primary service groups: Insurance Services, Business & Government Services and Marketing Services. ChoicePoint’s offices are located throughout the United States. The Company’s business is not materially seasonal. The following table reflects the revenue generated by each of ChoicePoint’s three primary service groups, and from the royalty and divested and discontinued product lines, from 2000 through 2002 and the percentage contribution by each group to ChoicePoint’s revenue for each such year. The royalty revenue is generated from laser technology patents held by the Company. The remaining patents underlying this revenue expire between November 2004 and May 2005.

Insurance Services. ChoicePoint provides underwriting information to property and casualty insurance companies in the United States. Personal lines property and casualty insurance services include underwriting and claims information, such as motor vehicle reports, police reports, the Company’s Comprehensive Loss Underwriting Exchange (“C.L.U.E.®”) and Current Carrier™ database services, vehicle registration services, credit reports, modeling services, ChoicePointLink® (insurance agent software), and driver’s license information. C.L.U.E. is a proprietary database comprised of claims information contributed by major insurance underwriters (and accessed by those same underwriters) which enables them to underwrite in the auto and home insurance markets. Current Carrier is a proprietary database comprised of information regarding current and previous insurance coverage and possible lapses in coverage. ChoicePoint’s proprietary ChoicePoint Rules™ systems automate customer-specific decision making criteria to provide property and casualty insurance underwriters with decision management tools that streamline and reduce the cost of the underwriting process. This service group offers information delivery services to its clients using system-to-system and Internet communications. ChoicePoint also provides modeling services to the personal lines property and casualty market and development of high-end customized application rating and issuance software for commercial customers. Until the sale of the CP Commercial Specialists group in February 2003, ChoicePoint provided services to the commercial property and casualty insurance market. Those services included commercial inspections for underwriting purposes and workers compensation audits of commercial properties. Until the sale of the Osborn Group, Inc. in August 2001, ChoicePoint also provided laboratory information services and related technology offerings to major life and health insurance companies in the United States.

Business & Government Services. In addition to serving the property and casualty insurance markets, ChoicePoint provides risk management and fraud prevention services and related technology solutions and shareholder locator services to Fortune 1000 corporations, consumer finance companies, asset-based lenders, legal and professional service providers, health care service providers, non-profit organizations, small businesses, consumers and local, state and federal government agencies. For instance, the Company provides information and services to customers in a variety of industries for use in the hiring and employee regulatory compliance process, including: (i) pre-employment background screenings, which include credit and driving record checks, prior employment verification, education and licensing verification and criminal record searches; and (ii) comprehensive drug screening program management and administration and due diligence and credential verification services to legal and professional service providers, (iii) tenant screening services; and (iv) DNA identification services and authentication services.

The Company also provides enhanced information services to government agencies, such as (i) uncovering ownership of hidden assets, locating individuals and providing leads for criminal and civil investigations, (ii) providing parent locator services, which locate for the public sector individuals who are in violation of court mandates and (iii) providing information to certain Medicare and Medicaid providers and provider applicants to assist in identifying and reducing health care fraud. In connection with its business and government services, the Company provides online and on-demand searches and filings of public business records, including Uniform Commercial Code searches and filings, bankruptcy, lien and judgment searches, searches of partnership and corporation filing records, and criminal record searches to assist organizations and lending institutions in managing potential risk exposure. The Company provides services that facilitates ordering of certified vital records such as birth, death, marriage and divorce certificates.

Marketing Services. ChoicePoint also provides direct marketing and database marketing services to Fortune 1000 corporations, insurance companies and financial institutions. Marketing Services offers a full range of products including data, print fulfillment, database and campaign management services, as well as Web-based solutions.

For additional information regarding these service groups, see Note 11 to the Consolidated Financial Statements incorporated by reference into this report.

Customers. ChoicePoint’s customer base includes substantially all domestic insurance companies, many Fortune 1000 corporations, non-profit organizations, small businesses, consumers and certain local, state and federal government agencies. The Company has more than 50,000 customers, none of which represented more than 10% of the Company’s total revenue in 2002.

Each of ChoicePoint’s current service groups has the capability to receive orders for and deliver products and services through electronic communications. The Company supplies software to customers that wish to access the Company using private networks.

The Company operates in a number of geographic and product and service markets, which are highly competitive. In the Insurance Services market, ChoicePoint’s competitors include TML Information Services, Inc., Trans Union Corporation, Fair Isaac & Company, Inc., American Insurance Services Group, a unit of Insurance Services Office, Inc., Metropolitan Reporting Bureau, Explorer Information Services, American Driving Records and Insurance Information Exchange, L.L.C., a subsidiary of ISO Claims Services, Inc. In the Business & Government Services market, ChoicePoint’s competitors in the automated public records market currently include the Lexis-Nexis service of Reed Elsevier PLC, First Data Corporation, Seisint, Inc. and infoUSA Inc., while its competitors in the pre-employment screening and drug testing services market include various security companies and clinical laboratories, including pre-screening services of Automatic Data Processing, Inc., The First American Corporation, Total Information Services, a subsidiary of US Investigations Services, Inc., and Laboratory Corporation of America Holdings. Its competitors in the vital records market include USAVital.com, a subsidiary of Backgrounds USA, NationalBirthCertificate.com, Mantech International Corporation, Genesis Systems, Inc. and QS Technologies, Inc. Its competitors in database marketing services offerings include Acxiom Corporation, Knowledge Base Inc. and Harte-Hanks Communications, Inc. With respect to its offerings of consumer benefit services such as those provided by its subsidiary, EquiSearch, the Company competes with Keane Tracers, Inc. and Shareholder Communications Corporation. For DNA identification services, the Company competes with Orchid BioSciences, Inc. and Myriad Genetics Inc. In each of its markets, the Company competes on the basis of responsiveness to customer needs, price and the quality and range of products and services offered.

ChoicePoint’s operations depend upon information derived from a wide variety of automated and manual sources. External sources of data include public records information companies, governmental authorities and on-line search systems. ChoicePoint has no reason to anticipate the termination of any significant relationships with data suppliers. However, if material changes in state or federal laws regulating or prohibiting the distribution of public records were to occur, the Company’s business, financial condition and results of operations could be materially affected. In the event that such a termination occurs, the Company believes that it could acquire the data from other sources; however, such termination could have a material adverse effect on the Company’s financial condition or results of operations.

ChoicePoint currently maintains databases that contain information provided and used by insurance underwriters. The information comprising these databases is not owned by ChoicePoint, and the participating organizations could discontinue contributing information to the databases. If this were to occur, the Company’s financial condition and results of operations would be materially affected. ChoicePoint believes, however, that such an event is unlikely because contributors to the databases depend upon the aggregated information in such databases to conduct their business operations.

As of December 31, 2002, ChoicePoint employed approximately 5,300 persons, none of whom were unionized. All of the Company’s workforce is employed in the United States. As of December 31, 2002, ChoicePoint employed approximately 280 individuals in Hartford, Connecticut in its Insurity facilities, approximately 65 individuals in Santa Ana, California at its ChoicePoint PRG location, approximately 290 individuals in Peoria, Illinois in its CPM location, approximately 100 individuals in the WorkPlace Solutions St. Petersburg, Florida office, approximately 25 employees in White Plains, New York at its EquiSearch offices, and approximately 50 individuals at the Boston, Massachusetts CPPM office. The Company has approximately 260 employees at the CPM Pensacola, Florida office, approximately 60 NSA employees in Nashville, Tennessee, approximately 65 employees at Bode Labs in Springfield, Virginia, approximately 65 BTi employees in Dallas, Texas, approximately 80 employees in the WorkPlace Solutions Los Angeles, California office, approximately 100 WorkPlace Solutions employees in the Charlotte, North Carolina office and 300 PRG employees in Boca Raton, Florida. ChoicePoint has approximately 60 employees at its Vital Chek office in Nashville, Tennessee and about 55 employees at the Resident Data offices in Dallas, Texas. Approximately 1,200 individuals are employed in the Atlanta area in the Company’s headquarters and four branch office locations. The balance of ChoicePoint’s employees is located in the Company’s remaining offices. ChoicePoint believes that its relations with its employees are good. There were approximately 130 employees at the Company’s CP Commercial Specialists office in Overland Park, Kansas, until the sale of this business in February 2003.

ChoicePoint owns a number of trademarks and trade names that ChoicePoint believes are important to its business. Except for the ChoicePoint trademark and logo, however, the Company is not dependent upon any single trademark or trade name or group of trademarks or trade names. The current duration for federal registrations range from seven to fifteen years, but each trademark registration generally may be renewed an unlimited number of times as long as the trademark is in use. Additional trademarks and trade names used in the Company’s business are registered and maintained in the U.S. ChoicePoint, the ChoicePoint logo, VitalChek®, AutoTrackXP® and C.L.U.E. are registered trademarks of ChoicePoint Asset Company, a wholly owned subsidiary of the Company.

ChoicePoint owns a 62.5% interest in revenue relating to certain patents involving laser technology, which expires between November 2004 and May 2005. Upon the expiration of the applicable patent, ChoicePoint loses its right to exclude others from exploiting the inventions claimed therein, and accordingly, the obligations of third parties to make royalty payments will cease.

ChoicePoint’s principal executive offices are located in 206,000 square feet of office space in Alpharetta, Georgia, a suburb of Atlanta. As of December 31, 2002, ChoicePoint maintained approximately 80 other offices in the United States. These offices, all of which are leased, contain a total of approximately 780,000 square feet of space. Through ChoicePoint Health Systems Inc., ChoicePoint owns two laboratory facilities in Olathe, Kansas with approximately 76,000 square feet of space. Through CPM, ChoicePoint owns four buildings in Peoria, Illinois representing approximately 182,000 square feet of space. Through Vital Chek ChoicePoint owns two buildings in Nashville, Tennessee representing approximately 10,000 square feet. After the sale of CP Commercial Specialists in February 2003, the Company maintains approximately 56 offices in the United States for a total of approximately 720,000 square feet. The Company ordinarily leases office space of the general commercial type for conducting its business.

In 2002, ChoicePoint began construction on a 200,000 square foot data center adjacent to its principal executive offices at the Alpharetta, Georgia location. Construction on the new data facility is anticipated to be completed in April 2003.

In March 2003, ChoicePoint sold a building in Norcross, Georgia owned by ChoicePoint Services Inc. that represented approximately 8,400 square feet.

ChoicePoint is involved in litigation from time to time in the ordinary course of its business. The Company does not believe that the outcome of any pending or threatened litigation will have a material adverse effect on the financial condition or results of operations of ChoicePoint. However, the ultimate disposition of such matters cannot be predicted with certainty and it is impossible to currently determine the ultimate costs that may be incurred in connection with the disposition of such matters. Moreover, as is inherent in legal proceedings where issues may be decided by finders of fact, there is a risk that unpredictable decisions materially adverse to the Company could be reached.

No matters were submitted to a vote of security holders by the Company during the quarter ended December 31, 2002.

Set forth below is certain biographical information with respect to each executive officer of the Company, as of March 10, 2003:

Derek V. Smith, 48, has served as Chairman of the Board since May 1999 and as Chief Executive Officer and a Director of the Company since May 1997. He served as President of the Company from May 1997 until April 2002. He also serves as a director of The Stanley Works, a producer of tools and door products.

Douglas C. Curling, 48, has served as President since April 2002 and as Chief Operating Officer of the Company since May 1999. He served as Chief Operating Officer and Treasurer from May 1999 to May 2000 and served as Executive Vice President, Chief Financial Officer and Treasurer of the Company from the spin-off in 1997 until May 1999.

David T. Lee, 43, has served as Executive Vice President of the Company since May 1999 and served as Senior Vice President from the spin-off in 1997 until May 1999.

J. Michael de Janes, 45, has served as General Counsel and Secretary since April 1998 and served as General Counsel and Assistant Secretary from August 1997 to April 1998.

Steven W. Surbaugh, 53, has served as Chief Financial Officer since April 2002. Prior to April 2002, he was a partner with Arthur Andersen LLP for more than five years, where he most recently served as the partner-in-charge of the real estate, financial services and not-for-profit audit practices in the Atlanta, Georgia office.

David E. Trine, 42 has served as Treasurer since May 2000 and served as Vice President – Corporate Controller from May 1999 to May 2000. He served as Vice President – Finance and Accounting of the Company from the spinoff in 1997 until May 1999.

There are no family relationships among the executive officers of the Company, nor are there any arrangements or understandings between any of the executive officers and any other persons pursuant to which they were selected as executive officers. The Board of Directors may elect an executive officer or officers at any meeting of the Board of Directors. Each executive officer is elected to serve until his successor has been elected and has duly qualified. Elections of executive officers generally occur each year at the Board of Directors meeting held in conjunction with the Company’s Annual Meeting of Shareholders. In addition, the Chief Executive Officer is authorized to appoint certain officers of the Company.

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

The Company’s common stock is listed and traded on the New York Stock Exchange under the symbol “CPS.” Information regarding the high and low sales prices and the number of holders of the common stock is set forth under the captions “Market Information” and “Quarterly Stock Performance” on page 48 of the 2002 Annual Report to Shareholders (the “Annual Report”), a copy of which page is included in Exhibit 13 to this Form 10-K and is incorporated herein by reference.

The Company does not pay cash dividends and does not anticipate paying any cash dividends in the foreseeable future. The Company currently intends to retain future earnings to finance its operations and the expansion of its business. Any future determination to pay cash dividends will be at the discretion of the Company’s Board of Directors and will be dependent upon the Company’s financial condition, operating results, capital requirements and such other factors as the Board of Directors deems relevant.

The information included under the caption “Financial Highlights” on the inside front cover page of the Annual Report, a copy of which page is included in Exhibit 13 to this Form 10-K, is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information included under the caption “Management’s Discussion and Analysis” on pages 18 through 25 of the Annual Report, a copy of which pages are included in Exhibit 13 to this Form 10-K, is incorporated herein by reference.

You should carefully consider each of the following risk factors and all of the other information in this Annual Report on Form 10-K. These risks are not the only ones we face. Our business operations could also be impaired by additional risks and uncertainties that, at present, are not known to us or that, at present, we consider immaterial.

If any of the following risks and uncertainties develops into actual events, our business, financial condition and results of operations could be materially and adversely affected. If that happens, the trading prices of our common stock and any other securities we may issue in the future could decline significantly.

The risk factors below contain forward-looking statements regarding ChoicePoint. Actual results could differ materially from those set forth in the forward-looking statements. See “Cautionary Statements Regarding Forward-Looking Statements” on page 1, following the “Table of Contents.”

We have few long-term agreements with our customers. Although our management believes that the quality of our products and services should permit us to maintain relationships with our customers, there can be no assurance that we will do so. Any loss of a significant number of our major customers would have a material adverse effect on our business, financial condition, and results of operations.

Our customers include federal, state, and local governments. Government business is subject to many unique risks, such as delays in funding, reduction or modification of contracts or subcontracts, failure to exercise options, changes in government policies, and the imposition of budgetary restraints. A loss of government contract revenues also could have a material adverse effect on our business, financial condition, and results of operations.

The acquisition or consolidation of our customers by another company could decrease the demand for our products and services. After consolidation, these companies may reorganize management responsibilities or strategic and purchasing decisions that could adversely affect demand for our products and services. We may lose business relationships with key contacts within a customer’s organization due to budget cuts, layoffs, or other changes resulting from an acquisition or consolidation. The consolidation of companies also may alter the technological infrastructure of the combined entity, and our products and services may not be compatible with the new technological system.

Our long-term business strategy includes growth through acquisitions. While we believe we have been successful in implementing this strategy during prior years, we are not certain that we will complete future acquisitions on acceptable terms or that we will successfully integrate any acquired assets, data or businesses into our operations. Any acquisitions or investments will be accompanied by the risks commonly encountered in acquisitions of businesses. Such risks include, among other things:

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failing to integrate the operations and personnel of the acquired businesses in an efficient, timely manner;

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assuming potential liabilities arising from the products of an acquired company;

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incurring expenses associated with a write-off of a portion of goodwill and other intangible assets due to changes in market conditions, weak economies in certain competitive markets, or the failure of certain acquisitions to realize expected benefits; or

We depend upon third-party information suppliers for information used in our databases. The loss of some of our data supply sources could have a material adverse effect on our business, financial condition, and results of operations. We rely extensively upon data from external sources to maintain our proprietary and non-proprietary databases, and our operations depend upon information derived from a wide variety of automated and manual sources. We obtain data from public records, information companies, governmental authorities, competitors, and customers. Our agreements with our data suppliers are generally short-term agreements. Some of our suppliers are also our competitors, which may make us vulnerable to unpredictable price increases and may cause some suppliers not to renew certain agreements. We have no reason to anticipate the termination of any significant relationships with these data suppliers and believe that in most cases substitute suppliers could be arranged if any termination occurred. However, such a termination could have a material adverse effect on our business, financial condition, and results of operations if we were unable to arrange for substitute sources.

We currently maintain databases that contain information provided and used by insurance underwriters. We do not own the information in these databases, and the participating organizations could discontinue contributing information to the databases. If this information was withheld, our business, financial condition, and results of operations would be materially adversely affected.

We use social security numbers to generate certain reports. Social security numbers could become unavailable to us in the future because of changes in the law or because data suppliers decide not to supply them to us. If we cannot obtain this information in the future, we will be unable to generate reports as efficiently. Although we use names, addresses, and dates of birth to generate our reports, without the use of social security numbers, we believe that those reports would not be as complete or as accurate as the reports generated with social security numbers. We also would incur significant expense to revise the software we use to generate reports. Less complete or less accurate reports could adversely affect our business, financial condition, and results of operations.

We obtain the credit header data in our databases from consumer credit reporting agencies. The data consists of names, addresses, social security numbers, and dates of birth. Any of these suppliers could stop supplying this data to us or could substantially increase their prices. Withholding this data could materially adversely affect our business, financial condition, and results of operations.

The information industry in which we operate is highly competitive, and we expect it to remain highly competitive. In each of our markets, we compete on the basis of price, quality, customer service, product and service selection. Our competitive position in various market segments depends upon the relative strength of our competitors in the segment and the resources devoted to competing in that segment. Due to their size, certain competitors may be able to allocate greater resources to a particular market segment than we can. As a result, they may be in a better position to anticipate and respond to changing customer preferences, emerging technologies and market trends. In addition, new competitors and alliances may emerge to take market share away from us. We cannot be assured that we will be able to maintain or strengthen our competitive position in our market segments, especially against larger competitors. If we fail to successfully compete, our business, financial condition and results of operations may be adversely affected.

Because we use personal and public record information to search our databases and access the databases of others, we are vulnerable to government regulation and adverse publicity concerning these uses. We provide many types of data and services which already are subject to regulation under the Fair Credit Reporting Act, Gramm-Leach-Bliley Act, Drivers’ Privacy Protection Act, and to a lesser extent, various other federal, state, and local laws and regulations. These laws and regulations are designed to protect the privacy of the public and to prevent the misuse of personal information in the marketplace. However, many consumer advocates, privacy advocates, and government regulators believe the existing laws and regulations do not adequately protect privacy. They have become increasingly concerned with the use of

personal information, particularly social security numbers, motor vehicle reports, and dates of birth. As a result, they are lobbying for further restrictions on the dissemination or commercial use of personal information. The following legal and regulatory developments could have a material adverse affect on our business, financial condition, and results of operations:

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amendment, enactment, or interpretation of laws and regulations which restrict the access and use of personal information and reduce the supply of data available to our customers;

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changes in cultural and consumer attitudes to favor further restrictions on information collection and sharing;

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failure of our products and services to comply with current laws and regulations; and

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failure of our products and services to adapt to changes in the regulatory environment in an efficient, cost-effective manner.

We cannot be certain that we can continue to attract and retain sufficient qualified management, technical, sales, or other personnel necessary to conduct our business successfully. The resignation, retirement, death or disability of our Chief Executive Officer or Chief Operating Officer and the inability to sufficiently replace either position could adversely affect our business.

System interruptions could delay and disrupt our products and services, cause harm to our business and reputation, and result in a loss of customers. We depend heavily upon our computer systems, most of which are located in Alpharetta, Georgia and Boca Raton, Florida, to provide reliable, uninterrupted service. Certain events beyond our control, such as fires, floods, earthquakes, hurricanes, power losses, and telecommunications failures, could damage our computer networks and temporarily or permanently interrupt services to our customers. Our systems in Boca Raton, Florida are particularly susceptible to hurricanes. These interruptions also may interfere with our suppliers’ ability to provide data and our employees’ ability to attend work and perform their responsibilities. We have attempted to shield our systems from interruptions and failures, and we carry property and business interruption insurance in case these events occur. However, our system safeguards and our insurance still may not adequately protect us from losses arising from system interruptions.

Security breaches in our facilities, computer networks, and databases may cause harm to our business and reputation and result in a loss of customers. We have instituted many security measures to protect our systems and to assure the marketplace that our systems are secure. However, despite such security measures, our systems may be vulnerable to physical break-ins, computer viruses, attacks by hackers, or similar disruptive problems. Third-party contractors also may experience security breaches involving the storage and transmission of proprietary information. If unauthorized users gain access to our databases, they may be able to steal, publish, delete or modify confidential third-party information that is stored or transmitted on our networks. A security or privacy breach may affect us in the following ways:

The current general economic downturn could continue to result in a reduced demand for our products and services. Our revenues are dependent to a certain extent upon general economic conditions and upon conditions in the industries we serve. Certain of our revenues are derived from pre-employment screening services. The revenue growth and profitability of our business depends on the overall demand for our existing and new products. A softening of demand for our information services caused by a weakening of the economy generally may result in decreased revenues or lower growth rates. We cannot be certain that our future revenues, results of operations, cash flows and profitability will not fluctuate on a quarterly or annual basis or that we will be able to refinance our existing Credit Facility or Receivables Facility.

Our direct marketing products and services could be vulnerable to the following risks:

•

development of other methods of sales and advertising that are more effective than direct marketing;

•

changes in laws and regulations relating to data privacy, in particular, email privacy; and

•

increases in postal rates or disruption in the availability of postal services that could increase the cost of direct mail production and processing and reduce demand for information among our direct mail customers; and

Our growth partially depends on our ability to develop and market new products, services and technologies. We have focused on developing growth opportunities in a number of potential markets. We cannot assure you that we will be successful in developing new products, services and technologies or that they will gain market acceptance or generate significant revenue. Our initiatives are in various stages of development and may be subject to delays in implementation, customer dissatisfaction with product or service performance or other significant undetected problems. If we fail to successfully introduce new initiatives, our business, financial condition and results of operations may be adversely affected.

The Company is exposed to market risk from changes in interest rates. The information below summarizes the Company’s market risk associated with its debt obligations as of December 31, 2002. The information below should be read in conjunction with Note 5 of the “Notes to Consolidated Financial Statements” on pages 39 and 40 of the Annual Report, copies of which pages are included in Exhibit 13 to this Form 10-K and are incorporated herein by reference.

On May 10, 2002, ChoicePoint entered into a $325 million unsecured revolving credit facility (the “Credit Facility”) with a group of banks that extends through a termination date of May 2005 and bears interest at variable rates based on LIBOR plus an applicable margin. The applicable margins range from .475% to 1.2% per annum based on ChoicePoint’s leverage ratio. The average interest rate based on the terms of the Credit Facility at December 31, 2002 was 2.0%. Prior to May 10, 2002, the Company had a $250 million unsecured revolving credit facility with a group of banks. As of December 31, 2002, $95

million was outstanding under the Credit Facility. In July 2001, the Company and certain of its subsidiaries entered into an agreement (the “Receivables Facility”) with a financial institution whereby it may sell on a continuous basis an undivided interest in all eligible trade accounts receivable subject to limitations. The Receivables Facility permits the advance of up to $100 million on the sale of accounts receivable, may be extended in one-year terms and has been extended to July 2003. Net borrowings under the Receivables Facility were $85 million at December 31, 2002. The average interest rate based on the terms of the Receivables Facility at December 31, 2002 was approximately 2.0%. The Company has entered into four interest rate swap agreements (the “Swap Agreements”) to reduce the impact of changes in the benchmark interest rate (LIBOR) on its LIBOR-based payments on its synthetic leases. One interest rate swap agreement has a notional amount of $25 million and matures in August 2007. The other three interest rate swap agreements are forward starting swaps which have a total notional amount of $42 million, become effective May 2003 and mature in August 2007. The Swap Agreements involve the exchange of variable rate for fixed rate payments with a fixed rate between 4.6% and 6.5%.

Based on the Company’s overall interest rate exposure at December 31, 2002, a 1% change in interest rates would result in a change in annual pretax interest expense of approximately $1.8 million based on the Company’s level of borrowing at that date.

The information included under the captions “Consolidated Statements of Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Shareholders’ Equity,” “Consolidated Statements of Cash Flows” and “Notes to Consolidated Financial Statements” on pages 29 through 47 of the Annual Report, copies of which pages are included in Exhibit 13 to this Form 10-K, is incorporated herein by reference.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Upon the recommendation of the audit committee of the board of directors the board appointed Deloitte & Touche LLP as the Company’s independent public accountants for 2003. This appointment is subject to ratification by the shareholders at the Company’s 2003 annual meeting scheduled for April 29, 2003. The Company previously reported a change of accountants on a Current Report on Form 8-K filed March 22, 2002. The Company has no disagreements with Deloitte & Touch LLP or the former accountants, Arthur Andersen LLP, on accounting or financial disclosure issues.

The information required by this Item with respect to Directors of the Company is included in the sections entitled “Proposal No. 1 — Election of ChoicePoint Directors” and “Other Matters - ChoicePoint Section 16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement for the 2003 Annual Meeting of Shareholders and is incorporated herein by reference. Information regarding the Company’s executive officers is set forth in Part I of this report.

The information required by this Item is included in the sections entitled “ChoicePoint Executive Compensation,” “Management Compensation and Benefits Committee Report on Executive Compensation,” “Election of ChoicePoint Directors,” “ChoicePoint Executive Compensation — Employment Agreements and Change-in-Control Arrangements,” “ChoicePoint Executive Compensation Committee Interlocks and Insider Participation,” and “ChoicePoint Stock Performance Graph” of the Proxy Statement for the 2003 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is included in the sections entitled “ChoicePoint Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” of the Proxy Statement for the 2003 Annual Meeting of Shareholders and is incorporated herein by reference.

The information required by this Item is included in the section entitled “Other Matters — Certain Relationships and Related Transactions” of the Proxy Statement for the 2003 Annual Meeting of Shareholders and is incorporated herein by reference.

As required by SEC rules, the Company has evaluated the effectiveness of the design and operation of our disclosure controls and procedures within 90 days of the filing date of this annual report. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that the design and operation of our disclosure controls and procedures are effective. There were no significant changes to our internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation. As with any system of internal controls, there are inherent limitations in the controls the Company has put in place. Specifically, collusion by two or more employees can override the controls put in place within any organization. Specifically, individuals may execute transactions without the proper authority or disclosure.

Disclosure controls and procedures are the Company’s controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

Consolidated Balance Sheets as of December 31, 2002 and 2001 are incorporated by reference from the Annual Report, and are included in Exhibit 13 hereto.

Consolidated Statements of Income for the Years Ended December 31, 2002, 2001 and 2000 are incorporated by reference from the Annual Report, and are included in Exhibit 13 hereto.

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2002, 2001 and 2000 are incorporated by reference from the Annual Report, and are included in Exhibit 13 hereto.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000 are incorporated by reference from the Annual Report, and are included in Exhibit 13 hereto.

Notes to Consolidated Financial Statements are incorporated by reference from the Annual Report, and are included in Exhibit 13 hereto.

Report of Deloitte & Touche LLP on the foregoing 2002 financial statements is incorporated by reference from the Annual Report, and is included in Exhibit 13 hereto.

Report of Arthur Andersen LLP on the foregoing financial statements for the years ended 2001 and 2000 and the Explanatory Note regarding such report are incorporated be reference from the Annual Report and are included in Exhibit 13 hereto.

Schedule II — Consolidated Valuation and Qualifying Accounts is included as a schedule herein.

Schedules not listed have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.


Exhibit
Number		Description

2.1	—	Purchase Agreement, by and among ChoicePoint Inc., ChoicePoint Acquisition Corporation and DBT Online, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed February 15, 2000)
3.1	—	Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002)
3.2	—	Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2001)
4.1	—	Rights Agreement, dated as of October 29, 1997, by and between ChoicePoint Inc. and SunTrust Bank, Atlanta (incorporated by reference to Exhibit 4.2 of the Company’s Form 8-A, filed November 5, 1997)
4.2	—	Amendment No. 1 to the Rights Agreement, dated as of June 21, 1999, between ChoicePoint Inc. and SunTrust Bank, Atlanta (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-A, filed August 17, 1999)
4.3	—	Amendment No. 2 to the Rights Agreement between ChoicePoint Inc. and SunTrust Bank, Atlanta dated February 14, 2000 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed February 15, 2000)
4.4	—	Amendment No. 3 to the Rights Agreement between ChoicePoint Inc. and SunTrust Bank, Atlanta as dated July 30, 2002 (incorporated by reference to Exhibit 4.4 of the Company’s Current Report on Form 8-A/A, filed July 30, 2002)
4.5	—	Form of Common Stock certificate (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1, as amended, File No. 333-30297)
10.1	—	Employment Agreement, dated April 1, 1997, by and between DBT Online, Inc. and Frank Borman (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000)
10.2	—	Form of Employment and Compensation Agreement between the Company and Derek V. Smith dated as of April 25, 2002 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.3	—	Form of Employment and Compensation Agreement between the Company Douglas C. Curling dated as of April 25, 2002 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.4	—	Form of Employment and Compensation Agreement between the Company and David T. Lee dated as of April 25, 2002 (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.5	—	Form of Employment and Compensation Agreement between the Company and J. Michael de Janes dated as of April 25, 2002 (incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.6	—	Form of Employment and Compensation Agreement between the Company and Steven W. Surbaugh dated as of April 25, 2002 (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002)
10.7	—	Amendment No. 1 to the Form of Employment and Compensation Agreement between the Company and Derek V. Smith dated as of February 4, 2003.
10.8	—	Amendment No. 1 to the Form of Employment and Compensation Agreement between the Company and Douglas C. Curling dated as of February 4, 2003.


10.9	—	ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
10.10	—	DBT Online, Inc. Amended and Restated Stock Option Plan (incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K, for the year ended December 31, 2000)
10.11	—	Amendment 2000-1 to the DBT Online, Inc. Amended and Restated Stock Option Plan (incorporated by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-8, File No. 333-37498)
10.12	—	ChoicePoint Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K, for the year ended December 31, 2000)
10.13	—	First Amendment to the ChoicePoint Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-8, File No. 333-102249)
10.14	—	Second Amendment to the ChoicePoint Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8, File No. 333-102249)
10.15	—	Third Amendment to the ChoicePoint Inc. Deferred Compensation Plan.
10.16	—	ChoicePoint Inc. Deferred Compensation Plan No. 2
10.17	—	Employee Benefits Agreement, dated as of July 31, 1997, between Equifax Inc. and ChoicePoint Inc. (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
10.18	—	Tax Sharing and Indemnification Agreement, dated as of July 31, 1997, by and between Equifax Inc. and ChoicePoint Inc. (incorporated by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
10.19	—	Revolving Credit Agreement dated as of May 10, 2002 among ChoicePoint Inc., the Lenders listed therein, SunTrust Bank, as Administrative Agent, Wachovia Bank, National Association, as Syndication Agent, U.S. Bank National Association and BNP Paribas, as Documentation Agents, and First Union Securities, Inc. (D/b/a/Wachovia Securities) and SunTrust Capital Markets, Inc., as Co-Lead Arrangers (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended March 31, 2002)
10.20	—	First Amendment to the Revolving Credit Agreement, dated as of December 30, 2002, among ChoicePoint Inc., the Lenders listed therein, SunTrust Bank, as Administrative Agent, and Wachovia Bank, National Association, as Syndication Agent.
10.21	—	Master Agreement, dated as of July 31, 1997, among ChoicePoint Inc., SunTrust Banks, Inc. and SunTrust Bank, Atlanta, as Agent (incorporated by reference to Exhibit 10.11(a) of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
10.22		First Amendment to the Master Agreement, dated as of September 30, 1998, among ChoicePoint, Inc., as Lessee, SunTrust Banks, Inc., as Lessor, and SunTrust Bank, Atlanta, as Agent (incorporated by reference to Exhibit 10.15 of the Company’s Annual Report on Form 10-K, for the year ended December 31, 1999)
10.23	—	Second Amendment to the Master Agreement, dated as of December 30, 1999, among ChoicePoint Inc., as Lessee, SunTrust Banks, Inc., as Lessor, and SunTrust Bank, Atlanta, as Agent (incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form 10-K, for the year ended December 31, 1999)
10.24	—	Third Amendment to the Master Agreement, dated as of December 20, 2002, among ChoicePoint Inc., as Lessee, SunTrust Banks, Inc., as Lessor, and SunTrust Bank, as Agent.
10.25	—	Lease agreement, dated as of July 31, 1997, between ChoicePoint Inc. and SunTrust Banks, Inc. (incorporated by reference to Exhibit 10.11(b) of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
10.26	—	Georgia Lease Supplement, dated as of July 31, 1997, between ChoicePoint Inc. and SunTrust Banks, Inc., as Agent, (incorporated by reference to Exhibit 10.11(c) of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
10.27	—	First Amendment to the Georgia Lease Supplement, dated September 30, 1998, between ChoicePoint Inc. and SunTrust Banks, Inc. (incorporated by reference to Exhibit 10.17 of the Company’s Annual Report on Form 10-K, for the year ended December 31, 1999)
10.28	—	Second Amendment to the Georgia Lease Supplement, dated December 30, 1999, between ChoicePoint Inc. and SunTrust Banks, Inc. (incorporated by reference to Exhibit 10.18 of the Company’s Annual Report on Form 10-K, for the year ended December 31, 1999)
10.29	—	Operative Guaranty, dated as of July 31, 1997, by ChoicePoint Inc. as Guarantor (incorporated by reference to Exhibit 10.11(d) of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
10.30	—	Construction Agency Agreement, dated as of July 31, 1997, between SunTrust Banks, Inc. and ChoicePoint Inc. (incorporated by reference to Exhibit 10.11(e) of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
10.31	—	Master Agreement, dated as of August 29, 2001, among ChoicePoint Inc., as Guarantor, ChoicePoint Inc. and certain subsidiaries of ChoicePoint Inc. that may hereafter become party hereto, as Lessees, Atlantic Financial Group, LTD., as Lessor, Certain Financial Institutions Parties Hereto, as Lenders and SunTrust Bank, as Agent (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001)


10.32	—	First Amendment to the Master Agreement, dated as of December 20, 2002, among ChoicePoint Inc., as Lessee and Guarantor, Atlantic Financial Group, LTD, as Lessor, and SunTrust Bank, as Agent, and SunTrust Bank, Fleet National Bank, and BNP Paribas, as Lenders.
10.33	—	Master Lease Agreement, dated as of August 29, 2001, between Atlantic Financial Group, LTD., as Lessor, and ChoicePoint Inc. and certain subsidiaries of ChoicePoint Inc., as Lessees. (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001)
10.34	—	Guaranty Agreement from ChoicePoint Inc., dated as of August 29, 2001 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001)
10.35	—	Construction Agency Agreement, dated as of August 29, 2001, among Atlantic Financial Group, Ltd. and ChoicePoint Inc., as Construction Agent (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001)
10.36	—	Georgia Lease Supplement and Short Form, dated as of August 29, 2001, between Atlantic Financial Group, Ltd., a Texas Limited Partnership doing business in Georgia as Atlantic Financial Group, Ltd. (L.P.)(Texas), as Lessor, and ChoicePoint Inc., a Georgia corporation, as Lessee.
10.37	—	Supplement to Georgia Lease Supplement and Short Form, dated as of August 29, 2001, between Atlantic Financial Group, Ltd., a Texas limited partnership doing business in Georgia as Atlantic Financial Group, Ltd. (L.P.) (Texas), as Lessor, and ChoicePoint Inc., a Georgia corporation, as Lessee.
10.38	—	Partial Lease Termination Agreement, dated as of August 29, 2001, by and between SunTrust Banks, Inc., as Lessor, and ChoicePoint Inc., as Lessee.
10.39	—	Loan Agreement, dated as of July 2, 2001, among ChoicePoint Financial Inc., as Borrower, ChoicePoint Inc., as Initial Servicer, Three Pillars Funding Corporation, as Lender, and SunTrust Equitable Securities Corporation, as Administrator (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2001)
10.40	—	Amendment #1 to Loan Agreement, dated July 1, 2002 among ChoicePoint Financial Inc., as Borrower, ChoicePoint Inc., as Servicer, Three Pillars Funding Corporation, as Lender, and SunTrust Capital Markets, Inc., as Administrator.
10.41	—	Amendment #2 to Loan Agreement, dated December 31, 2002 among ChoicePoint Financial Inc., as Borrower, ChoicePoint Inc., as Servicer, Three Pillars Funding Corporation, as Lender, and SunTrust Capital Markets, Inc., as Administrator.
10.42	—	Receivables Sale and Contribution Agreement, dated as of July 2, 2001, among ChoicePoint Services Inc., PRC Corporation, ChoicePoint Business and Government Services Inc., ChoicePoint Direct Inc., Statewide Data Services, Inc., I.R.S.C., Inc., ChoicePoint Public Records Inc., Patlex Corporation, National Safety Alliance, Incorporation, BTi Employee Screening Services, Inc. and each other subsidiary of ChoicePoint Inc. that hereafter becomes a party hereto, as Originators, and ChoicePoint Capital Inc., as Buyer (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2001)
10.43	—	Receivables Sale Agreement, dated as of July 2, 2001, among ChoicePoint Capital Inc., as Seller, and ChoicePoint Financial Inc., as Purchaser (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2001)
10.44	—	Loan Agreement, dated as of August 29, 2001, among Atlantic Financial Group, Ltd., as Lessor and Borrower, the financial institutions party hereto, as Lenders, and SunTrust Bank, as Agent (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended September 30, 2001)
10.45	—	Sublease Agreement, dated as of July 31, 1997, between Equifax Inc. and Equifax Services Inc. (for certain property and building located at 1525 Windward Concourse, Alpharetta, Georgia [J.V. White Technology Center]) (incorporated by reference to Exhibit 10.13 of the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 1997)
13	—	The inside front cover and pages 17 — 48 of the Company’s 2002 Annual Report To Shareholders.
21	—	Subsidiaries of the Company.
23.1	—	Consent of Deloitte & Touche LLP, Independent Auditors.
23.2	—	Note Regarding Arthur Andersen LLP.
99.1	—	Independent Auditors’ Report on Financial Statement Schedule — Deloitte & Touche LLP.
99.2	—	Report of Independent Public Accountants on Financial Statement Schedule — Arthur Andersen LLP.
99.3	—	Certification of Derek V. Smith, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.4	—	Certification of Steven W. Surbaugh, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Copies of the Company’s Form 10-K that are furnished pursuant to the written request of the Company’s shareholders do not include the exhibits listed above. Any shareholder desiring copies of one or more of such exhibits should write to the Company’s Office of Corporate Secretary, specifying the exhibit or exhibits requested.

A report on Form 8-K, filed December 2, 2002, announced the Company’s acquisition of Vital Chek Network, Inc. and Vital Chek Network of Canada, Inc. pursuant to a Stock Purchase Agreement by and among ChoicePoint Inc., ChoicePoint Services Inc., Vital Chek Network, Inc., Vital Chek Network of Canada, Inc. and the stockholders listed therein.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Alpharetta, State of Georgia, on March 26, 2003.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2002, 2001 and 2000

22 EX-10.7 3 g81483exv10w7.txt EX-10.7 AMENDMENT #1 TO EMPLOYMENT AGREEMENT EXHIBIT 10.7 AMENDMENT NO. 1 TO THE EMPLOYMENT AND COMPENSATION AGREEMENT BETWEEN CHOICEPOINT INC. AND DEREK V. SMITH DATED APRIL 25, 2002 Pursuant to the action of the Management Compensation and Benefits Committee taken on February 4, 2003, the Employment and Compensation Agreement between ChoicePoint, Inc. and Derek V. Smith dated April 25, 2002, is hereby amended as of February 4, 2003, effective for all years ending on or after 12/31/02, to delete on Exhibit B, Compensation, Benefits and Severance the phrase "Maximum amount under proxy disclosure rules" from the column Amount, and next to the Benefit - Financial Planning/Tax Preparation and replace it with the amount of $100,000. Employer CHOICEPOINT, INC. By: /s/ Ken Langone ---------------------------- Name: Ken Langone -------------------------- Title: Chairman: Management Compensation and Benefits Committee ------------------------- EXECUTIVE: /s/ Derek V. Smith --------------------- EX-10.8 4 g81483exv10w8.txt EX-10.8 AMENDMENT #1 TO EMPLOYMENT AGREEMENT EXHIBIT 10.8 AMENDMENT NO. 1 TO THE EMPLOYMENT AND COMPENSATION AGREEMENT BETWEEN CHOICEPOINT INC. AND DOUGLAS C. CURLING DATED APRIL 25, 2002 Pursuant to the action of the Management Compensation and Benefits Committee taken on February 4, 2003, the Employment and Compensation Agreement between ChoicePoint, Inc. and Douglas C. Curling dated April 25, 2002, is hereby amended as of February 4, 2003, effective for all years ending on or after 12/31/02, to delete on Exhibit B, Compensation, Benefits and Severance the amount of $25,000 from the column Amount and next to the Benefit - Financial Planning/Tax Preparation and replace it with the amount of $50,000. Employer CHOICEPOINT, INC. By: /s/ Ken Langone ----------------------------------------- Name: Ken Langone Title:Chairman: Management Compensation and Benefits Committee EXECUTIVE: /s/ Douglas C Curling ----------------------------------------- EX-10.15 5 g81483exv10w15.txt EX-10.15 THIRD AMENDMENT TO DEFERRED COMP PLAN EXHIBIT 10.15 THIRD AMENDMENT TO THE CHOICEPOINT INC. DEFERRED COMPENSATION PLAN THIS AMENDMENT to the ChoicePoint Inc. Deferred Compensation Plan (the "Plan") is made and entered into by ChoicePoint Inc. (the "Company") as of the first day of September, 2002; WHEREAS, the Company has previously adopted the Plan, which was originally effective July 30, 1997, and has amended the Plan on two prior instances; and, WHEREAS, pursuant to Section 12.5 of the Plan, the Management Compensation & Benefits Committee of the Board of Directors of the Company did, by resolution duly adopted, approve the amendment of the Plan as contained herein, and Section 12.5 permits amendment of the Plan in the Plan Administrator's discretion consistent with the overall compensation and benefit policies of the Company. NOW, THEREFORE, the Plan is hereby amended as follows: 1. Section 2.5 is hereby amended by adding the following sentence prior to the last sentence thereof: The fund, and any accounts invested therein, shall be adjusted as appropriate by the Plan Administrator to prevent any dilution or enlargement of the rights of Participants that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Corporation, or (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. 2. Section 10.2(c) is hereby amended by adding the following sentence to the end of said section: In the event that a Beneficiary is to receive payments over a period of time, rather than in an immediate lump sum, the Beneficiary shall have the rights of a Participant with respect to the deceased Participant's Account, including the right to elect to treat the Account as if invested in one of the investment funds described in Section 7.3 and receive reports as described in Section 7.5. IN WITNESS WHEREOF, the Company has caused this Third Amendment to be executed as of the date and year first above written. CHOICEPOINT INC. By: /s/ John H. Karr ------------------------------ Title: Vice President; Compensation and Benefits Attest: /s/ Mary J. Rupert Title: Notary EX-10.16 6 g81483exv10w16.txt EX-10.16 DEFERRED COMPENSATION PLAN #2 EXHIBIT 10.16 DEFERRED COMPENSATION PLAN NO. 2 ChoicePoint Inc. (the "Company") does hereby adopt this ChoicePoint Inc. Deferred Compensation Plan No. 2, effective October 1, 2002. ARTICLE I. PREFACE SECTION 1.1. Effective Date. The effective date of this Plan is October 1, 2002. SECTION 1.2. Purpose of the Plan. The purpose of this Plan is to provide unfunded deferred compensation to certain persons as follows: Pursuant to the provisions of the Company's 1997 Omnibus Stock Incentive Plan (the "Omnibus Plan") and particularly section 19(c) thereof, to provide for a select group of highly compensated management Employees of the Company (and certain affiliated companies) the ability to elect to defer receipt, until the termination of their employment or attainment of a stated age, if later, of (i) unrestricted stock, which they would otherwise receive at the time when the restrictions pertaining to their Restricted Share awards granted pursuant to the Omnibus Plan would lapse, and (ii) certain cash bonuses granted at the time of grant of said Restricted Share awards. SECTION 1.3. Governing Law. This Plan shall be regulated, construed and administered under the laws of the State of Georgia, except when preempted by federal law. SECTION 1.4. Gender and Number. For purposes of interpreting the provisions of this Plan, the masculine gender shall be deemed to include the feminine, the feminine gender shall be deemed to include the masculine, and the singular shall include the plural unless otherwise clearly required by the context. ARTICLE II. DEFINITIONS The following words and phrases shall have the following respective meanings for purposes of this Plan: SECTION 2.1. Account shall mean the record maintained in accordance with Section 4.3 by the Employer to reflect the number of shares of the Company's common stock the receipt of which has been deferred pursuant to the terms hereof. SECTION 2.2. Beneficiary shall mean the person or persons designated by the Participant as his Beneficiary under this Plan, in accordance with the provisions of Article VII hereof. SECTION 2.3. Benefit shall mean the value as of any given date of the contributions and appropriate investment experience credited to a Participant's Account identified in Section 2.1. SECTION 2.4. ChoicePoint Inc. Stock Fund shall mean a hypothetical fund established for each Participant to reflect the value of the Participant's Account invested in said fund. Said fund shall be credited with shares and fractional shares of Company common stock at the time of any addition to the Fund which are equal to the number of shares, including any coincidental cash bonus (converted into shares), subject to a Participant's deferral election hereunder. Dividends paid on shares of the Company's common stock shall be calculated in dollars based on the number of shares held in the fund and shall be converted into shares based on the amount of the dividend divided by the value of a share of Company common stock and credited to the fund as of the date paid, as additional hypothetical earnings experienced by the fund. Transfers out of said fund shall be made in shares of Company stock only, and the fund shall be reduced by the number of shares required. For these purposes, the value of Company common stock will be the closing price for the stock quoted in The Wall Street Journal for the date in question. SECTION 2.5. Code shall mean the Internal Revenue Code of 1986, as amended. SECTION 2.6. Company shall mean ChoicePoint Inc. SECTION 2.7. Committee shall mean the Management Compensation and Benefits Committee of the Board of Directors of the Company. SECTION 2.8. Controlled Group means the Company and any other corporation which is a member of the controlled group of corporations of which the Company is a member as defined in section 414(b) of the Code. SECTION 2.9. Employee shall mean a person who (a) performs services for an Employer (b) is a common law employee of such an Employer, and (c) is classified on the Employer's records, and paid, as a salaried employee of the Employer. SECTION 2.10. Employer shall mean the Company and any other Controlled Group member that adopts this Plan pursuant to Section 8.7. SECTION 2.11. Insolvent. For purposes of this Plan, an Employer shall be considered Insolvent at such time as it (a) is unable to pay its debts as they mature, or (b) is subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code, as heretofore or hereafter amended. SECTION 2.12. Participant. For a particular Plan Year, the term Participant shall mean (a) any Employee designated by the Chief Executive Officer of the Company or, if the Participant in question is the Chief Executive Officer, by the Management Compensation and Benefits Committee of the Board of Directors of the Company, 2 as eligible to participate in the Plan. So long as such a person has an undistributed benefit under the Plan, he shall continue to be a Participant even though he is no longer an Employee. SECTION 2.13. Plan shall mean the ChoicePoint Inc. Deferred Compensation Plan No. 2, as set forth herein or as duly amended. SECTION 2.14. Plan Administrator shall mean the Chief Financial Officer and the Vice President, Compensation and Benefits, of the Company or the person or persons appointed by the Committee or the Board of Directors to administer the Plan pursuant to Article IX. SECTION 2.15. Plan Year shall mean the calendar year; provided, however, that the first Plan Year shall begin on the Effective Date and end on December 31, 2002. SECTION 2.16. Restricted Shares shall mean shares of Company common stock granted to a Participant pursuant to the Omnibus Plan which are subject to restrictions on transfers and/or a substantial risk of forfeiture. SECTION 2.17. Valuation Date shall mean each day in the calendar year or such other date determined by the Plan Administrator and communicated to the Participants. ARTICLE III. CONTRIBUTIONS SECTION 3.1. Elections to Defer. Each Participant may, at any time prior to one (1) year prior to the date on which restrictions pertaining to Restricted Share awards lapse, elect irrevocably to defer the receipt of said shares, by instrument in writing delivered to the Plan Administrator. The irrevocable election to defer receipt of said shares shall extinguish the Participant's rights with respect to said shares pursuant to the Omnibus Plan and replace those rights with the rights described herein. The number of said Restricted Shares as to which such an election is made shall be credited to the ChoicePoint Inc. Stock Fund. With respect to any cash bonus which was granted to the Participant as of the same date as the Restricted Shares in question, and which would have been payable, if vested, at the same date as the restrictions would have lapsed as to said Restricted Shares, each Participant may also elect to defer the receipt of any portion or all of said cash bonus award, as designated by the Participant on the relevant election form, which must be filed no later than one (1) year prior to the date on which the cash bonus award would be payable. The deferred cash bonus award will be credited to the Participant's Account and treated as if invested in common stock of the Company in the ChoicePoint Inc. Stock Fund based on the value of said shares determined by the Administrator as of the date of the deferral. SECTION 3.2. Effect and Duration of Election. Any elections made in accordance with Section 3.1 above shall be irrevocable. Notwithstanding the foregoing, a Participant's election to defer shall automatically terminate on the earlier of the 3 date the Participant's Employer is deemed Insolvent, or the date the Plan is terminated. ARTICLE IV. ACCOUNT ADMINISTRATION SECTION 4.1. Account Earnings Credit. As of each Valuation Date, the Accounts attributable to each Participant shall be revalued based on the closing price of the Company's stock, quoted in The Wall Street Journal, for said date or for the most immediately preceding date for which such a quote is published if not published on the Valuation Date. SECTION 4.2. Investment Fund. The sole investment fund available to determine the earnings credit to be applied (see Section 4.1) to each account is the ChoicePoint Inc. Stock Fund. Notwithstanding the foregoing, in the absence of a formal amendment to the Plan to permit otherwise, under no circumstances shall any Employer actually invest any amounts of the Employer's cash or other assets in ChoicePoint Inc. stock for the purposes of this Plan. SECTION 4.3. Participant's Accounts. Each Employer shall establish and maintain on its books a reserve in an aggregate amount equal to the total of the accounts for each Participant. The Plan Administrator shall maintain records for individual Participants which shall contain the following entries, as applicable: (a) Amounts deferred pursuant to Section 3.1; (b) Amounts to all Accounts for the earnings described in Section 4.1 which shall continue until such Accounts have been distributed to the Participant or his Beneficiary, and (c) Debits for any distributions made from the Accounts. SECTION 4.4. Statements. Participants shall be provided with statements of their Account balances as soon as practicable following each calendar quarter. ARTICLE V. VESTING A Participant shall be 100% vested in amounts credited to his Account hereunder upon the date on which the substantial risk of forfeiture and/or restriction on transfer of the Restricted Shares awarded to him would lapse by the terms of said award. ARTICLE VI. DISTRIBUTION OF BENEFITS TO PARTICIPANTS SECTION 6.1. Deferral Election Form. 4 (a) Deferral Period. The Deferral Election Forms described in the appropriate section above shall also contain such Participant's election regarding the time of the commencement of payment to him of his Benefit described therein. Each Participant may elect that payment of his Benefit shall commence on (i) the date on which he ceases to be an Employee of all members of the Controlled Group, or if later, (ii) the date on which he attains an age specified in the Deferral Election Form. (b) Form of Payment. In the Deferral Election Form, the Participant shall also elect whether to receive his benefits under the Plan in the form of a lump sum payment or in annual installments for a period not exceeding 20 years. Payments of benefits hereunder shall be made in the form elected by the Participant, provided that the Participant shall have made a written election with respect to the form of payment at least twelve months prior to the commencement of payments hereunder. In the event that the Participant has made more than one such election, the most recent election filed with the Plan Administrator, but no less than 12 months prior to the date payments are to commence, shall control. If the Participant fails to make a valid election with respect to the form of payment, payments hereunder shall be made in the form of a single lump sum payment. SECTION 6.2. Time and Manner of Payment. (a) Timing. A Participant's Benefit shall be paid (or commence to be paid) to the Participant no later than the 30th day after the date specified in the Participant's Deferral Election Form pursuant to Section 6.1. (b) Form. A Participant's Benefit shall be distributed to the Participant in the form(s) selected by the Participant in the Deferral Election Form pursuant to Section 6.1 with respect to such amounts. If installment payments are elected, the first installment shall be paid on the date specified in Section 6.2(a) and shall be made annually thereafter, with each installment being based on the number of shares of Company common stock held in the Account on the date immediately preceding the date such installment is to be paid. The installment shall be equal to such number multiplied by a fraction the numerator of which is one and the denominator of which is the total number of remaining installments to be paid, provided that the resulting number shall be rounded to the next higher whole number of shares, unless the final installment consists of a fraction, in which event it will be distributed in its cash equivalent determined by the Plan Administrator in good faith. The minimum installment payment shall be one share of Company common stock, except that the final payment shall be the remaining number, or fractions of shares of Company common stock held in the Account. (c) Small Accounts. Notwithstanding any provision of the Plan or a Participant's Deferral Election Form to the contrary, in the event that the 5 Account of a Participant does not exceed 100 shares of Company common stock at the time of the Participant's termination of employment with all members of the Controlled Group (regardless of whether the Participant has elected distribution at a later age), such Account shall automatically be paid to him in a single lump sum payment as soon as practicable following such termination of employment. SECTION 6.3. Liability for Payment/Expenses. The Company shall pay all Benefits and any administrative expenses hereunder to or on behalf of a Participant. ARTICLE VII. DEATH BENEFITS SECTION 7.1. Beneficiary Designations. A designation of a Beneficiary hereunder may be made only by an instrument (in form acceptable to the Plan Administrator) signed by the Participant and filed with the Plan Administrator prior to the Participant's death. In the absence of such a designation and at any other time when there is no existing Beneficiary designated hereunder, the Beneficiary of a Participant for his Benefits shall be the estate of the Participant. If two or more persons designated as a Participant's Beneficiary are in existence with respect to a single Benefit, the amount of any payment to the Beneficiary under this Plan shall be divided equally among such persons unless the Participant's designation specifically provides for a different allocation. Any change in Beneficiary shall be made by giving written notice thereof to the Plan Administrator and any change shall be effective only if received by the Plan Administrator prior to the death of the Participant. SECTION 7.2. Distribution to Beneficiaries. (a) Amount of Benefits. The Benefits payable to a Participant's Beneficiary under this Plan shall be equal to such Participant's Account balance (or, in the case of a Participant who is not fully vested, the appropriate fraction thereof), on the date of the distribution of the Account to the Beneficiary. (b) Time of Payment. The Benefits payable to a Beneficiary under this Plan shall be paid as soon as practicable following the death of the Participant. (c) Manner of Payment. All Benefits payable to a Beneficiary hereunder shall be paid in the form of a lump sum payment, unless the Participant has elected on the appropriate Deferral Election Form, prior to his death, that the Benefits shall be paid to the Beneficiary (i) in the form of annual installments for a period not exceeding 5 years or (ii) in the form currently being paid, if payments are in pay status at the time of the death, or (iii) in such other form as the Plan Administrator has made available on the Deferral Election Form from time to time. All payments shall be made in shares of Company common stock. 6 ARTICLE VIII. MISCELLANEOUS SECTION 8.1. Liability of Employers. Nothing in this Plan shall constitute the creation of a trust or other fiduciary relationship between an Employer and any Participant, Beneficiary or any other person. SECTION 8.2. Limitation on Rights of Participants and Beneficiaries - No Lien. The Plan is designed to be an unfunded, nonqualified plan. Nothing contained herein shall be deemed to create a trust or lien in favor of any Participant or Beneficiary on any assets of any Employer. The Employers shall have no obligation to purchase any assets that do not remain subject to the claims of the creditors of the Employers for use in connection with the Plan. No Participant or Beneficiary or any other person shall have any preferred claim on, or any beneficial ownership interest in, any assets of an Employer prior to the time that such assets are paid to the Participant or Beneficiary as provided herein. Each Participant and Beneficiary shall have the status of a general unsecured creditor of the Employers. SECTION 8.3. No Guarantee of Employment. Nothing in this Plan shall be construed as guaranteeing future employment to any Participant. A Participant who is an Employee continues to be an Employee of an Employer solely at the will of the Employer and is subject to discharge at any time, with or without cause. SECTION 8.4. Payment to Guardian. If a benefit payable hereunder is payable to a minor, to a person declared incompetent or to a person incapable of handling the disposition of his property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Plan Administrator may require such proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Employers from all liability with respect to such benefit. SECTION 8.5. Assignment. No right or interest under this Plan of any Participant or Beneficiary shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of the Participant or Beneficiary. SECTION 8.6. Severability. If any provision of this Plan or the application thereof to any circumstance(s) or person(s) is held to be invalid by a court of competent jurisdiction, the remainder of the Plan and the application of such provision to other circumstances or persons shall not be affected thereby. SECTION 8.7. Adoption by Other Employers. Any member of the Controlled Group may adopt this Plan with the consent of the Plan Administrator or the Chief Executive Officer of the Company by executing an instrument evidencing its adoption of this Plan on the order of its Board of Directors and filing a copy 7 thereof with the Company. Such adoption may be subject to such terms and conditions as the Committee requires or approves. SECTION 8.8. Tax Withholding. Any amount payable to a Participant or Beneficiary under this Plan shall be subject to reduction by amounts required to be withheld by the Company under any provision of law (including without limitation the provisions of federal, state, local and foreign tax laws). SECTION 8.9. Effect on other Benefits. Benefits payable to or with respect to a Participant under the 401 (k) Plan or any other Employer-sponsored (qualified or nonqualified) plan, if any, are in addition to those provided under this Plan. ARTICLE IX. ADMINISTRATION OF THE PLAN SECTION 9.1. Administration. (a) In general. The Plan shall be administered by the Plan Administrator. The Plan Administrator shall have sole and absolute discretion to interpret where necessary all provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan), to determine the rights and status under the Plan of Participants, or other persons, to resolve questions or disputes arising under the Plan and to make any determinations with respect to the Benefits payable under the Plan and the persons entitled thereto as may be necessary for the purposes of the Plan. Without limiting the generality of the foregoing, the Plan Administrator is hereby granted the authority (i) to determine whether a particular Employee is a Participant, and (ii) to determine if an Employee is entitled to Benefits hereunder and, if so, the amount and duration of such Benefits, and (iii) to make any other decisions required in connection with the ongoing administration of the Plan. The Plan Administrator's determination of the rights of any Employee or former Employee or Beneficiary hereunder shall be final and binding on all persons, subject only to the provisions of Sections 9.3 and 9.4 hereof. (b) Delegation of Duties. The Plan Administrator may delegate any of its administrative duties, including, without limitation, duties with respect to the processing, review, investigation, approval and payment of Benefits, to a named administrator or administrators. SECTION 9.2. Regulations. The Plan Administrator shall promulgate any rules and regulations he deems necessary in order to carry out the purposes of the Plan or to interpret the provisions of the Plan; provided, however, that no rule, regulation or interpretation shall be contrary to the provisions of the Plan. The rules, regulations and interpretations made by the Plan Administrator shall, subject to the provisions of Sections 9.3 and 9.4 hereof be final and binding on all persons. 8 SECTION 9.3. Claims Procedures. The Plan Administrator shall determine the rights of any Employee or former Employee or Beneficiary to any Benefits hereunder. Any person who believes that he has not received the Benefits to which he is entitled under the Plan may file a claim in writing with the Plan Administrator. The Plan Administrator shall, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant within the first 90 day period), either allow or deny the claim in writing. If a claimant does not receive written notice of the Plan Administrator's decision on his claim within the above-mentioned period, the claim shall be deemed to have been denied in full. A denial of a claim by the Plan Administrator, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include: (a) the specific reasons for the denial; (b) specific reference to pertinent Plan provisions on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claim review procedure. A claimant whose claim is denied (or his duly authorized representative) may within 60 days after receipt of denial of a claim file with the Plan Administrator a written request for a review of such claim. If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Plan Administrator on his claim. If such an appeal is so filed within such 60-day period, the Company (or its delegate) shall conduct a full and fair review of such claim. The Company shall mail or deliver to the claimant a written decision on the matter based on the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request for review (unless special circumstances require an extension of up to 60 additional days, in which case written notice of such extension shall be given to the claimant prior to the commencement of such extension). Such decision shall be written in a manner calculated to be understood by the claimant, shall state the specific reasons for the decision and the specific Plan provisions on which the decision was based and shall, to the extent permitted by law, be final and binding on all interested persons. If the decision on review is not furnished to the claimant within the above-mentioned time period, the claim shall be deemed to have been denied on review. SECTION 9.4. Revocability of Plan Administrator/Employer Action. Any action taken by the Plan Administrator or an Employer with respect to the rights or benefits under the Plan of any person shall be revocable by the Plan Administrator or the Employer as to payments not yet made to such person, and acceptance of any Benefits under the Plan constitutes acceptance of and agreement to the Plan Administrator's or the Employer's making any appropriate adjustments in future 9 payments to such person (or to recover from such person) for any excess payment or underpayment previously made to him. SECTION 9.5. Amendment. The Committee may at any time (without the consent of an Employer) amend any or all of the provisions of this Plan, except that (a) no such amendment may adversely affect any Participant's Benefit as of the date of such amendment and (b) no such amendment may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any amendment shall be in the form of a written instrument executed by an authorized officer of the Company on the order of the Committee. In addition, the Plan Administrator shall have the authority to adopt (i) amendments to the Plan in order to comply with the requirements of applicable laws and regulations, and (ii) any other amendments that are consistent with the overall compensation and benefit policies of the Company. Subject to the foregoing provisions of this Section, such amendment shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. SECTION 9.6. Termination. (a) The Committee, in its sole discretion, may terminate this Plan at any time and for any reason whatsoever, except that (i) no such termination may adversely affect any Participant's Benefit as of the date of such termination, except for the acceleration of distribution thereof, and (ii) no such termination may suspend the crediting of earnings on the balance of a Participant's Account, until the entire balance of such Account has been distributed, in either case, without the prior written consent of the affected Participant. Any such termination shall be expressed in the form of a written instrument executed by an authorized officer of the Company on the order of the Committee. Subject to the foregoing provisions of this Subsection, such termination shall become effective as of the date specified in such instrument or, if no such date is specified, on the date of its execution. Written notice of any termination shall be given to the Participants as soon as practicable after the instrument is executed. (b) Notwithstanding anything in the Plan to the contrary, in the event of a termination of the Plan, the Company, in its sole and absolute discretion, shall have the right to change the time and form of distribution of Participants' Benefits, including requiring that all amounts credited to Participants' Accounts hereunder be immediately distributed in the form of a lump sum payment. (c) Any Employer (other than the Company) that adopts the Plan may elect to withdraw from the Plan and such withdrawal shall constitute a termination of the Plan as to such Employer provided, however, that such terminating Employer shall continue to be an Employer for the purposes hereof as to 10 Participants or Beneficiaries to whom it owes obligations hereunder. Such withdrawal and termination shall be expressed in an instrument executed by the terminating Employer on authority of its Board of Directors (or the applicable Committee thereof) and filed with the Plan Administrator, and shall become effective as of the date designated in such instrument or, if no such date is specified, on the date of its execution. Notwithstanding any other provision of the Plan, if an Employer (other than the Company) ceases to be a member of the Controlled Group, the Plan shall automatically terminate with respect to such Employer and all vested amounts credited to the Accounts of Employees of such Employer shall be immediately payable in the form of a lump sum payment or any applicable form of payment pursuant to the Participant's election, which shall thereupon become effective, or transferred to appropriate accounts established under a successor plan by said Employer. Executed as of the Effective Date. CHOICEPOINT INC. By: /s/ J. Michael de Janes ----------------------------------- Title: General Counsel and Secretary ----------------------------------- 11 EX-10.20 7 g81483exv10w20.txt EX-10.20 FIRST AMENDMENT TO REVOLVING CREDIT AGR EXHIBIT 10.20 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT to the Credit Agreement referred to below (this "Agreement") dated as of December 30, 2002 is made and entered into by and among CHOICEPOINT INC., a Georgia corporation (the "Borrower"), the Material Subsidiaries of the Borrower signatories hereto, certain of the Lenders party to the Credit Agreement referred to below (the "Lenders"), SUNTRUST BANK, a Georgia banking corporation, as Administrative Agent (the "Administrative Agent"), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as Syndication Agent (the "Syndication Agent" and collectively with the Administrative Agent, the "Agents"). STATEMENT OF PURPOSE The Borrower, the Lenders and the Agents have entered into that certain Revolving Credit Agreement dated as of May 10, 2002 (as amended hereby and as further amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") pursuant to which the Lenders have extended certain credit facilities to the Borrower. The Borrower and certain of its Subsidiaries have requested that the Agents and the Required Lenders waive and amend certain provisions of the Credit Agreement and to consent to certain actions under the Credit Agreement, all as more particularly set forth herein. The Agents and the Required Lenders have agreed to do so, but only upon the terms and conditions set forth below in this Agreement. NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms used and not defined in this Agreement shall have the meanings assigned thereto in the Credit Agreement. SECTION 2. Amendments to the Credit Agreement. (a) Section 1.01 (Definitions) of the Credit Agreement is hereby amended by adding the following defined terms in correct alphabetical order: "2002 Corporate Changes" means the following transactions, all of which are contemplated to occur on or about December 31, 2002: (a) The contribution of all of the assets of Marketing Information and Technology, Inc. ("MITI"), a Massachusetts corporation, to Marketing Information and Technology Trust, a business trust created under the laws of Massachusetts ("MITI Trust"), and the subsequent dissolution of MITI; (b) The contribution of all of the assets of Direct Mail Credit Data, Inc. ("DMCD"), a Massachusetts corporation, to Direct Mail Credit Data Trust ("DMCD Trust"), a business trust created under the laws of Massachusetts, and the subsequent dissolution of DMCD; (c) The contribution of all of the assets of DMCD Trust to MITI Trust, and the subsequent dissolution of DMCD Trust; (d) The contribution of all of the assets of MITI Trust to CPPM Inc. ("CPPM"), a Georgia corporation, and the subsequent dissolution of MITI Trust; and (e) The merger of Optimum Graphics Printing, Inc. and Statewide Data Services Inc. into ChoicePoint Direct Inc., and the subsequent merger of ChoicePoint Direct Inc. into ChoicePoint Precision Marketing Inc. ("ChoicePoint Precision"), a Georgia corporation. "First Amendment Effective Date" means the date of effectiveness of the First Amendment to this Agreement dated as of December 30, 2002 by and among the Borrower, the Required Lenders and the Agents. (b) Section 5.13 (Subsidiaries) of the Credit Agreement is hereby amended by: (i) deleting the first and second sentences thereof in its entirety and substituting in their place the following: "Part A of Schedule 5.13, which speaks as of the First Amendment Effective Date and prior to giving effect to the 2002 Corporate Changes, and Part B of Schedule 5.13, which speaks after giving effect to the 2002 Corporate Changes, accurately describe (1) the complete name of each Subsidiary of Borrower, (2) the jurisdiction of incorporation or organization of each Subsidiary of Borrower, (3) the ownership of all issued and outstanding Capital Stock of each Subsidiary of Borrower and (4) whether such Subsidiary is a Material Subsidiary. Except as disclosed on Schedule 5.13, as of the First Amendment Effective Date, Borrower has no Subsidiaries and neither Borrower nor any Subsidiary is a joint venture partner or general partner in any partnership." (ii) replacing Schedule 5.13 to the Credit Agreement with Schedule 5.13 attached hereto. (c) Section 6.01 (Corporate Existence, Etc.) of the Credit Agreement is hereby amended by deleting such section in its entirety and substituting in its place the following: Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, (A) its corporate existence, except (i) for mergers, divestitures and consolidations permitted pursuant to Section 7.03, and (ii) that a Subsidiary that is not a Material Subsidiary may dissolve, so long as either it has no assets or transfers all of its assets to one or more other Consolidated Companies; and (B) 2 except where the failure to be so qualified would reasonably be expected to have a Materially Adverse Effect, its qualification to do business as a foreign corporation in all jurisdictions where it conducts business or other activities making such qualification necessary (d) Section 6.09 (Additional Credit Parties) of the Credit Agreement is hereby amended by deleting the cross-reference to Section 4.01(c), (v), (vi), (vii), (viii), (xi) and (xiv) in the last sentence thereof and replacing it with "Section 4.01(c)(iv), (v), (vi), (vii), (viii) and (xi)." (e) Section 7.03 (Mergers, Consolidations) of the Credit Agreement is hereby amended by deleting clause (a) in its entirety and substituting in its place the following: "(a) mergers or consolidations of (i) any Subsidiary with any other Subsidiary which is a Guarantor, (ii) any Subsidiary with Borrower and (iii) any Subsidiary other than a Material Subsidiary into any Consolidated Company;" (f) Section 7.04 (Asset Sales) of the Credit Agreement is hereby amended by deleting clause (a) in its entirety and substituting in its place the following: "(a) sales, leases, transfers or dispositions of assets of (i) any Consolidated Company to Borrower or any Guarantor and (ii) any Subsidiary other than a Material Subsidiary to any Consolidated Company. SECTION 3. Consent. Subject to the terms and conditions hereof and notwithstanding any provision of the Credit Agreement to the contrary, the Agents and the Required Lenders hereby consent to the 2002 Corporate Changes; provided that the Agents and the Required Lenders shall not be deemed to have consented to the release of any Guarantor from its obligations under the Guaranty Agreement. SECTION 4. Waiver. Subject to the terms and conditions hereof, the Agents and the Required Lenders hereby waive any Default or Event of Default arising under Section 8.03 of the Credit Agreement resulting solely from any violation by the Borrower of Section 6.01 in connection with the dissolution of BTi Inc. SECTION 5. Conditions to Effectiveness. This Agreement shall become effective on the date each of the following conditions has been satisfied: (a) Execution of Agreement. Receipt by the Agents of a fully executed original of this Agreement executed by the Borrower, the Guarantors, the Agents and the Required Lenders. (b) Certificate of Secretary. Receipt by the Agents of a certificate of the secretary or assistant secretary of ChoicePoint Precision certifying as to the incumbency and genuineness of the signature of each officer of ChoicePoint Precision executing the Credit Documents and certifying that attached thereto is a true, complete and correct copy of (i) the articles of incorporation of ChoicePoint Precision, certified as of a recent date by the Secretary of State of Georgia, (ii) the bylaws of ChoicePoint Precision as in effect on the First Amendment Effective 3 Date, (iii) resolutions duly adopted by the Board of Directors of ChoicePoint Precision authorizing the execution, delivery and performance of the Guaranty Agreement and the Contribution Agreement and the other Credit Documents to which it is a party, and (iv) a certificate of a recent date of the good standing of ChoicePoint Precision from the Secretary of State of Georgia. (c) Closing Certificate. Receipt of a duly executed certificate of the Borrower, in substantially the form of Exhibit E to the Credit Agreement and appropriately completed, certifying that, after giving effect to this Agreement, (i) the representations and warranties contained in Article V of the Credit Agreement are true and correct in all material respects as of the First Amendment Effective Date, (ii) the Borrower and the Guarantors are in compliance with all terms and provisions of the Credit Agreement and the other Credit Documents as of the First Amendment Effective Date, (iii) on the First Amendment Effective Date, no Default or Event of Default has occurred and is continuing, and (iv) as of the First Amendment Effective Date, there has been no materially adverse change in the financial condition of the Borrower and its Subsidiaries as of the reflected in the most recently delivered financial statements delivered to the Agents pursuant to Section 6.07 of the Credit Agreement. (d) Solvency Certificate. Receipt by the Agents of a duly executed solvency certificate of the Borrower and the Guarantors, in form and substance satisfactory to the Agents and the Lenders. (e) Contribution and Guaranty Agreement Supplements. Receipt by the Agents of a supplement to the Contribution Agreement and the Guaranty Agreement in the forms attached thereto, duly executed by ChoicePoint Precision. SECTION 6. Delivery Covenants. (a) Opinions of Counsel. On or before January 10, 2003, the Borrower shall deliver to the Agents opinions of Jones, Day, Reavis & Pogue and in-house general counsel to the Credit Parties, both in form and substance satisfactory to the Agents with respect to the addition of ChoicePoint Precision as a Guarantor. (b) 2002 Corporate Changes. Upon the request of the Agents, the Borrower shall deliver copies of all documentation (including articles of merger, certificates of dissolution, and any other documents necessary to consummate the 2002 Corporate Changes) relating to the 2002 Corporate Changes. SECTION 7. References to Credit Agreement. On and after the date this Agreement becomes effective, each and every reference in the Credit Documents to the Credit Agreement shall be deemed to refer to and to mean the Credit Agreement as amended by this Agreement. The Borrower and Material Subsidiaries confirm and agree that (a) except as expressly amended herein, the Credit Agreement remains in full force and effect in accordance with its terms, and (b) all other Credit Documents remain in full force and effect in accordance with their respective terms. 4 SECTION 8. Reaffirmation. Each Guarantor reaffirms its obligations under the Guaranty Agreement, the Contribution Agreement, and the other Credit Documents, consents to the execution and delivery of this Agreement by the Borrower, and agrees and acknowledges that its obligations under the Guaranty Agreement, the Contribution Agreement, and the other Credit Documents shall not be diminished in any way by the execution and delivery of this Agreement or by the consummation of any of the transactions contemplated herein. SECTION 9. Limited Amendment, Consent, and Waiver. Except as expressly amended hereby, the Credit Agreement and each other Credit Document shall continue to be, and shall remain, in full force and effect. This Agreement shall not be deemed (a) to be a waiver of, or consent to, or a modification or amendment of, any other term or condition of, or Default or Event of Default under, the Credit Agreement or any other Credit Document or (b) to prejudice any other right or remedies to which the Agents or the Lenders may now have or may have in the future under or in connection with the Credit Agreement or the Credit Documents or any of the instruments or agreements referred to therein, as the same may be amended, restated or otherwise modified from time to time. This document is part of the Credit Agreement and constitutes a Credit Document thereunder. SECTION 10. Expenses. The Borrower shall pay all reasonable out-of-pocket expenses of the Agents in connection with the preparation, execution and delivery of this Agreement, including without limitation the reasonable fees and disbursements of counsel for the Agents. SECTION 11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, without reference to the conflicts or choice of law principles thereof. SECTION 12. Counterparts. This Agreement may be executed in separate counterparts, each of which when executed and delivered is an original but all of which taken together constitute one and the same instrument. SECTION 13. Fax Transmission. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto, and an executed copy of this Agreement may be delivered by one or more parties hereto by facsimile or similar instantaneous electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof. [Signature Pages Follow] 5 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, all as of the day and year first written above. BORROWER AND GUARANTORS: CHOICEPOINT INC., as Borrower By: /s/ David E. Trine Name: David E. Trine Title: Treasurer CHOICEPOINT SERVICES INC., as Guarantor By: /s/ David E. Trine Name: David E. Trine Title: Treasurer CHOICEPOINT DIRECT INC., as Guarantor By: /s/ David E. Trine Name: David E. Trine Title: Treasurer NATIONAL SAFETY ALLIANCE, INCORPORATED, as Guarantor By: /s/ David E. Trine Name: David E. Trine Title: Treasurer CHOICEPOINT PUBLIC RECORDS INC., as Guarantor By: /s/ David E. Trine Name: David E. Trine Title: Treasurer [Signature Pages Continue] AGENTS AND LENDERS: SUNTRUST BANK, as Administrative Agent and Lender By: /s/ Daniel S. Komitor Name: Daniel S. Komitor Title: Director WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndication Agent and Lender By: /s/ William R. Goley Name: William R. Goley Title: Director BNP PARIBAS, as Lender By: /s/ John Stacy Name: John Stacy Title: Managing Director BNP PARIBAS, as Lender By: /s/ Craig Pierce Name: Craig Pierce Title: Associate U.S. BANK NATIONAL ASSOCIATION, as Lender By: /s/ Eric Hartman Name: Eric Hartman Title: Vice President CREDIT SUISSE FIRST BOSTON, as Lender By: Not Required Name: Title: [Signature Pages Continue] JP MORGAN CHASE BANK, as Lender By: /s/ H. David Jones Name: H. David Jones Title: Vice President FLEET NATIONAL BANK, as Lender By: /s/ John B. Desmond Name: John B. Desmond Title: Director EX-10.24 8 g81483exv10w24.txt EX-10.24 THIRD AMENDMENT TO MASTER AGREEMENT EXHIBIT 10.24 THIRD AMENDMENT TO MASTER AGREEMENT This Third Amendment To Master Agreement (this "Amendment") dated as of December 20, 2002, by and among CHOICEPOINT INC., a Georgia corporation, as Lessee and Guarantor, SUNTRUST BANKS, INC., a Georgia corporation, as Lessor, and SUNTRUST BANK (formerly known as SunTrust Bank, Atlanta), a Georgia state banking corporation, as Agent. W I T N E S S E T H : WHEREAS, the Lessee, the Lessor and the Agent have entered into that certain Master Agreement, dated as of July 31, 19 97, as amended by Amendment to Master Agreement dated as of September 30, 1998 and Second Amendment to Master Agreement dated as of December 30, 1999 (as so amended, the "Master Agreement") (capitalized terms used herein without definition shall have the meanings ascribed to them in Appendix A to the Master Agreement); and WHEREAS, the Lessee and certain of its affiliates has entered into a $100,000,000 asset securitization program and the original revolving credit agreement of the Lessee has been replaced by a Revolving Credit Agreement dated as of May 10, 2002 among the Lessee, as Borrower, the Lenders party thereto from time to time, SunTrust Bank, as Administrative Agent, Wachovia Bank, National Association, as Syndication Agent, and U.S. Bank National Association and BNP Paribas, as Documentation Agents, and the Lessee has requested that certain changes be made to the financial and certain other covenants in the Master Agreement and related definitions in Appendix A to the Master Agreement in order that they would reflect the existence of such asset securitization and that such covenants be substantially the same as in such replacement Revolving Credit Agreement, and the Lenders are willing to so agree, subject to the terms and conditions hereof; NOW, THEREFORE, for and in consideration of the foregoing premises, the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged, the parties hereby agree that the Master Agreement is hereby amended as follows: Section 1. Modifications to Master Agreement. The parties hereto amend the Master Agreement as follows: 1.1 Section 4.1(w) (Environmental Matters) of the Master Agreement is hereby amended by deleting the text thereof and substituting therefor the following: (a) The Consolidated Companies have received no notices of claims or potential liability under, and are in compliance with, all applicable Environmental Laws, where such claims and liabilities under, and failures to comply with, such statutes, regulations, rules, ordinances, laws or licenses, would reasonably be expected to result in penalties, fines, claims or other liabilities to the Consolidated Companies having a Material Adverse Effect. (b) None of the Consolidated Companies has received any notice of violation or notice of any action, either judicial or administrative, from any governmental authority (whether United States or foreign) relating to the actual or alleged violation of any Environmental Law, including, without limitation, any notice of any actual or alleged spill, leak, or other release of any Hazardous Material by any Consolidated Company or its employees or agents, or as to the existence of any contamination on any properties owned by any Consolidated Company, where any such violation, spill, leak, release or contamination would reasonably be expected to result in penalties, fines, claims or other liabilities to the Consolidated Companies having a Material Adverse Effect. (c) The Consolidated Companies have obtained all necessary governmental permits, licenses and approvals which are material to the operations conducted on their respective properties, including without limitation, all required material permits, licenses and approvals for (A) the emission of air pollutants or contaminants, (B) the treatment or pretreatment and discharge of waste water or storm water, (C) the treatment, storage, disposal or generation of hazardous wastes, (D) the withdrawal and usage of ground water or surface water, and (E) the disposal of solid wastes. 1.2 Section 5.1(h) (Financial Covenants) of the Master Agreement is hereby amended by replacing such Section in its entirety with the following: (h) Financial Covenants. (i) Fixed Charge Coverage Ratio. Maintain as of the last day of each fiscal quarter, a Fixed Charge Coverage Ratio, calculated for the fiscal quarter then ended and the immediately preceding three fiscal quarters, equal to or greater than 2.5 to 1.0. (ii) Funded Debt to Consolidated EBITDA. Maintain as of the last day of each fiscal quarter, a maximum ratio of Funded Debt to Consolidated EBITDA, calculated for the fiscal quarter then ended and the immediately preceding three fiscal quarters, of less than or equal to 3.0 to 1.0. 1.3 Section 5.2(a)(xi) (Liens) of the Master Agreement is hereby amended by deleting the phrase "fifteen percent (15%)" where it appears therein, and substituting therefor the phrase "ten percent (10%)". 1.4 Section 5.2(c) (Mergers, Consolidations) of the Master Agreement is hereby amended by replacing such Section in its entirety with the following: (a) Mergers, Consolidations. Merge or consolidate with any other Person, except that the foregoing restrictions shall not be applicable to: (i) mergers or consolidations of (x) any Subsidiary with any other Subsidiary or (y) any Subsidiary with the Lessee; or (ii) mergers or consolidations in which any Person engaged in businesses in which the Lessee is engaged as of the Closing Date or substantially 2 related thereto merges or consolidates with the Lessee or any of its Subsidiaries where the surviving corporation is the Lessee or such Subsidiary; or (iii) the merger of ChoicePoint Capital Corporation into ChoicePoint Capital, Inc.; provided that before and after giving effect to any such merger or consolidations and any Funded Debt incurred by the Lessee or such Subsidiary in connection with such merger or consolidation, (x) the Lessee is and will be in compliance with Section 5.1(h) hereof and if the consideration paid by the Lessee or such Subsidiary in connection with such merger or consolidation is greater than $100,000,000, the Lessee has delivered pro forma financial covenants calculations demonstrating such compliance, in such detail and using such form of presentation of historical and forecasted financial information as may be satisfactory to the Agent with copies provided to each Funding Party (based on the projected Fixed Charges or Funded Debt, as the case may be, for the immediately succeeding four fiscal quarters (including Fixed Charges incurred as a result of the incurrence of any such Funded Debt) and the historical Consolidated EBIT (including the Consolidated EBIT of such Person)); and (y) no other Default exists hereunder; 1.5 Section 5.2(e) (Investments, Loans, Etc.) of the Master Agreement is hereby amended by replacing Section 5.2(e)(i) and (ii) in its entirety with the following: (i) Investments in the stock of Subsidiaries of the Lessee and Receivables Subsidiaries existing as of the Third Amendment Date or existing as Subsidiaries of the Lessee immediately prior to the making of such Investment, and Investments in the form of loans and advances by the Lessee to any Subsidiary; (ii) Investments in the stock or other assets of any other Person that is engaged in a business permitted by Section 5.2(j) hereof; provided, that after giving effect to such Investment and any Funded Debt incurred by the Lessee or such Subsidiary in connection with making such Investment, (x) the Lessee is and will be in compliance with Section 5.1(h) hereof and if the Investment is greater than $100,000,000, the Lessee has delivered pro forma financial covenants calculations demonstrating such compliance, in such detail and using such form of presentation of historical and forecasted financial information as may be satisfactory to the Agent; (y) no other Default exists hereunder (based on the projected Fixed Charges or Funded Debt, as the case may be, for the immediately succeeding four fiscal quarters (including Fixed Charges incurred a result of the incurrence of any such Funded Debt) and the historical Consolidated EBIT (including the Consolidated EBIT of such Person)); and (z) as a result of such Investment, such Person becomes a Subsidiary of the Lessee. 1.6 Section 5.2 (Negative Covenants) of the Master Agreement is hereby amended by adding the following new paragraphs at the end thereof; 3 (m) Sale and Leaseback Transactions. Sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which any Consolidated Company intends to use for substantially the same purpose as the property being sold or transferred. (n) Actions under Certain Documents. Without the prior written consent of the Agent and the Required Funding Parties, modify, amend or supplement the Asset Securitization Agreements to (i) increase the program limit amount in excess of $175,000,000, (ii) modify any requirement of prepayment or repayment thereunder which would shorten the final maturity or average life of the Indebtedness outstanding thereunder or make the requirement of prepayment more onerous, or (iii) make any covenant or event of default contained therein more restrictive as to the Lessee and its Subsidiaries than the provisions of this Master Agreement. (o) Amendments; Payments and Prepayments of Subordinated Debt. Amend or modify (or permit the modification or amendment of) any of the terms or provisions of any subordinated debt of the Lessee or any of its Material Subsidiaries, or cancel or forgive, make any voluntary or optional payment or prepayment on, or redeem or acquire for value (including, without limitation, by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due) any subordinated debt of the Lessee or any of its Material Subsidiaries. 1.7 Appendix A to the Master Agreement is hereby amended by adding the following definitions of "Third Amendment Date" and "Receivables Subsidiaries" in the appropriate alphabetical order: "BOND OBLIGATIONS" means all obligations of the Consolidated Companies arising under or pursuant to that certain Lease Agreement (the "Equipment Lease") dated as of December 1, 2001, by and between Development Authority of Fulton County, as lessor of certain equipment described therein (the "Development Authority"), and the Lessee, as lessee of such equipment, and all other instruments, documents, and agreements relating to such lease or that certain $30,000,000 Development Authority of Fulton County Taxable Industrial Development Revenue Bond (ChoicePoint Inc. Project), Equipment Series (the "Bond"), including, without limitation, that certain Bond Guaranty Agreement dated as of December 31, 2001, issued by the Lessee, in its capacity as guarantor (in such capacity, the "Bond Guarantor") in favor of the Lessee, in its capacity as purchaser of the Bond (the "Bond Purchaser") pursuant to which the Bond Guarantor unconditionally guaranteed payment and performance of the debt service on the Bond for the benefit of the Bond Purchaser (the Bond Purchaser having financed the acquisition by the Development Authority of the equipment which was leased to the Lessee), and, since the Lessee is the lessee, the Bond Purchaser and the Bond Guarantor, the Bond Obligations are not required to be classified as a liability of the Lessee in accordance with GAAP. "ASSET SECURITIZATION" means the $100,000,000 asset securitization program entered into by the Receivable Subsidiaries and Three Pillars Funding Corporation. "ASSET SECURITIZATION AGREEMENTS" means those documents which govern the Asset Securitization. 4 "THIRD AMENDMENT DATE" means December 20, 2002. "RECEIVABLES SUBSIDIARIES" means, collectively, ChoicePoint Capital, Inc., a Delaware corporation and ChoicePoint Financial, Inc., a Delaware corporation. 1.8 Appendix A to the Master Agreement is further hereby amended by replacing the definitions of "Consolidated Companies", "Consolidated Fixed Charges", "Consolidated Interest Expense", "Consolidated Net Income (Loss)", "Consolidated Rental Expense", "Funded Debt", "Indebtedness", "Lease Documents", "Lease Obligations", "Material Subsidiary", and "Subsidiary" in their entirety with the following: "CONSOLIDATED COMPANIES" means, collectively, the Lessee and all of its Subsidiaries other than the Receivables Subsidiaries. "CONSOLIDATED FIXED CHARGES" means, for any fiscal period of the Lessee, the sum of (A) Consolidated Interest Expense, plus (B) Consolidated Rental Expense, plus (C) dividends and distributions on Capital Stock paid in cash during such fiscal period by the Lessee, any other Consolidated Company or any Receivables Subsidiary. "CONSOLIDATED INTEREST EXPENSE" means, for any fiscal period of the Lessee, total interest expense of the Consolidated Companies and the Receivables Subsidiaries (including without limitation, interest expense attributable to capitalized leases in accordance with GAAP, all commissions, discounts and other fees and charges owed with respect to bankers acceptance financing, and total interest expense (whether shown as interest expense or as loss and expenses on sale of receivables) under a receivables purchase facility) determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NET INCOME (LOSS)" means, for any fiscal period of the Lessee, the net income (or loss) of the Consolidated Companies and the Receivables Subsidiaries for such period (taken as a single accounting period), but excluding therefrom (to the extent otherwise included therein) the income of any Consolidated Company or any Receivables Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Consolidated Company or Receivables Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation. "CONSOLIDATED RENTAL EXPENSE" means, for any fiscal period of the Lessee, the operating lease expense of the Consolidated Companies and the Receivables Subsidiaries determined in accordance with GAAP for leases with an initial term greater than one year, as disclosed in the notes to the Lessee's consolidated financial statements of the Consolidated Companies or as disclosed in the Notes to any Receivables Subsidiary's financial statements, determined on a consolidated basis in accordance with GAAP. "CREDIT AGREEMENT" means the Revolving Credit Agreement, dated as of May 10, 2002 among the Lessee, as Borrower, the Lenders party thereto from time to time, SunTrust Bank, as Administrative Agent, Wachovia Bank, National Association, as Syndication Agent, and U.S. Bank National Association and BNP Paribas, as Documentation Agents. 5 "FUNDED DEBT" means all Indebtedness for money borrowed, Indebtedness evidenced or secured by purchase money Liens, capitalized leases, outstandings under asset securitization vehicles, conditional sales contracts and similar title retention debt instruments, including any current maturities of the foregoing, which by its terms matures less than one year from the date of any calculation thereof or which is renewable or extendable at the option of the obligor to a date beyond one year from such date. The calculation of Funded Debt shall include (i) all Funded Debt of the Consolidated Companies and the Receivables Subsidiaries, plus (ii) all Funded Debt of other Persons to the extent guaranteed by a Consolidated Company or a Receivables Subsidiary, to the extent supported by a letter of credit issued for the account of a Consolidated Company or a Receivables Subsidiary, or as to which and to the extent which a Consolidated Company or a Receivables Subsidiary or their respective assets otherwise have become liable for payment thereof, plus (iii) the redemption amount with respect to the stock of the Lessee required to be redeemed during the next succeeding twelve months at the option of the holder or its Subsidiaries. Notwithstanding the foregoing, "Funded Debt" shall exclude (x) the Lease Obligations in an amount not to exceed $77,000,000 (but Lease Obligations in excess of $77,000,000 shall be included in "Funded Debt"), and (y) all operating lease obligations. "INDEBTEDNESS" of any Person means, without duplication (i) all obligations of such Person which in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (ii) all rental obligations under leases required to be capitalized under GAAP; (iii) all Guaranties of such Person; (iv) all obligations, contingent or otherwise, of such Person relative to the face amount of letters of credit, whether or not drawn, including, without limitation (but without duplication), any Reimbursement Obligations (as defined in the Credit Agreement), and banker's acceptances issued for the account of such Person; (v) Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; (vi) obligations or other liabilities under currency contracts, interest rate hedging contracts, or similar agreements or combinations thereof to the extent required to be disclosed in such Person's financial statements in accordance with GAAP and (vii) the Lease Obligations. Notwithstanding the foregoing, "Indebtedness" shall exclude the Bond Obligations to the extent not required to be classified as a liability in accordance with GAAP. "LEASE DOCUMENTS" means, collectively, (i) the Operative Documents, (ii) that certain Lease Agreement, dated as of August 29, 2001, by and between the Lessee and certain of its Subsidiaries, as lessees, and Atlantic Financial Group, Ltd., as lessor, pursuant to which the Lessee has leased certain real property located at 1050 Alderman Drive, Alpharetta, GA 30005, (iii) that certain Master Agreement, dated as of August 29, 2001, by and among the Lessee and certain of its Subsidiaries, as lessees, the Lessee, as guarantor, Atlantic Financial Group, Ltd., as lessor, and SunTrust Bank, as Agent, (iv) a contemplated transaction by and among Development Authority of Fulton County, the Lessee, and Atlantic Financial Group, Ltd., wherein, in connection with a contemplated Development Authority of Fulton County Taxable Industrial Development Revenue Bond (ChoicePoint Inc. Project), Building Series, which bond is currently contemplated to be in a principal amount of approximately $52,200,000, the property subject to the Master Agreement and the Lease Agreement described in clauses (ii) and (iii) will be transferred by Atlantic Financial Group, Ltd. to Development Authority of Fulton County, leased back by Atlantic Financial Group, Ltd. and subleased by the Lessee from Atlantic 6 Financial Group, Ltd., still subject to such Master Agreement and the terms contained in such Lease Agreement and (v) all other documents, instruments and agreements executed in connection therewith (as the same may be amended, restated, supplemented or otherwise modified from time to time as permitted by this Agreement). "LEASE OBLIGATIONS" means the obligations of the Lessee under the Lease Documents in an aggregate amount not to exceed $77,000,000, as such amount may be increased with the consent of the Funding Parties and in accordance with Section 7.12 of the Credit Agreement. "MATERIAL SUBSIDIARY" means each Subsidiary of the Lessee (other than the Receivables Subsidiaries), now existing or hereafter established or acquired, that at any time prior to the Lease Termination Date (i) has or acquires assets which constitute fifteen percent (15%) or more of the Total Assets or (ii) accounts for or produces fifteen percent (15%) or more of Consolidated EBITDA during the most recently completed fiscal year of the Lessee. "SUBSIDIARY" means, with respect to any Person, any corporation or other entity (including, without limitation, partnerships, joint ventures, and associations) regardless of its jurisdiction of organization or formation, at least a majority of the total combined voting power of all classes of voting stock or other ownership interests of which shall, at the time as of which any determination is being made, be owned by such Person, either directly or indirectly through one or more other Subsidiaries; provided, that the Receivables Subsidiaries shall not be deemed to be Subsidiaries hereunder. 1.9 Exhibit E (Compliance Certificate) to the Master Agreement is hereby deleted and Exhibit E attached hereto is substituted therefor. Section 2. Representations and Warranties. The Lessee represents and warrants to each of the other parties hereto that each of the representations and warranties of the Lessee contained in the Master Agreement and in each other Operative Document is true and correct in all material respects on the Effective Date, with the same effect as though made on and as of the Effective Date and, for purposes of this Section, all references in such representations and warranties to the "Operative Documents" shall be deemed to include this Amendment (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date). Section 3. Effectiveness. Subject to the execution and delivery of this Amendment by all parties hereto, this Amendment shall be deemed effective on the date set forth in the preamble to this Amendment (the "Effective Date"). Section 4. GOVERNING LAW. THIS AMENDMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Section 5. References. All references to the words "Master Agreement" shall hereinafter refer to the Master Agreement as amended by this Amendment. 7 Section 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto on separate counterparts, each executed counterpart constituting an original but all together one agreement. (signatures on following page) 8 IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Master Agreement to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. CHOICEPOINT INC., as Lessee and Guarantor By: /s/ David E. Trine ------------------------- Name Printed: David E. Trine Title: Treasurer Attest: /s/ Mary M. Young --------------------------------- Name Printed: Mary M. Young Title: Assistant Corporate Secretary [CORPORATE SEAL] 9 SUNTRUST BANKS, INC., as Lessor By: /s/ Daniel S. Komitor ---------------------------- Name Printed: Daniel S. Komitor Title: Director SUNTRUST BANK, as Agent By: /s/ Daniel S. Komitor ---------------------------- Name Printed: Daniel S. Komitor Title: Director 10 EX-10.32 9 g81483exv10w32.txt EX-10.32 FIRST AMENDMENT TO MASTER AGREEMENT EXHIBIT 10.32 FIRST AMENDMENT TO MASTER AGREEMENT This First Amendment To Master Agreement (this "Amendment") dated as of December 20, 2002, by and among CHOICEPOINT INC., a Georgia corporation, as Lessee and Guarantor, ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership, as Lessor, and SUNTRUST BANK, a Georgia state banking corporation, as Agent, and SUNTRUST BANK, FLEET NATIONAL BANK and BNP PARIBAS, as Lenders. W I T N E S S E T H : WHEREAS, ChoicePoint, the Lessor, the Agent and the Lenders have entered into that certain Master Agreement, dated as of August 29, 2001 (the "Master Agreement") (capitalized terms used herein without definition shall have the meanings ascribed to them in Appendix A to the Master Agreement); and WHEREAS, the initial Credit Agreement has been replaced by a Revolving Credit Agreement dated as of May 10, 2002 among ChoicePoint, as Borrower, the Lenders party thereto from time to time, SunTrust Bank, as Administrative Agent, Wachovia Bank, National Association, as Syndication Agent, and U.S. Bank National Association and BNP Paribas, as Documentation Agents, and ChoicePoint has requested that certain changes be made to the financial covenants in the Master Agreement and related definitions in Appendix A to the Master Agreement in order that they would be substantially the same as in such replacement Credit Agreement, and the Lessor, the Agent and the Lenders are willing to so agree, subject to the terms and conditions hereof; and WHEREAS, the Lessee, the Lessor and the Lenders also wish to amend the Master Agreement to reflect an increase in the Lessor's Invested Amounts; NOW, THEREFORE, for and in consideration of the foregoing premises, the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged, the parties hereby agree that the Master Agreement is hereby amended as follows: Section 1. Modifications to Master Agreement. The parties hereto amend the Master Agreement as follows: 1.1 Section 4.1(w) (Environmental Matters) of the Master Agreement is hereby amended by deleting the text thereof and substituting therefor the following: (i) The Consolidated Companies have received no notices of claims or potential liability under, and are in compliance with, all applicable Environmental Laws, where such claims and liabilities under, and failures to comply with, such statutes, regulations, rules, ordinances, laws or licenses, would reasonably be expected to result in penalties, fines, claims or other liabilities to the Consolidated Companies having a Material Adverse Effect. (ii) None of the Consolidated Companies has received any notice of violation or notice of any action, either judicial or administrative, from any governmental authority (whether United States or foreign) relating to the actual or alleged violation of any Environmental Law, including, without limitation, any notice of any actual or alleged spill, leak, or other release of any Hazardous Material by any Consolidated Company or its employees or agents, or as to the existence of any contamination on any properties owned by any Consolidated Company, where any such violation, spill, leak, release or contamination would reasonably be expected to result in penalties, fines, claims or other liabilities to the Consolidated Companies having a Material Adverse Effect. (iii) The Consolidated Companies have obtained all necessary governmental permits, licenses and approvals which are material to the operations conducted on their respective properties, including without limitation, all required material permits, licenses and approvals for (A) the emission of air pollutants or contaminants, (B) the treatment or pretreatment and discharge of waste water or storm water, (C) the treatment, storage, disposal or generation of hazardous wastes, (D) the withdrawal and usage of ground water or surface water, and (E) the disposal of solid wastes. 1.2 Section 5.1(g)(iii) (No Default/Compliance Certificate) of the Master Agreement is hereby amended by deleting the reference to "Exhibit E" in the fourth line thereof and substituting therefor a reference to "Exhibit J". 1.3 Section 5.1(h)(ii) (Funded Debt to Consolidated EBITDA) of the Master Agreement is hereby amended by replacing such Section in its entirety with the following: (ii) Funded Debt to Consolidated EBITDA. Maintain as of the last day of each fiscal quarter, a maximum ratio of Funded Debt to Consolidated EBITDA, calculated for the fiscal quarter then ended and the immediately preceding three fiscal quarters, of less than or equal to 3.0 to 1.0. 1.4 Section 5.2(a)(xi) (Liens) of the Master Agreement is hereby amended by deleting the phrase "fifteen percent (15%)" where it appears therein, and substituting therefor the phrase "ten percent (10%)". 1.5 Section 5.2(c) (Mergers, Consolidations) of the Master Agreement is hereby amended by replacing such Section in its entirety with the following: (C) MERGERS, CONSOLIDATIONS. Merge or consolidate with any other Person, except that the foregoing restrictions shall not be applicable to: (a) mergers or consolidations of (x) any Subsidiary with any other Subsidiary or (y) any Subsidiary with ChoicePoint; or (b) mergers or consolidations in which any Person engaged in businesses in which ChoicePoint is engaged as of the Closing Date or substantially related thereto merges or consolidates with ChoicePoint or any of its 2 Subsidiaries where the surviving corporation is ChoicePoint or such Subsidiary; or (c) the merger of ChoicePoint Capital Corporation into ChoicePoint Capital, Inc.; provided that before and after giving effect to any such merger or consolidations and any Funded Debt incurred by ChoicePoint or such Subsidiary in connection with such merger or consolidation, (x) ChoicePoint is and will be in compliance with Section 5.1(h) hereof and if the consideration paid by ChoicePoint or such Subsidiary in connection with such merger or consolidation is greater than $100,000,000, ChoicePoint has delivered pro forma financial covenants calculations demonstrating such compliance, in such detail and using such form of presentation of historical and forecasted financial information as may be satisfactory to the Agent with copies provided to each Funding Party (based on the projected Fixed Charges or Funded Debt, as the case may be, for the immediately succeeding four fiscal quarters (including Fixed Charges incurred as a result of the incurrence of any such Funded Debt) and the historical Consolidated EBIT (including the Consolidated EBIT of such Person)); and (y) no other Default exists; 1.6 Section 5.2(e) (Investments, Loans, Etc.) of the Master Agreement is hereby amended by replacing Section 5.2(e)(i) and (ii) in its entirety with the following: (i) Investments in the stock of Subsidiaries of ChoicePoint and Receivables Subsidiaries existing as of the First Amendment Date or existing as Subsidiaries of ChoicePoint immediately prior to the making of such Investment, and Investments in the form of loans and advances by ChoicePoint to any Subsidiary; (ii) Investments in the stock or other assets of any other Person that is engaged in a business permitted by Section 5.2(j) hereof; provided, that after giving effect to such Investment and any Funded Debt incurred by ChoicePoint or such Subsidiary in connection with making such Investment, (x) ChoicePoint is and will be in compliance with Section 5.1(h) hereof and if the Investment is greater than $100,000,000, ChoicePoint has delivered pro forma financial covenants calculations demonstrating such compliance, in such detail and using such form of presentation of historical and forecasted financial information as may be satisfactory to the Agent; (y) no other Default exists (based on the projected Fixed Charges or Funded Debt, as the case may be, for the immediately succeeding four fiscal quarters (including Fixed Charges incurred a result of the incurrence of any such Funded Debt) and the historical Consolidated EBIT (including the Consolidated EBIT of such Person)); and (z) as a result of such Investment, such Person becomes a Subsidiary of ChoicePoint. 3 1.7 Section 5.2 (Negative Covenants) of the Master Agreement is hereby amended by adding the following new paragraphs at the end thereof; (m) Sale and Leaseback Transactions. Sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which any Consolidated Company intends to use for substantially the same purpose as the property being sold or transferred. (n) Actions under Certain Documents. Without the prior written consent of the Agent and the Required Funding Parties, modify, amend or supplement the Asset Securitization Agreements to (i) increase the program limit amount in excess of $175,000,000, (ii) modify any requirement of prepayment or repayment thereunder which would shorten the final maturity or average life of the Indebtedness outstanding thereunder or make the requirement of prepayment more onerous, or (iii) make any covenant or event of default contained therein more restrictive as to ChoicePoint and its Subsidiaries than the provisions of this Master Agreement. (o) Amendments; Payments and Prepayments of Subordinated Debt. Amend or modify (or permit the modification or amendment of) any of the terms or provisions of any subordinated debt of ChoicePoint or any of its Material Subsidiaries, or cancel or forgive, make any voluntary or optional payment or prepayment on, or redeem or acquire for value (including, without limitation, by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due) any subordinated debt of ChoicePoint or any of its Material Subsidiaries. 1.8 Appendix A to the Master Agreement is hereby amended by adding the following definitions of "Bond Obligations", "First Amendment Date", "Lease Documents" and Lease Obligations" in the appropriate alphabetical order: "BOND OBLIGATIONS" means all obligations of the Consolidated Companies arising under or pursuant to that certain Lease Agreement (the "Equipment Lease") dated as of December 1, 2001, by and between Development Authority of Fulton County, as lessor of certain equipment described therein (the "Development Authority"), and ChoicePoint, as lessee of such equipment, and all other instruments, documents, and agreements relating to such lease or that certain $30,000,000 Development Authority of Fulton County Taxable Industrial Development Revenue Bond (ChoicePoint Inc. Project), Equipment Series (the "Bond"), including, without limitation, that certain Bond Guaranty Agreement dated as of December 31, 2001, issued by ChoicePoint, in its capacity as guarantor (in such capacity, the "Bond Guarantor") in favor of ChoicePoint, in its capacity as purchaser of the Bond (the "Bond Purchaser") pursuant to which the Bond Guarantor unconditionally guaranteed payment and performance of the debt service on the Bond for the benefit of the Bond Purchaser (the Bond Purchaser having financed the acquisition by the Development Authority of the equipment which was leased to ChoicePoint), and, since ChoicePoint is the lessee, the Bond Purchaser and the Bond Guarantor, the Bond Obligations are not required to be classified as a liability of ChoicePoint in accordance with GAAP. 4 "FIRST AMENDMENT DATE" shall mean December 20, 2002. "LEASE DOCUMENTS" shall mean, collectively, (i) the Operative Documents, (ii) the Existing Lease and the "Operative Documents" as defined therein, (iii) a contemplated transaction by and among Development Authority of Fulton County, ChoicePoint, and Lessor, wherein, in connection with a contemplated Development Authority of Fulton County Taxable Industrial Development Revenue Bond (ChoicePoint Inc. Project), Building Series, which bond is currently contemplated to be in a principal amount of approximately $52,200,000, the Leased Property located in Alpharetta, Georgia will be transferred by Lessor to the Development Authority of Fulton County, leased back by Lessor and subleased by ChoicePoint from Lessor pursuant to the Lease and (iv) all other documents, instruments and agreements executed in connection therewith. "LEASE OBLIGATIONS" shall mean the obligations of ChoicePoint under the Lease Documents in an aggregate amount not to exceed $77,000,000, as such amount may be increased with the consent of the Funding Parties and in accordance with Section 7.12 of the Credit Agreement. 1.9 Appendix A to the Master Agreement is further hereby amended by replacing the definitions of "Asset Securitization", "Credit Agreement," "Funded Debt" and "Indebtedness" in their entirety with the following: "ASSET SECURITIZATION" means the asset securitization program entered into by the Receivable Subsidiaries and Three Pillars Funding Corporation. "CREDIT AGREEMENT" means the Revolving Credit Agreement, dated as of May 10, 2002 among ChoicePoint, as Borrower, the Lenders party thereto from time to time, SunTrust Bank, as Administrative Agent, Wachovia Bank, National Association, as Syndication Agent, and U.S. Bank National Association and BNP Paribas, as Documentation Agents. "FUNDED DEBT" means all Indebtedness for money borrowed, Indebtedness evidenced or secured by purchase money Liens, capitalized leases, outstandings under asset securitization vehicles, conditional sales contracts and similar title retention debt instruments, including any current maturities of the foregoing, which by its terms matures less than one year from the date of any calculation thereof or which is renewable or extendable at the option of the obligor to a date beyond one year from such date. The calculation of Funded Debt shall include (i) all Funded Debt of the Consolidated Companies and the Receivables Subsidiaries, plus (ii) all Funded Debt of other Persons to the extent guaranteed by a Consolidated Company or a Receivables Subsidiary, to the extent supported by a letter of credit issued for the account of a Consolidated Company or a Receivables Subsidiary, or as to which and to the extent to which a Consolidated Company or a Receivables Subsidiary or their respective assets otherwise have become liable for payment thereof, plus (iii) the redemption 5 amount with respect to the stock of ChoicePoint required to be redeemed during the next succeeding twelve months at the option of the holder or its Subsidiaries. Notwithstanding the foregoing, "Funded Debt" shall exclude (x) the Lease Obligations in an amount not to exceed $77,000,000 (but Lease Obligations in excess of $77,000,000 shall be included in "Funded Debt"), and (y) all operating lease obligations. "INDEBTEDNESS" of any Person means, without duplication (i) all obligations of such Person which in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (ii) all rental obligations under leases required to be capitalized under GAAP; (iii) all Guaranties of such Person; (iv) all obligations, contingent or otherwise, of such Person relative to the face amount of letters of credit, whether or not drawn, including, without limitation (but without duplication), any Reimbursement Obligations (as defined in the Credit Agreement), and banker's acceptances issued for the account of such Person; (v) Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; (vi) obligations or other liabilities under currency contracts, interest rate hedging contracts, or similar agreements or combinations thereof to the extent required to be disclosed in such Person's financial statements in accordance with GAAP and (vii) the Lease Obligations. Notwithstanding the foregoing, "Indebtedness" shall exclude the Bond Obligations to the extent not required to be classified as a liability in accordance with GAAP. 1.10 Exhibit J attached hereto is hereby added as Exhibit J (Compliance Certificate) to the Master Agreement. Section 2. Commitments. Schedule 2.2 to the Master Agreement is hereby deleted in its entirety, and Schedule 2.2 attached hereto is hereby substituted therefor. Section 2.2(b) of the Master Agreement is hereby amended by deleting the number "3.5%" where it appears therein, and substituting therefor the number "5.0%". On such date as shall mutually be agreed to by ChoicePoint and the Agent, Lessor shall make a payment to the Agent, for the benefit of the Lenders, in an amount such that, after giving effect to such payment, the Lessor's Commitment shall have been fully funded and the outstanding A Loans and B Loans of each Lender shall be as set forth on Schedule 2.2 and any further fundings of Funded Amounts shall be made by the Lenders pro rata in proportion to their respective unused Commitments. Section 3. Representations and Warranties. ChoicePoint represents and warrants to each of the other parties hereto that each of the representations and warranties of ChoicePoint contained in the Master Agreement and in each other Operative Document is true and correct in all material respects on the Effective Date, with the same effect as though made on and as of the Effective Date and, for purposes of this Section, all references in such representations and 6 warranties to the "Operative Documents" shall be deemed to include this Amendment (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date). Section 4. Effectiveness. Subject to the execution and delivery of this Amendment by all parties hereto, this Amendment shall be deemed effective on the date set forth in the preamble to this Amendment (the "Effective Date"). Section 5. GOVERNING LAW. THIS AMENDMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Section 6. References. All references to the words "Master Agreement" shall hereinafter refer to the Master Agreement as amended by this Amendment. Section 7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto on separate counterparts, each executed counterpart constituting an original but all together one agreement. (signatures on following page) 7 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Master Agreement to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written. CHOICEPOINT INC., as Lessee and Guarantor By: /s/ David E. Trine Name Printed: David E. Trine Title: Treasurer Attest: /s/ Mary M. Young Name Printed: Mary M. Young Title: Assistant Corporate Secretary S-1 ATLANTIC FINANCIAL GROUP, LTD, as Lessor By: Atlantic Financial Managers, Inc., its General Partner By: /s/ Stephen Brookshire Name Printed: Stephen Brookshire Title: President S-2 SUNTRUST BANK, as Agent and a Lender By: /s/ Daniel S. Komitor Name Printed: Daniel S. Komitor Title: Director S-3 FLEET NATIONAL BANK, as a Lender By: /s/ John B. Desmond Name Printed: John B. Desmond Title: Director S-4 BNP PARIBAS, as a Lender By: /s/ John Stacy Name Printed: John Stacy Title: Managing Director By: /s/ Lloyd G. Cox Name Printed: Lloyd G. Cox Title: Managing Director S-5 EX-10.36 10 g81483exv10w36.txt EX-10.36 GEORGIA LEASE SUPPLEMENT AND SHORT FORM Exhibit 10.36 GEORGIA LEASE SUPPLEMENT AND SHORT FORM THIS GEORGIA LEASE SUPPLEMENT (this "Lease Supplement") dated as of August 29, 2001 between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership doing business in Georgia as Atlantic Financial Group, Ltd. (L.P.) (Texas), with an address at 2808 Fairmount, Suite 250, Dallas, Texas 75201, as the lessor (the "Lessor"), and CHOICEPOINT INC., a Georgia corporation, with an address of 1000 Alderman Drive, Alpharetta, Georgia 30005, as lessee (the "Lessee"). WHEREAS Lessor is the owner of the Land described on Appendix B hereto and wishes to lease the Land together with any Buildings and other improvements thereon or which hereafter may be constructed thereon pursuant to the Lease, together with any easements, rights and appurtenances thereto now owned or hereafter acquired, to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Interpretation. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to this Lease Supplement and the rules of interpretation and Documentary Conventions set forth in Appendix A shall apply to this Lease Supplement. SECTION 2. The Properties. Attached hereto as Appendix B is the description of certain land (the "Land"). Effective upon the execution and delivery of this Lease Supplement by Lessor and Lessee, such Land together with any Buildings and other improvements on such Land or which hereafter may be constructed on such Land pursuant to the Lease (collectively, the "Subject Property") shall be subject to the terms and provisions of the Lease and Lessor hereby demises, leases, grants, conveys, transfers and assigns the Subject Property to Lessee to the extent of those interests, rights, titles, estates, powers and privileges provided for in the Lease, the provisions of which are incorporated herein by this reference. The Subject Property does not include any inventory of Lessee held by Lessee for resale or rental. SECTION 3. Amendments to Lease with Respect to Subject Property. Effective upon the execution and delivery of this Lease Supplement by Lessor and Lessee, the following terms and provisions shall apply to the Lease with respect to the Subject Property: TO THE EXTENT THIS LEASE SUPPLEMENT AND THE LEASE ARE A DEED TO SECURE DEBT AND SECURITY AGREEMENT, THIS INSTRUMENT IS A "CONSTRUCTION MORTGAGE" AS THAT TERM IS DEFINED IN O.C.G.A. ss. 11-9-313(1)(c). 3.1 ARTICLE IV of the Lease is hereby amended to include the following to the extent the Lease and the Lease Supplement are a deed to secure debt and security agreement creating for Lessor and any successor thereto title and a security interest and security title in the Subject Property: LESSEE HEREBY EXPRESSLY WAIVES ANY RIGHT LESSEE MAY HAVE UNDER THE CONSTITUTION OF THE STATE OF GEORGIA OR THE CONSTITUTION OF THE UNITED STATES OF AMERICA TO NOTICE EXCEPT AS MAY BE EXPRESSLY PROVIDED FOR IN THE OPERATIVE DOCUMENTS OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED TO LESSOR BY THIS LEASE AND LEASE SUPPLEMENT, AND WAIVES LESSEE'S RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE UNDER POWER DULY CONSUMMATED IN ACCORDANCE WITH THE PROVISIONS OF THIS LEASE AND LEASE SUPPLEMENT ON THE GROUND (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT PRIOR NOTICE EXCEPT AS MAY BE EXPRESSLY PROVIDED FOR IN THE OPERATIVE DOCUMENTS OR JUDICIAL HEARING OR BOTH. LESSEE FURTHER HEREBY EXPRESSLY WAIVES ALL HOMESTEAD EXEMPTION RIGHTS, IF ANY, WHICH LESSEE OR LESSEE'S FAMILY MAY HAVE PURSUANT TO THE CONSTITUTION OF THE UNITED STATES, THE STATE OF GEORGIA OR ANY OTHER STATE OF THE UNITED STATES, IN AND TO THE PREMISES AS AGAINST THE COLLECTION OF THE INDEBTEDNESS, OR ANY PART THEREOF. ALL WAIVERS BY LESSEE IN THIS PARAGRAPH HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY BY LESSEE, AFTER LESSEE HAS BEEN AFFORDED AN OPPORTUNITY TO BE INFORMED BY COUNSEL OF LESSEE'S CHOICE AS TO POSSIBLE ALTERNATIVE RIGHTS. LESSEE'S EXECUTION OF THIS LEASE AND LEASE SUPPLEMENT SHALL BE CONCLUSIVE EVIDENCE OF THE WAIVER AND THAT SUCH WAIVER HAS BEEN VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY MADE. 3.2 ARTICLE XI of the Lease is hereby deleted in its entirety and inserted in lieu thereof is the following: Lessor and Lessee intend that the Lease and this Lease Supplement be treated, for accounting purposes, as an operating lease creating a leasehold estate, and not merely a usufruct. For all other purposes, Lessee and Lessor intend that the transaction represented by this Lease be treated as a financing transaction; for such purposes, it is the intention of the parties hereto (i) that THIS CONVEYANCE IS INTENDED to operate and be construed as a deed passing legal title to the Subject Property and all rents, issues, profits and proceeds (including, without limitation, Awards and Loss Proceeds) of the Subject Property to Lessor pursuant to the laws of the State of Georgia governing deeds to secure debt, and is also a security agreement granting a present and continuing security interest and security title in the portion of the Subject Property and all rents, issues, profits and proceeds (including, without limitation, Awards and Loss Proceeds) of the Subject Property constituting personal property or fixtures, and it is not a mortgage, (ii) that Lessee hereby grants, bargains, sells, conveys, assigns, transfers and sets over unto Lessor and its successors and assigns the Subject Property TO HAVE AND TO HOLD the Subject Property and all parts, rights, members and appurtenances thereof, to the use, benefit and behoof of Lessor and the successors and assigns of Lessor, forever, IN FEE SIMPLE, (iii) that Lessor shall have, as a result of such determination, all of the rights, powers and remedies of the holder of a deed to secure debt available under Applicable Law to take possession of and sell (whether by foreclosure or otherwise) the Subject Property, (iv) that the effective date of such deed to secure debt shall be the effective date of this Lease, (v) that the recording of this Lease or a Lease Supplement shall be deemed to be the recording of such deed to secure debt, and (vi) that such deed to secure debt shall secure payment and performance of: (a) the Lease and the other Operative Documents, together with any and all renewals and/or extensions thereof, bearing interest and default interest and payable as therein provided in installments, the final installment of which is due and payable on August 29, 2017 including discretionary extensions, if not sooner paid or accelerated (collectively, the "Liabilities"); provided, however, that notwithstanding anything herein to the contrary, the maximum principal amount of the Liabilities secured hereby at any one time shall not exceed Fifty-Two Million Two Hundred Thousand and No/100 Dollars ($52,200,000.00), plus all costs of enforcement and collection of the Lease and the other Operative Documents as provided for pursuant to such documents; (b) any and all additional advances made by Lessor to protect or preserve the Subject Property or the lien hereof on the Subject Property, or for taxes, assessments or insurance premiums as hereinafter provided (whether or not the original Lessee remains the owner of the Subject Property at the time of such advances); and (c) any and all other indebtedness, however incurred, which may now or hereafter be due and owing from Lessee to Lessor, now existing or hereafter coming into existence, however, and whenever incurred or evidenced, whether express or implied, direct or indirect, absolute or contingent, or due or to become due, and all renewals, modifications, consolidations and extensions thereof. 3.3 "Reasonable fees of attorneys" and similar terms as used in the Lease shall mean reasonable fees of attorneys actually incurred without regard for any statutory presumption." 3.4 Section 13.1 of the Lease is hereby amended by adding the following as a new clause (h): (c) To the extent the Lease and the Lease Supplement are a deed to secure debt and security agreement creating for Lessor and any successor thereto title and a security interest and security title in the Subject Property, Lessor may, at its option and election and without notice to Lessee, do any one or more of the following: (i) Acceleration of Liabilities. Lessor may immediately declare all or any portion of the Liabilities to be immediately due and payable, whereupon the same shall be and shall become due and payable forthwith without presentment, demand, protest or notice of any kind, all of which are expressly waived by Lessee. (ii) Entry and Possession. Lessor may enter upon the Subject Property or any part thereof and take possession thereof, excluding therefrom Lessee and all Lessors, employees and representatives of Lessee; employ a manager of the Subject Property or any part thereof; hold, store, use, operate, manage, control, maintain and lease the Subject Property or any part thereof; conduct business thereon; make all necessary and appropriate repairs, renewals and replacements; insure or keep the Subject Property insured; and carry out or enter into agreements of any kind with respect to the Subject Property. (iii) Collection of Rent. Lessor may collect and receive all Rent, and apply the same to the Liabilities, after deducting therefrom all costs, charges and expenses of taking, holding, managing and operating the Subject Property, including the reasonable fees and expenses of Lessor's attorneys and Lessors actually incurred without regard for any statutory presumption. (iv) Payments. Lessor may pay any sum or sums deemed necessary or appropriate by Lessor to protect the Subject Property or any part thereof or Lessor's interest therein. (v) Other Remedies. Lessor may exercise all rights and remedies contained in any other instrument, document, agreement or other writing now or hereafter evidencing or securing the Liabilities or any part thereof, or heretofore, concurrently herewith or in the future executed by Lessee in favor of Lessor in connection with any transaction resulting in the Liabilities or any part thereof. (vi) Appointment of Receiver. Lessor may make application to any court and be entitled to the appointment of a receiver to take charge of the Subject Property or any part thereof without alleging or proving, or having any consideration given to, the insolvency of Lessee, the value of the Subject Property as security for the Liabilities or any other matter usually incident to the appointment of a receiver. (vii) UCC Remedies. With respect to the personal property and fixtures in which a security interest is herein granted, at Lessor's option, Lessor may exercise any or all of the rights accruing to a secured party under this instrument, the Uniform Commercial Code (O.C.G.A. ss.ss. 11-9-101 et seq.) and any other applicable law. Lessee shall, if Lessor requests, assemble all such personal property and make it available to Lessor at a place or places, to be designated by Lessor, which shall be reasonably convenient to Lessee and Lessor. Any notice required to be given by Lessor of a public or private sale, lease or other disposition of the personal property or any other intended action by Lessor shall be addressed to the Lessee at the address set forth in Schedule 8.2, attached hereto and by this reference made a part hereof, or such other address as the Lessee shall specify to the Lessor and shall be deemed to have been given (i) the Business Day after being sent, if sent by overnight courier service; (ii) the Business Day received, if sent by messenger; (iii) the day sent, if sent by facsimile and confirmed electronically or otherwise during business hours of a Business Day (or on the next Business Day if otherwise sent by facsimile and confirmed electronically or otherwise); or (iv) three Business Days after being sent, if sent by registered or certified mail, postage prepaid. Such notice shall be provided to Lessee, at least five (5) business days prior to such proposed action, and if so given shall constitute reasonable and fair notice to Lessee of any such action. (viii) Power of Sale. Lessor may sell the Subject Property, or any part or parcel thereof or any interest of Lessee therein separately, at Lessor's discretion, with or without taking possession thereof, at a public sale or public sales before the courthouse door of the county in which the Subject Property or any part thereof is located, to the highest bidder for cash, after first giving notice of the time, place and terms of such sale or sales by advertisement published once a week for four consecutive weeks immediately preceding the date of sale (without any regard for the number of days between the date the first such notice is published and the date on which any such sale commences) in the newspaper in which advertisements of sheriff's sales are published in such county. Such advertisement so published shall be notice to Lessee, and Lessee hereby expressly waives all other notices. Lessor may bid and purchase at any such sale, and Lessor, as Lessor and attorney-in-fact for Lessee and in Lessee's name, may execute and deliver to the purchaser or purchasers at any such sale a sufficient conveyance of the Subject Property, or the part or parcel thereof or the interest therein which is sold. Lessor's conveyance may contain recitals as to the occurrence of any event of default under this Security Deed, and such recitals shall be presumptive evidence that all preliminary acts prerequisite to any such sale and conveyance were in all respects duly complied with. The recitals made by Lessor shall be binding and conclusive upon Lessee, and the sale and conveyance made by Lessor shall divest Lessee of all right, title, interest and equity that Lessee may have or have had in, to and under the Subject Property, or the part or parcel thereof or the interest therein which is sold, and shall vest the same in the purchaser or purchasers at such sale or sales. Such conveyance shall be effectual to bar all equity of redemption, including all statutory, redemption, homestead, dower, courtesy, and all other exemptions of the Lessee or its successors or assigns. Lessor may hold one or more sales hereunder until the Liabilities have been satisfied in full. Lessee hereby constitutes and appoints Lessor as Lessee's agent and attorney-in-fact to make such sale or sales, to execute and deliver such conveyance or conveyances, and to make such recitals, and Lessee hereby ratifies and confirms all of the acts and doings of Lessor as Lessee's agent and attorney-in-fact hereunder. Lessor's agency and power as attorney-in-fact hereunder are coupled with an interest, cannot be revoked by bankruptcy, insolvency, incompetency, death, dissolution or otherwise, and shall not be exhausted until the Liabilities have been satisfied in full. The proceeds of each sale by Lessor hereunder shall be applied first to the costs and expenses of the sale and of all proceedings in connection therewith (including without limitation the reasonable fees and expenses of Lessor's attorneys actually incurred in connection therewith without regard for any statutory presumption), then to the payment of the balance of the Liabilities, and the remainder, if any, shall be paid to Lessee or to the parties entitled thereto by law. If the proceeds of any sale are not sufficient to pay the Liabilities in full, Lessor shall determine, at Lessor's option and in Lessor's discretion, the portions of the Liabilities to which the proceeds (after deducting therefrom the costs and expenses of the sale and all proceedings in connection therewith) shall be applied and in what order the proceeds shall be so applied. Lessee covenants and agrees that, in the event of any sale pursuant to the agency and power herein granted, Lessee shall be and become a tenant holding over and shall deliver possession of the Subject Property, or the part thereof or interest therein sold, to the purchaser or purchasers at the sale or be summarily dispossessed in accordance with the provisions of law applicable to tenants holding over. 3.5. Lessee represents and warrants Lessor that neither all of the Subject Property nor any part thereof is to be used as a dwelling place by Lessee at the time this Lease Supplement is entered into and, accordingly, the notice requirements of O.C.G.A. ss. 44-14-162.2 shall not be applicable to any exercise of the power of sale contained in this Lease Supplement. 3.6. The interest of Lessor under this Lease Supplement and the liability and obligation of Lessee for the payment of the Liabilities arise from a "commercial transaction" within the meaning of O.C.G.A. ss. 44-14-260(1). Accordingly, pursuant to O.C.G.A. ss. 44-14-263, Lessee waives any and all rights which Lessee may have to notice prior to seizure by Lessor of any interest in personal property of Lessee which constitutes part of the Subject Property, whether such seizure is by writ of possession or otherwise. 3.7. To the extent the Lease and the Lease Supplement are a deed to secure debt and security agreement creating for Lessor and any successor thereto title and a security interest and security title in the Subject Property, Lessee warrants that Lessee has good and marketable fee simple title to the Subject Property, that Lessee is lawfully seized and possessed of the Subject Property, that Lessee has the right to convey the Subject Property, that the Subject Property is unencumbered except for those matters permitted by the Master Agreement and the Lease, and that Lessee shall forever warrant and defend the title to the Subject Property, against the claims of all persons whomsoever. 3.8 To the extent the Lease and this Lease Supplement are a deed to secure debt and security agreement, then should the indebtedness secured by such deed to secure debt be paid according to the tenor and effect thereof when the same shall become due and payable, and should Lessee perform all covenants contained in such deed to secure debt in a timely manner, then the deed to secure debt shall be cancelled and surrendered. SECTION 4. Ratification; Incorporation. Except as specifically modified hereby, the terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. The terms of the Lease (as amended by this Lease Supplement) are by this reference incorporated herein and made a part hereof. SECTION 5. Original Lease Supplement. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed and sealed by an officer thereunto duly authorized as of the date and year first above written. Signed, sealed and delivered ATLANTIC FINANCIAL GROUP, LTD., in the presence of: at the Lessor /s/ Pattie Keath By: Atlantic Financial Managers, - ----------------------------- Inc., its General Partner Unofficial Witness By: /s/ Stephen S. Brookshire Name: Stephen S. Brookshire Title: President /s/ Lisa M. Williams - ----------------------------- Notary Public [NOTARIAL SEAL] My Commission Expires: [CORPORATE SEAL] December 17, 2005 Signed, sealed and delivered CHOICEPOINT INC., as the Lessee in the presence of: /s/ Mary M. Young By: /s/ David E. Trine - ------------------------------ Name: David E. Trine Unofficial Witness Title: Treasurer /s/ Laura K. Peterson [CORPORATE SEAL] - ------------------------------ Notary Public [NOTARIAL SEAL] My Commission Expires: June 24, 2004 Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as of the date hereof. SUNTRUST BANK, as the Agent By: /s/ Daniel S. Komitor Name: Daniel S. Komitor Title: Director APPENDIX B LEGAL DESCRIPTION TRACT I ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 1041, 1046 and 1109 of the 2nd District, 1st Section, City of Alpharetta, State of Georgia and being more particularly described as follows: Commencing at the intersection of the westerly right-of-way of Windward Concourse (110' R/W) and the northerly right-of-way of Alderman Drive (variable R/W); thence along the northerly right-of-way of Alderman Drive in a westerly and southwesterly direction 1981.46 feet to an iron pin set and the True Point of Beginning; thence following said right-of-way along a curve to the left an arc distance of 43.29 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S22(degree)51'52"W a distance of 43.28 feet; thence continuing along said right-of-way S20(degree)30'00"W a distance of 58.11 feet to a point; thence along said right-of-way along a curve to the left an arc distance of 254.84 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S06(degree)34'51"W a distance of 252.34 feet; thence along said right-of-way S07(degree)20'19"E a distance of 156.08 feet to a point; thence along a curve to the left an arc distance of 54.71 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S10(degree)17'49"E a distance of 54.69 feet to an iron pin found; thence following said right-of-way along a curve to the left an arc distance of 274.01 feet to an iron pin set, said arc having a radius of 524.50 feet and a chord which bears S28(degree)16'25"E a distance of 270.91 feet; thence leaving said right-of-way S46(degree)29'46"W a distance of 47.48'; thence N63(degree)41'12"W a distance of 126.60 feet to an PK nail set; thence S28(degree)06'03"W a distance of 183.24 feet to an PK nail set; thence N70(degree)40'47" W a distance of 45.69 feet to an PK nail set; thence S19(degree)17'18"W a distance of 308.88 feet to an iron pin set; thence S70(degree)19'23"E a distance of 149.73 feet to an iron pin set; thence S 36(degree)39'41"W a distance of 96.61 feet to an iron pin set; thence S68(degree)23'28"W a distance of 276.66 feet to a computed point in the centerline of Camp Creek; thence along the centerline of Camp Creek N15(degree)45'02"W a distance of 636.39 feet to a computed point; thence continuing along said creek N21(degree)22'20"W 246.03 feet to a point; thence N 12(degree)26'10"W a distance of 286.31 feet; thence continuing along said creek N20(degree)59'52"W a distance of 261.90 feet to a point on the southerly right-of-way of Georgia State Highway 400 (Variable R/W); thence along said right-of-way N46(degree)01'18"E a distance of 89.20 feet to an iron pin set; thence S88(degree)55'51"E a distance of 463.95 to an iron pin set; thence N 87(degree)21'53"E a distance of 354.22 feet to an iron pin set and the True Point of Beginning. Said tract containing 794,530 sq. ft. or 18.240 acres. THE ABOVE-DESCRIBED PROPERTY is shown as 18.240 acres on and is described according to plat of ALTA/ACSM survey prepared for Atlantic Financial Group, Ltd., et al., by Seaton G. Shepherd, Georgia Registered Land Surveyor No. 2136, Grant Shepherd & Associates, dated August 9, 2001, last revised August 29, 2001, which said plat of survey is incorporated herein by this reference and made a part of this description. TOGETHER WITH Declaration of Covenants, Conditions and Restrictions for Windward Business Center Association recorded in Deed Book 8700, page 362, aforesaid records; with Re-Recording Declaration of Covenants, Conditions and Restrictions for Winward Business Center Associates being recorded in Deed Book 8750, page 82, aforesaid records; as amended to include subject property by Amendment recorded in Deed Book 20420, page 200, aforesaid records. EX-10.37 11 g81483exv10w37.txt EX-10.37 SUPPLEMENT TO GEORGIA LEASE EXHIBIT 10.37 SUPPLEMENT TO GEORGIA LEASE SUPPLEMENT AND SHORT FORM THIS SUPPLEMENT (this "Supplement") dated as of August 29, 2001 is entered into by and between ATLANTIC FINANCIAL GROUP, LTD., a Texas limited partnership doing business in Georgia as Atlantic Financial Group, Ltd. (L.P.) (Texas), with an address at 2808 Fairmount, Suite 250, Dallas, Texas 75201, as the lessor (the "Lessor"), and CHOICEPOINT INC., a Georgia corporation, with an address of 1000 Alderman Drive, Alpharetta, Georgia 30005, as lessee (the "Lessee"). WHEREAS, the Lessor and Lessee enter into a certain Master Lease Agreement (the "Lease") dated as of August 29, 2001; WHEREAS, Lessor and Lessee entered into a certain Georgia Lease Supplement and Short form (the "Lease Supplement") dated as of August 29, 2001 which subjected the land described on Exhibit A hereto to the Lease; WHEREAS, the Lessor and Lessee wish to supplement the Lease Supplement as set forth below. NOW, THEREFORE, the Lessor and Lessee agree to supplement the Lease Supplement as follows: The following sentence is added to the Lease Supplement at the end of Section 2 of the Lease Supplement "The Recourse Deficiency Percentage with respect to the Subject Property is 85%." IN WITNESS WHEREOF, the Lessor has entered into this Supplement as of the date first above written. Signed, sealed and delivered ATLANTIC FINANCIAL GROUP, LTD., in the presence of: at the Lessor /s/ Pattie Keath By: Atlantic Financial Managers, - ---------------------------- Inc., its General Partner Unofficial Witness By: /s/ Stephen S. Brookshire Name: Stephen S. Brookshire Title: President /s/ Lisa Williams - ---------------------------- Notary Public [NOTARIAL SEAL] My Commission Expires: [CORPORATE SEAL] December 17, 2005 Signed, sealed and delivered CHOICEPOINT INC., as the Lessee in the presence of: /s/ Mary M. Young By: /s/ David E. Trine - ----------------------------- Name: David E. Trine Unofficial Witness Title: Treasurer /s/ Laura K. Peterson [CORPORATE SEAL] - ---------------------------- Notary Public [NOTARIAL SEAL] My Commission Expires: June 24, 2004 EXHIBIT A LEGAL DESCRIPTION TRACT I ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 1041, 1046 and 1109 of the 2nd District, 1st Section, City of Alpharetta, State of Georgia and being more particularly described as follows: Commencing at the intersection of the westerly right-of-way of Windward Concourse (110' R/W) and the northerly right-of-way of Alderman Drive (variable R/W); thence along the northerly right-of-way of Alderman Drive in a westerly and southwesterly direction 1981.46 feet to an iron pin set and the True Point of Beginning; thence following said right-of-way along a curve to the left an arc distance of 43.29 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S22(degree)51'52"W a distance of 43.28 feet; thence continuing along said right-of-way S20(degree)30'00"W a distance of 58.11 feet to a point; thence along said right-of-way along a curve to the left an arc distance of 254.84 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S06(degree)34'51"W a distance of 252.34 feet; thence along said right-of-way S07(degree)20'19"E a distance of 156.08 feet to a point; thence along a curve to the left an arc distance of 54.71 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S10(degree)17'49"E a distance of 54.69 feet to an iron pin found; thence following said right-of-way along a curve to the left an arc distance of 274.01 feet to an iron pin set, said arc having a radius of 524.50 feet and a chord which bears S28(degree)16'25"E a distance of 270.91 feet; thence leaving said right-of-way S46(degree)29'46"W a distance of 47.48'; thence N63(degree)41'12"W a distance of 126.60 feet to an PK nail set; thence S28(degree)06'03"W a distance of 183.24 feet to an PK nail set; thence N70(degree)40'47" W a distance of 45.69 feet to an PK nail set; thence S19(degree)17'18"W a distance of 308.88 feet to an iron pin set; thence S70(degree)19'23"E a distance of 149.73 feet to an iron pin set; thence S 36(degree)39'41"W a distance of 96.61 feet to an iron pin set; thence S68(degree)23'28"W a distance of 276.66 feet to a computed point in the centerline of Camp Creek; thence along the centerline of Camp Creek N15(degree)45'02"W a distance of 636.39 feet to a computed point; thence continuing along said creek N21(degree)22'20"W 246.03 feet to a point; thence N 12(degree)26'10"W a distance of 286.31 feet; thence continuing along said creek N20(degree)59'52"W a distance of 261.90 feet to a point on the southerly right-of-way of Georgia State Highway 400 (Variable R/W); thence along said right-of-way N46(degree)01'18"E a distance of 89.20 feet to an iron pin set; thence S88(degree)55'51"E a distance of 463.95 to an iron pin set; thence N 87(degree)21'53"E a distance of 354.22 feet to an iron pin set and the True Point of Beginning. Said tract containing 794,530 sq. ft. or 18.240 acres. THE ABOVE-DESCRIBED PROPERTY is shown as 18.240 acres on and is described according to plat of ALTA/ACSM survey prepared for Atlantic Financial Group, Ltd., et al., by Seaton G. Shepherd, Georgia Registered Land Surveyor No. 2136, Grant Shepherd & Associates, dated August 9, 2001, last revised August 29, 2001, which said plat of survey is incorporated herein by this reference and made a part of this description. TOGETHER WITH Declaration of Covenants, Conditions and Restrictions for Windward Business Center Association recorded in Deed Book 8700, page 362, aforesaid records; with Re-Recording Declaration of Covenants, Conditions and Restrictions for Winward Business Center Associates being recorded in Deed Book 8750, page 82, aforesaid records; as amended to include subject property by Amendment recorded in Deed Book 20420, page 200, aforesaid records. EX-10.38 12 g81483exv10w38.txt EX-10.38 PARTIAL LEASE TERMINATION AGREEMENT Exhibit 10.38 PARTIAL LEASE TERMINATION AGREEMENT This Partial Lease Termination Agreement is entered into this 29th day of August, 2001 by and between SUNTRUST BANKS, INC., as Lessor, and CHOICEPOINT INC., a Georgia corporation, as Lessee. RECITALS WHEREAS, Lessor and Lessee entered into a Lease Agreement (the "Lease") dated as of July 31, 1997, which Lease is described in that certain Georgia Lease Supplement No. One and Short Form recorded August 4, 1997 in Deed Book 22914, Page 15 with the Clerk of Circuit Court of Fulton County, Georgia; as affected by Georgia Lease Supplement No. Two and Short Form, dated September 30, 1998 recorded October 1, 1998 in Deed Book 25269, Page 164, aforesaid records; as further affected by First Amendment to Georgia Lease No. One and Short Form, dated September 30, 1998 recorded in Deed Book 25269, Page 279, aforesaid records; as further affected by Second Amendment to Georgia Lease No. One and Short Form, dated September 30, 1998 recorded January 3, 2000 as Document 2000-0000161, in Deed Book 28308, Page 173, aforesaid records WHEREAS, Lessor and Lessee have agreed to terminate the Lease insofar as it demises the property described on Exhibit A hereto upon the terms and conditions set forth in this agreement. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth Lessor and Lessee agree as follows: Effective as of August 29th, 2001 the Lease is terminated insofar as it demises the property described on Exhibit A hereto. This Partial Lease Termination Agreement does not release any covenants, warranties, indemnities or other obligations of Lessee or any other party under the Lease which by their terms expressly survive the release or termination of such Lease: provided, however, that this Release shall act as a release and termination of all liens, claims and interest Lessor and Lessee possess under the Lease in and to the property subject to the Lease. To the extent that the Lease encumbers property other than the real estate described on Exhibit A hereto the Lease shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. Signed, sealed and delivered SUNTRUST BANKS, INC. in the presence of: /s/ Peter D. Kantor Jr. - ---------------------------- Witness By: /s/ R. Todd Shutley Name: R. Todd Shutley Title: Vice President /s/ Cendric W. Olds - ---------------------------- Notary Public [NOTARIAL SEAL] My Commission Expires: June 29, 2004 S-1 Signed and delivered CHOICEPOINT INC., as the Lessee in the presence of: /s/ Laura K. Peterson By: /s/ J. Michael de Janes - ----------------------------- Name: Michael de Janes Witness Title: General Counsel & Corporate Secretary /s/ Sandra H. Curtis [CORPORATE SEAL] - ---------------------------- Notary Public [NOTARIAL SEAL] My Commission Expires: August 4, 2005 S-2 EXHIBIT A LEGAL DESCRIPTION ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 1041, 1046 and 1109 of the 2nd District, 1st Section, City of Alpharetta, State of Georgia and being more particularly described as follows: Commencing at the intersection of the westerly right-of-way of Windward Concourse (110' R/W) and the northerly right-of-way of Alderman Drive (variable R/W); thence along the northerly right-of-way of Alderman Drive in a westerly and southwesterly direction 1981.46 feet to an iron pin set and the True Point of Beginning; thence following said right-of-way along a curve to the left an arc distance of 43.29 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S22(degree)51'52"W a distance of 43.28 feet; thence continuing along said right-of-way S20(degree)30'00"W a distance of 58.11 feet to a point; thence along said right-of-way along a curve to the left an arc distance of 254.84 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S06(degree)34'51"W a distance of 252.34 feet; thence along said right-of-way S07(degree)20'19"E a distance of 156.08 feet to a point; thence along a curve to the left an arc distance of 54.71 feet to a point, said arc having a radius of 524.50 feet and a chord which bears S10(degree)17'49"E a distance of 54.69 feet to an iron pin found; thence following said right-of-way along a curve to the left an arc distance of 274.01 feet to an iron pin set, said arc having a radius of 524.50 feet and a chord which bears S28(degree)16'25"E a distance of 270.91 feet; thence leaving said right-of-way S46(degree)29'46"W a distance of 47.48'; thence N63(degree)41'12"W a distance of 126.60 feet to an PK nail set; thence S28(degree)06'03"W a distance of 183.24 feet to an PK nail set; thence N70(degree)40'47" W a distance of 45.69 feet to an PK nail set; thence S19(degree)17'18"W a distance of 308.88 feet to an iron pin set; thence S70(degree)19'23"E a distance of 149.73 feet to an iron pin set; thence S 36(degree)39'41"W a distance of 96.61 feet to an iron pin set; thence S68(degree)23'28"W a distance of 276.66 feet to a computed point in the centerline of Camp Creek; thence along the centerline of Camp Creek N15(degree)45'02"W a distance of 636.39 feet to a computed point; thence continuing along said creek N21(degree)22'20"W 246.03 feet to a point; thence N 12(degree)26'10"W a distance of 286.31 feet; thence continuing along said creek N20(degree)59'52"W a distance of 261.90 feet to a point on the southerly right-of-way of Georgia State Highway 400 (Variable R/W); thence along said right-of-way N46(degree)01'18"E a distance of 89.20 feet to an iron pin set; thence S88(degree)55'51"E a distance of 463.95 to an iron pin set; thence N 87(degree)21'53"E a distance of 354.22 feet to an iron pin set and the True Point of Beginning. Said tract containing 794,530 sq. ft. or 18.240 acres. THE ABOVE-DESCRIBED PROPERTY is shown as 18.240 acres on and is described according to plat of ALTA/ACSM survey prepared for Atlantic Financial Group, Ltd., et al., by Seaton G. Shepherd, Georgia Registered Land Surveyor No. 2136, Grant Shepherd & Associates, dated August 9, 2001, last revised August 29, 2001, which said plat of survey is incorporated herein by this reference and made a part of this description. TOGETHER WITH Declaration of Covenants, Conditions and Restrictions for Windward Business Center Association recorded in Deed Book 8700, page 362, aforesaid records; with Re-Recording Declaration of Covenants, Conditions and Restrictions for Winward Business Center Associates being recorded in Deed Book 8750, page 82, aforesaid records; as amended to include subject property by Amendment recorded in Deed Book 20420, page 200, aforesaid records. EX-10.40 13 g81483exv10w40.txt EX-10.40 AMENDMENT #1 TO LOAN AGREEMENT Exhibit 10.40 AMENDMENT #1 TO LOAN AGREEMENT THIS AMENDMENT #1 TO LOAN AGREEMENT (this "AMENDMENT") is entered into as of July 1, 2002 among CHOICEPOINT FINANCIAL INC., a Delaware corporation ("BORROWER"), CHOICEPOINT INC., a Georgia corporation, in its capacity as the initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "SERVICER"), THREE PILLARS FUNDING CORPORATION, a Delaware corporation (together with its successors and permitted assigns, "LENDER"), and SUNTRUST CAPITAL MARKETS, INC. (formerly known as SunTrust Equitable Securities Corporation), a Tennessee corporation, as agent and administrator for Lender (in such capacity, together with its successor and assigns in such capacity, the "ADMINISTRATOR") and pertains to the Loan Agreement among the parties hereto dated as of July 2, 2001 (the "EXISTING AGREEMENT"). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Existing Agreement. BACKGROUND WHEREAS, Borrower desires that Lender agree to certain amendments to the Existing Agreement; and WHEREAS, Lender is willing to agree to such amendments on the terms and subject to the conditions set forth in this Amendment; NOW THEREFORE, in consideration of the promises and mutual agreements herein contained, the parties hereto agree as follows: 1. AMENDMENTS TO SECTION 1.1 OF THE EXISTING AGREEMENT. The definitions of "LIQUIDITY TERMINATION DATE" and "SCHEDULED COMMITMENT TERMINATION DATE" are hereby amended to delete "July 1, 2002" where it appears and to substitute in lieu thereof "June 30, 2003." 2. CONTINUING EFFECT. Except as expressly amended above, the Existing Agreement remains unaltered and in full force and effect and is hereby ratified and confirmed. 3. BINDING EFFECT. This Amendment shall become effective when it shall have been executed and delivered by each of the parties hereto and thereafter shall be binding upon and inure to the benefit of Borrower, Servicer, Lender and Administrator and their respective successors and assigns. 4. EXPENSES. Borrower agrees to pay all reasonable costs and expenses incurred by Lender and Administrator in connection with the preparation, execution, delivery, administration and enforcement of, or any breach of this Amendment, including without limitation the reasonable fees and expenses of counsel. 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)). 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment. 2 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. THREE PILLARS FUNDING CORPORATION, AS LENDER By: /s/ Douglas K. Johnson Name: Douglas K. Johnson Title: President SUNTRUST CAPITAL MARKETS, INC., AS ADMINISTRATOR By: /s/ James R. Bennison Name: James R. Bennison Title: Managing Director CHOICEPOINT FINANCIAL INC., AS BORROWER By: /s/ David E. Trine Name: David E. Trine Title: Treasurer and Corporate Controller CHOICEPOINT INC., AS INITIAL SERVICER By: /s/ David E. Trine Name: David E. Trine Title: Treasurer and Corporate Controller 3 EX-10.41 14 g81483exv10w41.txt EX-10.41 AMENDMENT #2 TO LOAN AGREEMENT Exhibit 10.41 AMENDMENT #2 TO LOAN AGREEMENT THIS AMENDMENT #2 TO LOAN AGREEMENT (this "AMENDMENT") is entered into as of December 31, 2002 among CHOICEPOINT FINANCIAL INC., a Delaware corporation ("BORROWER"), CHOICEPOINT INC., a Georgia corporation, in its capacity as the initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "SERVICER"), THREE PILLARS FUNDING CORPORATION, a Delaware corporation (together with its successors and permitted assigns, "LENDER"), and SUNTRUST CAPITAL MARKETS, INC. (formerly known as SunTrust Equitable Securities Corporation), a Tennessee corporation, as agent and administrator for Lender (in such capacity, together with its successor and assigns in such capacity, the "ADMINISTRATOR") and pertains to the Loan Agreement among the parties hereto dated as of July 2, 2001 (the "EXISTING AGREEMENT"). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Existing Agreement. BACKGROUND WHEREAS, Borrower desires that Lender agree to a certain amendment to the Existing Agreement; and WHEREAS, Lender is willing to agree to such amendment on the terms and subject to the conditions set forth in this Amendment; NOW THEREFORE, in consideration of the promises and mutual agreements herein contained, the parties hereto agree as follows: 1. AMENDMENT TO SECTION 4.1(A) OF THE EXISTING AGREEMENT. Section 4.1(a) of the Existing Agreement is hereby amended FIRST, to delete clause (iii) thereof and SECOND, to move the word "and" at the end of clause (ii) thereof to the end of clause (i) thereof. 2. CONTINUING EFFECT. Except as expressly amended above, the Existing Agreement remains unaltered and in full force and effect and is hereby ratified and confirmed. 3. BINDING EFFECT. This Amendment shall become effective when it shall have been executed and delivered by each of the parties hereto and thereafter shall be binding upon and inure to the benefit of Borrower, Servicer, Lender and Administrator and their respective successors and assigns. 4. EXPENSES. Borrower agrees to pay all reasonable costs and expenses incurred by Lender and Administrator in connection with the preparation, execution, delivery, administration and enforcement of, or any breach of this Amendment, including without limitation the reasonable fees and expenses of counsel. 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW)). 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment. 2 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. THREE PILLARS FUNDING CORPORATION, AS LENDER By: /s/ Douglas K. Johnson Name: Douglas K. Johnson Title: President SUNTRUST CAPITAL MARKETS, INC., AS ADMINISTRATOR By: /s/ James R. Bennison Name: James R. Bennison Title: Managing Director CHOICEPOINT FINANCIAL INC., AS BORROWER By: /s/ David E. Trine Name: David E. Trine Title: Treasurer CHOICEPOINT INC., AS INITIAL SERVICER By: /s/ David E. Trine Name: David E. Trine Title: Treasurer 3 EX-13 15 g81483exv13.txt EX-13 PORTIONS OF COMPANY'S 2002 ANNUAL REPORT . . . EXHIBIT 13 FINANCIAL HIGHLIGHTS(a)

Financial information excluding merger-related costs, unusual items, change in accounting principle and gain (loss) on sale(d): Operating income 200,616 148,370 119,002 83,157 72,850 60,067 Net income 118,792 83,138 64,402 42,179 39,380 30,672 EPS, diluted(c) 1.33 0.95 0.77 0.52 0.49 0.39 EBITDA 246,375 207,882 172,621 131,745 112,522 93,744

(a) All financial information has been restated to reflect the merger of ChoicePoint and DBT Online, Inc. in 2000, which has been accounted for as a pooling of interests, and the stock splits paid in the form of stock dividends effective November 24, 1999, March 7, 2001 and June 6, 2002. (b) In 2002, the Company recorded a goodwill impairment charge of $24.4 million, net of taxes in accordance with the adoption of FASB Statement No. 142, "Goodwill and Other Intangible Assets." (c) EPS for 1997 assumes pro forma diluted shares outstanding of 78.9 million due to the spin-off in August 1997. (d) EBITDA represents earnings before interest, taxes, depreciation, and amortization, excluding merger-related costs, unusual items, and gain (loss) on sale of business. The Company has included EBITDA data and financial information excluding merger-related costs, unusual items, gain (loss) on sale, and change in accounting principle (which are not measures of financial performance under accounting principles generally accepted in the United States) because such data is used by certain investors to analyze and compare companies on a basis of operating performance, leverage and liquidity, and to determine a company's ability to service debt. These measures are not presented as a substitute for operating income, net income or cash flows from operating activities. BUSINESS DESCRIPTION ChoicePoint provides information solutions to mitigate the risks that threaten so many facets of our personal and business lives. Capitalizing on robust data and unique databases - and technological expertise to analyze that data and add intelligence to it - ChoicePoint is a leading provider of identification and credential verification services to business, government, and individual customers. By transforming data into Actionable Intelligence(R), ChoicePoint helps those customers reduce risk and better manage business relationships. ChoicePoint common stock trades on the New York Stock Exchange (NYSE) under the symbol CPS. ChoicePoint, headquartered in the Atlanta area, is organized into three business segments: Insurance Services, Business & Government Services, and Marketing Services. Insurance Services includes the Property & Casualty Personal Lines and Property & Casualty Commercial Lines businesses. Business & Government Services includes the WorkPlace Solutions, Public Records, and Nursery businesses. Marketing Services includes the ChoicePoint Precision Marketing businesses. CONTENTS Letter to Shareholders 2 Critical Needs 6 Compelling Solutions 8 Q & A with Derek Smith and Doug Curling 12 Financial Review 17 Shareholder Information 48 Board of Directors INSIDE BACK COVER

[CHOICEPOINT LOGO] Management's Discussion and Analysis 18 Report of Management 26 Report of Independent Auditors 27 Report of Independent Public Accountants 28 Explanatory Note Regarding Report of Independent Public Accountants 28 Consolidated Statements of Income 29 Consolidated Balance Sheets 30 Consolidated Statements of Shareholders' Equity 31 Consolidated Statements of Cash Flows 32 Notes to Consolidated Financial Statements 33 Shareholder Information 48 Board of Directors, Elected Officers and Corporate Governance 49

ChoicePoint is committed to full disclosure of its accounting policies as well as other administrative procedures within the Company. For instance, as of December 31, 2002, the only off-balance sheet assets or liabilities are two synthetic leases on the properties of the Company's corporate headquarters. Similarly, ChoicePoint employees may direct their retirement funds to a variety of investments vehicles, only one of which is ChoicePoint stock. Shareholders who have any questions or concerns about corporate policies and disclosure are urged to contact the Company's Investor Relations office. CHOICEPOINT 2002 ANNUAL REPORT 17 MANAGEMENT'S DISCUSSION AND ANALYSIS ChoicePoint 2002 Annual Report OVERVIEW ChoicePoint Inc. (NYSE:CPS), a Georgia corporation ("ChoicePoint" or the "Company"), is the leading provider of identification and credential verification services for making smarter decisions in a world challenged by the reality of risks. Serving the needs of business, government, non- profit organizations and individuals, ChoicePoint works to create a safer and more secure society through the responsible use of information while ensuring the protection of personal privacy. For more information, visit the Company's Web site at www.choicepoint.com. ChoicePoint's businesses are focused on three primary markets - Insurance Services, Business & Government Services and Marketing Services. The Insurance Services group ("Insurance") provides information products and services used in the underwriting and claims processes by property and casualty insurers. Major offerings to the personal lines property and casualty market include claims history data, motor vehicle records, police records, credit information and modeling services. Additionally, ChoicePoint provides customized policy rating and issuance software and property inspections and audits to the commercial insurance market. Prior to the divestiture in August 2001 (see Note 4 to the Consolidated Financial Statements), ChoicePoint also provided laboratory testing services and related technology solutions to the life and health insurance market. The Business & Government Services group ("B&G") provides information products and services to Fortune 1000 corporations, consumer finance companies, asset-based lenders, legal and professional service providers, health care service providers, non-profit organizations, small businesses, consumers and federal, state and local government agencies. Major offerings include employment background screenings and drug testing administration services, public record searches, credential verification, due diligence information, Uniform Commercial Code searches and filings, DNA identification services, authentication services, and people and shareholder locator information searches. The Marketing Services group ("Marketing Services") provides direct marketing services to Fortune 1000 corporations, insurance companies and financial institutions. Marketing Services offers a full complement of products including data, print fulfillment, database and campaign management services, as well as Web-based solutions. RESULTS OF OPERATIONS Revenue
(In thousands) Year Ended December 31, 2002 2001 % Change 2000 % Change -------- -------- -------- -------- -------- Revenue: Insurance Services $332,521 $281,046 18% $235,737 19% Business & Government Services 308,761 267,409 15% 233,270 15% Marketing Services 105,833 76,461 38% 63,549 20% Royalty 5,855 6,808 -14% 6,364 7% -------- -------- --- -------- --- Core Revenue 752,970 631,724 19% 538,920 17% -------- -------- --- -------- --- Divested and discontinued product lines 72 24,243 n/m 54,613 n/m -------- -------- --- -------- --- Revenue without reimbursable expenses 753,042 655,967 15% 593,533 11% Reimbursable expenses per EITF 01-14 38,520 38,028 37,392 -------- -------- --- -------- --- Total revenue $791,562 $693,995 14% $630,925 10% ======== ======== === ======== ===
The Company's revenue grew 14%, or $97.6 million, to $791.6 million in 2002 and 10%, or $63.1 million, to $694.0 million in 2001 from $630.9 million in 2000. This revenue includes certain reimbursed out-of-pocket expenses in the Marketing Services segment totaling $38.5 million in 2002, $38.0 million in 2001, and $37.4 million in 2000. In accordance with Emerging Issues Task Force ("EITF") No. 01-14 (see Note 3 to the Consolidated Financial Statements), the Company has presented these reimbursable expenses on a gross basis as revenues and expenses. As these expenses are fully reimbursed, without mark-up, by our clients and in a majority of the cases prepaid by the customers, there is no impact on operating income, net income, earnings per share ("EPS"), cash flows or the balance sheet; therefore, we have excluded the impact of these reimbursable expenses from the discussions below. We believe that core revenue is a more appropriate way to measure the revenue growth of our Company; therefore, all of the following revenue discussions are based on core revenue which excludes the impact of the reimbursable expenses and divested and discontinued product lines. CONSOLIDATED RESULTS 2002 vs. 2001 Core revenue, which excludes revenue from reimbursable expenses, our laboratory services business sold in August 2001 and other discontinued product lines, grew 19%, or $121.2 million, from 2001 to 2002. Consolidated internal revenue growth, which also excludes the effect of revenue from acquisitions, was 12% in 2002. Revenue growth in 2002 was driven primarily from continued strong unit performances in all of the Insurance products and services, contributions from our homeland security initiatives in our B&G product lines and acquisitions in our Marketing Services segment. 2001 vs. 2000 Core revenue grew 17%, or $92.8 million, from 2000 to 2001. Consolidated internal revenue growth, which excludes the effect of revenue from purchased acquisitions and divestitures, was 8% in 2001. Revenue growth in 2001 resulted primarily from strong unit growth across our Insurance products and services and acquisitions in our B&G and Marketing Services segments. 18 CHOICEPOINT 2002 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2002 Annual Report BUSINESS SEGMENT RESULTS Insurance Services 2002 vs. 2001 In 2002, Insurance Services' revenue was $332.5 million, up 18%, or $51.5 million, from $281.0 million in 2001. This growth was driven by continued strong unit performance in the personal lines business led by volume increases in C.L.U.E.(R) Property, NCF(TM) (National Credit File) and C.L.U.E. Auto, and strong demand for our commercial insurance products. During 2002, the Company acquired L&S Report Service, Inc. and Accident Report Services, Inc., to further enhance the Company's police records product line in our personal lines business. Also, in August 2001, the Company sold its laboratory services business. Excluding these transactions, internal revenue growth in Insurance Services was 18% for 2002 over 2001. 2001 vs. 2000 Revenue from Insurance Services grew $45.3 million, or 19%, to $281.0 million from $235.7 million in 2000, driven by strong unit performance, the introduction of new personal lines products, and continued growth in our commercial inspection and commercial software businesses. During 2001, the Company acquired Insurity Solutions, Inc., a provider of Internet-based rating, underwriting, and policy-servicing tools to complement its existing policy rating and issuance software business, and disposed of a component of its laboratory services business. Excluding these transactions, comparable internal revenue growth over 2000 was 17%. Business & Government Services 2002 vs. 2001 Business & Government Services' revenue for 2002 increased $41.4 million, or 15%, to $308.8 million from $267.4 million in 2001. This growth was driven primarily by our continued success in our homeland security initiatives including providing analytical and data services to U.S. law enforcement and background screening for transportation security agencies. Excluding homeland security initiatives, revenue growth from share gains in the core business and from new products such as National Criminal File, DEBTOR Discovery(SM) and AutoTrack(R) International was offset by the continued soft hiring and economic environments. During 2002, the Company acquired Resident Data, Inc., a residential screening services provider to apartment management companies, and Vital Chek Network, Inc. ("VitalChek"), a provider of proprietary technology and data management services that facilitate the remote ordering of certified birth, death, marriage and divorce certificates, to further expand its B&G product line offerings. Comparable internal growth in B&G from 2001 to 2002 excluding these acquisitions was 8%. 2001 vs. 2000 Revenue from Business & Government Services was $267.4 million in 2001, an increase of $34.1 million, or 15%, from $233.3 million in 2000. This revenue increase was primarily due to acquisitions made in 2001, tempered by general economic conditions which impacted our base business. During 2001, the Company acquired BTi Employee Screening Services, Inc., a pre-employment background screening organization; ABI Consulting, Inc., a third-party administrator of employee drug testing programs; The Bode Technology Group, Inc., a premier provider of DNA identification services; the pre-employment and drug testing businesses of Pinkerton's, Inc., a unit of Securitas AB of Sweden; and certain assets of National Medical Review Offices, Inc., a large provider of medical review office services. There was no comparable internal revenue growth for Business & Government Services excluding these acquisitions for 2001 compared to 2000. Marketing Services 2002 vs. 2001 In 2002, core revenue increased $29.4 million, or 38%, to $105.8 million from $76.5 million, primarily due to acquisitions. During 2002, the Company acquired the insurance market on-line consumer credit reporting, marketing and pre-screen list extract services business of Experian Information Solutions, Inc. and Total eData Corporation, an e-mail database company which gives ChoicePoint an entry into a new and growing market. Excluding these acquisitions, internal revenue growth was 5% for 2002 over 2001. 2001 vs. 2000 Revenue from Marketing Services was $76.5 million in 2001, an increase of $12.9 million, or 20%, from $63.6 million in 2000. This increase was driven primarily by the acquisition of Marketing Information & Technology, Inc., a provider of large-scale marketing systems for Fortune 500 clients, in July 2001 and the expansion of our telemarketing business, offset slightly by the impact of general economic conditions on our direct mailing and database fulfillment product lines. Excluding the acquisition, comparable internal revenue growth over 2000 was 2%. OTHER RESULTS Royalty revenue from laser technology patents held by the Company decreased to $5.9 million from $6.8 million in 2001 and $6.4 million in 2000. The remaining patents underlying this revenue expire between November 2004 and May 2005 (see Note 3 to the Consolidated Financial Statements). Divested and discontinued product lines include the operating results from the laboratory services business sold in August 2001, ChoicePoint Limited, the Company's United Kingdom-based insurance division sold in January 2000, and certain other product lines which were, primarily as a result of the merger with DBT Online, Inc. ("DBT") in 2000 and the subsequent integration of the two public records businesses, determined to be duplicative in nature or contrary to ChoicePoint's strategic goals and, hence, discontinued (see Note 4 to the Consolidated Financial Statements). CHOICEPOINT 2002 ANNUAL REPORT 19 MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2002 Annual Report OPERATING INCOME (In thousands)
Pro forma Year Ended December 31, 2002 2001(*) 2001 2000 --------- --------- --------- --------- Operating income: Insurance Services $ 155,391 $ 129,291 $ 127,745 $ 101,994 Business & Government Services 69,424 56,203 45,089 29,377 Marketing Services 32,866 26,391 22,185 19,285 Royalty 3,326 4,400 4,400 3,804 Reimbursable expenses -- -- -- -- Divested and discontinued product lines (206) (968) (1,771) 8,045 Corporate and shared expenses (60,185) (49,278) (49,278) (43,503) --------- --------- --------- --------- Operating income before merger-related costs, unusual items, and loss on sale of business 200,616 166,039 148,370 119,002 Merger-related costs and unusual items (7,384) (18,009) (18,009) (28,949) Loss on sale of business -- (10,853) (10,853) -- --------- --------- --------- --------- Operating income $ 193,232 $ 137,177 $ 119,508 $ 90,053 --------- --------- --------- ---------
OPERATING MARGINS
Pro forma Year Ended December 31, 2002 2001(*) 2001 2000 ---- --------- ---- ---- Operating income as reported, as a percentage of total revenue 24.4% 19.8% 17.2% 14.3% Operating income before merger-related costs, unusual items, and loss on sale of business, as a percentage of revenue without reimbursable expenses 26.6% 25.3% 22.6% 20.0%
(*) Pro forma 2001 represents operating income without goodwill amortization as if Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" had been adopted as of January 1, 2001. IN 2002, THE COMPANY DISCONTINUED AMORTIZING GOODWILL AND RECORDED A GOODWILL IMPAIRMENT OF $39.1 MILLION ($24.4 MILLION NET OF TAXES). CONSOLIDATED RESULTS 2002 vs. 2001 Consolidated operating income was $193.2 million in 2002 compared to $137.2 million in 2001 excluding goodwill amortization as if SFAS No. 142 had been adopted as of January 1, 2001. Operating income in 2002 includes a charge for $7.4 million of unusual items including a write-down of minority investments in start-up companies, asset impairments of technology initiatives, and costs related to the closure of two facilities (see Note 10 to the Consolidated Financial Statements). The improvement in margins, excluding unusual items, from 2001 (excluding goodwill amortization) to 2002 was primarily due to the strong revenue performance discussed above, the introduction of higher margin products, and our continued focus on improving cost efficiencies, offset slightly by increased investment in new business initiatives and resources to support the growth of the Company. 2001 vs. 2000 Consolidated operating income was $119.5 million in 2001 and $90.1 million in 2000 which includes goodwill amortization in both years, merger-related costs and unusual items of $18.0 million in 2001 and $28.9 million in 2000 primarily related to the merger with DBT and asset impairments (see Note 10 to the Consolidated Financial Statements). The loss on sale of business of $10.9 million in 2001 relates to the sale of the Company's laboratory services business in August 2001 (see Note 4 to the Consolidated Financial Statements). The improvement in margins from 2000 to 2001 was primarily due to the strong revenue performance discussed above, cost synergies realized in the integration of the Company's acquisitions, and continued focus on improving cost efficiencies. BUSINESS SEGMENT RESULTS Insurance Services 2002 vs. 2001 Insurance Services had 2002 operating income of $155.4 million, an increase of $27.6 million or 22%, compared with $127.7 million in 2001 ($129.3 million excluding goodwill amortization). This resulted in an operating margin of 46.7% of revenue in 2002 compared to 45.5% of revenue in 2001 (46.0% of revenue excluding goodwill amortization). The increase in operating income was primarily due to the increase in revenue discussed above. 2001 vs. 2000 Insurance Services had 2001 operating income of $127.7 million, an increase of $25.7 million, or 25%, from $102.0 million in 2000. This resulted in an operating margin of 45.5% during 2001, compared with 43.3% in 2000, primarily as a result of the revenue growth discussed above and continued focus on improving cost efficiencies. Business and Government Services 2002 vs. 2001 Business & Government Services had 2002 operating income of $69.4 million, an increase of $24.3 million or 54%, compared with $45.1 million ($56.2 million excluding goodwill amortization) in 2001. This resulted in an operating margin of 22.5% of revenue in 2002, compared to 16.9% of revenue (21.0% of revenue excluding goodwill amortization) in 2001. The margin increase from operating income excluding goodwill amortization in 2001 is primarily due to revenue contributions from our homeland security initiatives, the growth of higher margin products such as National Criminal File, and our continued focus on cost controls. 20 CHOICEPOINT 2002 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2002 Annual Report 2001 vs. 2000 Business & Government Services had operating income of $45.1 million in 2001, an increase of $15.7 million, or 53%, over the prior year, resulting in an operating margin of 16.9% during 2001 compared with 12.6% in 2000. This improvement was primarily the result of the cost synergies realized in the integration of the Company's acquisitions, including the merger of DBT, and aggressive cost control efforts. Marketing Services 2002 vs. 2001 Marketing Services had 2002 operating income of $32.9 million, an increase of $10.7 million or 48%, compared with $22.2 million ($26.4 million excluding goodwill amortization) in 2001. This resulted in an operating margin of 31.1% of core revenue in 2002, down from 34.5% of core revenue excluding goodwill amortization in 2001 (29.0% of core revenue including goodwill amortization). The margin decrease from operating income excluding goodwill amortization in 2001 is primarily due to a one-time project in 2001 that generated higher-than-average margins throughout the year. 2001 vs. 2000 Marketing Services had 2001 operating income of $22.2 million, an increase of $2.9 million, or 15%, over the prior year, resulting in an operating margin of 29.0% during 2001 compared with 30.3% in 2000. The slight decline in margin was primarily a result of lower margins in the business unit acquired during its integration into the Company's Marketing segment and due to the intangible amortization from the acquisition. Corporate and Shared Expenses Corporate and shared expenses included in selling, general, and administrative costs represent costs of support functions, research and development initiatives, incentives, and profit sharing that benefit Insurance Services, Business & Government Services, and Marketing Services. The increase to $60.2 million in 2002 from $49.3 million in 2001 and $43.5 million in 2000 is primarily due to the increase in compensation expense recognized under employee stock plans and incentives and additional resources to support the growth of the Company. Corporate and shared expenses as a percentage of revenue without reimbursable expenses were approximately 8% in 2002, 8% in 2001, and 7% in 2000. Interest Expense, net Interest expense, net decreased from $11.7 million in 2000 to $10.5 million in 2001 and $7.8 million in 2002. Lower interest rates and lower average borrowings, due to increased earnings and working capital management and the expiration of the interest rate swap with a notional amount of $125 million (see Note 5 to the Consolidated Financial Statements) were responsible for the decrease in interest expense. Interest expense in 2000 is also net of interest income from short-term investments of $882,000. ChoicePoint has entered into four interest rate swap agreements to reduce the impact of changes in its benchmark interest rate (LIBOR) on its LIBOR-based payments on the synthetic leases (see Note 5 to the Consolidated Financial Statements). Income Taxes In 2002, the provision for income taxes was $71.2 million before cumulative effect of change in accounting principle compared to $58.7 million in 2001 and $34.5 million in 2000. The increase in the tax provision is primarily a result of increased earnings. The tax provision in 2001 includes tax expense of $10.5 million related to the sale of our laboratory services business. ChoicePoint's overall effective tax rates were 38.6% in 2002 down from 39.7% (53.8% including the effect of merger-related costs, unusual items, and loss on sale of business) in 2001 due to the elimination of non-deductible goodwill amortization. The 2001 tax provision was down from 40.0% (44.0% including the effect of merger-related costs and unusual items) in 2000 due to implementation of state and local tax planning initiatives. FINANCIAL CONDITION AND LIQUIDITY AND MARKET RISK, INCLUDING OFF-BALANCE SHEET ITEMS The Company is exposed to market risk from changes in interest rates. The information below summarizes the Company's market risk associated with its debt obligations as of December 31, 2002. The information below should be read in conjunction with Note 5 to the Consolidated Financial Statements. The Company's sources of cash liquidity include cash and cash equivalents, cash from operations, amounts available under credit facilities, and other external sources of funds. The Company's short-term and long-term liquidity depends primarily upon its level of net income, working capital management (accounts receivable, accounts payable and accrued expenses), and long-term debt. On May 10, 2002, ChoicePoint entered into a $325 million unsecured revolving credit facility (the "Credit Facility") with a group of banks that extends through a termination date of May 2005 and bears interest at variable rates based on LIBOR plus an applicable margin. Total borrowings under the Credit Facility were $95.0 million at December 31, 2002. Prior to May 10, 2002, the Company had a $250 million unsecured revolving credit facility (the "Former Credit Facility") (see Note 5 to the Consolidated Financial Statements). Total borrowings under the Former Credit Facility were $155.0 million at December 31, 2001. In July 2001, the Company and certain of its subsidiaries entered into an agreement (the "Receivables Facility") with a financial institution whereby it may sell on a continuous basis, an undivided interest in all eligible trade accounts receivable subject to limitations. The Company will maintain the balance in the designated pool of accounts receivable sold by selling undivided interests in new receivables as existing receivables are collected. The Receivables Facility permits the advance of up to $100 million on the sale of accounts receivable, may be extended in one-year terms, and has been extended to July 2003. The Receivables Facility, which does not qualify for off-balance sheet treatment under SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" due to certain contractual removal-of-accounts provisions, has been recorded as an on-balance sheet financing transaction. The Company believes the Receivables Facility provides a low cost of financing and is an additional source of debt capital with diversification from other alternatives. Net proceeds from the Receivables Facility were $85.0 million at December 31, 2002 and were used to finance a portion of the VitalChek acquisition (see Note 4 to the Consolidated Financial Statements). There were no sales of accounts receivable during 2001. CHOICEPOINT 2002 ANNUAL REPORT 21 MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2002 Annual Report In addition, there was $2.4 million of other long-term debt and capital leases outstanding at December 31, 2002 and $3.8 million outstanding at December 31, 2001. ChoicePoint may use additional borrowings under the Credit Facility and Receivables Facility to finance acquisitions and for general corporate cash requirements. The Company may desire to obtain additional long-term financing for other uses of cash or for strategic reasons. The Company anticipates no difficulty in obtaining long-term financing based on favorable experiences in the debt market in the recent past. ChoicePoint may also utilize lines of credit with two banks for overnight borrowings; however, no such borrowings were out- standing at December 31, 2002 or 2001. OFF-BALANCE SHEET ITEMS CONSIST OF TWO SYNTHETIC LEASES - ONE ON THE COMPANY'S HEADQUARTERS BUILDING AND THE OTHER TO FINANCE THE CONSTRUCTION OF THE COMPANY'S NEW DATA CENTER FACILITY. Off-Balance Sheet Items In 1997, the Company entered into a $25 million synthetic lease agreement for the Company's headquarters building. Under the synthetic lease agreement, a third-party lessor purchased the property, paid for the construction and leased the building to the Company. In 2001, the Company entered into another synthetic lease agreement for up to $52 million to finance the construction of its data center facility that will be completed in mid 2003. Both leases expire in 2007, at which time the Company has the following options for each lease: renew the lease for an additional five years, purchase the building for the original cost or remarket the property. If the Company elects to remarket the property, ChoicePoint must guarantee the lessor 80% to 85% of the original cost. The Company has accounted for the synthetic leases as operating leases and has recorded rent expense. The Financial Accounting Standards Board ("FASB") has recently issued Interpretation No. 46, "Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51" ("FIN 46") that might change current generally accepted accounting principles in the United States of America related to synthetic leases. The Company is currently evaluating the impact of this new standard, which may require the Company to modify its synthetic leases to maintain off-balance sheet treatment. If the Company had elected to purchase the properties instead of entering into the synthetic leases or if the Company was required to change its accounting for the synthetic leases based on a new accounting principle, our assets and debt would have increased by $54.3 million at December 31, 2002 and the Company would have recorded additional depreciation expense related to the $25 million synthetic lease of approximately $800,000 for the years ended December 31, 2002 and 2001. No depreciation would have been recorded related to the amount drawn down under the $52 million synthetic lease since the data center facility is still under construction. If the Company was required to change its accounting for the synthetic leases, estimated depreciation expense would be approximately $1.4 million in 2003 and $2.2 million annually for 2004 through 2007. Derivatives Derivative financial instruments at December 31, 2002 consist of four interest rate swap agreements entered into to reduce the impact of changes in a benchmark interest rate (LIBOR) on the Company's LIBOR-based payments on the Company's synthetic leases. At December 31, 2002, the total notional amount under these swap agreements was $67 million and they involve the receipt of a variable rate and payment by ChoicePoint of fixed rates between 4.6% and 6.5%. Amounts currently due to or from interest rate swap counterparties are recorded as expense in the period in which they accrue. The Company does not enter into derivative financial instruments for trading or speculative purposes. As of December 31, 2002, the fair value of the outstanding interest rate swap agreements was a liability of $4.8 million which has been recorded net of taxes in accumulated other comprehensive loss in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (see Notes 3 and 5 to the Consolidated Financial Statements). The Company previously had a fifth interest rate swap agreement with a notional amount of $125 million to limit the effect of changes in the benchmark interest rate (LIBOR) on $125 million of the Company's borrowings. This interest rate swap agreement expired in August 2002. Contractual Obligations and the Related Future Payments (In thousands)
Payments Due by Period Total 2003 2004 2005 Thereafter -------- -------- ------- -------- ---------- Debt $182,100 $ 85,130 $ 130 $ 95,140 $ 1,700 Capital lease obligations 346 257 74 15 -- Operating leases and other commitments 64,596 17,586 14,954 11,729 20,327 -------- -------- ------- -------- ------- Total contractual cash obligations $247,042 $102,973 $15,158 $106,884 $22,027 -------- -------- ------- -------- -------
22 CHOICEPOINT 2002 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2002 Annual Report We believe that our existing cash balance, available debt capacity, and cash flows from operations will be sufficient to meet our working capital and capital expenditure requirements for the next 12 months. However, any material variance of our operating results from our projections or the investments in or acquisitions of businesses, products, or technologies could require us to obtain additional equity or debt financing. Based on the Company's overall interest rate exposure at December 31, 2002, a 1% change in interest rates would result in a change in annual pretax interest expense of approximately $1.8 million based on the Company's current level of borrowing. As noted above, as of December 31, 2002, $54.3 million is outstanding under the synthetic lease agreements, the LIBOR-based payments of which are hedged with the swap agreements. In addition, $95.0 million is outstanding under the Credit Facility and $85.0 million is outstanding under the Receivables Facility. Cash and cash equivalents totaled $34.4 million as of December 31, 2002. Cash provided by operations increased from $110.2 million in 2000 to $127.5 million in 2001 and $168.8 million in 2002. These increases were primarily attributable to the increase in net income, as adjusted for depreciation and amortization. In 2002, ChoicePoint continued to invest in future growth and used $187.0 million for acquisitions, net of cash acquired, $19.8 million for property and equipment, and $29.2 million for other asset additions (primarily internally developed and externally purchased software). During 2001, ChoicePoint used $154.3 million for acquisitions net of cash acquired, $18.9 million for property and equipment, and $31.8 million for other asset additions (primarily purchased data files and internally developed and externally purchased software). During 2000, ChoicePoint invested $110.4 million for acquisitions net of cash acquired, $14.5 million for property and equipment, and $16.5 million for other asset additions (primarily purchased data files and internally developed and externally purchased software). Cash provided by financing activities of $47.9 million in 2002 was primarily generated through borrowings under the Credit Facility and Receivables Facility to fund acquisitions. Cash provided by the exercise of stock options of $26.6 million and net borrowings of $14.0 million on long-term debt provided cash from financing activities in 2001 compared to cash used by financing activities of $14.6 million in 2000. The Company currently anticipates full-year capital expenditures for 2003 to be in the range of $45 million to $50 million, which is consistent with 2002 and will be used primarily for the continued development of the new public records technology platform, new product development, system upgrades, furniture and equipment for the new data center facility, purchased data files and internally developed and externally purchased software. Earnings before interest, taxes, depreciation, and amortization ("EBITDA") excluding merger-related costs, unusual items, and loss on sale of business increased $38.5 million, or 19%, to $246.4 million in 2002 from $207.9 million in 2001 and $172.6 million in 2000. EBITDA as a percentage of revenue without reimbursable expenses increased from 29.1% in 2000 to 31.7% in 2001 and to a record 32.7% in 2002 due to ChoicePoint's strong operating performance and ability to control costs in a tough economic environment. The Company has included EBITDA data (which is not a measure of financial performance under accounting principles generally accepted in the United States of America) because such data is used by certain investors to analyze and compare companies on the basis of operating performance, leverage and liquidity, and to determine a company's ability to service debt. EBITDA is not presented as a substitute for income from operations, net income, or cash flows from operating activities. Economic Value Added(R) ("EVA") measures the value created in excess of the cost of capital used to run the business. The Company uses EVA as a performance measure to make operational, capital, and compensation decisions. EVA increased $13 million in 2002 and $10 million in 2001 due primarily to strong operating results and capital management. The Company uses cash generated to invest in growing the business and to fund acquisitions and operations. Therefore, no cash dividends have been paid and the Company does not anticipate paying any cash dividends on its common stock in the near future. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE Effective January 1, 2002, ChoicePoint adopted new accounting rules for goodwill and certain intangible assets. Among the requirements of the new rules is that goodwill and certain intangible assets be assessed for impairment using fair value measurement techniques. During the second quarter of 2002, the Company completed its impairment review and recorded a $39.1 million non-cash pretax charge ($24.4 million net of taxes) for the impairment of goodwill resulting primarily from the EquiSearch Services, Inc. acquisition in 1998 and the Internet business the Company acquired as part of the DBT merger in May 2000. The charge is non-operational in nature and is reflected as a cumulative effect of change in accounting principle in the accompanying consolidated financial statements (see Note 3 to the Consolidated Financial Statements). In order to enhance comparability, the Company compares current year results to the prior year, exclusive of this charge. NEW ACCOUNTING PRONOUNCEMENTS In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which requires companies to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred (see Note 3 to the Consolidated Financial Statements). SFAS No. 143 is effective for the Company beginning in 2003. We are currently evaluating the impact of this statement on our Consolidated Financial Statements but do not expect that its adoption will have a material impact on the Company's future consolidated results of operations. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" which requires costs associated with exit or disposal activities to be recognized when the costs are incurred, rather than at a date of commitment to an exit or disposal plan. The FASB bases the accrual of an exit or disposal cost on the existence of a liability that constitutes an "obligation" both legally and socially as defined under FASB Statement of Concept No. 6. SFAS No. 146 is effective for disposal activities initiated after December 31, 2002. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," ("FIN 45"). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guaranty, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for the Company as of December 31, 2002. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or CHOICEPOINT 2002 ANNUAL REPORT 23 MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2002 Annual Report modified after December 31, 2002. As of December 31, 2002, there is no impact of this statement on our Consolidated Financial Statements. In January 2003, the FASB issued FIN 46, which addresses consolidation of business enterprises of variable interest entities ("VIE") and requires companies with a controlling financial interest in a VIE to include the assets, liabilities and results of activities of the VIE in the consolidated financial statements of the company. FIN 46 is effective immediately for VIE's created after January 31, 2003 and is effective for the quarter ending June 30, 2003 for all VIE's that existed prior to January 31, 2003. The Company has accounted for the synthetic leases as operating leases and has recorded rent expense. FIN 46 might change current generally accepted accounting principles in the United States of America related to synthetic leases. The Company is currently evaluating the impact of this new standard which may require the Company to modify its synthetic leases to maintain off-balance sheet treatment. CRITICAL ACCOUNTING POLICIES The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the Company to make estimates and assumptions which may be revised over time as new information and regulations become available. The Company believes that of its significant accounting policies (see Note 3 to the Consolidated Financial Statements), the following may involve a higher degree of judgment and complexity: Purchase price allocation: Over its history, the Company's growth has been partly driven by acquisitions. The application of the purchase method of accounting requires companies to assign values to acquired assets and liabilities, including intangible assets acquired based on their fair value. The determination of fair value for acquired assets, particularly intangible assets, requires a high degree of judgment, and estimates often involve significant subjectivity due to the lack of transparent market data or listed market prices. The Company generally uses internal cash flow models and other evaluations as well as third-party appraisals in determining the fair value of assets acquired; however, the use of different valuation models or assumptions could result in different amounts of goodwill and other acquisition intangible assets and different lives for amortizable intangible assets. As of December 31, 2002, certain of the Company's 2002 purchase price allocations were based on preliminary estimates which may be revised in 2003 as final third-party appraisals are received or as estimates and assumptions are finalized (see Note 4 to the Consolidated Financial Statements). The Company does not anticipate that these revisions would be significant to the financial statements taken as a whole. Impairment charges: On January 1, 2002, ChoicePoint adopted SFAS No. 142. ChoicePoint has assessed its goodwill and other indefinite life assets for impairment during the year ended December 31, 2002, and is required to assess these assets on at least an annual basis thereafter (see Notes 3 and 4 to the Consolidated Financial Statements). In assessing the recoverability of these intangible assets, the Company must make assumptions regarding the estimated future cash flows to determine fair value of the respective assets. These assumptions may change in the future due to economic conditions or in connection with the sale or integration of the Company's business units, at which time, ChoicePoint may be required to record impairment charges for these assets. Upon completion of our analysis for goodwill impairment in the second quarter of 2002 in accordance with the adoption of SFAS No. 142, ChoicePoint recorded a non-cash charge of $39.1 million ($24.4 million net of taxes) to reduce the carrying value of its goodwill retroactive to January 1, 2002. In calculating the goodwill impairment charge, the fair value of the impaired reporting units was estimated using a discounted cash flow methodology. This impairment charge is due to increased competition and pricing pressures and relates primarily to goodwill recorded in the 1998 acquisition of EquiSearch Services, Inc. and good- will related to the Internet business acquired as part of the DBT Merger in May 2000. The Company also completed its annual goodwill impairment review as of October 31, 2002. No additional impairment charge was recorded as a result of this review based on estimated future cash flows as compared to the current book value of long-lived assets. If the Company had assumed a 10% reduction in its estimated annual cash flows, it would have recorded additional impairment of less than $2 million in the above analyses. For the other acquisition intangible assets such as purchased software, customer relationships and non-compete agreements, the Company is required to assess them for impairment whenever indicators of impairment exist in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." During 2002, there were no indicators of impairment related to these assets. The Company periodically reviews and reevaluates the assumptions used for assessing the recoverability of its intangible assets and adjusts them as necessary. As discussed in Note 10 to the Consolidated Financial Statements, in connection with selling and integrating certain business operations, the Company has recorded asset impairment charges for data and software assets that will no longer be used. Inherent in the assumptions used in impairment analyses are certain significant management judgments and estimates. The Company periodically reviews and reevaluates these assumptions and adjusts them as necessary. Software developed for internal use: As discussed in Note 3 to the Consolidated Financial Statements, the Company capitalizes certain direct costs incurred in the development of internal use software. Amortization of such costs as cost of sales is done on a straight-line basis generally over three to five years. The Company evaluates the recoverability of capitalized costs periodically or as changes in circumstance suggest a possible impairment may exist in accordance with SFAS No. 144. Primarily in connection with the DBT merger and integration of the Company's public records businesses, capitalized software costs were written down by $3.0 million in 2002, $2.7 million in 2001, and $2.1 million in 2000. Amortization of capitalized software costs amounted to $10.1 million in 2002, $6.7 million in 2001, and $5.9 million in 2000. Postretirement benefit obligations: In connection with developing the Company's projected liabilities for postretirement benefits, management is required to make estimates and assumptions which affect the reported amounts of the liability as of the date of the financial statements and the amount of expense recognized during the period. The liability is developed based on currently available information, estimates of future trends and actuarial assumptions provided by the Company's independent actuaries including a discount rate of 6.75% and an initial health care cost trend rate of approximately 13%. A 0.25% decrease or increase in the discount rate (to 6.5% or 7.0%) would result in a change in the liability of approximately $600,000. Actual results could differ from these estimates. See Note 8 to the Consolidated Financial Statements for a discussion of the impact of changes in health care cost trend rates. 24 CHOICEPOINT 2002 ANNUAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2002 Annual Report SUBSEQUENT EVENTS In January 2003, ChoicePoint acquired two entities, National Data Retrieval, Inc., one of the nation's leading providers of public records information for bankruptcies, civil judgments, and federal and state tax liens based in Alpharetta, Georgia, and The List Source, Inc. d/b/a Kramer Lead Marketing Group, a marketing company servicing the life & health insurance and financial services markets based in Dallas, Texas. The total purchase price of these acquisitions was approximately $38 million and was paid in cash (see Note 14 to the Consolidated Financial Statements). In February 2003, the Company sold substantially all of the assets of its CP Commercial Specialists ("CPCS") business to an affiliate of New Mountain Capital, LLC for approximately $87 million in cash. This transaction is the culmination of the transformation of ChoicePoint to a data-driven and technology-oriented business. The sale resulted in a gain of approximately $33 million (net of taxes) which will be recorded in the first quarter of 2003 (see Note 14 to the Consolidated Financial Statements). FORWARD-LOOKING STATEMENTS Certain written and oral statements made by or on behalf of the Company, including information in this Annual Report, constitute "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Words or phrases such as "should result," "are expected to," "we anticipate," "we estimate," "we project," or similar expressions are intended to identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statements. These risks and uncertainties include, but are not limited to, the following important factors: demand for the Company's services, product development, maintaining acceptable margins, maintaining secure systems, ability to control costs, and the impact of federal, state, and local regulatory requirements on the Company's business, specifically the public records market and privacy matters affecting the Company, the impact of competition and customer consolidations, ability to continue our long-term business strategy including growth through acquisition, ability to attract and retain qualified personnel, and the uncertainty of economic conditions in general. Additional information concerning these risks and uncertainties is contained in the Company's filings with the Securities and Exchange Commission ("SEC"), including the Company's Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made, and the Company undertakes no obligation to publicly update these statements based on events that may occur after the date of this report. CHOICEPOINT 2002 ANNUAL REPORT 25 REPORT OF MANAGEMENT ChoicePoint 2002 Annual Report The management of ChoicePoint Inc. has the responsibility for preparing the accompanying financial statements, and for their integrity and objectivity. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States and, as such, include amounts based on management's best estimates and judgments. Management is further responsible for maintaining a system of internal control and related policies and procedures designed to provide reasonable assurance that assets are adequately safeguarded and that the accounting records reflect transactions executed in accordance with management's authorization. An independent assessment of the system of internal control is performed by the Company's internal audit staff in order to confirm that the system is adequate and operating effectively. The Company's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for purposes of expressing an opinion on the financial statements. The audit committee of the board of directors, consisting solely of outside directors, meets periodically with financial management, internal audit, and the independent public accountants to review internal accounting controls and accounting, auditing, and financial reporting matters. The committee recommends to the board of directors appointment of the independent auditors. Both the internal auditors and the independent auditors have access to the audit committee, with or without the presence of management. /s/ Derek V. Smith /s/ Steven W. Surbaugh /s/ David E. Trine -------------------- -------------------- ------------------------------ Derek V. Smith Steven W. Surbaugh David E. Trine Chairman and Chief Financial Officer Treasurer and Corporate Controller Chief Executive Officer

26 CHOICEPOINT 2002 ANNUAL REPORT REPORT OF INDEPENDENT AUDITORS ChoicePoint 2002 Annual Report To the Board of Directors and Shareholders of ChoicePoint Inc.: We have audited the consolidated balance sheet of ChoicePoint Inc. and subsidiaries (the "Company") as of December 31, 2002, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audit. The consolidated financial statements of ChoicePoint Inc. as of December 31, 2001, and for each of the two years in the period ended December 31, 2001, before the revisions described in Notes 3, 7, and 11 to the consolidated financial statements, were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those consolidated financial statements in their report dated February 15, 2002. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such 2002 consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142 in 2002. As discussed above, the consolidated financial statements of ChoicePoint Inc. as of December 31, 2001 and for each of the two years in the period ended December 31, 2001 were audited by other auditors who have ceased operations. These consolidated financial statements have been revised as follows: - - As described in Note 7, the Company effected a four-for-three stock split in 2002. All share and per share data presented have been retroactively adjusted to reflect the split. - - As described in Note 3, the Company adopted the provisions of Emerging Issues Task Force 01-14, Income Statement Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred ("EITF 01-14") and therefore revised certain revenues and expenses to conform to the presentation requirements of EITF 01-14. - - As described in Note 11, the Company changed the composition of its reportable segments in 2002, and the amounts in the 2001 and 2000 consolidated financial statements relating to reportable segments have been revised to conform to the 2002 composition of reportable segments. - - As described in Note 3, these consolidated financial statements have been revised to include the disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), which was adopted by the Company as of January 1, 2002. We audited the adjustments described in Notes 3, 7, and 11 that were applied to revise the 2001 and 2000 consolidated financial statements. We also audited the transitional SFAS 142 disclosures described in Note 3. In our opinion, such adjustments and disclosures are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 consolidated financial statements of the Company other than with respect to such adjustments and disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 consolidated financial statements taken as a whole. /s/ Deloitte & Touche LLP ---------------------- Atlanta, Georgia February 21, 2003 (February 28, 2003 as to Note 14) CHOICEPOINT 2002 ANNUAL REPORT 27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ChoicePoint 2002 Annual Report To ChoicePoint Inc.: We have audited the accompanying consolidated balance sheets of ChoicePoint Inc. (a Georgia corporation) and subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 1999 consolidated financial statements of DBT Online, Inc. and subsidiaries, a company acquired during 2000 in a transaction accounted for as a pooling of interests as discussed in Note 2. Such statements are included in the consolidated financial statements of ChoicePoint Inc. and reflect revenue of 15% of the related consolidated total for the year ended December 31, 1999. These statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for DBT Online, Inc. and subsidiaries, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ChoicePoint Inc. and subsidiaries as of December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States. Arthur Andersen LLP Atlanta, Georgia February 15, 2002 EXPLANATORY NOTE REGARDING REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS On March 21, 2002, ChoicePoint Inc. decided to no longer engage Arthur Andersen LLP as its independent public accountants and engaged Deloitte & Touche LLP to serve as its independent public accountants for the year ending December 31, 2002. More information regarding ChoicePoint Inc.'s change in independent public accountants is contained in a current report on Form 8-K filed with the SEC on March 22, 2002. We could not obtain permission of Arthur Andersen LLP to the inclusion in this Annual Report on Form 10-K of their Report of Independent Public Accountants above. Accordingly, the report of Arthur Andersen LLP above is merely reproduced from ChoicePoint Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001 (although the consolidated balance sheet as of December 31, 2000 and the consolidated statements of income, shareholders' equity, and cash flows for the year ended December 31, 1999 referred to in that report are not included herein) and does not include the manual signature of Arthur Andersen LLP. 28 CHOICEPOINT 2002 ANNUAL REPORT CONSOLIDATED STATEMENTS OF INCOME ChoicePoint 2002 Annual Report
(In thousands, except per share data) Year Ended December 31, 2002 2001 2000 -------- -------- -------- Revenue before reimbursable expenses $753,042 $655,967 $593,533 -------- -------- -------- Reimbursable expenses (Note 3) 38,520 38,028 37,392 -------- -------- -------- Total revenue 791,562 693,995 630,925 -------- -------- -------- Costs and expenses: Cost of services 407,762 385,839 343,994 Reimbursable expenses 38,520 38,028 37,392 Selling, general, and administrative 144,664 121,758 130,537 Loss on sale of business - 10,853 - Merger-related costs and unusual items 7,384 18,009 28,949 -------- -------- -------- Total costs and expenses 598,330 574,487 540,872 ------- ------- ------- Operating income 193,232 119,508 90,053 Interest expense, net 7,772 10,487 11,743 -------- -------- -------- Income before income taxes and cumulative effect of change in accounting principle 185,460 109,021 78,310 Provision for income taxes 71,217 58,687 34,488 -------- -------- -------- Income before cumulative effect of change in accounting principle 114,243 50,334 43,822 Cumulative effect of change in accounting principle, net of tax (Note 3) 24,416 - - -------- -------- -------- Net income $ 89,827 $ 50,334 $ 43,822 ======== ======== ======== Earnings per share (Notes 3 and 7) Basic: Before cumulative effect of change in accounting principle $ 1.36 $ 0.61 $ 0.55 Cumulative effect of change in accounting principle, net (0.29) -- -- -------- -------- -------- Net income $ 1.07 $ 0.61 $ 0.55 -------- -------- -------- Weighted average shares - basic 84,313 82,417 79,828 Diluted: Before cumulative effect of change in accounting principle $ 1.28 $ 0.58 $ 0.52 Cumulative effect of change in accounting principle, net (0.27) -- -- -------- -------- -------- Net income $ 1.01 $ 0.58 $ 0.52 ======== ======== ======== Weighted average shares - diluted 89,194 87,151 84,139
The accompanying notes are an integral part of these consolidated financial statements. CHOICEPOINT 2002 ANNUAL REPORT 29 CONSOLIDATED BALANCE SHEETS ChoicePoint 2002 Annual Report
(In thousands, except par values) December 31, 2002 2001 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 34,359 $ 53,033 Accounts receivable, net of allowance for doubtful accounts of $4,978 in 2002 and $4,634 in 2001 143,610 128,307 Deferred income tax assets 6,557 7,266 Other current assets 20,809 24,064 -------- -------- Total current assets 205,335 212,670 Property and equipment, net 66,221 64,929 Goodwill 578,608 450,912 Other acquisition intangible assets, net 42,572 27,180 Deferred income tax assets 12,672 9,183 Other 73,602 67,518 -------- -------- Total assets $979,010 $832,392 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt and current maturities of long-term debt $ 85,387 $156,426 Accounts payable 31,825 34,251 Accrued salaries and bonuses 37,801 33,697 Other current liabilities 47,683 60,315 -------- -------- Total current liabilities 202,696 284,689 Long-term debt, less current maturities 97,059 2,390 Postretirement benefit obligations 37,853 43,976 Other long-term liabilities 18,795 16,516 -------- -------- Total liabilities 356,403 347,571 -------- -------- Commitments and contingencies (Note 9) Shareholders' equity: Preferred stock, $0.01 par value; 10,000 shares authorized, no shares issued or outstanding -- -- Common stock, $0.10 par value; shares authorized - 400,000; issued - 86,555 in 2002 and 84,496 in 2001 8,655 8,450 Paid-in capital 345,426 297,612 Retained earnings 287,787 197,960 Cumulative other comprehensive loss (2,881) (3,635) Treasury stock, at cost, 1,065 shares in 2002 and 1,042 shares in 2001 (16,380) (15,566) -------- -------- Total shareholders' equity 622,607 484,821 -------- -------- Total liabilities and shareholders' equity $979,010 $832,392 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. SEE NOTES 5 AND 9 FOR DISCUSSION OF OFF-BALANCE SHEET ITEMS, AMOUNTS PLEDGED UNDER THE RECEIVABLES FACILITY AND OTHER COMMITMENTS. 30 CHOICEPOINT 2002 ANNUAL REPORT CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ChoicePoint 2002 Annual Report
Cumulative Other Comprehensive Common Paid-in Retained Comprehensive Treasury (In thousands) Income Stock Capital Earnings Loss Stock Total ------------- ------ -------- -------- ------------- --------- -------- Balance, December 31, 1999 $8,023 $219,376 $103,804 $ (476) $ (11,418) $319,309 Net income $43,822 -- -- 43,822 -- -- 43,822 Change in unrealized net loss on investments 255 -- -- -- 255 -- 255 Translation adjustments 129 -- -- -- 129 -- 129 ------- Comprehensive income $44,206 ------- Restricted stock plans, net (8) 275 -- -- -- 267 Stock options exercised 194 30,796 -- -- -- 30,990 Tax benefit of stock options exercised -- 6,297 -- -- -- 6,297 ------ -------- -------- -------- --------- -------- Balance, December 31, 2000 8,209 256,744 147,626 (92) (11,418) 401,069 Net income $50,334 -- -- 50,334 -- -- 50,334 Change in fair value of derivatives, net of deferred taxes of $2,400 (3,635) -- -- -- (3,635) -- (3,635) Translation adjustments 92 -- -- -- 92 -- 92 ------- Comprehensive income $46,791 ------- Restricted stock plans, net 14 2,530 -- -- -- 2,544 Stock options exercised 222 26,377 -- -- -- 26,599 Common stock redeemed -- -- -- -- (2,176) (2,176) Stock purchased by employee benefit trusts 5 (5) -- -- (1,972) (1,972) Tax benefit of stock options exercised -- 11,966 -- -- -- 11,966 ------ -------- -------- -------- --------- -------- Balance, December 31, 2001 8,450 297,612 197,960 (3,635) (15,566) 484,821 NET INCOME $89,827 -- -- 89,827 -- -- 89,827 CHANGE IN FAIR VALUE OF DERIVATIVES, NET OF DEFERRED TAXES OF $503 754 -- -- -- 754 -- 754 ------- COMPREHENSIVE INCOME $90,581 ------- RESTRICTED STOCK PLANS, NET (9) 2,791 -- -- -- 2,782 STOCK OPTIONS EXERCISED 214 25,050 -- -- -- 25,264 COMMON STOCK REDEEMED -- -- -- -- (814) (814) TAX BENEFIT OF STOCK OPTIONS EXERCISED -- 19,973 -- -- -- 19,973 ------ -------- -------- -------- --------- -------- BALANCE, DECEMBER 31, 2002 $8,655 $345,426 $287,787 $ (2,881) $ (16,380) $622,607 ====== ======== ======== ======== ========= ========
The accompanying notes are an integral part of these consolidated financial statements. CHOICEPOINT 2002 ANNUAL REPORT 31 CONSOLIDATED STATEMENTS OF CASH FLOWS ChoicePoint 2002 Annual Report
(In thousands) Year Ended December 31, 2002 2001 2000 --------- --------- --------- Cash flows from operating activities: Net income $ 89,827 $ 50,334 $ 43,822 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of change in accounting principle, net of tax 24,416 -- -- Depreciation and amortization 45,759 59,512 53,619 Provision for merger-related costs and unusual items 7,384 18,009 28,949 Pretax loss on sale of business -- 10,853 -- Compensation recognized under employee stock plans, net 2,782 2,544 239 Tax benefit of stock options exercised 19,973 11,966 6,297 Changes in assets and liabilities, excluding effects of acquisitions and divestitures: Accounts receivable, net (10,761) (7,817) 7,009 Other current assets 3,346 (10,617) (5,276) Deferred income taxes 10,120 6,023 4,145 Current liabilities, excluding debt (16,977) (11,772) (29,111) Other long-term liabilities, excluding debt (7,119) (1,536) 513 --------- --------- --------- Net cash provided by operating activities 168,750 127,499 110,206 --------- --------- --------- Cash flows from investing activities: Acquisitions, net of cash acquired (186,990) (154,259) (110,376) Cash proceeds from sale of businesses 650 49,000 1,500 Proceeds from sales or maturities of short-term investments -- -- 16,198 Additions to property and equipment, net (19,796) (18,880) (14,509) Additions to other assets, net (29,207) (31,797) (16,524) --------- --------- --------- Net cash used by investing activities (235,343) (155,936) (123,711) --------- --------- --------- Cash flows from financing activities: Payments on Former Credit Facility (155,000) (74,000) (120,000) Payments on Credit Facility (40,000) -- -- Borrowings under Former Credit Facility -- 90,000 75,000 Borrowings under Credit Facility 135,000 -- -- Borrowings under Receivables Facility 85,000 -- -- Payments on other debt, net (1,531) (1,982) (612) Redemption of common stock (814) (2,176) -- Purchases of stock held by employee benefit trusts -- (1,972) -- Proceeds from exercise of stock options 25,264 26,599 30,990 --------- --------- --------- Net cash provided (used) by financing activities 47,919 36,469 (14,622) --------- --------- --------- Effect of foreign currency exchange rates on cash -- 92 (65) Net (decrease) increase in cash and cash equivalents (18,674) 8,124 (28,192) Cash and cash equivalents, beginning of year 53,033 44,909 73,101 --------- --------- --------- Cash and cash equivalents, end of year $ 34,359 $ 53,033 $ 44,909 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 32 CHOICEPOINT 2002 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ChoicePoint 2002 Annual Report 1 NATURE OF OPERATIONS ChoicePoint Inc. (NYSE:CPS), a Georgia corporation ("ChoicePoint" or the "Company"), is the leading provider of identification and credential verification services for making smarter decisions in a world challenged by the reality of risks. Serving the needs of business, government, non-profit organizations and individuals, ChoicePoint works to create a safer and more secure society through the responsible use of information while ensuring the protection of personal privacy. For more information, visit the Company's Web site at www.choicepoint.com. ChoicePoint's businesses are focused on three primary markets - Insurance Services, Business & Government Services and Marketing Services. The Insurance Services group provides information products and services used in the underwriting and claims processes by property and casualty insurers. Major offerings to the personal lines property and casualty market include claims history data, motor vehicle records, police records, credit information and modeling services. Additionally, ChoicePoint provides customized policy rating and issuance software and property inspections and audits to the commercial insurance market. Prior to the divestiture in August 2001 (Note 4), ChoicePoint also provided laboratory testing services and related technology solutions to the life and health insurance market. The Business & Government Services group ("B&G") provides information products and services to Fortune 1000 corporations, consumer finance companies, asset-based lenders, legal and professional service providers, health care service providers, non-profit organizations, small businesses, consumers and federal, state, and local government agencies. Major offerings include employment background screenings and drug testing administration services, public record searches, credential verification, due diligence information, Uniform Commercial Code searches and filings, DNA identification services, authentication services and people and shareholder locator information searches. The Marketing Services group provides direct marketing services to Fortune 1000 corporations, insurance companies, and financial institutions. Marketing Services offers a full complement of products, including data, print fulfillment, teleservices, database and campaign management services, as well as Web-based solutions. 2 BASIS OF PRESENTATION ChoicePoint Inc. was established through the combination of the businesses that comprised the Insurance Services Group of Equifax Inc. ("Equifax") within a separate company and the subsequent spinoff on August 8, 1997 (the "Spinoff") of the Company's outstanding stock by Equifax as a stock dividend to the shareholders of Equifax. The consolidated financial statements include the accounts of ChoicePoint and its subsidiaries. All material transactions between entities included in the consolidated financial statements have been eliminated. On May 16, 2000, ChoicePoint completed a merger (the "Merger") with DBT Online, Inc. ("DBT"), a leading nationwide provider of online public records data and other publicly available information, by exchanging approximately 21.2 million shares (adjusted for stock splits - Note 7) of its common stock for all of the common stock of DBT. Each share of DBT was exchanged for .525 shares (pre-split) of ChoicePoint common stock. In addition, outstanding DBT stock options were converted at the same exchange ratio into options to purchase approximately 3.6 million shares of ChoicePoint common stock. The Merger has been accounted for as a pooling of interests, and accordingly, all prior period consolidated financial statements have been restated to include the combined results of operations and financial position. There were no material transactions between ChoicePoint and DBT prior to the Merger. No material adjustments were required to conform the accounting policies of the two companies. 3 SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. EARNINGS PER SHARE ("EPS") - Diluted EPS includes the dilutive effect of stock options (Note 7). RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform with the current year presentation. REVENUE AND EXPENSE RECOGNITION - ChoicePoint recognizes revenue when an agreement exists, prices are determinable, services and products are delivered, and collectibility is reasonably assured. Revenue for the majority of information products and services is generally billed on a transactional basis determined by customer usage with some fixed elements. Marketing Services revenues are recognized when projects are completed and delivered and are billed in accordance with contractual terms. Software revenues for our Insurance Services segment are generated primarily by licensing software systems (consisting of software and maintenance support) and providing professional services. Perpetual software arrangements require significant customization and are recognized under the percentage of completion method in accordance with Statement of Position ("SOP") 97-2, "Software Revenue Recognition" and SOP 81-1, "Accounting for Performance of Construction Type and Certain Product-Type Contracts," based on the terms and conditions in the contract. Changes in estimates to complete and revisions in overall profit estimates are recognized in the period in which they are determined. Multi-year software license agreements are recognized ratably over the term of the agreement. Maintenance and support agreements are marketed under annual or multi-year agreements and are recognized ratably over the period covered by the agreements. Software-related professional services are recognized as the service is performed. Certain software revenues from our Marketing Services segment represent hosting arrangements. The revenues and certain up-front costs related to these hosting arrangements are recognized ratably over the term of the agreement. The Company records certain revenue on a net basis. Motor vehicle records registry revenue (the fee charged by states for motor vehicle records) and other fixed costs that are passed on by ChoicePoint to its customers ("pass-through expense") are excluded from revenue and recorded as a reduction to cost of services in the consolidated financial statements. Pass-through expense was $491.7 million in 2002, $423.2 million in 2001, and $358.2 million in 2000. CHOICEPOINT 2002 ANNUAL REPORT 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report During 2002, the Company began applying the consensus reached in Emerging Issues Task Force ("EITF") Issue No. 01-14, "Income Statement Characterization of Reimbursements Received for `Out-of-Pocket' Expenses Incurred," ("EITF 01-14") which requires the presentation of reimbursed out-of-pocket expenses on a gross basis as revenues and expenses. As required, the Company reclassified prior periods presented herein to comply with the guidance in EITF 01-14. Accordingly, reimbursed materials, shipping and postage charges in the Company's Marketing Services segment for 2002, 2001, and 2000 amounting to $38.5 million, $38.0 million, and $37.4 million, respectively, have been reclassified and presented as revenues and expenses in the corresponding Consolidated Statements of Income. The application of EITF 01-14 had no impact on net income. STOCK OPTIONS - As of December 31, 2002, the Company has stock-based employee compensation plans (Note 7). The Company accounts for these stock option plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related Interpretations ("APB No. 25"). Accordingly, the Company does not recognize compensation cost in connection with these plans, as all options granted under these plans had an exercise price equal to the market value of ChoicePoint common stock on the date of grant. If the Company had elected to apply the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") to stock-based employee compensation, net income and net income per share would have been reduced to the pro forma amounts indicated in the following table (in thousands, except per share information):
Year Ended December 31, 2002 2001 2000 - ----------------------- ------- ------- ------- Net income, as reported $89,827 $50,334 $43,822 Deduct: Total stock-based employee compensation expense determined under fair value based method for stock option awards, net of related tax effects 15,360 9,696 6,443 ------- ------- ------- Pro forma net income $74,467 $40,638 $37,379 ------- ------- ------- Earnings per share: Basic - as reported $ 1.07 $ 0.61 $ 0.55 Basic - pro forma 0.88 0.50 0.47 Diluted - as reported $ 1.01 $ 0.58 $ 0.52 Diluted - pro forma 0.85 0.47 0.44
The fair value of each option granted is estimated on the date of grant using the Black-Scholes Option Pricing Model with the following assumptions:
Year Ended December 31, 2002 2001 2000 - ----------------------- ------ ------ ------ Dividend yield 0% 0% 0% Expected volatility 33% 29% 32% Risk-free interest rate 4.4% 4.6% 6.6% Expected life in years 4.77 6.53 6.02 Weighted average fair value of options granted $14.31 $11.61 $ 8.32
PROPERTY AND EQUIPMENT - Property and equipment at December 31, 2002 and 2001 consisted of the following (in thousands):
December 31, 2002 2001 - ------------ --------- --------- Land, buildings, and improvements $ 30,824 $ 28,932 Data processing equipment and furniture 135,718 121,531 Less accumulated depreciation (100,321) (85,534) --------- -------- $ 66,221 $ 64,929 ========= ========
The cost of property and equipment is depreciated primarily on the straight-line basis over estimated asset lives of 30 to 40 years for buildings; useful lives, not to exceed lease terms, for leasehold improvements; three to eight years for data processing equipment and eight to ten years for furniture. GOODWILL - Except for the DBT Merger accounted for as a pooling of interests, the Company accounts for all acquisitions using the purchase method of accounting. As a result, goodwill and other acquisition intangibles are recorded at the time of purchase based on internal evaluations and independent third-party appraisals. Goodwill for acquisitions prior to July 1, 2001 was amortized on a straight-line basis over ten to 40 years. Accumulated amortization was $56.7 million as of December 31, 2001. BEGINNING IN 2002, THE COMPANY IS NO LONGER AMORTIZING GOODWILL. THE COMPANY RECORDED A GOODWILL IMPAIRMENT OF $39.1 MILLION IN 2002 AND FUTURE ANNUAL IMPAIRMENT REVIEWS MAY RESULT IN PERIODIC WRITEDOWNS OF GOODWILL. In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," effective July 1, 2001 and SFAS No. 142, "Goodwill and Other Intangible Assets," effective for the Company on January 1, 2002. SFAS No. 142 requires companies to cease amortizing goodwill that existed at June 30, 2001 on December 31, 2001. Any goodwill resulting from acquisitions completed after June 30, 2001 will not be amortized. SFAS No. 142 also broadens the criteria for recording intangible assets separate from goodwill and establishes a new method of testing goodwill impairment whereby goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. As a result of the adoption of these accounting standards, certain intangibles were subsumed into goodwill and amortization of these assets and goodwill was discontinued effective January 1, 2002. Upon completion of our analysis for goodwill impairment in the second quarter of 2002 in accordance with the adoption of SFAS No. 142, ChoicePoint recorded a non-cash charge of $39.1 million ($24.4 million net of taxes) to reduce the carrying value of its goodwill retroactive to January 1, 2002. Such charge is reflected as a cumulative effect of change in accounting principle in the accompanying Consolidated Statements of Income. In calculating the goodwill impairment charge, the fair value of the impaired reporting units was estimated using a discounted cash flow methodology. This impairment charge is due to increased competition and pricing pressures and relates primarily to the 1998 acquisition of EquiSearch Services, Inc. and the Internet business acquired as part of the DBT Merger in May 2000. The Company also completed its annual goodwill impairment review as of October 31, 2002. No additional impairment charge was recorded as a result of this review. 34 CHOICEPOINT 2002 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report A summary of the change in goodwill during the year ended December 31, 2002, by business segment, is as follows:
Net Goodwill at Acquisitions NET GOODWILL AT (In thousands) December 31, 2001 & Adjustments Impairments DECEMBER 31, 2002 - -------------- ----------------- ------------- ----------- ----------------- Insurance $ 35,220 $ 10,439 $ -- $ 45,659 B&G 264,788 124,985 (35,009) 354,764 Marketing 150,904 31,388 (4,107) 178,185 ----------------- ------------- ----------- ----------------- Total $450,912 $166,812 $(39,116) $578,608 ================= ============= =========== =================
The 2001 and 2000 results on a historical basis do not reflect the provisions of SFAS No. 142. Had ChoicePoint adopted SFAS No. 142 on January 1, 2000, the historical net income and basic and diluted EPS would have changed to the adjusted amounts indicated below for the years ended December 31:
(In thousands, except per share data) 2002 2001 2000 - ------------------------------------- --------- -------- -------- Income before cumulative effect of change in accounting principle $ 114,243 $ 50,334 $ 43,822 Goodwill amortization, net of taxes -- 13,242 13,195 --------- -------- -------- Adjusted net income $ 114,243 $ 63,576 $ 57,017 --------- -------- -------- Basic EPS before change in accounting principle $ 1.36 $ 0.61 $ 0.55 Goodwill amortization -- 0.16 0.16 --------- -------- -------- Adjusted basic EPS $ 1.36 $ 0.77 $ 0.71 --------- -------- -------- Diluted EPS before change in accounting principle $ 1.28 $ 0.58 $ 0.52 Goodwill amortization -- 0.15 0.16 --------- -------- -------- Adjusted diluted EPS $ 1.28 $ 0.73 $ 0.68 --------- -------- --------
OTHER ACQUISITION INTANGIBLE ASSETS - Other acquisition intangibles, excluding trademarks/tradenames totaling $3.3 million included in other intangible assets below, are being amortized on a straight-line basis over three to ten years. Other acquisition intangibles in 2001 included workforce which was subsumed into goodwill in 2002 in accordance with SFAS No. 142. Amortization expense was $6.1 million for 2002 and $5.3 million for 2001. Estimated amortization expense for the next five years is $7.6 million for 2003, $7.2 million for 2004, $6.6 million for 2005, $5.4 million for 2006 and $4.4 million for 2007. Other Acquisition Intangible Assets subject to amortization at December 31, 2002 and 2001 consisted of the following:
2002 2001 ACCUMULATED Accumulated (In thousands) Gross AMORTIZATION Net Gross Amortization Net - -------------- ------- ------------ ------- ------- ------------ ------- Customer relationships $23,353 $ (3,404) $19,949 $16,272 $ (663) $15,609 Purchased data files 14,815 (14,066) 749 14,815 (13,197) 1,618 Internally developed software 14,232 (9,264) 4,968 11,532 (8,355) 3,177 Non-compete agreements 11,767 (2,828) 8,939 3,310 (2,586) 724 Other intangible assets 11,300 (3,333) 7,967 8,500 (3,034) 5,466 Workforce -- -- -- 1,050 (464) 586 ------- -------- ------- ------- -------- ------- $75,467 $(32,895) $42,572 $55,479 $(28,299) $27,180
OTHER ASSETS - Other assets at December 31, 2002 and 2001 consisted of the following (in thousands):
December 31, 2002 2001 - ------------ ------- ------- System development and other deferred costs, net $70,504 $60,403 Royalty patents, net 3,098 4,745 Other -- 2,370 ------- ------- $73,602 $67,518 ======= =======
CHOICEPOINT 2002 ANNUAL REPORT 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report For the years ended December 31, costs of software developed for internal use of approximately $19.3 million in 2002, $24.9 million in 2001, and $9.8 million in 2000 were capitalized and are included in system development and other deferred costs. The amounts capitalized include certain direct costs, including independent contractor and payroll costs in accordance with SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." System development and other deferred costs are being amortized on a straight-line basis primarily over three to five years. Accumulated amortization was $47.9 million as of December 31, 2002 and $39.4 million as of December 31, 2001. The Company owns a 62.5% interest in laser patent revenue relating to certain patents involving laser technology which expire between November 2004 and May 2005. Upon the expiration of the applicable patent, the Company loses its right to exclude others from exploiting the inventions claimed therein, and accordingly, the obligation of third parties to make royalty payments will cease. The Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amount of other long-lived assets may warrant revision or may not be recoverable. When factors indicate that other assets should be evaluated for possible impairment, the Company uses an estimate of the future undiscounted net cash flows of the related business over the remaining life of the other assets in measuring whether those assets are recoverable. If the carrying amount exceeds undiscounted cash flows, an impairment loss would be recognized for the difference between the carrying amount and its estimated fair value on a discounted cash flow methodology. For the years ended December 31, 2002 and 2001, approximately $5.4 million and $12.7 million of other long-lived assets were written down to fair value and recognized as unusual items, respectively (Note 10). DEPRECIATION AND AMORTIZATION EXPENSE - Depreciation and amortization expense for 2002, 2001, and 2000 consisted of the following (in thousands):
Year Ended December 31, 2002 2001 2000 - ----------------------- ------- ------- ------- Property and equipment $20,104 $23,297 $21,582 Goodwill -- 17,516 15,709 Other acquisition intangibles 6,133 5,413 4,477 Royalty patents 1,695 1,695 1,695 System development and other deferred costs 17,827 11,591 10,156 ------- ------- ------- $45,759 $59,512 $53,619 ======= ======= =======
CONSOLIDATED STATEMENTS OF CASH FLOWS - The Company considers short-term cash investments with original maturities of three months or less to be cash equivalents. The tax payments made by ChoicePoint were approximately $43.7 million in 2002, $46.6 million in 2001, and $25.4 million in 2000. Interest paid on long-term debt totaled $8.5 million in 2002, $10.0 million in 2001, and $12.7 million in 2000. In June 2000, the Company sold its remaining investments in state and municipal bonds that were classified as short-term investments available for sale as of December 31, 1999. In 2002, the Company obtained $468,000 in investments in corporate bond mutual funds in connection with its acquisition of Vital Chek Network, Inc. These investments are included in other current assets as of December 31, 2002. In 2002, 2001, and 2000, the Company acquired various businesses that were accounted for as purchases (Note 4). In conjunction with these transactions, liabilities were assumed as follows (in thousands):
Year Ended December 31, 2002 2001 2000 - ----------------------- -------- -------- -------- Fair value of assets acquired $201,058 $181,570 $119,667 Cash paid for acquisitions 192,582 157,348 110,613 -------- -------- -------- Liabilities assumed $ 8,476 $ 24,222 $ 9,054 ======== ======== ========
FINANCIAL INSTRUMENTS AND DERIVATIVES - The Company's financial instruments recorded on the balance sheet consist primarily of cash and cash equivalents, accounts receivable, marketable securities, accounts payable, and debt. The carrying amounts approximate their fair values because of the short maturity of these instruments or, in the case of debt, because it bears interest at current market rates. Derivative financial instruments at December 31, 2002 and 2001 consist of interest rate swap agreements (Note 5) entered into to limit the effect of changes in LIBOR (a benchmark interest rate) on the Company's LIBOR-based payments, including the synthetic leases and Credit Facility. Amounts currently due to or from interest rate swap counterparties are recorded in expense in the period in which they accrue. The Company measures all derivatives at fair value and recognizes them in the Consolidated Balance Sheet as an asset or liability, depending on ChoicePoint's rights or obligations under the applicable derivative contract. ChoicePoint's only derivative instruments are swap agreements (Note 5) which have been designated as cash flow hedges to hedge the variability in expected future interest payments on a portion of the Company's LIBOR-based payments and, as such, the effective portions of changes in fair value are reported in cumulative other comprehensive loss and are subsequently reclassified into earnings when the hedged item affects earnings. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company assesses, on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of hedged items. Should it be determined that a derivative is not highly effective as a hedge, the Company will discontinue hedge accounting treatment. The Company does not enter into derivative financial instruments for trading or speculative purposes. The fair value of the interest rate swap agreements, obtained from a counterparty based on its internal valuation models, was a liability of $4.8 million as of December 31, 2002 and a liability of $6.1 million at December 31, 2001. 36 CHOICEPOINT 2002 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report OTHER NEW ACCOUNTING PRONOUNCEMENTS - In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which requires companies to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the cost is capitalized by increasing the carrying amount of the related long-lived asset. On an interim and annual basis, the liability is adjusted to its present value and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, a gain or loss may be incurred based on the remaining balance. SFAS No. 143 is effective for the Company beginning in 2003. We are currently evaluating the impact of this statement on our Consolidated Financial Statements but do not expect its adoption will have a material impact on the Company's future consolidated results of operations. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" which requires costs associated with exit or disposal activities to be recognized when the costs are incurred, rather than at a date of commitment to an exit or disposal plan. The FASB bases the accrual of an exit or disposal cost on the existence of a liability that constitutes an "obligation" both legally and socially as defined under FASB Statement of Concept No. 6. SFAS No. 146 is effective for disposal activities initiated after December 31, 2002. In November 2002, the FASB issued interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," ("FIN 45"). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guaranty, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for the Company as of December 31, 2002. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. As of December 31, 2002, there is no impact of this statement on our Consolidated Financial Statements. In January 2003, the FASB issued FIN 46, which addresses consolidation of business enterprises of variable interest entities ("VIE") and requires companies with a controlling financial interest in a VIE to include the assets, liabilities and results of activities of the VIE in the consolidated financial statements of the company. FIN 46 is effective immediately for VIE's created after January 31, 2003 and is effective for the quarter ending June 30, 2003 for all VIE's that existed prior to January 31, 2003. The Company has accounted for the synthetic leases as operating leases and has recorded rent expense. FIN 46 might change current generally accepted accounting principles in the United States of America related to synthetic leases. The Company is currently evaluating the impact of this new standard which may require the Company to modify its synthetic leases to maintain off-balance sheet treatment. 4 ACQUISITIONS AND DIVESTITURES ACQUISITIONS - During 2002, 2001, and 2000, the Company acquired 100% of the following businesses:
Date Business Acquired - -------- ------------- Accident Report Services, Inc. December 2002 Vital Chek Network, Inc. December 2002 Resident Data, Inc. October 2002 L&S Report Service, Inc. July 2002 Total eData Corporation April 2002 Experian Information Solutions, Inc. (marketing and list extraction and reporting businesses) January 2002 Marketing Information & Technology, Inc. July 2001 Pinkerton's, Inc. (pre-employment and drug testing businesses) July 2001 The Bode Technology Group, Inc. April 2001 National Medical Review Offices, Inc. April 2001 Insurity Solutions, Inc. March 2001 BTi Employee Screening Services, Inc. February 2001 ABI Consulting, Inc. February 2001 Drug Free Consortium, Inc. December 2000 Cat Data Group, LLC November 2000 VIS'N Service Corporation November 2000 RRS Police Records Management, Inc. October 2000 Practical Computer Concepts, Inc., d/b/a Fraud Defense Network March 2000 NSA Resources, Inc. February 2000 Statewide Data Services, Inc. January 2000
The acquisitions above were accounted for as purchases, and the results of operations from these acquisitions are included in ChoicePoint's consolidated results from the date acquired. In addition, the Company merged with DBT (Note 2) in 2000 and accounted for the Merger as a pooling of interests. THE DETERMINATION OF FAIR VALUE OF ASSETS ACQUIRED REQUIRES A HIGH DEGREE OF JUDGMENT AND THE USE OF ESTIMATES. THE COMPANY GENERALLY USES INTERNAL CASH FLOW MODELS, OTHER EVALUATIONS, AND THIRD-PARTY APPRAISALS IN DETERMINING FAIR VALUES. CHOICEPOINT 2002 ANNUAL REPORT 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report On December 2, 2002, ChoicePoint acquired 100 percent of the outstanding common stock of Vital Chek Network, Inc. and Vital Chek of Canada, Inc. (collectively, "VitalChek"). The results of VitalChek's operations have been included in the consolidated financial statements since that date. VitalChek has been assigned to the B&G segment. VitalChek is a provider of proprietary technology and data management services that facilitate the remote ordering of certified birth, death, marriage, and divorce certificates, and is based in Nashville, Tennessee. As a result of the acquisition, ChoicePoint extends its current product and services offerings that help verify a person's identity to include the birth certificates that often begin the process. The purchase price was $120.0 million in an initial cash payment with additional earnouts over the next three years if VitalChek exceeds certain financial targets. The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of acquisition. ChoicePoint is in the process of obtaining independent third-party valuations of certain intangible assets; thus, the allocation of the purchase price may be revised (in thousands): Current assets $ 4,231 Property, plant and equipment, net 1,176 Goodwill 105,184 Other acquisition intangible assets 12,300 Other assets 765 -------- Total assets acquired 123,656 Current liabilities 3,045 Other long-term liabilities 611 -------- Total liabilities assumed 3,656 -------- Net assets acquired $120,000 ========

The goodwill listed above is fully deductible for tax purposes. Of the $12.3 million of acquired intangible assets, $8.7 million was assigned to non-compete agreements which will have a useful life of seven years, $1.6 million was assigned to software which will have a useful life of three years and $2.0 million was assigned to trademarks/tradenames that will have an indefinite life. The Company's unaudited pro forma combined historical results as of December 31, as if VitalChek had been acquired at the beginning of 2002 and 2001, respectively, are estimated to be:
(In thousands, except per share information) 2002 2001 -------- -------- Revenue $813,435 $711,363 Income before cumulative effect of change in accounting principle 113,620 44,996 Net income 89,204 44,996 EPS, diluted $ 1.00 $ 0.52
Also in 2002, the Company acquired the insurance market on-line consumer credit reporting, marketing and pre-screen list extract services of Experian Information Solutions, Inc., based in Chicago, Illinois; Total eData Corporation, an e-mail database company based in Little Rock, Arkansas; Resident Data, Inc., a residential screening services provider to apartment management companies based in Richardson, Texas; and two police reports providers to the P&C insurance industry, L&S Report Service, Inc., based in Phoenix, Arizona, and Accident Report Services, Inc., based in Oklahoma City, Oklahoma. Excluding VitalChek, 2002 acquisitions had an aggregate purchase price of $72.6 million which was paid in cash, $59.8 million was allocated to goodwill, of which $30.9 million is expected to be fully deductible for tax purposes, and $9.9 million to other acquisition intangible assets as follows based on preliminary allocations:
Weighted Average (In thousands) Amount Amortization Period ------ ------------------- Internally developed software $1,500 3 years Trademark/tradename 1,300 Indefinite life asset Customer relationships 7,081 5 years ------ $9,881 ======
In 2001, the Company acquired Marketing Information & Technology, Inc., a provider of large-scale marketing systems for Fortune 500 clients, based in the Boston, Massachusetts area; the pre-employment and drug testing businesses of Pinkerton's, Inc., a unit of Securitas AB of Sweden, based in Charlotte, North Carolina; The Bode Technology Group, Inc., a premier provider of DNA identification services, based in Springfield, Virginia; certain assets of National Medical Review Offices, Inc., a large provider of medical review office services, based in Los Angeles, California; Insurity Solutions, Inc., a provider of Internet-based rating, underwriting, and policy-servicing tools based in Cumming, Georgia; BTi Employee Screening Services, Inc., a pre- employment background screening organization based in Dallas, Texas; and ABI Consulting, Inc., a third-party administrator of employee drug testing programs, based in Murray, Utah. The 2001 acquisitions had an aggregate purchase price of $157.3 million, which was paid primarily in cash, $138.1 million was allocated to goodwill, of which $99.0 million is expected to be fully deductible for tax purposes, and $18.4 million to intangible assets, which are being amortized over three to ten years (primarily customer relationships, data files, and software). Goodwill from the 2001 acquisitions prior to July 1, 2001 of $52.4 million was amortized on a straight-line basis over 25 to 30 years through December 31, 2001 and other intangible assets are amortized over three to five years. Goodwill from acquisitions after June 2001 of $85.7 million was not amortized in accordance with SFAS No. 142. Goodwill of $4.2 million was allocated to Insurance Services, $94.1 million to Business & Government Services and $39.8 million to Marketing Services. 38 CHOICEPOINT 2002 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report The 2000 acquisitions had an aggregate purchase price of $110.6 million, with $106.5 million allocated to goodwill and $3.3 million to intangible assets (primarily data files and software). Goodwill from the 2000 acquisitions was amortized on a straight-line basis over ten to 30 years through December 31, 2001 and other intangible assets are amortized over three to five years. The allocation of purchase price to the assets and liabilities of certain acquisitions is preliminary and subject to change based on the resolutions of pre-acquisition contingencies. The remaining accrual of $3.6 million as of December 31, 2002 for transaction costs related to the above acquisitions, will primarily be used for future payments under lease terminations and related office closure expenses. Certain of these acquisitions are subject to contingent payment agreements based on revenue and operating profit goals over the next two to three years. The Company will record goodwill related to these contingent payment agreements as goals are met and payments are reasonably estimable and probable. The pro forma effect of 2002, 2001 and 2000 purchased acquisitions, other than VitalChek, is not material to the consolidated financial statements. DIVESTITURES - In August 2001, the Company sold its laboratory services business for approximately $49 million and retained certain assets. The results of this business historically had been included in the Insurance Services business segment. Operating segment results have been restated for all periods to reflect the sale of this line of business (see Note 11). Consolidated operating income for the year ended December 31, 2001 includes a $10.9 million pretax loss on the sale, which includes transaction-related costs of $6.9 million, including severance and retention commitments for approximately 170 employees. Net income for the year ended December 31, 2001 includes a $21.4 million (including tax expense of $10.5 million) after-tax loss on the sale of this line of business. In November 1998, the Company entered into a strategic partnership with Experian Limited (U.K.) leading to the sale of ChoicePoint Limited, the Company's United Kingdom-based insurance services division. The sale was completed in January 2000 with no material gain on the sale of the business. In connection with the strategic partnership with Experian Limited, ChoicePoint has recognized earnings of $2.1 million in 2002, $1.9 million in 2001, and $450,000 in 2000. 5 DEBT AND OTHER FINANCING Long-term debt at December 31, 2002 and 2001 was as follows:
(In thousands) December 31, 2002 2001 --------- --------- Credit Facility $ 95,000 $ -- Former Credit Facility -- 155,000 Receivables Facility 85,000 -- Other long-term debt 2,100 2,225 Capital leases 346 1,591 --------- --------- 182,446 158,816 Less current maturities (85,387) (156,426) --------- --------- $ 97,059 $ 2,390 ========= =========
On May 10, 2002, ChoicePoint entered into a $325 million unsecured revolving credit facility (the "Credit Facility") with a group of banks that extends through a termination date of May 2005 and bears interest at variable rates based on LIBOR plus an applicable margin. The applicable margins range from .475% to 1.2% per annum based on ChoicePoint's leverage ratio. The average interest rate based on the terms of the Credit Facility at December 31, 2002 was 2.0%. Prior to May 10, 2002, the Company had a $250 million unsecured revolving credit facility (the "Former Credit Facility") with a group of banks. The average interest rate based on the terms of the Former Credit Facility, and adjusted for an interest rate swap agreement discussed below, at December 31, 2001 was 5.6%. The Credit Facility contains covenants customary for facilities of this type. Such covenants include limitations, in certain circumstances, on the ability of the Company and its subsidiaries to (i) effect a change of control of the Company, (ii) incur certain types of liens, and (iii) transfer or sell assets. The Credit Facility also requires compliance with financial covenants, including (i) maximum leverage and (ii) minimum fixed charge coverage. In July 2001, the Company and certain of its subsidiaries entered into an agreement (the "Receivables Facility") with a financial institution whereby it may sell on a continuous basis, an undivided interest in all eligible trade accounts receivable subject to limitations. The Company will maintain the balance in the designated pool of accounts receivable sold by selling undivided interests in new receivables as existing receivables are collected. The Receivables Facility permits the advance of up to $100 million on the sale of accounts receivable, may be extended in one-year terms and has been extended to July 2003. The Receivables Facility, which does not qualify for off-balance sheet treatment under SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" due to certain contractual removal-of-accounts provisions, has been recorded as an on-balance sheet financing transaction. The Company believes the Receivables Facility provides a low cost of financing and is an additional source of debt capital with diversification from other alternatives. Net proceeds from the Receivables Facility were $85.0 million at December 31, 2002 and were used to finance a portion of the VitalChek acquisition (see Note 4). There were no sales of accounts receivable during 2001. In 1997, the Company entered into a $25 million synthetic lease agreement for the Company's headquarters building. Under the synthetic lease agreement, a third-party lessor purchased the property, paid for the construction and leased the building to the Company. In 2001, the Company entered into another synthetic lease agreement for up to $52 million to finance the construction of its new data center facility, which is anticipated to be completed during the first half of 2003. Both leases expire in 2007, at which time the Company has the following options for each lease: renew the lease for an additional five years, purchase the building for the original cost or remarket the property. If the Company elects to remarket the properties, ChoicePoint must guarantee the lessor 80% to 85% of the original cost. The Company has accounted for the synthetic leases as operating leases and has recorded rent expense. The Financial Accounting Standards Board has recently issued a new standard that might change current generally accepted accounting principles in the United States of America related to synthetic leases. The Company is currently evaluating the impact of this new standard which may require the Company to CHOICEPOINT 2002 ANNUAL REPORT 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report modify its synthetic leases to maintain off-balance sheet treatment. If the Company had elected to purchase the properties instead of entering into the synthetic leases or if the Company was required to change its accounting for the synthetic leases based on a new accounting principle, total assets and debt would have increased by $54.3 million at December 31, 2002 and $25.0 million at December 31, 2001 and the Company would have recorded additional depreciation expense of approximately $800,000 related to the $25 million synthetic lease for the years ended December 31, 2002 and 2001. No depreciation would have been recorded related to the amount drawn under the $52 million synthetic lease since the data center facility is still under construction. At December 31, 2002, ChoicePoint had four interest rate swap agreements (the "Swap Agreements") outstanding that reduce the impact of changes in the benchmark interest rate (LIBOR) on its LIBOR-based payments on the synthetic leases. One interest rate swap agreement has a notional amount of $25 million and matures in August 2007. The other three interest rate swap agreements are forward starting swaps which have a total notional amount of $42 million, become effective May 2003 and mature in August 2007. These Swap Agreements involve the receipt of a variable rate and payment by ChoicePoint of fixed rates between 4.6% and 6.5%. ChoicePoint has designated all of these swaps as hedges of the variability in expected future interest payments on $67 million of borrowings. The Company had a fifth interest rate swap agreement to reduce the impact of changes in the benchmark interest rate (LIBOR) on $125 million of borrowings which expired in August 2002. The Company is exposed to credit loss in the event of non-performance by the other parties to the Swap Agreements. However, the Company does not anticipate nonperformance by the counterparties. Scheduled maturities of long-term debt subsequent to December 31, 2002 are as follows: $85.4 million in 2003, $204,000 in 2004, $95.2 million in 2005, $145,000 in 2006, $155,000 in 2007 and $1.4 million thereafter. 6 INCOME TAXES The Company records deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income tax assets and liabilities are recorded based on the differences between the financial reporting and income tax bases of assets and liabilities. The provision for income taxes consists of the following:
(In thousands) Year Ended December 31, 2002 2001 2000 -------- ------- ------- Current: Federal $ 55,306 $51,304 $26,642 State 5,791 3,827 3,508 Foreign -- 256 193 -------- ------- ------- 61,097 55,387 30,343 -------- ------- ------- Deferred: Federal (4,744) 1,979 2,606 State 164 1,313 1,475 Foreign -- 8 64 -------- ------- ------- (4,580) 3,300 4,145 -------- ------- ------- Total $ 56,517 $58,687 $34,488 ======== ======= =======
The provision for income taxes is based upon income before income taxes, as follows:
(In thousands) Year Ended December 31, 2002 2001 2000 -------- -------- ------- United States $146,344 $108,429 $77,744 Foreign -- 592 566 -------- -------- ------- $146,344 $109,021 $78,310 ======== ======== =======
The provision for income taxes is reconciled with the federal statutory rate, as follows:
Year Ended December 31, 2002 2001 2000 ---- ---- ---- Federal statutory rate 35.0% 35.0% 35.0% State and local taxes, net of federal tax benefit 2.6 2.5 3.4 Tax effect resulting from foreign activities -- 0.1 -- Goodwill amortization -- 1.7 2.8 Merger-related costs and unusual items -- 14.1 4.0 Other 1.0 0.4 (1.2) ---- ---- ---- Overall effective rate 38.6% 53.8% 44.0% ==== ==== ====
Components of the Company's deferred income tax assets and liabilities at December 31, 2002 and 2001 are as follows:
(In thousands) December 31, 2002 2001 -------- -------- Deferred income tax assets: Postretirement benefits $ 15,682 $ 18,004 Reserves and accrued expenses 7,515 7,266 Employee compensation programs 7,179 8,934 Goodwill impairment 14,700 -- Other 6,773 2,709 -------- -------- 51,849 36,913 -------- -------- Deferred income tax liabilities: Purchased software, data files, technology, and other assets (14,000) (5,752) Depreciation (3,576) (1,708) Deferred expenses (9,820) (8,204) Other (5,224) (4,800) -------- -------- (32,620) (20,464) -------- -------- Net deferred income tax assets $ 19,229 $ 16,449 ======== ========
40 CHOICEPOINT 2002 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report 7 SHAREHOLDERS' EQUITY STOCK SPLIT - On June 6, 2002, ChoicePoint effected a four-for-three stock split in the form of a stock dividend for shareholders of record as of May 16, 2002. On March 7, 2001, ChoicePoint effected a three-for-two stock split in the form of a stock dividend for shareholders of record as of February 16, 2001. Share and per share data for all periods presented have been adjusted to reflect the splits. Effective October 3, 2002, shareholders of the Company approved an amendment to the Articles of Incorporation to increase the authorized common stock of the Company from 100 million to 400 million shares. STOCK OPTIONS - Prior to the Spinoff, the ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan (the "Omnibus Plan") was approved for ChoicePoint and ratified by the shareholders in 1999. The Omnibus Plan authorizes grants of stock options, stock appreciation rights, restricted stock, deferred shares, performance shares, and performance units for an aggregate of 20 million shares of ChoicePoint common stock. The Omnibus Plan requires options be granted at the fair market value of the underlying stock at the date of grant, except the options granted as replacement options under the prior Equifax equity-based plans, with a maximum term of ten years. In connection with the Merger (Note 2), outstanding stock options under the stock option plan maintained by DBT were assumed by the Company. Stock option transactions summarized below include amounts for the Omnibus Plan and the DBT plan using the Merger exchange rate of .525 (pre-split) for each DBT option. In 2002, options for 2.9 million shares were granted at fair market value under the Omnibus Plan with a weighted average option price of $40.04. A summary of changes in all outstanding options and the related weighted average exercise price per share is as follows (shares in thousands):
December 31, 2002 2001 2000 ----------------------- ---------------------- ----------------------- SHARES AVG. PRICE Shares Avg. Price Shares Avg. Price ------ ---------- ------ ---------- ------ ---------- Balance, beginning of year 11,840 $15.31 11,986 $12.56 13,141 $12.53 Granted 2,946 40.04 2,554 26.39 2,083 19.30 Canceled/forfeited (327) 32.49 (580) 19.64 (1,252) 16.40 Exercised (2,199) 11.67 (2,120) 11.89 (1,986) 17.78 ------ ------ ------ ------ ------ ------ Balance, end of year 12,260 $21.44 11,840 $15.31 11,986 $12.56 ------ ------ ------ ------ ------ ------ Exercisable at end of year 7,285 $13.82 6,699 $11.20 6,321 $10.73 ====== ====== ====== ====== ====== ======
The following table summarizes information about stock options outstanding at December 31, 2002 (shares in thousands):
Options Outstanding Options Exercisable ----------------------------------------------------- -------------------------------- Weighted Average Weighted Weighted Remaining Contractual Average Average Range of Exercise Prices Shares Life in Years Exercise Price Shares Exercise Price - ------------------------ ------ --------------------- -------------- ------ -------------- $ 0.001-$13.340 3,631 4.2 $ 8.45 3,631 $ 8.45 $13.341-$17.788 1,834 5.8 14.06 1,721 14.06 $17.789-$22.235 1,522 6.6 19.14 769 19.20 $22.236-$26.682 2,009 7.9 25.98 872 25.97 $26.683-$35.576 491 7.1 29.02 292 28.62 $35.577-$40.630 1,830 9.0 38.73 - - $40.631-$44.470 943 9.3 42.38 - -
CHOICEPOINT 2002 ANNUAL REPORT 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report On a periodic basis, certain key officers and directors of ChoicePoint are granted restricted stock under the Omnibus Plan. As of December 31, 2002, 115,000 restricted shares were outstanding. The compensation cost charged against income for restricted stock plans was $5.9 million in 2002, $5.9 million in 2001, and $4.0 million in 2000. The Company applies APB No. 25 and related interpretations in accounting for its stock option plans. Accordingly, the Company does not recognize compensation cost in connection with its stock option plans. See Note 3 for the pro forma effect if the Company had elected to recognize compensation cost for these plans based on the fair value at grant date as prescribed by SFAS No. 123. SHAREHOLDER RIGHTS PLAN - On October 29, 1997, the Company's board of directors adopted a Shareholder Rights Plan (the "Rights Plan"). The Rights Plan contains provisions to protect the Company's shareholders in the event of an unsolicited offer to acquire the Company, including offers that do not treat all shareholders equally, the acquisition in the open market of shares constituting control without offering fair value to all shareholders, and other coercive, unfair, or inadequate takeover bids and practices that could impair the ability of the ChoicePoint board of directors to fully represent shareholders' interests. Pursuant to the Rights Plan, the ChoicePoint board of directors declared a dividend of one Share Purchase Right (a "Right") for each outstanding share of the Company's common stock as of November 14, 1997. The Rights will be represented by, and trade together with, the Company's common stock. The Rights will separate upon passage of time in certain events includ- ing the acquisition of 15% or more of the Company's common stock by a person or group of affiliated or associated persons ("Associated Persons"). The Rights will not become exercisable unless certain triggering events occur. Among the triggering events will be the acquisition of 20% or more of the Company's common stock by Associated Persons. Unless previously redeemed by the ChoicePoint board of directors, upon the occurrence of one of the specified triggering events, each Right that is not held by the 20% or more shareholder will entitle its holder to purchase one share of common stock or, under certain circumstances, additional shares of common stock at a discounted price. The Rights will cause substantial dilution to a person or group that attempts to acquire ChoicePoint on terms not approved by the ChoicePoint board of directors. Thus, the Rights are intended to encourage persons who may seek to acquire control of ChoicePoint to initiate such an acquisition through negotiation with the board of directors. GRANTOR TRUSTS - ChoicePoint has established two grantor trusts totaling $16.5 million. The funds in the grantor trusts are used to purchase ChoicePoint common stock in the open market as previously approved by the board of directors for distribution under its various compensation and benefit plans. Funds from the grantor trusts totaling $13.4 million have been used to purchase 989,000 shares of ChoicePoint common stock, which are reflected as treasury stock, at cost, in the December 31, 2002 balance sheet. Cash remaining in the grantor trusts of approximately $3.1 million at December 31, 2002 and $1.1 million at December 31, 2001 are included in cash and cash equivalents in the accompanying consolidated balance sheets. TREASURY STOCK - In addition to the common stock held in the Grantor Trusts, in accordance with the terms of the awards, ChoicePoint redeemed 24,000 shares of common stock in 2002 and 53,000 shares in 2001 at market price in consideration of the minimum tax obligations for restricted stock vestings at a total cost of $814,000 in 2002 and $2.2 million in 2001. 8 EMPLOYEE BENEFITS 401(K) PROFIT SHARING PLAN - ChoicePoint adopted a 401(k) profit sharing plan, under which eligible Company employees may contribute up to 25% of their compensation. ChoicePoint intends to make matching contributions in the form of ChoicePoint common stock equal to a minimum of 25% of employee contributions up to the first 6% of an employee's contributions. The match made on eligible employee contributions was 64% for 2002 and 55% in both 2001 and 2000. Employee contributions will be invested in one of the available investment funds, as selected by the employee. Matching contributions will be invested in the ChoicePoint stock fund. ChoicePoint may make additional contributions based on achievement of targeted performance levels. DBT had a 401(k) plan which was frozen effective December 31, 2000. All eligible DBT employees were able to contribute to the ChoicePoint 401(k) plan effective January 1, 2001. The expense for the 401(k) profit sharing plans was $4.8 million in 2002, $4.8 million in 2001, and $4.4 million in 2000. EMPLOYEES MAY DIRECT THEIR RETIREMENT FUNDS TO A VARIETY OF INVESTMENTS, ONLY ONE OF WHICH IS CHOICEPOINT STOCK. MATCHING CONTRIBUTIONS ARE MADE IN CHOICEPOINT STOCK. As a result of the Spinoff, ChoicePoint agreed to contribute to a defined contribution plan for certain ChoicePoint employees. The additional benefits are intended to offset the adverse impact of transitioning out of a defined benefit pension plan and represent the present value of the estimated future contributions. The expense recognized and amounts contributed to the 401(k) profit sharing plan to offset the adverse impact of transitioning out of the defined benefit plan was $1.7 million in 2002, 2001, and 2000. DEFERRED COMPENSATION PLAN - ChoicePoint offers deferred compensation plans to directors and certain officers of the Company. Under these plans, amounts earned by an officer or director may be deferred and credited with gains and losses based upon four different investment alternatives, including ChoicePoint common stock. The corresponding deferred compensation liability is recorded at the current fair value of the individual's investment elections and any changes are recorded as expense in the period incurred. As of December 31, 2002 and 2001, related to these plans, the Company has recorded a liability of $17.3 million and $10.6 million, respectively. POSTRETIREMENT BENEFITS - As a result of the Spinoff, the Company agreed to provide certain retiree health care and life insurance benefits for a defined group of eligible employees. No additional members have been added to this group since the Spinoff. Health care and life insurance benefits are provided through a trust. The Company accrues the cost of providing postretirement benefits for medical and life insurance coverage over the active service period of each employee. 42 CHOICEPOINT 2002 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report The following table presents a reconciliation of the changes in the plan's benefit obligations and fair value of assets at December 31, 2002 and 2001:
(In thousands) December 31, 2002 2001 -------- -------- Change in benefit obligation: Obligation at beginning of year $ 32,737 $ 36,737 Service cost 158 394 Interest cost 2,338 2,831 Actuarial loss (gain) 4,187 (4,351) Benefit payments (6,244) (2,874) -------- -------- Obligation at end of year 33,176 32,737 -------- -------- Change in plan assets: Fair value of plan assets at beginning of year -- -- Employer contributions 6,244 2,874 Benefit payments (6,244) (2,874) -------- -------- Fair value of plan assets at end of year -- -- -------- -------- Funded status: Funded status at end of year and net amount recognized (33,176) (32,737) Unrecognized prior service cost (2,719) (3,785) Unrecognized gain (5,107) (10,342) -------- -------- Net amount recognized (41,002) (46,864) Less current portion (3,600) (2,888) -------- -------- Accrued benefit cost $(37,402) $(43,976) ======== ========
The current portion is included in other current liabilities in the accompanying consolidated balance sheets. Net periodic postretirement benefit expense (income) includes the following components:
(In thousands) Year Ended December 31, 2002 2001 2000 ------- ------- ------- Service cost $ 158 $ 394 $ 343 Interest cost on accumulated benefit obligation 2,338 2,831 3,217 Amortization of prior service cost (1,066) (1,847) (2,385) Amortization of losses (1,047) (371) -- Curtailment gain -- (712) -- ------- ------- ------- Net periodic postretirement benefit expense $ 383 $ 295 $ 1,175 ======= ======= =======
In 2001, the Company recognized a curtailment gain due to the sale of the laboratory services business (Note 4). The following are weighted average assumptions used in the computation of postretirement benefit expense and the related obligation:
Year Ended December 31, 2002 2001 2000 ----- ---- ---- Discount rate used to determine accumulated postretirement benefit obligation at December 31 6.75% 7.50% 8.00% Initial health care cost trend rate 13.38% 9.27% 8.50% Ultimate health care cost trend rate 5.50% 5.00% 6.00% Year ultimate health care cost trend rate reached 2012 2007 2005 ----- ---- ----
If the health care cost trend rate were increased 1% for all future years, the accumulated postretirement benefit obligation as of December 31, 2002 would have increased 1.7%. The effect of such a change on the aggregate of service and interest cost for 2002 would have been an increase of 3.3%. If the health care cost trend rate were decreased 1% for all future years, the accumulated postretirement benefit obligation as of December 31, 2002 would have decreased 1.7%. The effect of such a change on the aggregate of service and interest cost for 2002 would have been a decrease of 2.1%. The Company continues to evaluate ways in which it can better manage these benefits and control its costs. Any changes in the plan, revisions to assumptions or changes in the Medicare program that affect the amount of expected future benefits may have a significant effect on the amount of the reported obligation and future annual expense. In connection with the VitalChek acquisition, as of December 31, 2002 the Company has a defined benefit pension plan which covers substantially all of the permanent employees of VitalChek. Benefits are based on the employee's years of service and compensation. This plan is funded in conformity with the funding requirements of applicable government regulations. For the period from acquisition to December 31, 2002, the net periodic pension cost associated with this plan was approximately $20,000. As of December 31, 2002, the fair value of funded assets was approximately $565,000 and the unfunded accrued pension benefit cost was approximately $450,000. The Company terminated this plan effective January 31, 2003. 9 COMMITMENTS AND CONTINGENCIES LEASES - The Company's operating leases involve principally office space and office equipment. Rental expense relating to these leases was $19.2 million in 2002, $19.4 million in 2001, and $15.9 million in 2000. Included in the operating leases are two synthetic lease agreements (Note 5). The Company has accounted for these synthetic leases as operating leases and has recorded rent expense. If the Company had elected to purchase the property instead of entering into the synthetic leases, assets and debt would have increased by $54.3 million at December 31, 2002 and the Company would have recorded additional depreciation expense of $833,000 in 2002. Future minimum payment obligations for noncancelable operating leases exceeding one year, net of subleases and assuming the utilization of the full notional amount under the synthetic leases, are as follows as of December 31, 2002:
(In thousands) Year Amount ------- 2003 $17,586 2004 14,954 2005 11,729 2006 8,279 2007 4,694 Thereafter 7,354 ------- $64,596 =======
CHOICEPOINT 2002 ANNUAL REPORT 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report CHANGE IN CONTROL PROVISIONS IN EMPLOYMENT AGREEMENTS - The Company has entered into employment agreements with certain officers to provide severance pay and benefits in the event of a "change in control" of ChoicePoint. At December 31, 2002, the maximum contingent liability under the agreements or plans was approximately $59.4 million. In addition, the Company's restricted stock and stock option plans provide that all outstanding grants under the Omnibus Plan shall become fully vested in the event of a change in control. LITIGATION - A limited number of lawsuits seeking damages are brought against the Company each year. The Company provides for estimated legal fees and settlements relating to pending lawsuits. In the opinion of management, the ultimate resolution of these matters will not have a materially adverse effect on the Company's financial position, liquidity, or results of operations. 10 MERGER COSTS AND UNUSUAL ITEMS The Company recorded merger-related costs and unusual items of $7.4 million in 2002, $18.0 million in 2001, and $28.9 million in 2000. The categories of costs incurred and the accrued balances at December 31, 2002 are summarized below:
REMAINING ACCRUAL AT 2002 2001 2000 (In thousands) DECEMBER 31, 2002 EXPENSE EXPENSE EXPENSE -------------------- ------- ------- ------- Transaction costs $ -- $ -- $ -- $11,579 Personnel-related costs -- -- 1,832 3,780 Other merger integration costs -- -- 2,433 3,629 Write down of minority investments -- 2,370 -- -- Asset impairments -- 2,985 12,693 6,954 Nonmerger severance 149 609 982 2,353 Other one-time charges 625 1,420 69 654 ------ ------- ------- ------- $ 774 $ 7,384 $18,009 $28,949 ====== ======= ======= =======
During the second quarter of 2002, the Company recorded an unusual item charge of $7.4 million. This charge included a write-down of minority investments in start-up companies of $2.4 million, asset impairments of technology initiatives of $3.0 million, $0.6 million in severance and termination benefits, and $1.4 million of expenses primarily related to the closure of two facilities and remaining obligations. In the first quarter of 2001, the personnel-related costs of $1.8 million consisted primarily of stay bonuses for services rendered through March 31, 2001 and severance and termination benefit costs primarily related to the integration of the two public records platforms and related sales and marketing departments. Other merger integration costs of $2.4 million consisted primarily of data contract and lease exit costs. Asset impairments of $12.7 million primarily reflected the write- down of equipment and other long-lived assets deemed to be impaired based on the integration plan for the two public records platforms which was finalized in the first quarter of 2001. In the second quarter of 2000, transaction costs of approximately $11.6 million included investment banking, legal, and printing fees and other costs directly related to the Merger. Personnel-related costs of approximately $3.8 million consisted of benefit plan exit costs and stay bonuses for services rendered through June 30, 2000 and severance. Other merger integration costs primarily include the elimination of duplicative data contracts. Asset impairments of approximately $7.0 million represent the write-down of goodwill and other long-lived assets, including internally developed software. INHERENT IN THE ACCRUAL OF EXIT COSTS AND ASSUMPTIONS USED IN IMPAIRMENT ANALYSES ARE CERTAIN MANAGEMENT JUDGMENTS AND ESTIMATES. THE COMPANY PERIODICALLY REVIEWS AND REEVALUATES THESE ASSUMPTIONS AND ADJUSTS THEM AND THE RELATED ACCRUALS AS NECESSARY. 44 CHOICEPOINT 2002 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report 11 SEGMENT DISCLOSURES During 2002, ChoicePoint reorganized its product lines into three reportable segments: Insurance Services ("Insurance"), Business & Government Services ("B&G") and Marketing Services ("Marketing") because of a change in managerial and operational reporting responsibilities and due to recent acquisitions within the Marketing Services business unit. Historical information in the following tables has been reclassified to conform with the current presentation. See Note 1 for a description of each service group. The accounting policies of the segments are the same as those described in Note 3. Substantially all of the Company's operations are located in the United States, and no one customer represents more than 10% of total operating revenue.
DECEMBER 31, 2002 December 31, 2001 December 31, 2000 --------------------- ----------------------------------- ----------------------------------- Unaudited Unaudited Pro forma Pro forma OPERATING Operating Operating Operating Operating (In thousands) REVENUE INCOME Revenue Income(b) Income Revenue Income(b) Income -------- --------- -------- ---------- --------- -------- ---------- --------- Insurance $332,521 $ 155,391 $281,046 $ 129,291 $ 127,745 $235,737 $ 103,097 $ 101,994 B&G 308,761 69,424 267,409 56,203 45,089 233,270 38,747 29,377 Marketing core revenue 105,833 32,866 76,461 26,391 22,185 63,549 23,460 19,285 Reimbursable expenses 38,520 -- 38,028 -- -- 37,392 -- -- -------- --------- -------- --------- --------- -------- --------- --------- Marketing 144,353 32,866 114,489 26,391 22,185 100,941 23,460 19,285 -------- --------- -------- --------- --------- -------- --------- --------- Royalty (Note 3) 5,855 3,326 6,808 4,400 4,400 6,364 3,804 3,804 Divested and discontinued 72 (206) 24,243 (968) (1,771) 54,613 9,250 8,045 Corporate and shared(a) -- (60,185) -- (49,278) (49,278) -- (43,503) (43,503) Merger-related costs and unusual items (Note 10) -- (7,384) -- (18,009) (18,009) -- (28,949) (28,949) Loss on sale of business -- -- -- (10,853) (10,853) -- -- -- -------- --------- -------- --------- --------- -------- --------- --------- Total $791,562 $ 193,232 $693,995 $ 137,177 $ 119,508 $630,925 $ 105,906 $ 90,053 ======== ========= ======== ========= ========= ======== ========= =========

(In thousands) Divested & Unallocated December 31, Insurance B&G Marketing Royalty Discontinued & Other(c) Total --------- -------- --------- ------- ------------ ----------- -------- 2002 Assets $180,475 $519,129 $217,203 $5,709 $ -- $56,494 $979,010 Depreciation & amortization 9,584 21,634 8,682 1,697 -- 4,162 45,759 ======== ======== ======== ====== ======= ======= ======== 2001 Assets(d) 156,673 393,186 190,621 5,902 1,860 84,150 832,392 Depreciation & amortization 9,933 30,798 10,189 1,700 3,078 3,814 59,512 ======== ======== ======== ====== ======= ======= ======== 2000 Assets(d) 144,739 284,866 144,165 7,586 68,570 54,513 704,439 Depreciation & amortization 9,092 26,215 7,854 1,703 5,979 2,776 53,619 ======== ======== ======== ====== ======= ======= ========
(a) Corporate and shared expenses represent costs of support functions, research and development initiatives, incentives, and profit sharing that benefit all segments. (b) Unaudited pro forma operating income represents operating results as if the discontinuation of goodwill amortization was effective January 1, 2000. (c) Unallocated and Other includes certain corporate items and eliminations that are not allocated to the segments. (d) Where not specifically identifiable, assets have been allocated to segments based on management estimates. CHOICEPOINT 2002 ANNUAL REPORT 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report 12 RELATED PARTY TRANSACTIONS Three directors and shareholders of ChoicePoint are directors of The Home Depot, Inc. During 2002, the Company performed services for The Home Depot, Inc. through the Business & Government Services segment totaling approximately $14.1 million ($10.0 million net of pass-through expenses). These services were the result of arm's length negotiations in the ordinary course of business. One director and shareholder is a director of FleetBoston Financial Corporation. In 2002, ChoicePoint entered into the Credit Facility with a total commitment of $325 million, in which Fleet National Bank, a subsidiary of FleetBoston Financial Corporation, participates in the amount of $25 million. As of December 31, 2002, $95.0 million is outstanding under the Credit Facility, of which ChoicePoint is liable to Fleet National Bank for $7.3 million. Total interest paid to Fleet National Bank in 2002 related to this transaction was $135,000. ChoicePoint also has a synthetic lease with a total commitment of up to $52 million, in which Fleet National Bank participates in the amount of $15 million. As of December 31, 2002, $29.3 million was outstanding under the synthetic lease, of which ChoicePoint is liable to Fleet National Bank for $8.5 million. No interest was paid to Fleet National Bank in 2002 related to this transaction. In addition, during 2002, the Company provided public record information services for FleetBoston Financial Corporation totaling approximately $30,000. The Credit Facility, synthetic lease and services performed were the results of arm's length negotiations conducted in the ordinary course of business. 13 QUARTERLY FINANCIAL SUMMARY (UNAUDITED) Following is a summary of the unaudited interim results of operations for each quarter in the years ended December 31, 2002 and 2001:
(In thousands, except per share data) First Second Third Fourth Year Ended December 31, 2002 Quarter Quarter Quarter Quarter Total -------- -------- -------- -------- -------- Revenue before reimbursable expenses $173,657 $187,834 $194,713 $196,838 $753,042 Reimbursable expenses 10,019 9,923 10,098 8,480 38,520 -------- -------- -------- -------- -------- Total revenue 183,676 197,757 204,811 205,318 791,562 Operating income, excluding unusual items 46,789 48,899 52,767 52,161 200,616 Operating income 46,789 41,515 52,767 52,161 193,232 Income before change in accounting principle 27,414 24,113 31,262 31,454 114,243 Net income 2,998 24,113 31,262 31,454 89,827 EPS before change in accounting principle, basic 0.33 0.29 0.38 0.37 1.36 EPS before change in accounting, diluted 0.31 0.27 0.35 0.35 1.28 Year Ended December 31, 2001 Revenue before reimbursable expenses $155,681 $162,806 $172,851 $164,629 $655,967 Reimbursable expenses 8,950 8,139 10,816 10,123 38,028 -------- -------- -------- -------- -------- Total revenue 164,631 170,945 183,667 174,752 693,995 Operating income, excluding merger costs, unusual items, and loss on sale of business 33,445 35,581 38,415 40,929 148,370 Operating income 15,436 35,581 27,562 40,929 119,508 Net income 7,213 19,921 12 23,188 50,334 Earnings per share, basic 0.09 0.24 0.00 0.28 0.61 Earnings per share, diluted 0.08 0.23 0.00 0.26 0.58
46 CHOICEPOINT 2002 ANNUAL REPORT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2002 Annual Report The unaudited quarterly financial information reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. As discussed in Note 3, the Company began presenting reimbursed out-of-pocket expenses on a gross basis as revenues and expenses during the second quarter of 2002. Accordingly, all amounts presented prior to the adoption of EITF 01-14 have been reclassified. There was no impact to operating income, net income or EPS. Operating income decreased in the second quarter of 2002 and the first quarter of 2001 due to $7.4 million and $18.0 million of charges for merger-related costs and unusual items (Note 10) and the loss on sale of business in the third quarter of 2001 of $10.9 million (Note 4). The net effect of these items on net income (loss) was $4.5 million or $0.05 per share in the second quarter of 2002, $11.4 million or $0.14 per share in first quarter 2001, and $21.4 million or $0.24 per share in third quarter 2001. 14 SUBSEQUENT EVENTS In January 2003, ChoicePoint acquired two entities, National Data Retrieval, Inc., one of the nation's leading providers of public records information for bankruptcies, civil judgments, and federal and state tax liens based in Alpharetta, Georgia, and The List Source, Inc. d/b/a Kramer Lead Marketing Group, a marketing company servicing the life & health insurance and financial services markets based in Dallas, Texas. The total purchase price of these acquisitions was approximately $38 million and was paid in cash. The Company is currently in the process of allocating the purchase price, but preliminarily estimates that approximately $30 million will be allocated to goodwill, which will be deductible for tax purposes. This preliminary estimate is subject to change based on the resolutions of pre-acquisition contingencies. In February 2003, the Company sold substantially all of the assets of its CP Commercial Specialists ("CPCS") business to an affiliate of New Mountain Capital, LLC for approximately $87 million in cash. This transaction is the culmination of the transformation of ChoicePoint to a data-driven and technology-oriented business. The sale resulted in a gain of approximately $33 million (net of taxes) which will be recorded in the first quarter of 2003. The major classes of assets and liabilities of CPCS which were included in the Consolidated Balance Sheet as of December 31, 2002 are as follows:
(In thousands) 2002 ------- Assets: Accounts receivable, net $ 6,715 Property and equipment 1,254 Goodwill 10,829 ------- Liabilities: Accrued salaries and wages 2,244 -------
The unaudited pro forma financial results as if CPCS had been sold as of January 1, 2002 are as follows (in thousands, except per share amounts):
2002 2002 UNAUDITED Consolidated Results AS REPORTED PRO FORMA ----------- --------- Total revenue $791,562 $729,323 Operating income 193,232 182,480 Operating income excluding unusual items 200,616 189,864 Income before cumulative effect of change in accounting principle 114,243 108,520 EPS before cumulative effect of change in accounting principle, diluted $ 1.28 $ 1.22

2002 2002 UNAUDITED Insurance Segment AS REPORTED PRO FORMA ----------- --------- ~~Total revenue $332,521 $270,282 Operating income 155,391 144,639~~
CHOICEPOINT 2002 ANNUAL REPORT 47 SHAREHOLDER INFORMATION ChoicePoint 2002 Annual Report INFORMATION ABOUT CHOICEPOINT ChoicePoint Inc., a publicly traded company headquartered in the Atlanta suburb of Alpharetta, GA, is the leading provider of identification and credential verification services for making smarter decisions in a world challenged by the reality of risks. Serving the needs of business, government, non-profit organizations and individuals. As of March 1, 2003, ChoicePoint employs more than 3,500 people at locations from coast to coast in the United States. CORPORATE HEADQUARTERS ChoicePoint Inc. 1000 Alderman Drive Alpharetta, GA 30005 770-752-6000 www.choicepoint.com ANNUAL MEETING The Annual Meeting of Shareholders will be held on April 29, 2003 at ChoicePoint's headquarters, 1000 Alderman Drive, Alpharetta, GA 30005. Shareholders are encouraged to attend the meeting, which will begin at 11:00 am local time. Alpharetta is a suburb of Atlanta. MARKET INFORMATION ChoicePoint common stock trades on the world's largest financial market, the New York Stock Exchange (NYSE), under the symbol "CPS." Shareholders will find volume and pricing information in leading financial publications as well as the Investor Relations section of ChoicePoint's Web site (www.choicepoint.com). As of March 1, 2003, there were 86.7 million common shares outstanding and ChoicePoint common stock was held by 4,038 shareholders of record. QUARTERLY STOCK PERFORMANCE ChoicePoint common stock first traded on August 8, 1997 at a price -- adjusted for a two-for-one stock split effective November 24, 1999, a three-for-two split effective March 7, 2001, and a four-for-three split effective June 6, 2002 -- of $8.94. Shown below, on that adjusted basis, are high and low sale prices for each quarter of 2001 and 2002.
High Low ------ ------ Q1 2001 $32.12 $22.16 Q2 2001 31.99 24.13 Q3 2001 32.72 27.11 Q4 2001 38.99 28.13 Q1 2002 $44.21 $35.55 Q2 2002 48.15 40.50 Q3 2002 47.56 32.00 Q4 2002 40.30 29.75 ------ ------
EMPLOYMENT INFORMATION ChoicePoint's successful strategy for growth, coupled with the increased need for identification and credential verification services in today's society, has created rewarding career opportunities at the equal opportunity employer. To learn more about those opportunities visit our corporate website or contact us at: Human Resources ChoicePoint Inc. 1000 Alderman Drive Alpharetta, GA 30005 INVESTOR INFORMATION The Investor Relations section of ChoicePoint's corporate Web site (www.choicepoint.com) contains a wealth of valuable information, ranging from financial news releases and filings to archived (audio) copies of investor conference calls. For additional information, or to obtain copies of the Form 10-K for the year ended December 31, 2002 (which will be provided free of charge with a copy of the financial statements and schedules), Form 10-Q, or other materials, please contact: John Mongelli Vice President, Investor Relations Email: investors@choicepoint.com Phone: 770-752-6171 ChoicePoint Inc. 1000 Alderman Drive Alpharetta, GA 30005 Financial reports can also be obtained from ChoicePoint's Web site. CONFERENCE CALLS ChoicePoint conducts quarterly conference calls to discuss financial performance and other issues of importance to investors. To learn about scheduled calls, hear archived copies of previous calls, and to listen in to live Webcasts, visit the Web site at www.choicepoint.com. ANALYST COVERAGE A number of leading Sell Side financial analysts and investment advisory services produce investment research on ChoicePoint. For an up-to-date list, see the Investor Relations section of the ChoicePoint Web site, www.choicepoint.com. DIVIDEND POLICY ChoicePoint has not paid any dividends since it became a public company, and it does not anticipate paying any in the near future. INDEPENDENT PUBLIC ACCOUNTANTS Deloitte & Touche LLP Atlanta, GA TRANSFER AGENT AND REGISTRAR Shareholders with questions concerning the transfer of shares, lost certificates, changes of address, or other issues should contact ChoicePoint's transfer agent and registrar: SunTrust Bank, Inc. P.O. Box 4625 Atlanta, GA 30302 800-568-3476 TRADEMARKS ChoicePoint, the ChoicePoint logo, Actionable Intelligence, Esteem, KnowX, VitalChek, AutoTrack, C.L.U.E., Commercial Intellisys, AutoTrackXP, and ChoicePointLink are registered trademarks; ScreenNow, Smarter Decisions. Safer World., ChoicePoint Attract,NCF, Current Carrier, MarketView, EAFS and ChoicePoint DirectLink are trademarks; and Signal IVS, DEBTOR Discovery, VIN Services and VolunteerSelect are service marks of ChoicePoint Asset Company. (C) 2003 ChoicePoint Asset Company. All rights reserved. 48 CHOICEPOINT 2002 ANNUAL REPORT EX-21 16 g81483exv21.txt EX-21 SUBSIDIARIES OF THE COMPANY . . . Exhibit 21 SUBSIDIARIES OF CHOICEPOINT INC. Bti LP Texas ChoicePoint Asset Company Delaware ChoicePoint Business and Government Services Inc. Georgia ChoicePoint Capital Inc. Delaware ChoicePoint Financial Inc. Delaware ChoicePoint Health Systems Inc. Kansas ChoicePoint Licensing Company Delaware ChoicePoint Precision Marketing Inc. Georgia ChoicePoint Police Records Inc. Arizona ChoicePoint Public Records Inc. Georgia ChoicePoint Services Inc. Georgia CPPM Inc. Georgia DataMart Processing LLC Georgia EquiSearch Services Inc. Georgia Insurity Inc. Georgia KnowX LLC Georgia National Credit Audit Corporation Illinois National Data Retrieval, Inc. Georgia National Safety Alliance, Incorporated Tennessee Patlex Corporation Pennsylvania Resident Data Financial, LLC Texas Resident Data, Inc. Delaware The Bode Technology Group, Inc. Virginia The List Source, Inc. Texas Vital Chek Network, Inc. Tennessee Vital Chek Network of Canada, Inc. Delaware

~~EX-23.1 17 g81483exv23w1.htm EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP exv23w1~~

We consent to the incorporation by reference in Registration Statement Nos. 333-32453, 333-37498, and 333-102249 of ChoicePoint Inc. on Forms S-8 of our report dated February 21, 2003 (February 28, 2003 as to Note 14), relating to the consolidated financial statements of ChoicePoint Inc. as of and for the year ended December 31, 2002 (which report expresses an unqualified opinion and includes explanatory paragraphs relating to ChoicePoint Inc.’s change in method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142 in 2002 and to the application of procedures relating to certain disclosures and adjustments of financial statement amounts related to the 2001 and 2000 financial statements that were audited by other auditors who have ceased operations and for which we have expressed no opinion or other form of assurance other than with respect to such disclosures and adjustments) and of our report dated February 21, 2003, relating to the 2002 financial statement schedule of ChoicePoint Inc. appearing in and incorporated by reference in this Annual Report on Form 10-K of ChoicePoint Inc. for the year ended December 31, 2002.

~~23 EX-23.2 18 g81483exv23w2.htm EX-23.2 NOTE REGARDING ARTHUR ANDERSEN LLP exv23w2~~

The Company was unable to obtain the consent of Arthur Andersen LLP to the incorporation by reference of its audit report that it issued in connection with its audit of the Company’s consolidated financial statements for the years ended December 31, 2001 and 2000 and its report on financial statement schedule dated February 15, 2002 because Arthur Andersen LLP has ceased operations.

~~24 EX-99.1 19 g81483exv99w1.htm EX-99.1 INDEPENDENT AUDITORS REPORT ON FIN STMT SC exv99w1~~

We have audited the consolidated financial statements of ChoicePoint Inc. and subsidiaries (the “Company”) as of and for the year ended December 31, 2002, and have issued our report thereon dated February 21, 2003 (February 28, 2003 as to Note 14), which report expresses an unqualified opinion and includes explanatory paragraphs relating to the Company’s change in method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142 in 2002 and to the application of procedures relating to certain disclosures and adjustments of financial statement amounts related to the 2001 and 2000 financial statements that were audited by other auditors who have ceased operations and for which we have expressed no opinion or other form of assurance other than with respect to such disclosures and adjustments; such consolidated financial statements and report are included in your 2002 Annual Report to Shareholders and are incorporated herein by reference. Our audit also included the 2002 financial statement schedule of the Company. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the 2002 financial statement schedule, when considered in relation to the basic 2002 financial statements taken as a whole, presents fairly in all material respects the information set forth therein. The financial statement schedule for the years ended December 31, 2001 and 2000 were audited by other auditors who have ceased operations. Those auditors expressed an opinion, in their report dated February 15, 2002, that such 2001 and 2000 financial statement schedule, when, considered in relation to the 2001 and 2000 basic financial statements taken as a whole, presented fairly, in all material respects, the information set forth therein.

~~25 EX-99.2 20 g81483exv99w2.htm EX-99.2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS exv99w2~~

We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in ChoicePoint Inc.’s annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 15, 2002. We did not audit the 1999 consolidated financial statements of DBT Online, Inc. and subsidiaries, a company acquired during 2000 in a transaction accounted for as a pooling of interests as discussed in Note 2. Such statements are included in the consolidated financial statements of ChoicePoint Inc. and reflect total revenue of 15% of the related consolidated totals for the year ended December 31, 1999. These statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for DBT Online, Inc. and subsidiaries is based solely on the report of the other auditors. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index is the responsibility of the company’s management and is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

On March 21, 2002, ChoicePoint Inc. decided to no longer engage Arthur Andersen LLP as its independent public accountants and engaged Deloitte & Touche LLP to serve as its independent public accountants for the year ending December 31, 2002. More information regarding ChoicePoint Inc.’s change in independent public accountants is contained in a current report on Form 8-K filed with the SEC on March 22, 2002.

We could not obtain permission of Arthur Andersen LLP to the inclusion in this Annual Report on Form 10-K of their Report of Independent Public Accountants above. Accordingly, the report of Arthur Andersen LLP above is merely reproduced from ChoicePoint Inc.’s Annual Report on Form 10-K for the year ended December 31, 2001 (although the financial statements for the year ended December 31, 1999 referred to in that report are not included herein) and does not include the manual signature of Arthur Andersen LLP.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Annual Report on Form 10-K of ChoicePoint Inc. (the “Company”) for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chairman and Chief Executive Officer of the Company, certifies that: Based on my knowledge,

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.


(Mark One)
x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2002
		or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from _______________ to _______________


Georgia		58-2309650
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

1000 Alderman Drive
Alpharetta, Georgia		30005
(Address of Principal Executive Offices)		(Zip Code)


PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item X. Executive Officers of the Registrant
PART II
	Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	Item 13. Certain Relationships and Related Transactions
	Item 14. Controls and Procedures
PART IV
	Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
CERTIFICATION
EX-10.7 AMENDMENT #1 TO EMPLOYMENT AGREEMENT
EX-10.8 AMENDMENT #1 TO EMPLOYMENT AGREEMENT
EX-10.15 THIRD AMENDMENT TO DEFERRED COMP PLAN
EX-10.16 DEFERRED COMPENSATION PLAN #2
EX-10.20 FIRST AMENDMENT TO REVOLVING CREDIT AGR
EX-10.24 THIRD AMENDMENT TO MASTER AGREEMENT
EX-10.32 FIRST AMENDMENT TO MASTER AGREEMENT
EX-10.36 GEORGIA LEASE SUPPLEMENT AND SHORT FORM
EX-10.37 SUPPLEMENT TO GEORGIA LEASE
EX-10.38 PARTIAL LEASE TERMINATION AGREEMENT
EX-10.40 AMENDMENT #1 TO LOAN AGREEMENT
EX-10.41 AMENDMENT #2 TO LOAN AGREEMENT
EX-13 PORTIONS OF COMPANY'S 2002 ANNUAL REPORT
EX-21 SUBSIDIARIES OF THE COMPANY
EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP
EX-23.2 NOTE REGARDING ARTHUR ANDERSEN LLP
EX-99.1 INDEPENDENT AUDITORS REPORT ON FIN STMT SC
EX-99.2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
EX-99.3 CERTIFICATION OF CEO
EX-99.4 CERTIFICATION OF CFO


Signature	Title	Date

/s/ Derek V. Smith Derek V. Smith	Chairman and Chief Executive Officer and Director	March 26, 2003

/s/ Steven W. Surbaugh Steven W. Surbaugh	Chief Financial Officer	March 26, 2003

/s/ Thomas M. Coughlin Thomas M. Coughlin	Director	March 25, 2003

/s/ Douglas C. Curling Douglas C. Curling	President, Chief Operating Officer and Director	March 26, 2003

/s/ James M. Denny James M. Denny	Director	March 25, 2003

/s/ Dr. John J. Hamre Dr. John J. Hamre	Director	March 26, 2003

/s/ Bonnie G. Hill Bonnie G. Hill	Director	March 24, 2003

/s/ Kenneth G. Langone Kenneth G. Langone	Director	March 27, 2003

/s/ Bernard Marcus Bernard Marcus	Director	March 27, 2003

/s/ Terrence Murray Terrence Murray	Director	March 25, 2003

/s/ Charles I. Story Charles I. Story	Director	March 24, 2003


	Balance at		Charged to Costs		Charged						Balance at End
	Beginning of		&		to Other						of
Description	Period		Expenses		Accounts			Deductions			Period

	(In thousands)
Year ended December 31, 2002
Allowance for Doubtful Accounts	$	4,634	$	3,880	$	385	(1)	$	(3,921	)	$	4,978
Merger & Exit Cost Reserves		7,131		1,953		2,997	(1)		(7,264	)		4,817
Year ended December 31, 2001
Allowance for Doubtful Accounts		5,787		3,246		507	(1)		(4,906	)		4,634
Merger & Exit Cost Reserves		4,270		5,316		9,363	(1)		(11,818	)		7,131
Year ended December 31, 2000
Allowance for Doubtful Accounts		4,670		2,835		492	(1)		(2,210	)		5,787
Merger & Exit Cost Reserves		4,556		11,263		1,224	(1)		(12,773	)		4,270


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, par value $.10 per share		New York Stock Exchange


			Page

Part I
	Item 1.	Business	1
	Item 2.	Properties	6
	Item 3.	Legal Proceedings	7
	Item 4.	Submission of Matters to a Vote of Security Holders	7
	Item X.	Executive Officers of the Registrant	7
Part II
	Item 5.	Market for the Registrant’s Common Equity and Related Stockholder Matters	8
	Item 6.	Selected Financial Data	8
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	12
	Item 8.	Financial Statements and Supplementary Data	13
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	13
Part III
	Item 10.	Directors and Executive Officers of the Registrant	13
	Item 11.	Executive Compensation	13
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	14
	Item 13.	Certain Relationships and Related Transactions	14
	Item 14.	Controls and Procedures	14
Part IV
	Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	14
Signatures			19
Certifications			20


		2002					2001					2000

		Amount		%			Amount		%			Amount		%

		(Dollars in thousands)
Insurance Services		$	332,521		44	%	$	281,046		45	%	$	235,737		44	%
Business & Government Services			308,761		41			267,409		42			233,270		43
Marketing Services			105,833		14			76,461		12			63,549		12
Royalty			5,855		1			6,808		1			6,364		1

Subtotal			752,970		100	%		631,724		100	%		538,920		100	%
Reimbursable Expenses			38,520					38,028					37,392
Divested & Discontinued Product Lines			72					24,243					54,613

	Total	$	791,562				$	693,995				$	630,925


Name and Position	Age		Executive Officer Since

Derek V. Smith, Chairman and Chief Executive Officer		48		1997
Douglas C. Curling, President and Chief Operating Officer		48		1997
David T. Lee, Executive Vice President		43		1997
J. Michael de Janes, General Counsel and Secretary		45		1997
Steven W. Surbaugh, Chief Financial Officer		53		2002
David E. Trine, Treasurer and Corporate Controller		42		2000


		CHOICEPOINT INC.

		By:		/s/ Derek V. Smith

				Derek V. Smith
				Chairman and Chief Executive Officer