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 þ 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 o

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

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2003: $2,943,718,441 (based on the closing sale price of the Registrant’s Common Stock on that date as reported on the New York Stock Exchange).

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 88,003,626 shares of Common Stock, par value $.10 per share, outstanding as of February 29, 2004.

Portions of ChoicePoint Inc.’s Proxy Statement relating to the 2004 Annual Meeting of Shareholders are incorporated herein by reference in Part III, Items 10, 11, 12, 13 and 14.

Portions of ChoicePoint Inc.’s Annual Report to Shareholders for the year ended December 31, 2003 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,” “project,” “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 position, 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”), was incorporated in 1997. Over the past six years, ChoicePoint has transformed from a predominately manually-driven and insurance customer-focused asset base into the diversified, technology driven, data intensive business it is today. Given the unique data and analytical and distribution capabilities, ChoicePoint is the leading provider of identification and credential verification services for making smarter decisions in a world challenged by increased 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, issuance and administration software and related business outsourcing services 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, authentication, regulatory compliance 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 the 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, developing new products and services 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.

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

In June 2003, the Company purchased Mortgage Asset Research Institute, Inc., which operates databases that help monitor and identify fraud, misrepresentation and misconduct in the mortgage industry.

In July 2003, the Company acquired Identico Systems, LLC, a real-time provider of customer identity verification via face-to-face transactions at the point of sale.

In August 2003, the Company purchased certain assets of TML Information Services, Inc., a provider of motor vehicle reports.

In September 2003, the Company acquired the assets of insuranceDecisions, Inc., a provider of full service claims administration applications to the insurance industry and the assets of Bridger Systems, Inc., which assists customers with compliance with the USA PATRIOT Act, Office of Foreign Assets Control and other requirements.

To complement the Company’s tenant screening services, in October 2003, the Company acquired CITI NETWORK, Inc. d/b/a Applicant Screening and Processing, which provides residential screening services to apartment communities.

In February 2004, ChoicePoint acquired The Templar Corporation, a provider of advanced and secure information technology solutions.

In February 2003, the Company sold its CP Commercial Specialists (“CPCS”) 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 2001 through 2003 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. Due to changes in accounting rules in 2002, CPCS is reported as discontinued operations and its revenues are excluded from the amounts below.

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^TM system automates 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. The Company also provides customized policy rating, issuance and administration software and related business outsourcing services to the commercial insurance market. Until the sale of the CPCS group in February 2003, ChoicePoint provided other services to the commercial property and casualty insurance market, which 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 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 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: (1) pre-employment background screenings, which include credit and driving record checks, prior employment verification, education and licensing verification and criminal record searches; (2) comprehensive drug screening program management and administration and due diligence and credential verification services to legal and professional service providers; (3) tenant screening services; (4) volunteer screening services and (5) authentication services and DNA identification services.

The Company also provides enhanced information services to government agencies, such as uncovering ownership of hidden assets, locating individuals and providing leads for criminal and civil investigations, assisting with homeland security initiatives and 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 & 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, regulatory compliance services, searches of partnership and corporation filing records, and criminal record searches to assist organizations and lending institutions in managing potential risk exposure. The Company also provides services that facilitate ordering 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, financial institutions, 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 2003.

ChoicePoint’s 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.

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 property and casualty competitors include Trans Union Corporation, Fair Isaac & Company, Inc., American Insurance Services Group, a unit of Insurance Services Office, Inc., Metropolitan Reporting Bureau, Explorer Information Services and Insurance Information Exchange, L.L.C., a subsidiary of ISO Claims Services, Inc., while the Company’s competitors in the commercial insurance market are Computer Sciences Corporation, CGI Group Inc. and Fiserv, 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., First Advantage Corporation, Merlin Information Services, LocatePLUS Holdings Corporation and infoUSA Inc., while its competitors in the pre-employment screening and drug testing services market include Kroll Inc., 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. and in the permit services market the primary competitors are Comdata Transportation Services, a division of Ceridian Corporation and Xero-Fax, 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 Services Inc. (“EquiSearch”), the Company competes with Keane Tracers, Inc. and Georgeson 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 online 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 certain data or public records were to occur, the Company’s business, financial position 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 position 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 position 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, 2003, ChoicePoint employed approximately 4,100 persons, none of whom were unionized. All of the Company’s workforce is employed in the United States. As of December 31, 2003, ChoicePoint employed approximately 240 individuals in Hartford, Connecticut in its Insurity facilities, approximately 40 individuals in Santa Ana, California at one of its ChoicePoint Public Records Group (“PRG”) locations, approximately 215 individuals in Peoria, Illinois in one of its ChoicePoint Precision Marketing (“CPM”) locations, approximately 70 individuals in the WorkPlace Solutions St. Petersburg, Florida office, approximately 37 employees in White Plains, New York at its EquiSearch offices, and approximately 70 individuals at the Boston, Massachusetts CPPM, Inc. office. The Company has approximately 300 employees at the CPM Pensacola, Florida office, approximately 90 National Safety Alliance employees in Nashville, Tennessee, approximately 85 employees at Bode Labs in Springfield, Virginia, approximately 50 BTi employees in Dallas, Texas, approximately 55 employees in the WorkPlace Solutions Los Angeles, California office, approximately 100 WorkPlace Solutions employees in the Charlotte, North Carolina office and about 320 PRG employees in Boca Raton, Florida. ChoicePoint has approximately 60 employees at its Vital Chek office in Nashville, Tennessee, approximately 38 employees at the Bridger Systems office in Bozeman, Montana and about 60 employees at the Resident Data offices in Dallas, Texas. Approximately 1,240 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 throughout the United States. ChoicePoint believes that its relations with its employees are good.

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, ScreenNow®, Current Carrier, 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 expire 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 files annual, quarterly, and current reports, proxy statements, and other information with the Securities and Exchange Commission (“SEC”). You may read and copy any materials ChoicePoint files with the SEC, at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. For information on the operation of the Public Reference Room, call the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers such as ChoicePoint that file electronically with the SEC at http://www.sec.gov. The Company makes its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to such reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, available (free of charge) on or through its Internet Web site, located at www.choicepoint.com, as soon as reasonably practicable after they are filed with or furnished to the SEC.

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, 2003, ChoicePoint maintained approximately 50 other offices in the United States. These offices, all of which are leased, contain a total of approximately

680,000 square feet of space. Through CPM, ChoicePoint owns four buildings in Peoria, Illinois representing approximately 180,000 square feet of space. Through Vital Chek, ChoicePoint owns two buildings in Nashville, Tennessee representing approximately 10,000 square feet. The Company ordinarily leases office space of the general commercial type for conducting its business.

ChoicePoint completed construction on a 200,000 square foot data center adjacent to its principal executive offices at the Alpharetta, Georgia location in the second quarter of 2003.

In March 2003, ChoicePoint sold a building in Norcross, Georgia owned by ChoicePoint Services Inc. that represented approximately 8,400 square feet. In October 2003, ChoicePoint sold two buildings in Olathe, Kansas owned by ChoicePoint Health Systems Inc. that represented approximately 99,000 square feet.

A class action lawsuit against the Company was filed in the United States District Court for the Middle District of Florida on May 30, 2003 (last styled Russell V. Rosen and Rabbi Joel Levine et al. v. ChoicePoint Inc.) alleging violations of the federal Driver’s Privacy Protection Act (“DPPA”). The plaintiffs recently dismissed this case against all defendants. Three ChoicePoint entities have been added as defendants in a similar complaint filed in the United States District Court for the Southern District of Florida (styled Fresco, et al. v. Automotive Directions Inc., et al.) Additionally, Russell V. Rosen and Rabbi Joel Levine have been added as plaintiffs in this case. The complaints allege that the Company has obtained, disclosed and used information obtained from the Florida Department of Highway Safety and Motor Vehicles (“Florida DHSMV”) in violation of the DPPA. The plaintiffs seek to represent classes of individuals whose personal information from Florida DHSMV records has been obtained, disclosed and used for marketing purposes or other allegedly impermissible uses by ChoicePoint without the express written consent of the individual. A number of the Company’s competitors have also been sued in the same or similar litigation in Florida.

In addition, on July 10, 2003, a plaintiff filed a class action lawsuit against the Company in the United States District Court for the Eastern District of Louisiana (styled Betty D. Russell v. ChoicePoint Services, Inc.) that alleges substantially similar violations of the DPPA. The plaintiff sought to represent a national class of all individuals whose information the Company has obtained from motor vehicle records and a subclass of all individuals domiciled in Louisiana whose information the Company has obtained from motor vehicle records in Louisiana. ChoicePoint filed a Motion to Dismiss. The Court granted such motion in part and denied in part.

Each of these complaints seeks certification as a class action, compensatory damages, attorney’s fees and costs, and injunctive and other relief. The Company intends to defend against these actions vigorously. While the ultimate resolution of these cases cannot presently be determined, an unfavorable outcome in any of these cases could have a material adverse effect on the Company’s financial position or results of operations.

ChoicePoint also is involved in litigation from time to time in the ordinary course of its business. The Company provides for estimated legal fees and settlements relating to pending lawsuits when they are probable and reasonably estimated. The Company does not believe that the outcome of any such pending or threatened litigation in the ordinary course of business will have a material adverse effect on the financial position or results of operations of ChoicePoint. However, as is inherent in legal proceedings where issues may be decided by finders of fact, there is a risk that unpredictable decisions adverse to the Company could be reached.

No matters were submitted to a vote of security holders by the Company during the quarter ended December 31, 2003.

Set forth below is certain biographical information with respect to each executive officer of the Company, as of March 1, 2004:

Derek V. Smith, 49, 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.

Douglas C. Curling, 49, 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 1997 until May 1999.

David T. Lee, 44, has served as Executive Vice President of the Company since May 1999 and served as Senior Vice President from 1997 until May 1999.

J. Michael de Janes, 46, has served as General Counsel since 1997 and also served as Secretary from April 1998 until December 2003.

Steven W. Surbaugh, 54, 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 W. Davis, 51, has served as Corporate Secretary and Vice President, Government Affairs since December 2003. He served as Staff Director and Policy Director of the Office of the Vice Chair of the Senate Republican Conference from January 2003 to December 2003 and from 2001 to January 2003 he served as Chief of Staff and Legislative Director for the Office of Senator Kay Bailey Hutchison. From 1994 to 2001 Mr. Davis served as Military Legislative Assistant and Deputy Chief of Staff for Senator Hutchison.

David E. Trine, 43 has served as Treasurer since May 2000 and as Vice President — Corporate Controller since May 1999. He served as Vice President — Finance and Accounting of the Company from 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.

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” in the 2003 Annual Report to Shareholders (the “Annual Report”), a copy of such sections 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” in the Annual Report, a copy of such section 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” in the Annual Report, a copy of such section is 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 facing the Company. ChoicePoint’s business operations could also be impaired by additional risks and uncertainties that, at present, are not known to the Company or that, at present, are considered 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 i, 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 position, 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 position, 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:


	•	paying more than fair market value for an acquired company or assets;

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

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

	•	managing the potential disruption to our ongoing business;

	•	distracting management focus from our core business;

	•	impairing relationships with employees, customers, and strategic partners;

	•	incurring expenses associated with the amortization of other intangibles;

	•	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

	•	diluting the share value and voting power of existing shareholders.

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 position, 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 position, 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 position, 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 position 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 position 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, these competitors 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 sure 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 position 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, department of motor vehicle data and dates of birth. As a result, they are lobbying for further restrictions on the dissemination or commercial use of personal information to the public and private sectors. The following legal and regulatory developments could have a material adverse affect on our business, financial position and results of operations:


	•	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;

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

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

	•	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. During recent years, the Company has significantly increased its senior management talent levels. Accordingly, the dependency on the Chief Executive Officer and/or the Chief Operating Officer will continue to diminish in future years.

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 through disaster recovery planning, 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:


	•	deterring customers from using our products and services;

	•	harming our reputation;

	•	exposing us to liability;

	•	increasing our operating expenses to correct problems caused by the breach;

	•	affecting our ability to meet our customers’ expectations; or

	•	causing inquiry from governmental authorities.

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, telephone solicitation and email privacy;

	•	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

	•	loss of use or data by third parties.

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 these products, services and technologies 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 position and results of operations may be adversely affected.

ChoicePoint and its subsidiaries are involved in various legal proceedings that periodically arise during the course of business. While the Company does not have reason to believe that the outcome of any such pending or threatened litigation will have a material adverse effect on our financial position, litigation is essentially unpredictable and excessive verdicts could occur. Although we believe we have valid defenses in these matters, in the future we could incur judgments or enter into settlements of claims that could have a material adverse effect on our financial position or results of operations.

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, 2003. The information below should be read in conjunction with Note 5 of the “Notes to Consolidated Financial Statements” of the Annual Report, which notes 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, 2003 was 1.6% and 2.0% at December 31, 2002. Prior to May 10, 2002, the Company had a $250 million unsecured revolving credit facility with a group of banks. As of December 31, 2003, there were no borrowings 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 through June 2004. Net borrowings under the Receivables Facility were $50.0 million at December 31, 2003. The average interest rate based on the terms of the Receivables Facility at December 31, 2003 was approximately 1.5%. 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 have a total notional amount of $42 million, became 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%. As of December 31, 2003, $67.3 million was outstanding under the Company’s synthetic base agreements, of which $67.0 million of LIBOR-based payments were hedged with the swap agreements.

Based on the Company’s overall interest rate exposure at December 31, 2003, a 1% change in interest rates would result in a change in annual pretax interest expense of approximately $500,000 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” in the Annual Report, a copy of which sections 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

As required by SEC rules, the Company has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by 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.

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. There were no significant changes to our internal controls over financial reporting during the fourth quarter that materially affected or are reasonably likely to affect, the Company’s internal controls over financial reporting during the fourth quarter of 2003. 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, and individuals may execute transactions without the proper authority or disclosure.

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,” “Other Matters — ChoicePoint Section 16(a) Beneficial Ownership Reporting Compliance” and “Board Meetings and Committees — Audit Committee” of the Proxy Statement for the 2004 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. ChoicePoint has adopted a Code of Ethics for Senior Financial Officers and Business Unit Leaders that

applies to the Company’s chief executive officer, chief financial officer, principal accounting officer, controller and other senior officers. A copy of the ChoicePoint Inc. Code of Conduct, Code of Ethics for Senior Financial Officers and Business Unit Leaders, the Corporate Governance Guidelines and charters for the audit committee, management compensation and benefits committee and corporate governance and nominating committee may be found on the Company’s Web site at www.choicepoint.com. Copies will be furnished upon written request to the Company at the following address: Attn: Corporate Secretary, ChoicePoint Inc., 1000 Alderman Drive, Alpharetta, GA 30005. If the Company makes any amendments to the Code of Ethics for Senior Financial Officers and Business Unit Leaders other than technical, administrative, or other non-substantive amendments, or grants any waivers, including implicit waivers, from a provision of this code to the Company’s chief executive officer, chief financial officer, principal accounting officer, controller and other senior officers, the Company will disclose the nature of the amendment or waiver, its effective date and to whom it applies on its Web site or in a report on Form 8-K filed with the SEC.

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 2004 Annual Meeting of Shareholders and is incorporated herein by reference.

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 2004 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 2004 Annual Meeting of Shareholders and is incorporated herein by reference.

The information required by this Item is included in the section entitled “Audit Fees, Financial Information System Fees and Other Fees” of the Proxy Statement for the 2004 Annual Meeting of Shareholders and is incorporated herein by reference.

Consolidated Balance Sheets as of December 31, 2003 and 2002 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, 2003, 2002 and 2001 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, 2003, 2002 and 2001 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, 2003, 2002 and 2001 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 financial statements referenced above is incorporated by reference from the Annual Report, and is 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.


*	Management contract, compensatory plan or arrangement required to be filed as an exhibit.

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.

On October 23, 2003, the Company furnished a Current Report on Form 8-K, including the Press Release of ChoicePoint Inc., dated October 21, 2003 reporting ChoicePoint Inc.’s financial results for the third quarter of 2003.

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 5, 2004.


	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.


(1)	Represents allowances established in connection with acquisitions net of amounts charged to goodwill.

21 EX-10.11 3 g87580exv10w11.txt EX-10.11 1997 OMNIBUS STOCK INCENTIVE PLAN EXHIBIT 10.11 CHOICEPOINT INC. 1997 OMNIBUS STOCK INCENTIVE PLAN 1. PURPOSE. The purpose of the 1997 Omnibus Stock Incentive Plan (the "Plan") is to attract and retain directors, officers and key employees for ChoicePoint Inc. (the "Corporation") and its Subsidiaries and to provide to such persons incentives and rewards for superior performance. 2. DEFINITIONS. As used in this Plan, "Annual Meeting" means the annual meeting of shareholders of the Corporation. "Appreciation Right" means a right granted pursuant to Section 5 of this Plan, including a Free- standing Appreciation Right or a Tandem Appreciation Right. "Base Price" means the price to be used as the basis for determining the Spread upon the exercise of a Free-standing Appreciation Right. "Board" means the Board of Directors of the Corporation. "Change in Control" shall have the meaning provided in Section 13 of this Plan. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Committee" means the committee (or a subcommittee) described in Section 18 of this Plan. "Common Shares" means shares of common stock, $.10 par value per share, of the Corporation or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 12 of this Plan. "Covered Employee" means a Participant who is, or is determined by the Committee to be likely to become, a "covered employee" within the meaning of Section 162(m) of the Code (or any successor provision). "Date of Grant" means the date specified by the Committee on which a grant of Option Rights, Appreciation Rights, Performance Shares or Performance Units or a grant or sale of Restricted Shares or Deferred Shares shall become effective. "Deferral Period" means the period of time during which Deferred Shares are subject to deferral limitations under Section 7 of this Plan. "Deferred Shares" means an award made pursuant to Section 7 of this Plan of the right to receive Common Shares at the end of a specified Deferral Period. "Designated Subsidiary" means a Subsidiary that is (i) not a corporation or (ii) a corporation in which at the time the Corporation owns or controls, directly or indirectly, less than 80 percent of the total combined voting power represented by all classes of stock issued by such corporation. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time. "Free-standing Appreciation Right" means an Appreciation Right granted pursuant to Section 5 of this Plan that is not granted in tandem with an Option Right or similar right. "Incentive Stock Options" means Option Rights that are intended to qualify as "incentive stock options" under Section 422 of the Code or any successor provision. "Management Objectives" means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares or Performance Units or, when so determined by the Committee, Option Rights, Appreciation Rights, Restricted Shares and dividend credits pursuant to this Plan. Management Objectives may be described in terms of Corporation-wide objectives or objectives that are related to the performance of the individual Participant or of the Subsidiary, division, department, region or function within the Corporation or Subsidiary in which the Participant is employed. The Management Objectives may be made relative to the performance of other corporations. The Management Objectives applicable to an award to a Covered Employee shall be based on specified levels of growth or improvement in one or more of the following criteria: 1. earnings; 2. earnings per share (earnings per share will be calculated without regard to any change in accounting standards that may be required by the Financial Accounting Standards Board after the goal is established); 3. share price; 4. shareholder return; 5. return on invested capital, equity, or assets; 2 6. operating earnings; 7. sales; 8. productivity; 9. cash flow; 10. market share; 11. profit margin; 12. customer service; and/or 13. economic value added. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Corporation, or the manner in which it conducts its business, or other events or circumstances render the Management Objectives unsuitable, the Committee may in its discretion modify such Management Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable, except in the case of a Covered Employee where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code. In such case, the Committee shall not make any modification of the Management Objectives or minimum acceptable level of achievement. "Market Value per Share" means, as of any particular date, the fair market value of the Common Shares as determined by the Committee, which at the discretion of the Committee may be based on an average price at which the Common Shares have traded over a period of time specified by the Committee or any price or combination of prices on a particular date specified by the Committee. In any case in which the Committee has not established a specific procedure, Market Value per share shall be the mean of the high and low trading prices for the Common Shares on a national stock exchange on the date in question. "Non-Employee Officer or Director" means an officer or director of the Corporation who is not an employee of the Corporation or any Subsidiary. "Optionee" means the optionee named in an agreement evidencing an outstanding Option Right. "Option Price" means the purchase price payable on exercise of an Option Right. "Option Right" means the right to purchase Common Shares upon exercise of an option granted pursuant to Section 4 or Section 9 of this Plan. "Participant" means a person who is selected by the Committee to receive benefits under this Plan and who is at the time an officer, or other key employee of the Corporation or any one or more of its Subsidiaries, or who has agreed to commence serving in any of such capacities within 90 days of the Date of Grant, and shall also include each Non-Employee Officer or Director who receives an award of Option Rights pursuant to Section 9 of 3 this Plan, or any other person, whether or not an employee, Director or officer, who renders significant services as a consultant or otherwise, in the discretion of the Committee. "Performance Period" means, in respect of a Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating to such Performance Share or Performance Unit are to be achieved. "Performance Share" means a bookkeeping entry that records the equivalent of one Common Share awarded pursuant to Section 8 of this Plan. "Performance Unit" means a bookkeeping entry that records a unit equivalent to $1.00 awarded pursuant to Section 8 of this Plan. "Reload Option Rights" means additional Option Rights granted automatically to an Optionee upon the exercise of Option Rights pursuant to Section 4(f) of this Plan. "Replacement Awards" means Option Rights or Restricted Shares that are issued in substitution of awards of option rights or restricted shares that were granted under the Equifax Inc. Omnibus Stock Incentive Plan, the 1993 Employee Stock Incentive Plan or the 1995 Employee Stock Incentive Plan to former employees of Equifax Inc. or subsidiaries of Equifax Inc. who are employees of the Corporation as of the date of the spin-off of the Corporation to the shareholders of Equifax Inc. or become employees of the Corporation after such date pursuant to the Equifax/ChoicePoint Employee Benefits Agreement. "Restricted Shares" means Common Shares granted or sold pursuant to Section 6 or Section 9 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers referred to in such Section 6 has expired. "Rule l6b-3" means Rule 16b-3 of the Securities and Exchange Commission (or any successor rule to the same effect) as in effect from time to time. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time. "Spread" means the excess of the Market Value per Share of the Common Shares on the date when an Appreciation Right is exercised, or on the date when Option Rights are surrendered in payment of the Option Price of other Option Rights, over the Option Price provided for in the related Option Right. "Subsidiary" means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), 4 but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Corporation except that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, "Subsidiary" means any corporation in which at the time the Corporation owns or controls, directly or indirectly, more than 50 percent of the total combined voting power represented by all classes of stock issued by such corporation. "Tandem Appreciation Right" means an Appreciation Right granted pursuant to Section 5 of this Plan that is granted in tandem with an Option Right or any similar right granted under any other plan of the Corporation. "Voting Shares" means at any time, the then-outstanding securities entitled to vote generally in the election of directors of the Corporation. 3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as provided in Section 12 of this Plan, the number of Common Shares that may be issued or transferred (i) upon the exercise of Option Rights or Appreciation Rights, (ii) as Restricted Shares and released from substantial risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of Performance Shares or Performance Units that have been earned, (v) as awards to Non-Employee Officers or Directors, (vi) pursuant to other awards specified in Section 10 of this Plan or (vii) in payment of dividend equivalents paid with respect to awards made under the Plan shall not exceed in the aggregate 4,000,000 shares plus any shares specified in paragraph (b) of this Section 3. Such shares may be shares of original issuance or treasury shares or a combination of the foregoing. Upon the payment of any Option Price by the transfer to the Corporation of Common Shares or upon satisfaction of any withholding amount by means of transfer or relinquishment of Common Shares, there shall be deemed to have been issued or transferred under this Plan only the net number of Common Shares actually issued or transferred by the Corporation. (b) Total shares available under the Plan shall also include (i) any shares relating to awards that expire or are forfeited or cancelled and (ii) the number of shares repurchased by the Corporation after August 1, 1997 in the open market or otherwise and having an aggregate purchase price no greater than the amount of cash proceeds received by the Corporation from the sale of Common Shares under the Plan. (c) Upon payment in cash of the benefit provided by any award granted under this Plan, any shares that were covered by that award shall again be available for issue or transfer hereunder. (d) Notwithstanding anything in this Section 3, or elsewhere in this Plan, to the contrary, the aggregate number of Common Shares actually issued or transferred by the Corporation upon the exercise of Incentive Stock Options shall not exceed 4,000,000 shares, subject to adjustments as provided in Section 12 of this Plan. 5 (e) Notwithstanding any other provision of this Plan to the contrary, no Participant shall be granted Option Rights for more than 750,000 Common Shares during any calendar year, subject to adjustments as provided in Section 12 of this Plan. Further, in no event shall any Participant in any calendar year receive more than 750,000 Appreciation Rights, subject to adjustments as provided in Section 12 of this Plan. (f) Notwithstanding any other provision of this Plan to the contrary, in no event shall any Participant in any calendar year receive an award of Performance Shares, Performance Units or Restricted Shares that specify Management Objectives having an aggregate maximum value as of their respective Dates of Grant in excess of $2,000,000. 4. OPTION RIGHTS. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of options to purchase Common Shares. Such grants may be original awards or Replacement Awards. Each such grant may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each grant shall specify the number of Common Shares to which it pertains subject to the limitations set forth in Section 3 of this Plan. (b) Each grant, other than a grant of a Replacement Award, shall specify an Option Price per share, which shall not be less than 100 percent of the Market Value per Share on the Date of Grant. (c) Each grant shall specify whether the Option Price shall be payable (i) in cash or by check acceptable to the Corporation, (ii) by the actual or constructive transfer to the Corporation of nonforfeitable, unrestricted Common Shares owned by the Optionee (or other consideration authorized pursuant to subsection (d) below) having a value at the time of exercise equal to the total Option Price, or (iii) by a combination of such methods of payment. (d) The Committee may determine, at or after the Date of Grant, that payment of the Option Price of any option (other than an Incentive Stock Option) may also be made in whole or in part in the form of Restricted Shares or other Common Shares that are forfeitable or subject to restrictions on transfer, Deferred Shares, Performance Shares (based, in each case, on the Market Value per Share on the date of exercise), other Option Rights (based on the Spread on the date of exercise) or Performance Units. Unless otherwise determined by the Committee at or after the Date of Grant, whenever any Option Price is paid in whole or in part by means of any of the forms of consideration specified in this paragraph, the Common Shares received upon the exercise of the Option Rights shall be subject to such risks of forfeiture or restrictions on transfer as may correspond to any that apply to the consideration surrendered, but only to the extent of (i) the number of shares or Performance Shares, (ii) the Spread of any unexercisable portion of Option Rights, or (iii) the stated value of Performance Units surrendered. 6 (e) Any grant may provide for deferred payment of the Option Price from the proceeds of sale through a broker on a date satisfactory to the Corporation of some or all of the shares to which such exercise relates. (f) Any grant may, at or after the Date of Grant, provide for the automatic grant of Reload Option Rights to an Optionee upon the exercise of Option Rights (including Reload Option Rights) using Common Shares or other consideration specified in paragraph (d) above. Reload Option Rights shall cover up to the number of Common Shares, Deferred Shares, Option Rights or Performance Shares (or the number of Common Shares having a value equal to the value of any Performance Units) surrendered to the Corporation upon any such exercise in payment of the Option Price or to meet any withholding obligations. Reload Options shall specify an Option Price per share, which shall not be less than 100 percent of the Market Value per Share on the Date of Grant of the Reload Option Right, and shall be on such other terms as may be specified by the Committee, which may be the same as or different from those of the original Option Rights. (g) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised. (h) Each grant shall specify the period or periods of continuous service by the Optionee with the Corporation or any Subsidiary which is necessary before the Option Rights or installments thereof will become exercisable and may provide for the earlier exercise of such Option Rights in the event of a Change in Control, retirement, death or disability of the Optionee or other similar transaction or event. (i) Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights. (j) Option Rights granted under this Plan may be (i) options, including, without limitation, Incentive Stock Options, that are intended to qualify under particular provisions of the Code, (ii) options that are not intended so to qualify, or (iii) combinations of the foregoing. (k) The Committee may, at or after the Date of Grant of any Option Rights (other than Incentive Stock Options), provide for the payment of dividend equivalents to the Optionee on either a current or deferred or contingent basis or may provide that such equivalents shall be credited against the Option Price. (l) The exercise of an Option Right shall result in the cancellation on a share-for-share basis of any Tandem Appreciation Right authorized under Section 5 of this Plan. (m) Each grant shall specify the term of the Option Right; provided, however, that no Option Right shall be exercisable more than 10 years from the Date of Grant. 7 (n) Each grant of a Replacement Award shall specify an Option Price per share, as determined by the Committee. Notwithstanding any other provision in this Plan to the contrary, no grant of a Replacement Award in substitution of an award that qualified as an Incentive Stock Option immediately before the grant of the Replacement Award shall contain any term that is more favorable than the terms of the substituted award. (o) Each grant of Option Rights shall be evidenced by an agreement executed on behalf of the Corporation by an officer and delivered to the Optionee and containing such terms and provisions, consistent with this Plan, as the Committee may approve. 5. APPRECIATION RIGHTS. The Committee may also authorize grants to Participants of Appreciation Rights. An Appreciation Right shall be a right of the Participant to receive from the Corporation an amount, which shall be determined by the Committee and shall be expressed as a percentage (not exceeding 100 percent) of the Spread at the time of the exercise of such right. Any grant of Appreciation Rights under this Plan shall be upon such terms and conditions as the Committee may determine in accordance with the following provisions: (a) Any grant may specify that the amount payable on exercise of an Appreciation Right may be paid by the Corporation in cash, in Common Shares or in any combination thereof and may either grant to the Optionee or retain in the Committee the right to elect among those alternatives. (b) Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Committee at the Date of Grant. (c) Any grant may specify waiting periods before exercise and permissible exercise dates or periods. (d) Any grant may specify that such Appreciation Right may be exercised only in the event of a Change in Control or other similar transaction or event. (e) Each grant of Appreciation Rights shall be evidenced by a notification executed on behalf of the Corporation by an officer and delivered to and accepted by the Optionee, which notification shall describe such Appreciation Rights, identify the related Option Rights, state that such Appreciation Rights are subject to all the terms and conditions of this Plan, and contain such other terms and provisions, consistent with this Plan, as the Committee may approve. (f) Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such rights. 8 (g) Regarding Tandem Appreciation Rights only: Each grant shall provide that a Tandem Appreciation Right may be exercised only (i) at a time when the related Option Right (or any similar right granted under any other plan of the Corporation) is also exercisable and the Spread is positive and (ii) by surrender of the related Option Right (or such other right) for cancellation. In addition, a Tandem Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently with such Incentive Stock Option. (h) Regarding Free-standing Appreciation Rights only: (i) Each grant shall specify in respect of each Free-standing Appreciation Right a Base Price per Common Share, which shall be equal to or greater than the Market Value per Share on the Date of Grant; (ii) Successive grants may be made to the same Participant regardless of whether any Free- standing Appreciation Rights previously granted to such Participant remain unexercised; (iii) Each grant shall specify the period or periods of continuous service by the Participant with the Corporation or any Subsidiary that is necessary before the Free- standing Appreciation Rights or installments thereof shall become exercisable, and any grant may provide for the earlier exercise of such rights in the event of a Change in Control, retirement, death or disability of the Participant or other similar transaction or event as approved by the Committee; and (iv) No Free-standing Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant. 6. RESTRICTED SHARES. The Committee may also authorize the grant or sale to Participants of Restricted Shares. Each such grant or sale may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each such grant or sale shall constitute an immediate transfer of the ownership of Common Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than Market Value per Share at the Date of Grant. 9 (c) Each such grant or sale shall provide that the Restricted Shares covered by such grant or sale shall be subject to a "substantial risk of forfeiture" within the meaning of Section 83 of the Code for a period of not less than one (1) year to be determined by the Committee at the Date of Grant, or less than one (1) year if so determined by the Committee in the case of a Replacement Award, and any grant or sale may provide for the earlier termination of such period in the event of a Change in Control, retirement, or death or disability of the Optionee or other similar transaction or event as approved by the Committee. (d) Each such grant or sale shall provide that during the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Committee at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Corporation or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee). (e) Any grant of Restricted Shares may specify Management Objectives which, if achieved, will result in termination or early termination of the restrictions applicable to such shares and each grant may specify in respect of such specified Management Objectives, a minimum acceptable level of achievement and may set forth a formula for determining the number of Restricted Shares on which restrictions will terminate if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives. (f) Any such grant or sale of Restricted Shares may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and reinvested in additional Restricted Shares, which may be Subject to the same restrictions as the underlying award. (g) Each grant or sale of Restricted Shares shall be evidenced by an agreement executed on behalf of the Corporation by any officer and delivered to and accepted by the Participant and shall contain such terms and provisions, consistent with this Plan, as the Committee may approve. Unless otherwise directed by the Committee, all certificates representing Restricted Shares shall be held in custody by the Corporation until all restrictions thereon shall have lapsed, together with a stock power executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such Shares. 7. DEFERRED SHARES. The Committee may also authorize the grant or sale of Deferred Shares to Participants. Each such grant or sale may utilize any or all of the authorizations, and shall be subject to all of the requirements contained in the following provisions: (a) Each such grant or sale shall constitute the agreement by the Corporation to deliver Common Shares to the Participant in the future in consideration of the performance 10 of services, but subject to the fulfillment of such conditions during the Deferral Period as the Committee may specify. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant. (c) Each such grant or sale shall be subject, except (if the Committee shall so determine) in the event of a Change in Control or other similar transaction or event, to a Deferral Period of not less than 1 year, as determined by the Committee at the Date of Grant. (d) During the Deferral Period, the Participant shall have no right to transfer any rights under his or her award and shall have no rights of ownership in the Deferred Shares and shall have no right to vote them, but the Committee may, at or after the Date of Grant, authorize the payment of dividend equivalents on such Shares on either a current or deferred or contingent basis, either in cash or in additional Common Shares. (e) Each grant or sale of Deferred Shares shall be evidenced by an agreement executed on behalf of the Corporation by any officer and delivered to and accepted by the Participant and shall contain such terms and provisions, consistent with this Plan, as the Committee may approve. 8. PERFORMANCE SHARES OR PERFORMANCE UNITS. The Committee may also authorize the grant of Performance Shares or Performance Units that will become payable to a Participant upon achievement of specified Management Objectives. Each such grant may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each grant shall specify the number of Performance Shares or Performance Units to which it pertains, which number may be subject to adjustment to reflect changes in compensation or other factors; provided, however, that no such adjustment shall be made in the case of a Covered Employee where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code. (b) The Performance Period with respect to each Performance Share or Performance Unit shall be such period of time not less than 1 year, (except in the event of a Change in Control or other similar transaction or event, if the Committee shall so determine) commencing with the Date of Grant and ending on the last date of the Performance Period (as shall be determined by the Committee at the time of grant). (c) Any grant of Performance Shares or Performance Units shall specify Management Objectives which, if achieved, will result in payment or early payment of the award, and each grant shall specify in respect of such specified one or more Management Objectives a minimum acceptable level of achievement and shall set forth a formula for 11 determining the number of Performance Shares or Performance Units that will be earned if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives. The grant of Performance Shares or Performance Units shall specify that, before the Performance Shares or Performance Units shall be earned and paid, the Committee must certify that the Management Objectives have been satisfied. (d) Each grant shall specify a minimum acceptable level of achievement in respect of the specified Management Objectives below which no payment will be made and shall set forth a formula for determining the amount of payment to be made if performance is at or above such minimum but short of full achievement of the Management Objectives. (e) Each grant shall specify the time and manner of payment of Performance Shares or Performance Units which have been earned. Any grant may specify that the amount payable with respect thereto may be paid by the Corporation in cash, in Common Shares or in any combination thereof and may either grant to the Participant or retain in the Committee the right to elect among those alternatives. (f) Any grant of Performance Shares may specify that the amount payable with respect thereto may not exceed a maximum specified by the Committee at the Date of Grant. Any grant of Performance Units may specify that the amount payable or the number of Common Shares issued with respect thereto may not exceed maximums specified by the Committee at the Date of Grant. (g) The Committee may, at or after the Date of Grant of Performance Shares, provide for the payment of dividend equivalents to the holder thereof on either a current or deferred or contingent basis, either in cash or in additional Common Shares. (h) Each grant of Performance Shares or Performance Units shall be evidenced by a notification executed on behalf of the Corporation by any officer and delivered to and accepted by the Participant, which notification shall state that such Performance Shares or Performance Units are subject to all the terms and conditions of this Plan, and contain such other terms and provisions, consistent with this Plan, as the Committee may approve. 9. AWARDS TO NON-EMPLOYEE OFFICERS OR DIRECTORS. Restricted Shares and Option Rights shall be granted to Non-Employee Officers or Directors as follows: (a) Immediately following his or her initial election to the Board, Restricted Shares with a fair market value of $25,000, if unrestricted, shall be granted to each Non-Employee Officer or Director. Such Restricted Shares shall become transferable and nonforfeitable three (3) years from the Date of Grant; provided, however, that such Restricted Shares shall immediately become transferable and nonforfeitable in the event of (i) a Change in Control, or (ii) the Participant's death while a non-Employee Officer or Director, or (iii) the Participant's retirement from the Board. 12 (b) Immediately following each Annual Meeting, 3,000 Option Rights shall be granted to each Non- Employee Officer or Director, other than the Chairman of the Board who shall be granted 5,000 Option Rights immediately following each Annual Meeting. The exercise price for such Option Rights shall be Market Value per Share on the Date of Grant. Such Option Rights shall become exercisable two (2) years from the Date of Grant; provided, however, that such Option Rights shall immediately become exercisable in the event of (i) a Change in Control, or (ii) the Participant's death while a non-Employee Officer or Director, or (iii) the Participant's retirement from the Board. (c) Each grant of Restricted Shares or Option Rights shall be evidenced by an agreement executed on behalf of the Corporation by an officer and delivered to the grantee and such terms and provisions, consistent with this Plan, as the Committee may approve. In addition, the Board retains the discretion at any time to alter the provisions set forth under Sections 9(a) and 9(b) and to add any additional terms as it, in its discretion, deems appropriate or to make any awards on terms that the Board determines to be appropriate. 10. OTHER AWARDS. The Committee shall have the authority to specify the terms and provisions of other equity-based or equity-related awards not described above ("Other Awards") which the Committee determines to be consistent with the purpose of the Plan and the interests of the Corporation, which awards may provide for the acquisition or future acquisition of Common Shares by Participants. 11. TRANSFERABILITY. (a) Except as otherwise determined by the Committee, no Option Right, Appreciation Right or other derivative security granted under the Plan shall be transferable by an Optionee other than by will or the laws of descent and distribution. Except as otherwise determined by the Committee, Option Rights and Appreciation Rights shall be exercisable during the Optionee's lifetime only by him or her or by his or her guardian or legal representative. (b) The Committee may specify at the Date of Grant that part or all of the Common Shares that are (i) to be issued or transferred by the Corporation upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Deferral Period applicable to Deferred Shares or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, shall be subject to further restrictions on transfer. 12. ADJUSTMENTS. The Committee may make or provide for such adjustments in the numbers of Common Shares covered by outstanding Option Rights, Appreciation Rights, Deferred Shares, Performance Shares and Other Awards granted hereunder, in the prices per share applicable to such Option Rights and Appreciation Rights and in the kind of shares covered thereby, as the Committee, in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of Participants 13 or Optionees 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. Moreover, in the event of any such transaction or event, the Committee, in its discretion, may provide in substitution for any or all outstanding awards under this Plan such alternative consideration as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. The Committee may also make or provide for such adjustments in the numbers of shares specified in Section 3 of this Plan and in the number of Option Rights to be granted automatically pursuant to Section 9 of this Plan as the Committee in its sole discretion, exercised in good faith, may determine is appropriate to reflect any transaction or event described in this Section 12. 13. CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control" shall mean if at any time any of the following events shall have occurred: (a) The Corporation is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction is held in the aggregate by the holders of Voting Shares immediately prior to such transaction; (b) The Corporation sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and as a result of such sale or transfer, less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Shares immediately prior to such sale or transfer; (c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 30% or more of the Voting Shares; (d) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Corporation has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or 14 (e) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation's shareholders, of each Director of the Corporation first elected during such period was approved by a vote of at least two-thirds of the Directors of the Corporation then still in office who were Directors of the Corporation at the beginning of any such period. (f) Notwithstanding the foregoing provisions of Section 13(c) and (d) above, a "Change in Control" shall not be deemed to have occurred for purposes of this Plan (i) solely because (A) the Corporation, (B) a Subsidiary or (C) any Corporation-sponsored employee stock ownership plan or other employee benefit plan of the Corporation, either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Shares, whether in excess of 30% or otherwise, or because the Corporation reports that a change of control of the Corporation has or may have occurred or will or may occur in the future by reason of such beneficial ownership or (ii) solely because of a change in control of any Subsidiary. (g) Notwithstanding the foregoing provisions of this Section 13, if prior to any event described in paragraphs (a), (b), (c) or (d) of this Section 13 instituted by any person who is not an officer or director of the Corporation, or prior to any disclosed proposal instituted by any person who is not an officer or director of the Corporation which could lead to any such event, management proposes any restructuring of the Corporation which ultimately leads to an event described in paragraphs (a), (b), (c) or (d) of this Section 13 pursuant to such management proposal, then a "Change in Control" shall not be deemed to have occurred for purposes of this Plan. 14. FRACTIONAL SHARES. The Corporation shall not be required to issue any fractional Common Shares pursuant to this Plan. The Committee may provide for the elimination of fractions or for the settlement of fractions in cash based on Market Value per Share on the date of settlement. 15. WITHHOLDING TAXES. To the extent that the Corporation is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Corporation for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Corporation for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Committee) may include relinquishment of a portion of such benefit. The Corporation and a Participant or such other person may also make similar arrangements with respect to the payment of any taxes with respect to which withholding is not required. 15 16. PARTICIPATION BY EMPLOYEES AND OTHER PROVIDERS OF SERVICES TO DESIGNATED SUBSIDIARIES. As a condition to the effectiveness of any grant or award to be made hereunder to a Participant who is an employee of, or other provider of services to, a Designated Subsidiary, whether or not such Participant is also employed by or provides services to the Corporation or another Subsidiary, the Committee may require such Designated Subsidiary to agree to transfer to such person (when, as and if provided for under this Plan and any applicable agreement entered into with any such person pursuant to this Plan) the Common Shares that would otherwise be delivered by the Corporation, upon receipt by such Designated Subsidiary of any consideration then otherwise payable by such Participant to the Corporation. Any such award shall be evidenced by an agreement between the Participant and the Designated Subsidiary, in lieu of the Corporation, on terms consistent with this Plan and approved by the Committee and such Designated Subsidiary. All such Common Shares so delivered by or to a Designated Subsidiary shall be treated as if they had been delivered by or to the Corporation for purposes of Section 3 of this Plan, and all references to the Corporation in this Plan shall be deemed to refer to such Designated Subsidiary, except for purposes of the definition of "Board" and except in other cases where the context otherwise requires. 17. FOREIGN EMPLOYEES AND PROVIDERS OF SERVICES. In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may provide for such special terms for awards to Participants who are foreign nationals or who are employed by or provide services to the Corporation or any Subsidiary outside of the United States of America as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of this Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Corporation may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, shall include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the shareholders of the Corporation. 18. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by a Committee of the Board (or subcommittee thereof), consisting of not less than three Non-Employee Directors appointed by the Board. Moreover, except as the Board may otherwise determine, so long as all of the Corporation's outstanding shares are owned by Equifax Inc., or until the Board appoints a ChoicePoint Inc. Management Compensation Committee, all matters relating to awards under the Plan shall be, and are hereby delegated to the Management Compensation Committee of Equifax Inc., provided, however, that all actions taken shall be subject to the approval by the Board. To the extent of such delegation, references in the Plan to the Board shall also refer to the appropriate committee. A majority of the Committee (or subcommittee thereof) shall constitute a quorum, and the action of the members of the Committee (or subcommittee thereof) present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the committee 16 (or subcommittee thereof). Until subsequent action of the Board, the Committee shall be the Management Compensation Committee of the Board. (b) The interpretation and construction by the Committee of any provision of this Plan or of any agreement, notification or document evidencing the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares, Performance Units or Other Awards and any determination by the Committee pursuant to any provision of this Plan or of any such agreement, notification or document shall be final and conclusive. No member of the Committee shall be liable for any such action or determination made in good faith. 19. AMENDMENTS, ETC. (a) The Committee may at any time and from time to time amend the Plan in whole or in part; provided, however, that any amendment which must be approved by the shareholders of the Corporation in order to comply with applicable law or the rules of the principal national securities exchange upon which the Common Shares are traded or quoted shall not be effective unless and until such approval has been obtained. Presentation of this Plan or any amendment hereof for shareholder approval shall not be construed to limit the Corporation's authority to offer similar or dissimilar benefits under plans that do not require shareholder approval. (b) The Committee may, with the concurrence of an affected Optionee or other Participant, cancel any agreement evidencing Option Rights or any other award granted under this Plan. In the event of such cancellation, the Committee may authorize the granting of new Option Rights or other awards hereunder (which may or may not cover the same number of Common Shares which had been the subject of the prior award) in such manner, at such option price, and subject to such other terms, conditions and discretion as would have been applicable under this Plan had the cancelled Option Rights or other award not been granted. (c) The Committee also may permit Participants to elect to defer the issuance of Common Shares or the settlement of awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of this Plan. The Committee also may provide that deferred settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts. (d) The Committee may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Corporation or a Subsidiary to the Participant. (e) In case of termination of employment or service by reason of death, disability or normal or early retirement, or in the case of hardship or other special circumstances, of a Participant who holds an Option Right or Appreciation Right not immediately exercisable in full, or any Restricted Shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Deferred Shares as 17 to which the Deferral Period has not been completed, or any Performance Shares or Performance Units which have not been fully earned, or who holds Common Shares subject to any transfer restriction imposed pursuant to Section 11(b) of this Plan, the Committee may, in its sole discretion, accelerate the time at which such Option Right or Appreciation Right may be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Deferral Period will end or the time at which such Performance Shares or Performance Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award. (f) This Plan shall not confer upon any Participant any right with respect to continuance of employment or other service with the Corporation or any Subsidiary, nor shall it interfere in any way with any right the Corporation or any Subsidiary would otherwise have to terminate such Participant's employment or other service at any time. (g) To the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision shall be null and void with respect to such Option Right. Such provision, however, shall remain in effect for other Option Rights and there shall be no further effect on any provision of this Plan. 20. TERMINATION. No grant (other than an automatic grant of Reload Option Rights) shall be made under this Plan more than 10 years after the date on which this Plan is first approved by the shareholders of the Corporation, but all grants made on or prior to such date shall continue in effect thereafter subject to the terms thereof and of this Plan. 18 EX-10.13 4 g87580exv10w13.txt EX-10.13 FIRST AMENDMENT TO THE 2003 OMNIBUS EXHIBIT 10.13 FIRST AMENDMENT TO THE CHOICEPOINT INC. 2003 OMNIBUS INCENTIVE PLAN THIS AMENDMENT is made this 2nd day of February, 2004, by CHOICEPOINT INC., a Georgia corporation (the "Company"), to the CHOICEPOINT INC. 2003 OMNIBUS INCENTIVE PLAN (the "Plan"). WHEREAS, the Company has previously adopted the Plan, and pursuant to Section 25 thereof, has authorized the Management Compensation and Benefits Committee of the Company's Board of Directors (the "Committee") to amend the Plan; and, WHEREAS, the Committee deems it desirable to amend the Plan as reflected below; NOW, THEREFORE, the Plan is hereby amended as follows: 1. Section 2 of the Plan is hereby amended by adding the following sentence at the end of the definition of "Participant" contained in said section: "This definition may only be expanded with the approval of the shareholders of the Corporation." 2. Section 3 of the Plan is hereby amended by adding the following sentence at the end of subsection (a) of said section: "Subject to the adjustments provided for in Section 13 below, the number of Common Shares which may be issued or transferred to Participants pursuant to the first sentence of this subsection (a) may only be increased with the approval of the shareholders of the Corporation." 3. Section 15 of the Plan is hereby amended by adding the following phrase at the end of the final sentence thereof: "; provided, however, that any such action by the Committee with respect to the restriction period otherwise applicable to Option Rights will only be effective after approval of the Board in each case." 4. The remaining provisions of the Plan are hereby ratified and confirmed. IN WITNESS WHEREOF, the Company has executed this First Amendment as directed by the Committee, effective the date first above noted. CHOICEPOINT INC. By: /s/ John H. Karr --------------------------------------- Title: V. P. Compensation --------------------------------- 2 EX-10.20 5 g87580exv10w20.txt EX-10.20 FOURTH AMENDMENT TO THE DEFERRED COMPEN. EXHIBIT: 10.20 FOURTH 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 31st day of December, 2003; WHEREAS, the Company has previously adopted the Plan, which was originally effective July 30, 1997, and has amended the Plan on three 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, amend the Plan as reflected herein, and the Company wishes to memorialize said amendment formally; NOW, THEREFORE, the Plan is hereby amended as follows: 1. Section 9.1(d) of the Plan is hereby amended by deleting said section in its entirety and replacing it with the following: "(d) Nature of Payment. Distributions of Excess Matching Contribution Accounts, Excess Transition Benefit Plan Accounts, Excess Profit-Sharing Contributions Accounts (for post-2001 Plan Years) and SERP Accounts shall be made in Company stock, except that the portion of any contribution to a SERP Account made for 2003 which represents a percentage of compensation for a Participant which is greater than the percentage contributed for said Participant for 2002 shall be distributed in cash, and distributions of all other Accounts shall be made in cash." IN WITNESS WHEREOF, the Company has caused this Fourth Amendment to be executed as of the date and year first above written. CHOICEPOINT INC. By: /s/ John H. Karr -------------------------------- Title: V. P. Compensation --------------------------- Attest: /s/ Mary M. Young - -------------------------- Title: Assistant Secretary EX-10.21 6 g87580exv10w21.txt EX-10.21 FIFTH AMENDMENT TO THE DEFERRED COMPEN. EXHIBIT: 10.21 FIFTH 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 2nd day of February, 2004; WHEREAS, the Company has previously adopted the Plan, which was originally effective July 30, 1997, and has amended the Plan on four 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, authorize the amendment of the Plan as reflected herein, and the Company wishes to memorialize said amendment formally; NOW, THEREFORE, the Plan is hereby amended as follows: 1. Article III of the Plan is hereby amended by adding the following Section 3.9 thereto: "SECTION 3.9. Maximum Number of Shares Available for Certain Benefits. Notwithstanding any other provision of this Plan, in no event shall the maximum number of shares of Company common stock in the aggregate which may be granted subsequent to the effective date of this provision, pursuant to Excess Profit Sharing Contributions, Excess Transition Benefit Contributions and the Supplemental Executive Retirement Plan Contributions, exceed three hundred and fifty-thousand (350,000). Said number shall be adjusted, as appropriate, by the Plan Administrator, consistent with the adjustment provisions contained in Section 2.5 above." 2. Subparagraph (a) of Section 12.6 of the Plan is hereby amended by adding the following sentence to the end of said subparagraph: "In the absence of a prior termination, this Plan shall nonetheless be terminated, and no further benefits granted hereunder, on April 28, 2014." IN WITNESS WHEREOF, the Company has caused this Fifth Amendment to be executed as of the date and year first above written. CHOICEPOINT INC. By: /s/ John H. Karr --------------------------- Title: VP, Compensation ------------------------ Attest: /s/ Mary M. Young - ------------------------------- Title: Assistant Secretary 2 EX-10.23 7 g87580exv10w23.txt EX-10.23 EMPLOYEE BENEFITS AGREEMENT EXHIBIT 10.23 EQUIFAX / CHOICEPOINT EMPLOYEE BENEFITS AGREEMENT . . . INDEX TO EMPLOYEE BENEFITS AGREEMENT

ANNEX I LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ANNEX II CANADIAN EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ANNEX III INACTIVE EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

EMPLOYEE BENEFITS AGREEMENT THIS EMPLOYEE BENEFITS AGREEMENT ("Agreement") is made as of July 31, 1997. The parties ("Parties") to this Agreement are EQUIFAX INC., a Georgia corporation ("Equifax"), and ChoicePoint Inc., a Georgia corporation ("ChoicePoint"). RECITALS WHEREAS, pursuant to the terms of that certain Distribution Agreement dated July 31, 1997 ("Distribution Agreement"), Equifax has agreed to distribute to its shareholders the stock of ChoicePoint, to which it will have transferred the stock of those companies which constitute its insurance services group, (the "Business") effective prior to or as of the Stock Distribution Date; WHEREAS, ChoicePoint will employ directly certain persons who were employed by Equifax or by direct or indirect Subsidiaries (as defined herein) of Equifax and ChoicePoint, and the companies which are or will be owned by ChoicePoint will employ or continue to employ certain persons who have participated in employee benefit programs sponsored by Equifax; WHEREAS, the Parties desire to set forth the terms and conditions pursuant to which ChoicePoint shall provide employee benefits to those employees of ChoicePoint and its subsidiaries who currently are employed in connection with the Business, including the arrangements for transition in the provision of said benefits from plans and programs sponsored by Equifax for its own employees and those of its Subsidiaries to plans sponsored directly by ChoicePoint for its employees and those of its subsidiaries. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: ARTICLE 1 DEFINITIONS 1.1 General. As used in this Agreement, capitalized terms defined immediately after their use shall have the respective meanings thereby provided, and the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): Action: any demand, action or cause of action, claim, suit, arbitration, inquiry, subpoena, discovery request, proceeding or investigation by or before any court or grand jury, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal related to, arising out of or resulting from any Employee Liability. Affiliate: with respect to any specified person, a person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person; provided, that Equifax and ChoicePoint shall not be deemed to be Affiliates of each other for purposes of this Agreement. Code: the Internal Revenue Code of 1986, as it may be amended or recodified from time to time. Deferred Compensation Plans: the Equifax Inc. Supplemental Executive Retirement Plan and the Equifax Inc. Deferred Compensation Plan. Controlled Group: two or more business entities affiliated within the meaning of Code Sections 414(b), 414(c), 414(m) and/or 414(o). Employee Benefit Plans: (i) any severance, disability, cafeteria, bonus, stock option, stock appreciation, stock purchase, deferred compensation, or similar types of plans, agreements, policies or arrangements that currently are established, maintained or contributed to by Equifax or a Subsidiary for the benefit of any former or present Employees or their beneficiaries, dependents or spouses, and (ii) any employee welfare and employee pension benefit plans (as such terms are defined in Section 3(1) and 3(2), respectively, of ERISA) which are applicable to former or present Employees or their beneficiaries, dependents or spouses, and that currently are established, maintained or contributed to by Equifax or any Subsidiary. 2 Employee/Labor Law: any federal, state, local or municipal law (including common law), statute, ordinance, regulation, order, decree, judgment, decision, ruling, permit or authorization (each as may be in effect, applicable and binding, from time to time) relating or applicable to the work place or to the employer/employee relationship including, without limitation, any of the foregoing relating or applicable to wage and hour claims, collective bargaining and labor laws, ERISA-governed employee benefit and welfare plans, federal, state and local tax withholding and payment rules and regulations, workers' compensation and similar laws, accrued vacation statutes, and sexual harassment and anti-discrimination laws. Employee Liability: any and all debts, charges, liabilities, warranties and obligations (of any nature or type whatsoever regardless of when arising), whether accrued, contingent or reflected on a balance sheet including, without limitation, liability for administrative, civil or criminal penalties or forfeitures, and attorneys' fees or other costs of defending an Action or a claim of Employee Liability under any Employee/Labor Law. Employees : the Equifax and the Subsidiary Employees. ERISA: the Employee Retirement Income Security Act of 1974, as amended. Efx Employee : any employee of Equifax (including any employee on authorized leave of absence, sick pay leave or short-term disability), who during the six full calendar months following the Stock Distribution Date, is requested by ChoicePoint (with the consent of Equifax) to be transferred from Equifax to ChoicePoint. Each Efx Employee who is transferred to ChoicePoint shall be identified in a separate letter from Equifax to ChoicePoint. IIS Group Subsidiary: Equifax Services Inc., Equifax Government and Special Systems, Inc., Equifax Commercial Specialists Division, Osborn Laboratories (Canada), Inc., PRC Corporation Inc., Osborn Laboratories, Inc., The Kit Factory, Inc., ChoicePoint Ltd., Professional Test Administrators, Inc., Mid-American Technologies, Inc., CDB Infotek, Intellisys, Inc., Charles E. Simon & Company and Innovative Data Services, Inc. IIS Group Employees : any employee of ChoicePoint or an IIS Group Subsidiary (including any employee on authorized leave of absence, sick pay leave, short-term disability or long-term disability), who is employed as of June 30, 1997. 3 Stock Distribution Date : The date of the distribution by Equifax to its shareholders of the stock of ChoicePoint. Subsidiary: any corporation at least seventy per cent (70%) of the stock of which is owned directly or indirectly by Equifax. 1.2 Other Definitions. Capitalized terms not specifically defined herein shall have the meanings ascribed thereto in the Distribution Agreement. ARTICLE 2 CHANGE IN OWNERSHIP 2.1 Transfer of IIS Group Subsidiary Employees. The Parties acknowledge that Equifax has transferred or shall transfer to ChoicePoint all of the issued and outstanding capital stock of the IIS Group Subsidiaries. Such stock transfers shall result in each IIS Group Subsidiary becoming (or remaining) a wholly-owned subsidiary or division of ChoicePoint, and shall operate as a transfer of all of the IIS Group Subsidiary Employees to ChoicePoint on a consolidated or Controlled Group basis. In the case of CDB Infotek, said ownership may be less than 100%. 2.2 Conditions of Employment. (a) Prior to the Distribution Date ChoicePoint may make an offer of employment to certain Employees who have been or will be identified to Equifax; (b) nothing in this Agreement shall require either ChoicePoint or Equifax to employ any person who declines employment with ChoicePoint; and (c) Section 2.1 shall not be interpreted to prohibit or otherwise restrict ChoicePoint from terminating the employment of any employee, or from changing the salary or wage range, grade level or location of employment of any employee, in accordance with ChoicePoint's personnel policies and procedures following June 30, 1997, or from making an offer of employment to any Employee following the Distribution Date. Without limiting the generality of Section 5.9 hereof, no Employee or other person shall have any rights as a third party beneficiary under this Agreement. 2.3 Certain Payroll Deductions. Effective as of June 30, 1997 (or, if later, as of the date of an Efx Employee's transfer to ChoicePoint), to the extent (if any) required by applicable law and to the extent disclosed by Equifax in accordance with this paragraph, ChoicePoint will assume Equifax's obligation to comply with any garnishment order applicable to 4 such Efx Employee. Furthermore, if an Efx Employee who transfers to ChoicePoint has any outstanding liability or obligation to Equifax (for example, salary advances) which existed on June 30, 1997 (or, if later, as of the date of such Efx Employee's transfer to ChoicePoint) which has resulted in a special payroll deduction for such Efx Employee, then, to the extent permitted under applicable law, ChoicePoint will withhold such amounts for Equifax's benefit from the Efx Employee's compensation. Equifax will provide the special payroll deduction information or garnishment information 30 days prior to the date ChoicePoint assumes payroll processing responsibility for an Efx Employee. ARTICLE 3 EMPLOYEE BENEFIT PLANS 3.1 Welfare Benefit Plans. (a) On or before June 30, 1997 ChoicePoint shall establish, effective as of such date, certain welfare benefit plans for employees who are salaried employees, including the following: (i) a medical and dental plan, (ii) flexible spending accounts (FSAs) covering health care and dependent care, (iii) life and accident insurance plans, (iv) a sick leave policy, (v) a vacation and holiday policy, and (vi) a Code Section 125 cafeteria plan. The terms and provisions of such plans including, without limitation, coverage and co-pay requirements, shall be determined in the sole discretion of ChoicePoint; provided, however, that ChoicePoint shall use its best efforts to ensure that any medical plan it adopts shall contain no limitation on coverage for preexisting conditions of employees, with respect to those IIS Group Employees and Efx Employees who were on said date participants in the corresponding Equifax plans and who had satisfied any pre-existing condition limitation imposed by the Equifax plan in question. IIS Group Employees and Efx Employees shall be credited in the ChoicePoint medical and dental plans on and after June 30, 1997 or the date they enter said plans, if later, for purposes of any deductibles or out-of-pocket maximum provisions for amounts paid by such employees under the Equifax medical/dental Employee Benefit Plans. Copies of said plans are attached as Exhibit A hereto, although they (and any other ChoicePoint plans attached as exhibits) may be revised or amended in ChoicePoint's discretion. (b) ChoicePoint will also use its best efforts to provide life insurance (without underwriting) to salaried IIS Group Employees and salaried Efx Employees in the same policy amounts as existed for and had been elected by them pursuant to the Equifax group universal life insurance plan as of June 30, 5 1997. A copy of the ChoicePoint group universal life insurance plan is attached as Exhibit B hereto. (c) ChoicePoint will provide salaried IIS Group Employees and salaried Efx Employees with credit for service with Equifax or any Affiliate for purposes of meeting the eligibility period under ChoicePoint's group short-term disability plan. A copy of the ChoicePoint short-term disability plan is attached as Exhibit C hereto. (d) Equifax will arrange for the distribution to ChoicePoint of a portion of the premium deposit account held by the carrier for the Equifax group long-term disability insurance; said portion will be that percentage of said account which is the same as the premiums for said insurance under the Equifax plan during the immediate past calendar quarter paid by ChoicePoint and the IIS Group Subsidiaries divided by the entire premiums paid under said plan during said quarter. A copy of the ChoicePoint long-term disability plan is attached as Exhibit D hereto. (e) Any IIS Group Employee who is receiving benefits under the Equifax Inc. Short-Term Disability Plan ("Equifax STDP") at June 30, 1997 and any Efx Employee who is receiving benefits under such plan at the date of his or her transfer to ChoicePoint will continue to receive benefits under the ChoicePoint Inc. Short-Term Disability Plan under the material provisions contained in the Equifax STDP in effect on June 30, 1997 (as those provisions are interpreted by ChoicePoint) in its role as a fiduciary of said plan until they are no longer deemed to be disabled under said provisions or until said benefits end according to the terms of said Equifax STDP. ChoicePoint will be responsible for the administration of claims relating to IIS Group Employees who are disabled employees, under the ChoicePoint Inc. Short-Term Disability Plan. (f) Any IIS Group Employee who was receiving long-term disability benefits under the Equifax group long-term disability plan, or who was disabled as of June 30, 1997 but had not yet satisfied the qualification period for said plan, will become the liability of the ChoicePoint long-term disability benefit plan as of July 1, 1997, for the duration of said disability, according to the terms of and as limited by said plan. ChoicePoint will be credited by the long-term disability carrier (UNUM) with both the claims experience and premium history of IIS Group Employees as of June 30, 1997, under the Equifax long-term disability plan. (g) ChoicePoint will be responsible for the provision of post-retirement medical and death benefits with respect to events occurring or claims incurred after June 30, 1997 for any 6 IIS Group Employees, or former employees of an IIS Group Subsidiary, who had qualified for said benefits as of June 30, 1997. (h) ChoicePoint will be responsible for any post-employment medical coverage with respect to claims incurred after June 30, 1997, for disabled IIS Group Employees or disabled former employees of an IIS Group Subsidiary who had qualified for said benefits as of June 30, 1997. (i) Equifax agrees to provide to ChoicePoint the data described on Annex III on each COBRA participant, retiree, disabled employee or other inactive employee who is a former employee (or dependent) of an IIS Group Subsidiary and who participated in any Employee Benefit Plan prior to June 30, 1997. For purposes of this Agreement a "COBRA participant" is an employee or former employee who has elected continuation coverage under a group health plan pursuant to Code Section 4980B and Part 6 of Title I of ERISA. The parties acknowledge that this information does not exist in complete electronic file format; Equifax will use its best efforts to provide such information from available sources. (j) In the event that Equifax receives any premium payments for health and/or welfare benefits from IIS Group Employees or any former employee of an IIS Group Subsidiary who is participating in ChoicePoint's respective benefit plans covering any period of coverage subsequent to June 30, 1997, Equifax will forward said amount to ChoicePoint within two (2) weeks of said receipt. (k) Equifax will provide ChoicePoint with a copy of existing data base containing historical claim data with respect to IIS Group Employees or former employee of an IIS Group Subsidiary who are participating in ChoicePoint's respective benefit plans and their dependents as to the medical and dental benefits provided pursuant to Equifax-sponsored plans as of June 30, 1997, and will provide copies of future such information as received from the plans' recordkeeper. (l) Equifax will provide ChoicePoint with copies of the historical eligibility files for IIS Group Employees or any former employee of an IIS Group Subsidiary who is participating in ChoicePoint's respective benefit plans under the Equifax medical and welfare benefits plan, including HMO's, dental, vision and long-term disability benefits. 3.2 Accrued Vacation Liability. ChoicePoint shall credit all IIS Group Employees and Efx Employees for any accrued vacation and sick leave earned under Equifax vacation and sick 7 leave policies but not taken by such employees, while they were Employees, in the current year through June 30, 1997 or, if later, through the date of such Employee's transfer to ChoicePoint or an IIS Group Subsidiary. Any such accrued vacation and sick leave shall be credited in accordance with the paid vacation policy and sick leave policy adopted by ChoicePoint in accordance with Section 3.1 above; provided, however, that ChoicePoint shall be solely responsible for payment of, and shall indemnify, defend, reimburse and hold Equifax and its Affiliates harmless from and against, any accrued vacation or sick leave payoff liability to any IIS Group Employee or Efx Employee incurred by or imposed upon Equifax under its current vacation policy or sick leave policy or under any applicable state or local law or statute. Notwithstanding the foregoing, nothing in this provision shall be deemed to abrogate the provisions of the Tax Sharing and Indemnification Agreement entered into between Equifax and ChoicePoint, and in the event of a conflict between said agreements, the Tax Sharing and Indemnification Agreement shall control. 3.3 Equifax Inc. U.S. Retirement Income Plan. IIS Group Employees who, as of the Stock Distribution Date and Efx Employees who as of the date of their transfer to ChoicePoint, are participants in the Equifax Inc. U.S. Retirement Income Plan shall be deemed for all purposes terminated participants thereunder, shall be fully vested in their benefits accrued thereunder, and shall receive a distribution of their vested accrued benefits pursuant to the terms of such plan. Distributions shall be made in accordance with the applicable provisions of Internal Revenue Service G.C.M. 39824, with the intention that benefits be paid as soon as practicable after the Stock Distribution Date to persons for whom the equivalent lump sum amount is $3500 or less, and as soon as practicable upon request in accordance with the terms of the plan to persons who have satisfied the requirements for early retirement, or automatically to those who have satisfied the requirements for normal retirement thereunder. Equifax will provide said persons with necessary explanations, calculations and forms pertaining to any relevant elections thereunder. Equifax will amend said plan to confirm the vesting and distribution provisions of this section in accordance with the amendment attached hereto as Exhibit G. 3.4 401(k) Plan. (a) ChoicePoint shall establish, prior to June 30, 1997, a defined contribution plan and trust intended to be qualified under Sections 401(a) and 501(a) of the Code and which allows for employee salary deferrals as provided in Section 8 401(k) of the Code (the "ChoicePoint 401(k) Plan"), which is intended to be a "spinoff" plan from the Equifax Inc. 401(k) Retirement and Savings Plan. Said plan will provide credit for services rendered to any member of the Equifax controlled group of businesses (within the meaning of Code Section 414(b) and (c)) prior to June 30, 1997, for purposes of any eligibility requirements. A copy of the ChoicePoint 401(k) Plan and its accompanying trust agreement is attached as Exhibit E hereto. (b) As soon as practicable after the establishment of the ChoicePoint 401(k) Plan as provided in Section 3.4(a) above, but no later than June 30, 1997, or such later date as is agreed to by Equifax and ChoicePoint, the vested account balances of all IIS Group Employees/participants in the Equifax Inc. 401(k) Retirement and Savings Plan (the "Equifax 401(k) Plan") shall be transferred to the ChoicePoint 401(k) Plan pursuant to a trustee-to-trustee transfer in accordance with applicable rules and regulations under ERISA and the Code, including Code Section 414(l). Until said transfer, IIS Group Employee/participants shall continue to be able to exercise customary investment discretion over their accounts in the Equifax 401(k) Plan. A "black out" period will be imposed on the respective plans in accordance with requirements of the Trustees of both the Equifax 401(k) Plan and the ChoicePoint 401(k) Plan, for purposes of account reconciliation related to the division of the Equifax 401(k) Plan. Equifax shall cause the trustee of the Equifax 401(k) Plan to take such steps (such as establishing the cost basis of shares) as may be necessary or helpful in effecting the trustee-to-trustee transfer. The amount of the assets transferred shall be equal to the aggregate of the account balances of all IIS Group Employees/participants. In addition, and as part of such trustee-to- trustee transfer, Equifax shall cause the unallocated company contribution account held in the Equifax 401(k) Plan to be bifurcated, and a portion transferred to the trustee of the ChoicePoint 401(k) Plan. Said account shall be allocated between the ChoicePoint 401(k) Plan and the Equifax 401(k) Plan based on the relative participant contributions (for participants who are Equifax Employees compared with those who are IIS Group Employees) actually transferred by Equifax and the members of its Controlled Group to the Equifax 401(k) Plan for the portion of the 1997 plan year ending on June 30, 1997 and eligible for a match under the Equifax 401(k) Plan. All assets transferred hereunder shall be in the form of ChoicePoint stock, cash or such other assets as ChoicePoint may specify and the trustees of both the Equifax 401(k) Plan and the ChoicePoint 401(k) Plan consent. The amendment to the Equifax 401(k) Plan which provides for the transfer of said assets is attached hereto as Exhibit F. 9 (c) ChoicePoint will, prior to the end of its remedial amendment period for the ChoicePoint 401(k) Plan, apply for an IRS determination letter stating that the ChoicePoint 401(k) Plan satisfies the requirements of qualification under Code Section 401(a) since its inception, and will take all actions necessary to obtain such determination letter. (d) Equifax and ChoicePoint will each provide for a stock fund, initially invested primarily in the common stock of the other company, in their respective 401(k) plans as of the Stock Distribution Date. The stock in said fund will be liquidated, and the proceeds reinvested according to the agreement of the parties and the trustee(s) of said plans, which agreement shall be in writing. In the absence of any such agreement, however, such liquidation may not commence until the second anniversary of the Distribution Date and shall extend over a period of at least six (6) months. Each party agrees to cooperate with the other when either party decides to liquidate the investment fund that is invested in the common stock of the other party. To the extent permissible under applicable law (including the Code and ERISA), each party agrees to provide the other party the right of first refusal to purchase its own stock from the selling plan, at fair market value in accordance with the provisions of ERISA. Each party also agrees to give the other party 3 months' advance notice of such decision to liquidate. At a minimum, the participants in each such 401(k) plan will be permitted to retain their investments in the other company's common stock fund and may elect to transfer their investment out of such stock fund; this provision shall neither require nor prohibit either plan allowing new investments in such common stock fund. (e) In order to ameliorate the effect of the elimination of possible future benefit accruals under the Equifax Inc. U.S. Retirement Income Plan for IIS Group Employees and Efx Employees who were participants in said plan as of June 30, 1997, ChoicePoint will, prior to December 31, 1997, create an age-weighted or similarly designed defined contribution pension program, either as part of the ChoicePoint 401(k) Plan or as a separate plan (either of which is referred to as the "Replacement Plan") pursuant to which accounts for those IIS Group Employees and Efx Employees who were participants in the Equifax Inc. U.S. Retirement Income Plan at the Stock Distribution Date shall be established to receive additional contributions from ChoicePoint for said purpose, and not in excess of those permitted by applicable laws. To facilitate the funding of the Replacement Plan and in recognition of the reduction of future pension liabilities to IIS Group Employees and Efx Employees, Equifax will transfer to ChoicePoint on the day prior to the Effective Date the amount of Thirteen Million Dollars. 10 3.5 Deferred Compensation Plans. Effective as of the Stock Distribution Date or, if later, the date of the applicable Employee's transfer to ChoicePoint, ChoicePoint will assume all liabilities of Equifax under the Deferred Compensation Plans with respect to IIS Group Employees and members of the Board of Directors of ChoicePoint and who consent in writing to the substitution of ChoicePoint for Equifax as the employer under such plans; to the extent applicable, said liability shall be calculated by applying the actuarial equivalence factors set forth on Schedule C to the Equifax Inc. Supplemental Executive Retirement Plan for the purposes of determining the actuarial equivalent lump sum representing any accrued benefits for said Employees under said plan. ChoicePoint may, in its sole discretion, establish ongoing deferred compensation plans in forms similar to or different from any one or more of the Deferred Compensation Plans and may combine its obligations under this Section with its obligations under such newly established plans, if any; provided, however, that, to the extent ChoicePoint assumes a liability hereunder, ChoicePoint shall be solely responsible for payment of, and shall indemnify, defend, reimburse and hold Equifax and its Affiliates harmless from and against, any such liability under the Deferred Compensation Plans to any Employee who becomes an IIS Group Employee and who has consented in writing to the substitution of ChoicePoint for Equifax as the employer under the Deferred Compensation Plans. ChoicePoint will establish a rabbi trust for the purpose of "funding" this obligation. A copy of ChoicePoint's deferred compensation plan and rabbi trust is attached hereto as Exhibit H. Equifax will amend its rabbi trust to require the trustee to waive its rights to the distribution of ChoicePoint common stock otherwise payable with respect to the Equifax common stock held in said trust. A copy of said amendment and the required corporate resolution is attached hereto as Exhibit I. 3.6 Stock Benefits Trust. Equifax will amend the Equifax Inc. Stock Benefits Trust to require the trustee to waive its rights to the distribution of ChoicePoint common stock otherwise payable with respect to the Equifax common stock held in said trust. A copy of said amendment and the required corporate resolution is attached hereto as Exhibit J. ChoicePoint will establish its own stock benefits trust. A copy of the ChoicePoint stock benefits trust is attached as Exhibit K hereto. 3.7 VEBA. Equifax will cause the trustee of its Voluntary Employees Beneficiary Association ("VEBA") to transfer to the trustee of a Code Section 501(c)(9) trust to be established by ChoicePoint a pro rata portion of the reserve maintained for retiree death benefit payments based upon the pro 11 rata liability for Equifax's post-retirement life insurance liability. With regard to the outstanding liabilities associated with any claims filed subsequent to June 30, 1997 for eligible services incurred prior to June 30, 1997 by Participants in the Equifax Major Medical Plan (including medical, dental, and vision coverages) will be the responsibility of said Plan and the VEBA. The VEBA contains reserves for incurred but not reported claims and for claims filed but not paid, and is funded on a current basis; therefore the transaction contemplated by the Distribution Agreement will not require an allocation of such reserves. Claims incurred by IIS Group Employees prior to June 30, 1997 will be administered and paid by ChoicePoint and Equifax shall reimburse ChoicePoint for such payments, no later than 2 weeks after delivery of detailed supporting documentation of such payments in the form indicated in Exhibit O. A copy of ChoicePoint's Code Section 501(c)(9) trust is attached as Exhibit L hereto. 3.8 Stock Options and SARs; Restricted Stock. a. (i) All options held by IIS Group Employees issued under the Equifax Inc. Omnibus Stock Incentive Plan, the 1993 Employee Stock Incentive Plan and the 1995 Employee Stock Incentive Plan (the "Equifax Option Plans"), to the extent vested, will remain exercisable according to their terms (as adjusted in accordance with sub- paragraph (ii) below) notwithstanding the stock distribution; said options, to the extent not vested and therefore not exercisable on the Stock Distribution Date, will be cancelled on the Stock Distribution Date. A copy of ChoicePoint's stock option plan (the "ChoicePoint Omnibus Plan") is attached as Exhibit M hereto. Those cancelled options will be replaced by ChoicePoint under its ChoicePoint Omnibus Plan. Such options shall retain the same aggregate intrinsic value as described below: The ChoicePoint Omnibus Plan shall provide for the replacement of all cancelled options as of the Stock Distribution Date with options for ChoicePoint stock ("Replacement Options") on the same material terms and conditions as the Equifax Option Plans, except with respect to the adjustment for number of shares and price referred to below: A. The number of Replacement Options for each affected IIS Group Employee will be determined by dividing the number of unexercised Equifax Inc. options on the Stock Distribution Date by the ratio calculated as the Fair Market Value of each share of 12 ChoicePoint stock divided by the Fair Market Value of Equifax stock prior to the Stock Distribution Date. B. The Replacement Options exercise price shall be calculated by multiplying the exercise price of the Equifax Inc. option prior to the Stock Distribution Date by the ratio of Fair Market Value of ChoicePoint stock divided by the Fair Market Value of Equifax stock prior to the Stock Distribution Date. (ii) All options held by the Employees of Equifax Inc., and all vested options held by IIS Group Employees issued under the Equifax Option Plans shall be adjusted ("Adjusted Options") to retain the same aggregate intrinsic value as described below: A. The number of Adjusted Options for each affected employee will be determined by dividing the number of unexercised Equifax options on the Stock Distribution Date by the ratio calculated as the Fair Market Value of each share of Equifax Inc. stock after the Stock Distribution Date divided by the Fair Market Value of Equifax Inc. stock prior to the Stock Distribution Date. B. The Adjusted Option exercise price shall be determined by multiplying the exercise price of the Equifax Inc. option, prior to the Stock Distribution Date, by the ratio of Fair Market Value of Equifax Inc. stock after the Stock Distribution Date divided by the Fair Market Value of Equifax Inc. stock prior to the Stock Distribution Date. For purposes of this section, in the case of the ChoicePoint stock, Fair Market Value is the low sale price of the ChoicePoint stock on the first regular trading day after the Stock Distribution Date. In the case of the Equifax Inc. stock, (i) Fair Market Value prior to the Stock Distribution Date is the closing price of Equifax Inc. stock on the Stock Distribution Date, and (ii) Fair Market Value after the Stock Distribution Date is the low sale price of Equifax Inc. stock on the day after the Stock Distribution Date. (iii) Notwithstanding the foregoing provisions of subparagraphs (i) and (ii), any options which are vested as of the Stock Distribution Date and which are held by those senior 13 executives of ChoicePoint who are identified on Exhibit N hereto will not become Adjusted Options as described in (ii) above, but will be cancelled and replaced with ChoicePoint Options as described in (i) above to the extent that said senior executive so elects. Any such election may apply to no less than all of said vested options, and shall be delivered in writing to the Corporate Secretary of Equifax, Inc. no later than the Stock Distribution Date. b. Any restricted stock of Equifax Inc. held by IIS Group Employees shall be handled by agreement between the parties. 3.9 Flexible Spending Accounts. Effective as of June 30, 1997 (or such later date as agreed to by Equifax and ChoicePoint), ChoicePoint shall establish three plans substantially in the same form as the following three plans currently maintained by Equifax: The Equifax Inc. Dependent Care Flexible Spending Account Plan, The Equifax Inc. Health Care Flexible Spending Account Plan, and The Equifax Inc. Flexible Benefits Plan (see Exhibit A hereto). As soon as practicable following June 30, 1997 (or such later date as agreed to by Equifax and ChoicePoint), an amount of cash equal to the existing spending account balances for IIS Group Employees and Efx Employees will be transferred from the Equifax plans to the ChoicePoint plans. For purposes of the preceding sentence, negative balances in accounts under the Health Care Flexible Spending Account Plan shall be taken into account as negative numbers (and accordingly shall reduce the amount of cash to be transferred) when determining the amount of cash to be transferred. 3.10 Various Liabilities. Equifax acknowledges that the transaction contemplated by the Distribution Agreement will not result in Equifax being liable for any severance pay to an Employee. 3.11 COBRA. Equifax shall be responsible for complying with the requirement of Code Section 4980B and Part 6 of Title I of ERISA with respect to any Employee in its group health plan and their "qualified beneficiaries" whose "qualifying event" (as such terms are defined in Code Section 4980B) occurs on or prior to June 30, 1997 or, if later, through the date of such Employee's transfer to ChoicePoint or an IIS Group Subsidiary. ChoicePoint shall be responsible for complying with the requirements of Code Section 4980B and Part 6 Title I of ERISA with respect to any IIS Group Employee and his or her "qualified beneficiaries" whose "qualifying event" (as such terms are defined in Code Section 4980B) occurs after June 30, 1997 (or, if later, after the date of such Employee's transfer to ChoicePoint) 14 or an IIS Group Subsidiary. ChoicePoint shall be responsible for providing COBRA coverage with respect to former employees of ChoicePoint Inc. or an IIS Group Subsidiary and to their qualified beneficiaries, subsequent to June 30, 1997. 3.12 Performance Share Plan. Equifax will take the actions required, including any necessary plan amendment, to provide that all IIS Group Employees or Efx Employees who are participants in Plan 15 (1995-1997) of the Equifax Inc. Performance Share Plan on the Stock Distribution Date shall be treated as if they had remained employed by Equifax Inc. pursuant to the provisions of said plan for the entire period. The effect of this treatment shall be that each such employee will receive 100% of the payment he or she would have been ultimately entitled to receive under "Plan 15" of said plan at the expiration of the performance period of the outstanding grants. Said payment shall be made in cash, and not in shares of Equifax Inc. stock, at the conclusion of the relevant performance period. Any other outstanding grants to IIS Group Employees or Efx Employees shall be cancelled. The Equifax Compensation Committee shall also revise the performance goals for the plan, for awards previously granted but not yet earned, to reflect the spinoff of a substantial portion of the company and a consequent change in certain anticipated measuring techniques. The Equifax Inc. Management Compensation Committee has adopted resolutions in order to effect this treatment under the Equifax, Inc. Performance Share Plan. 3.13 Community Service Associate Program. Any employee of ChoicePoint or an IIS Group Subsidiary who is a participant in the Equifax Inc. Community Service Associate Program shall be transferred to the employment of Equifax or a Subsidiary (which is not an IIS Group Subsidiary) on or before the Stock Distribution Date, and shall continue to participate in said program according to its terms. 3.14 Certain Arrangements for Non-U.S. Operations. a. United Kingdom. Those persons who become employees of ChoicePoint Ltd. on or after the Stock Distribution Date shall be eligible to participate in the Equifax Europe, UK Ltd. Money Purchase Pension Plan through December 31, 1997. ChoicePoint Ltd. shall fund the cost of said participation, which shall include the actual contributions to said plan as well as an agreed-upon reimbursement for administrative services incurred by Equifax Europe, UK Ltd. as a consequence of this accommodation. 15 b. Canada. For a period of up to 18 months from the Stock Distribution Date, Equifax Canada will provide to ChoicePoint the services of those employees identified on Annex II hereto, and ChoicePoint will reimburse Equifax Canada for the compensation, including the cost of benefits provided under Equifax Canada's current employee benefit plans. The parties will undertake in good faith to enter into an employee leasing agreement, with respect to said employees, with mutually agreeable terms. 3.15 Special Provisions Respecting CDB Infotek The definition of Subsidiary includes entities, at least 70% of which are owned by a parent company, for the purposes of including CDB Infotek ("CDB") as a Subsidiary. CDB is a Subsidiary of Equifax Inc., directly or indirectly, and is an IIS Group Subsidiary. The parties acknowledge, however, that CDB has not adopted, and the employees of CDB do not participate in any Employee Benefit Plans, nor will CDB adopt any such plans maintained by ChoicePoint immediately after the Stock Distribution Date. However, CDB is expected to adopt the ChoicePoint employee benefit plans as of January 1, 1998, or at a time subsequent thereto in ChoicePoint's discretion. Consequently, the provisions of this Agreement with respect to Subsidiaries, IIS Group Subsidiaries and employees of same shall be read in said context, with the intention, for example, that the transfer of any Efx Employees from Equifax to CDB pursuant to this Agreement would result in the transition of benefits as described herein, to the extent practical given the employee benefit plans maintained by CDB at the time. ARTICLE 4 INDEMNIFICATION 4.1 Indemnification. In addition to the indemnity obligations set forth in Sections 3.2 and 3.5 hereof, ChoicePoint agrees to indemnify, defend, reimburse and hold harmless Equifax and its Affiliates, and the officers, directors, employees, agents and representatives of Equifax and its Affiliates (each, an "Indemnified Party"), from and against any and all Actions, assessments, losses, damages, liabilities, costs and reasonable expenses including, without limitation, interest penalties, fines, excise taxes and reasonable attorneys' fees and expenses, asserted against or imposed upon or incurred by any Indemnified Party which result from, arise out of or are related to any failure by ChoicePoint to comply with the terms of this Employee Benefits Agreement. 16 ChoicePoint agrees that it will bear full responsibility for, and indemnify Equifax against any damage, expense or loss resulting from, the design, administration or funding of all plans adopted and/or implemented by ChoicePoint for the benefit of IIS Group Employees, former employees and their beneficiaries on and after July 1, 1997; this provision shall not apply to those plans sponsored by Equifax as to which ChoicePoint is or has been an adopting employer. Equifax agrees to indemnify, defend reimburse and hold harmless ChoicePoint and its Affiliates, and the officers, directors, employees, agents and representatives of said companies (each, an "Indemnified Party"), from and against any and all Actions, assessments, losses, damages, liabilities, costs and reasonable expenses including, without limitation, interest penalties, fines, excise taxes and reasonable attorneys' fees and expenses, asserted against or imposed upon or incurred by any Indemnified Party which result from, arise out of or are related to any failure on the part of Equifax to comply with the terms of this Employee Benefits Agreement. 4.2 Procedure for Indemnification. In the event any action, suit or proceeding is brought against an Indemnified Party pursuant to this Article 4 or Sections 3.2 and 3.5 hereof, the Parties shall comply with and be subject to the indemnifi-cation procedures set forth in the Distribution Agreement. 4.3 Employee Liability. Except as specified herein, ChoicePoint shall not assume Employee Liability of Equifax. ARTICLE 5 MISCELLANEOUS 5.1 Binding Agreement. This Agreement is binding upon and is for the benefit of the Parties hereto and their respective successors and permitted assigns. 5.2 Assignment. No Party to this Agreement shall convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the express written consent of the other Party hereto in its sole and absolute discretion. No assignment of this Agreement shall relieve the assigning Party of its obligations hereunder. 5.3 Notices. All notices or other communications required or permitted to be given hereunder shall be made pursuant to the notice provisions set forth in the Distribution Agreement. 17 5.4 No Waiver. No delay on the part of any Party hereto in exercising any right, power or privilege hereunder shall operate as a waiver, nor shall any waiver on the part of any Party of any right, power or privilege operate as a waiver of any other right, power or privilege hereunder, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the Parties hereto may otherwise have at law or in equity. 5.5 Entire Agreement; Amendment. This Agreement, and the agreements and other documents referred to herein, shall constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all prior agreements, understandings, statements or representations, oral or in writing, of the Parties relating thereto. This Agreement may be modified or amended only by written agreement of the Parties. In addition to the foregoing, on and after the Stock Distribution Date, any amendment to this Agreement must, in the case of ChoicePoint, be approved by one of its elected officers and in the case of Equifax, be approved by one of its elected officers. The employee benefit plans and policies which are attached as Exhibits to this Agreement may be amended by their sponsoring companies in any manner which they, in good faith, determine to be necessary or desirable. 5.6 Sharing of Information. Equifax and ChoicePoint recognize that each of them will require certain information and data regarding employees of the other company or its subsidiaries. Each agrees to provide the information requested by the other in good faith, and on a reasonably prompt basis. The requesting party shall be required to pay a reasonable amount for administrative expenses incurred by the supplying party in preparing the requested information. Such information will include but not be limited to that which is required for testing benefit plans for coverage, maximum benefit and contribution limitations, annual reports, and year-end or other periodic valuations. Such information shall be subject to the confidentiality provisions under section 15.05 of the Distribution Agreement. 5.7 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute a single instrument. 18 5.8 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws) as to all matters including, without limitation, matters of validity, construction, effect, performance and remedies. 5.9 No Third Party Beneficiaries. This Agreement is solely for the benefit of the Parties hereto and is not intended to confer upon any other person any rights or remedies hereunder. 5.10 Legal Enforceability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 5.11 Interpretation. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement. The parties have made a good faith effort in this Agreement to provide for these issues involving employee benefits in the transaction which can be reasonably foreseen. The parties acknowledge that other such issues may arise, and they agree to work in good faith to resolve any differences in light of the general philosophy that all matters involving Equifax benefit plans are the responsibility of Equifax except that ChoicePoint intends to be responsible, on an ongoing basis, for the administration and expense of those benefits which ChoicePoint has determined to continue for the IIS Group Employees after June 30, 1997. 5.12 Resolution. Any disputes between the parties based upon, related to, or arising in connection with this Agreement shall be resolved in accordance with the dispute resolution procedure set forth in section 17.10 of the Distribution Agreement. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed and delivered as of the day and year first above written. Equifax Inc. By: /s/ Daniel W. McGlaughlin ------------------------------------------ Its: President and Chief Executive Officer 19 ChoicePoint Inc. By: /s/ J. Michael de Janes ------------------------------------------ Its: General Counsel 20 EX-10.26 8 g87580exv10w26.txt EX-10.26 MASTER AGREEMENT EXHIBIT 10.26 ================================================================================ MASTER AGREEMENT Dated as of July 31, 1997 among CHOICEPOINT INC., as Lessee and Guarantor, SUNTRUST BANKS, INC., as Lessor, and SUNTRUST BANK, ATLANTA, as Agent ================================================================================ TABLE OF CONTENTS
Page SECTION 1 DEFINITIONS; INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS;NATURE OF TRANSACTION . . . . . . . . . . . . . . 2 SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 2.2 Fundings of Purchase Price, Development Costs and Construction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 2.3 Funded Amounts and Interest and Yield Thereon . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.4 Lessee Owner for Tax Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 2.5 Amounts Due Under Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.1 Conditions to the Obligations of the Funding Parties on each Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3.2 Additional Conditions for the Initial Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 3.3 Conditions to the Obligations of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.4 Conditions to the Obligations of the Funding Parties on each Funding Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3.5 Completion Date Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4 REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.1 Representations of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.2 Representations of the Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 4.3 Representations of each Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 5 COVENANTS OF THE LESSEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 5.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 5.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 5.3 Environmental Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 5.4 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 5.5 Environmental Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 5.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 5.7 Additional Required Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 6 TRANSFERS BY LESSOR AND LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 6.1 Lessor Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 6.2 Loan Agreement; Lender Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 7 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 7.1 General Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 7.2 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.3 Proceedings in Respect of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 7.4 General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 7.5 Interest Rate Not Ascertainable, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 7.6 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 7.7 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 7.8 Funding Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.9 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.10 Assumptions Concerning Funding of LIBOR Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.11 End of Term Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 8.1 Survival of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.5 Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 8.6 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.7 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.10 Liabilities of the Funding Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.11 Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.12 Liabilities of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

-ii- APPENDIX A Definitions and Interpretation
SCHEDULES SCHEDULE 2.2 Commitments SCHEDULE 4.1(l) Subsidiaries SCHEDULE 4.1(u) Outstanding Indebtedness SCHEDULE 4.1(w) Environmental Matters SCHEDULE 8.2 Notice Information

EXHIBITS EXHIBIT A Form of Funding Request EXHIBIT B Form of Assignment of Lease and Rents EXHIBIT C Form of Security Agreement and Assignment EXHIBIT D Form of Mortgage EXHIBIT E Form of Compliance Certificate EXHIBIT F Form of Environmental Audit Reliance Letter EXHIBIT G Forms of Opinions of Counsel EXHIBIT H Form of Lessee Certification of Construction Completion EXHIBIT I Form of Payment Date Notice EXHIBIT J Form of Assignment and Assumption Agreement EXHIBIT K Form of Loan Agreement
-iii- MASTER AGREEMENT THIS MASTER AGREEMENT, dated as of July 31, 1997 (as it may be amended or modified from time to time in accordance with the provisions hereof, this "Master Agreement"), is among CHOICEPOINT INC., a Georgia corporation ("Lessee"), SUNTRUST BANKS, INC., a Georgia corporation, as Lessor (the "Lessor"), and SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as Agent (the "Agent"). PRELIMINARY STATEMENT In accordance with the terms and provisions of this Master Agreement, the Lease, the Lease Participation Agreement, the Loan Agreement and the other Operative Documents, (i) the Lessor contemplates acquiring Land and Buildings on such Land from time to time, and leasing such Land and Buildings to the Lessee, (ii) the Lessee may construct Buildings on certain Land for the Lessor and, when completed, to lease such Buildings from the Lessor as part of the Leased Property under the Lease, (iii) the Lessee, as agent, wishes to obtain, and the Lessor is willing to provide, funding for the acquisition of the Land and Buildings and the construction of Buildings, (iv) the Lessor wishes to sell, and the Lease Participant wishes to purchase, a participation interest in the Lessor's rights under the Lease, (v) the Lessor may obtain from Lenders willing to provide the same, from time to time, financing of a portion of the funding of the acquisition of the Land and the construction of the Buildings, and (vi) the Lessee is willing to provide its Operative Guaranty to the Funding Parties. In consideration of the mutual agreements contained in this Master Agreement 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 Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof; and the rules of interpretation set forth in Appendix A hereto shall apply to this Master Agreement. SECTION 2 ACQUISITION, CONSTRUCTION AND LEASE; FUNDINGS; NATURE OF TRANSACTION SECTION 2.1 Agreement to Acquire, Construct, Fund and Lease. (a) Land. Subject to the terms and conditions of this Master Agreement, with respect to each parcel of Land, on the related Closing Date (i) the Lessor agrees to acquire such interest in the related Land from the applicable Seller as is transferred, sold, assigned and conveyed to the Lessor pursuant to the applicable Purchase Agreement, (ii) the Lessor hereby agrees to lease such Land to the Lessee pursuant to the Lease, and (iii) the Lessee hereby agrees to lease such Land from the Lessor pursuant to the Lease. (b) Building. With respect to each parcel of Land, subject to the terms and conditions of this Master Agreement, from and after the Closing Date relating to such Land (i) the Construction Agent agrees, pursuant to the terms of the Construction Agency Agreement, to construct and install the Building on such Land for the Lessor prior to the Scheduled Construction Termination Date, (ii) the Lenders and the Lessor agree to fund all or a portion of the costs of such construction and installation (and interest and yield thereon), (iii) the Lessor shall lease such Building as part of such Leased Property to the Lessee pursuant to the Lease, and (iv) the Lessee shall lease such Building from the Lessor pursuant to the Lease. SECTION 2.2 Fundings of Purchase Price, Development Costs and Construction Costs. (a) Initial Funding and Payment of Purchase Price for Land and Development Costs on Closing Date. Subject to the terms and conditions of this Master Agreement, on the Closing Date for any Land, each Lender shall make available to the Lessor its initial Loan with respect to such Land in an amount equal to the product of such Lender's Commitment Percentage times the purchase price for the Land and the development, transaction and closing costs incurred by the Lessee through such Closing Date, which funds the Lessor shall use, together with Lessor funds in an amount equal to the product of the Lessor's Commitment Percentage times the purchase price for the related Land and the development, transaction and closing costs incurred by the Lessee, as agent, through such Closing Date, to purchase the Land from the applicable Seller pursuant to the applicable Purchase 2 Agreement and to pay to the Lessee the amount of such development, transaction and closing costs, and the Lessor shall lease such Land to the Lessee pursuant to the Lease. (b) Subsequent Fundings and Payments of Construction Costs during Construction Term. Subject to the terms and conditions of this Master Agreement, on each Funding Date following the Closing Date for each parcel of Land until the related Construction Term Expiration Date, (i) each Lender shall make available to the Lessor a Loan in an amount equal to the product of such Lender's Commitment Percentage times the amount of Funding requested by the Lessee for such Funding Date, which funds the Lessor hereby directs the Lender to pay over to the Lessee as set forth in paragraph (d), and (ii) the Lessor shall pay over to the Lessee its own funds (which shall constitute a part of and an increase in the Lessor's Invested Amount with respect to such Leased Property) in an amount equal to the product of the Lessor's Commitment Percentage times the amount of Funding requested by the Lessee for such Funding Date. (c) Aggregate Limits on Funded Amounts. The aggregate amount that the Funding Parties shall be committed to provide as Funded Amounts under this Master Agreement, the Loan Agreement and the Lease Participation Agreement shall not exceed (x) with respect to each Leased Property the costs of purchase and construction of such Leased Property and the related closing and financing costs, or (y) $22,000,000 in the aggregate for all Leased Properties. The aggregate amount that any Funding Party shall be committed to fund under this Master Agreement, the Lease Participation Agreement and the Loan Agreement shall not exceed the lesser of (i) such Funding Party's Commitment and (ii) such Funding Party's Commitment Percentage of the aggregate Fundings requested under this Master Agreement. (d) Notice, Time and Place of Fundings. With respect to each Funding, the Lessee shall give the Lessor and the Agent an irrevocable prior written notice not later than 12:00 noon, Atlanta, Georgia, two Business Days prior to the proposed Closing Date or other Funding Date, as the case may be, pursuant, in each case, to a Funding Request in the form of Exhibit A (a "Funding Request"), specifying the Closing Date or subsequent Funding Date, as the case may be, the amount of Funding requested, and the Rent Period(s) therefor. All documents and instruments required to be delivered on such Closing Date pursuant to this Master Agreement shall be delivered at the offices of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603, or at such other location as may be determined by the 3 Lessor, the Lessee and the Agent. Each Funding shall occur on a Business Day and shall be in an amount equal to $250,000 or an integral multiple of $25,000 in excess thereof. All remittances made by any Lender and the Lessor for any Funding shall be made in immediately available funds by wire transfer to or, as is directed by, the Lessee, with receipt by the Lessee not later than 1:00 p.m., Atlanta, Georgia time, on the applicable Funding Date, upon satisfaction or waiver of the conditions precedent to such Funding set forth in Section 3; such funds shall (1) in the case of the initial Funding on a Closing Date, be used to pay the purchase price to the applicable Seller for the related Land and pay the Lessee development, transaction and closing costs related to such Land, and (2) in the case of each subsequent Funding in respect of a Construction Land Interest be used to pay to the Lessee as the Construction Agent for the payment or reimbursement of Construction costs. (e) Lessee's Deemed Representation for Each Funding. Each Funding Request by the Lessee shall be deemed a reaffirmation of the Lessee's indemnity obligations in favor of the Indemnitees under the Operative Documents and a representation by the Lessee to the Lessor, the Agent, the Lease Participant and the Lenders that on the proposed Closing Date or Funding Date, as the case may be, (i) the amount of Funding requested represents amounts owing in respect of the purchase price of the related Land and development, transaction and closing costs in respect of the Leased Property (in the case of the initial Funding on a Closing Date) or amounts that the Lessee reasonably believes will be due in the 90 days following such Funding from the Lessee to third parties in respect of the Construction, or amounts paid by the Lessee to third parties in respect of the Construction for which the Lessee has not previously been reimbursed by a Funding (in the case of any Funding), (ii) no Event of Default or Potential Event of Default exists, and (iii) the representations of the Lessee set forth in Section 4.1 are true and correct in all material respects as though made on and as of such Funding Date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date. (f) Notwithstanding anything to the contrary set forth herein or in the other Operative Documents, each Lender's and the Lessor's commitments shall be several, and not joint. In no event shall any Funding Party be obligated to fund an amount in excess of such Funding Party's Commitment Percentage of any 4 Funding, or to fund amounts in the aggregate in excess of such Funding Party's Commitment. SECTION 2.3 Funded Amounts and Interest and Yield Thereon. (a) The Lessor's Invested Amount for any Leased Property outstanding from time to time shall accrue yield ("Yield") at a rate equal to the sum of (i) the LIBOR Rate, plus (ii) the Applicable Margin per annum, in each case, computed using the actual number of days elapsed and a 360 day year. If all or a portion of the principal amount of or yield on the Lessor's Invested Amounts shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting the rights of the Lessor under the Lease, to the maximum extent permitted by law, accrue yield at the Overdue Rate, in each case from the date of nonpayment until paid in full (as well after as before judgment). Any change in the Yield rate on the Lessor's Invested Amounts resulting from a change in the Alternative Rate shall become effective as of the opening of business on the day on which such Alternative Rate changes as provided in the definition thereof. (b) Each Lender's Funded Amount for any Leased Property outstanding from time to time shall accrue interest as provided in the Loan Agreement. (c) During the Construction Term, in lieu of paying accrued interest, on such Payment Date, so long as no Event of Default or Potential Event of Default then exists, each Lender's Funded Amount in respect of a Construction Land Interest shall automatically be increased by the amount of interest accrued on the related Loans pursuant to the Loan Agreement during the quarter ending immediately prior to such Payment Date (except to the extent that at any time such increase would cause such Lender's Funded Amount to exceed such Lender's Commitment, in which event the Lessee shall pay such excess amount to such Lender in immediately available funds). Similarly, during the Construction Term, in lieu of paying accrued Yield, on such Payment Date, so long as no Event of Default then exists, the Lessor's Invested Amount in respect of such Construction Land Interest shall automatically be increased by the amount of Yield accrued on the Lessor's Invested Amount in respect of such Land during the quarter ending immediately prior to such Payment Date (except to the extent that at any time such increase would cause the Lessor's Invested Amount to exceed the Lessor's Commitment, in which event the Lessee shall pay such excess amount to the Lessor in immediately available funds). Such increases in Funded 5 Amounts shall occur without any disbursement of funds by the Funding Parties. (d) Three Business Days prior to the last day of each Rent Period, the Lessee shall deliver to the Lessor and the Agent a notice substantially in the form of Exhibit I (each, a "Payment Date Notice"), appropriately completed, specifying the allocation of the Funded Amounts related to such Rent Period to LIBOR Advances and the Rent Periods therefor, provided that no such allocation shall be in an amount less than $250,000. Each such Payment Date Notice shall be irrevocable. If no such notice is given, the Funded Amounts shall be allocated to a LIBOR Advance with a Rent Period of three (3) months. SECTION 2.4 Lessee Owner for Tax Purposes. With respect to each Leased Property, it is the intent of the Lessee and the Funding Parties that for federal, state and local tax purposes (A) the Lessee owns such Leased Property and will be entitled to all tax benefits ordinarily available to an owner of property similar to such Leased Property, (B) the Lease will be treated as a financing arrangement, and (C) the Lessor will be treated as a lender making loans to the Lessee. Nevertheless, the Lessee acknowledges and agrees that no Funding Party or any other Person has made any representations or warranties concerning the tax, financial, accounting or legal characteristics or treatment of the Operative Documents and that the Lessee has obtained and relied solely upon the advice of its own tax, accounting and legal advisors concerning the Operative Documents and the accounting, tax, financial and legal consequences of the transactions contemplated therein. SECTION 2.5 Amounts Due Under Lease. With respect to each Leased Property, anything else herein or elsewhere to the contrary notwithstanding, it is the intention of the Lessee and the Funding Parties that: (i) the amount and timing of Basic Rent due and payable from time to time from the Lessee under the Lease shall be equal to the aggregate payments due and payable with respect to interest on, and principal of, the Loans in respect of such Leased Property and Yield on, and principal of, the Lessor's Invested Amounts, if any, in respect of such Leased Property on each Payment Date; (ii) if the Lessee elects the Purchase Option with respect to a Leased Property or becomes obligated to purchase such Leased Property under the Lease, the Funded Amounts in respect of such Leased Property, all interest and Yield thereon and all other obligations of the Lessee owing to the Funding Parties in respect of the Leased Property shall be paid in full by the Lessee; (iii) if the Lessee properly elects 6 the Remarketing Option, the principal amount of, and accrued interest on, the A Loans and the A Percentage of the Lessor's Invested Amounts in respect of such Leased Property, if any, will be paid out of the Recourse Deficiency Amount, and the Lessee shall only be required to pay to the Lenders in respect of the principal amount of the B Loans in respect of such Leased Property and to the Lessor in respect of the B Percentage of the Lessor's Invested Amounts in respect of such Leased Property, if any, the proceeds of the sale of such Leased Property; and (iv) upon an Event of Default resulting in an acceleration of the Lessee's obligation to purchase such Leased Property under the Lease, the amounts then due and payable by the Lessee under the Lease shall include all amounts necessary to pay in full the Loans in respect of such Leased Property, and accrued interest thereon, the Lessor's Invested Amounts in respect of such Leased Property, if any, and accrued Yield thereon and all other obligations of the Lessee owing to the Funding Parties in respect of such Leased Property. SECTION 3 CONDITIONS PRECEDENT; DOCUMENTS SECTION 3.1 Conditions to the Obligations of the Funding Parties on each Closing Date. The obligations of the Lessor and each Lender to carry out their respective obligations under Section 2 of this Master Agreement to be performed on the Closing Date with respect to any Leased Property shall be subject to the fulfillment to the satisfaction of, or waiver by, each such party hereto (acting directly or through its counsel) on or prior to such Closing Date of the following conditions precedent, provided that the obligations of any Funding Party shall not be subject to any conditions contained in this Section 3.1 which are required to be performed by such Funding Party: (a) Documents. The following documents shall have been executed and delivered by the respective parties thereto: (i) Deed and Purchase Agreement. The related original Deed duly executed by the applicable Seller and in recordable form, and copies of the related Purchase Agreement, duly executed by such Seller and the Lessee, shall each have been delivered to the Agent, with copies thereof to each other Funding Party. (ii) Lease; Lease Supplement. The original of the related Lease Supplement, duly executed by the 7 Lessee and the Lessor and in recordable form, shall have been delivered to the Agent. (iii) Mortgage and Assignment of Lease and Rents. If a Loan Agreement is then in effect, counterparts of the Mortgage in the form of Exhibit D attached hereto, duly executed by the Lessor and in recordable form, shall have been delivered to the Agent (which Mortgage shall secure all of the debt to the Agent [unless such mortgage is subject to a tax based on the amount of indebtedness secured thereby, in which case the amount secured will be limited to debt in an amount equal to 125% of the projected cost of acquisition and construction of such Leased Property]); and the Assignment of Lease and Rents in recordable form, duly executed by the Lessor, shall have been delivered to the Agent. (iv) Security Agreement and Assignment. If applicable, counterparts of the Security Agreement and Assignment (substantially in the form of Exhibit C), duly executed by the Lessee, with an acknowledgment and consent thereto satisfactory to the Lessor and the Agent duly executed by the related General Contractor and the related Architect, as applicable, and complete copies of the related Construction Contract and the related Architect's Agreement certified by the Lessee, shall have been delivered to the Lessor and the Agent (it being understood and agreed that if no related Construction Contract or Architect's Agreement exists on such Closing Date the Lessee shall deliver such Security Agreement and Assignment and consents concurrently with the Lessee's entering into such contracts). (v) Survey. The Lessee shall have delivered, or shall have caused to be delivered, to the Lessor and the Agent, at the Lessee's expense, an accurate survey certified to the Lessor and the Agent in a form satisfactory to the Lessor and the Agent and showing no state of facts unsatisfactory to the Lessor or the Agent and prepared within ninety (90) days of the Closing Date by a Person reasonably satisfactory to the Lessor and the Agent. Such survey shall (1) be acceptable to the Title Insurance Company for the purpose of providing extended coverage to the Lessor and a lender's comprehensive endorsement to the Agent, 8 (2) show no encroachments on such Land by structures owned by others, and no encroachments from any part of such Leased Property onto any land owned by others, and (3) disclose no state of facts reasonably objectionable to the Lessor, the Agent or the Title Insurance Company, and be reasonably acceptable to each such Person. (vi) Title and Title Insurance. On such Closing Date, the Lessor shall receive from a title insurance company acceptable to the Lessor and the Agent an ALTA Owner's Policy of Title Insurance issued by such title insurance company and the Agent shall receive from such title insurance company an ALTA Mortgagee's Policy of Title Insurance issued by such title insurance company, in each case, in the amount of the projected cost of acquisition and construction of such Leased Property, reasonably acceptable in form and substance to the Lessor and the Agent, respectively (collectively, the "Title Policy"). The Title Policy shall be dated as of the Closing Date, and, to the extent permitted under Applicable Law, shall include a pending disbursements clause reasonably satisfactory to the Lessor and the Agent and coverage over the creditors' rights exclusion and the general exceptions to such policy, and shall contain such affirmative endorsements as to mechanic's liens, easements and rights-of-way, encroachments, the non-violation of covenants and restrictions, survey matters and other matters as the Lessor or the Agent shall reasonably request. (vii) Appraisal. Each Funding Party shall have received a report of the Appraiser (an "Appraisal"), paid for by the Lessee, which shall meet the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, shall be satisfactory to such Funding Party and shall state in a manner satisfactory to such Funding Party the estimated "as vacant" value of such Land and the Building to be constructed thereon. Such Appraisal must show that (1) the estimated Fair Market Sales Value of the Leased Property (determined as if the Building had already been completed in accordance with the related Plans and Specifications) at the commencement of the Lease Term with respect thereto is equal to the projected cost of acquisition and construction of such Leased Property, and (2) the "as vacant" value described above is at 9 least 60% of the total cost of the Leased Property, including the trade fixtures, equipment and personal property to be included therein. (viii) Environmental Audit and related Reliance Letter. The Lessor and the Agent shall have received an Environmental Audit for such Leased Property showing that no Hazardous Materials are present and otherwise satisfactory to the Lessor and the Agent; and the firm that prepared the Environmental Audit for such Leased Property shall have delivered to the Lessor and the Agent a letter (substantially in the form of Exhibit F) stating that the Lessor, the Agent, the Lease Participant and the Lenders may rely upon such firm's Environmental Audit of such Land, it being understood that the Lessor's and the Agent's acceptance of any such Environmental Audit shall not release or impair the Lessee's obligations under the Operative Documents with respect to any environmental liabilities relating to such Leased Property. (ix) Evidence of Insurance. The Lessor and the Agent shall have received from the Lessee certificates of insurance evidencing compliance with the provisions of Article VIII of the Lease (including the naming of the Lessor, the Agent, the Lease Participant and the Lenders as additional insured or loss payee with respect to such insurance), in form and substance reasonably satisfactory to the Lessor and the Agent. (x) Officer's Certificate. Each of the Agent and the Lessor shall have received an Officer's Certificate of the Lessee stating that, to the best of such officer's knowledge, (A) each and every representation and warranty of the Lessee contained in the Operative Documents is true and correct in all material respects on and as of such Closing Date as though made on and as of such Closing Date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date; (B) no Event of Default, Potential Event of Default or Construction Force Majeure Event has occurred and is continuing; (C) each Operative Document to which the Lessee is a party is in full force and effect with respect to it; and (D) no event that could reasonably be expected to 10 have a Material Adverse Effect has occurred since March 31, 1997. (xi) UCC Financing Statement; Recording Fees; Transfer Taxes. Each Funding Party shall have received satisfactory evidence of (i) the execution and delivery to Agent of a UCC-1 and UCC-2 financing statement to be filed with the Secretary of State of the applicable State (or other appropriate filing office) and the county where the related Land is located respectively, and such other Uniform Commercial Code financing statements as any Funding Party deems necessary or desirable in order to protect such Funding Party's interests and (ii) the payment of all recording and filing fees and taxes with respect to any recordings or filings made of the related Deed, the Lease, the related Lease Supplement, the related Mortgage and the related Assignment of Lease and Rents. (xii) Opinions. The opinion of local counsel for the Lessee qualified in the jurisdiction in which such Leased Property is located, substantially in the form set forth in Exhibit G-2, and containing such other matters as the parties to whom they are addressed shall reasonably request, shall have been delivered and addressed to each of the Lessor, the Agent, the Lease Participant and the Lenders, and to the extent requested by the Agent, opinions supplemental to those delivered under Section 3.2(vii) and reasonably satisfactory to the Agent shall have been delivered and addressed to each of the Lessor, the Agent, the Lease Participant and the Lenders. (b) Litigation. No action or proceeding shall have been instituted or threatened nor shall any governmental action, suit, proceeding or investigation be instituted or threatened before any Governmental Authority, nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Authority, to set aside, restrain, enjoin or prevent the performance of this Master Agreement or any transaction contemplated hereby or by any other Operative Document or which is reasonably likely to materially adversely affect the Leased Property or any transaction contemplated by the Operative Documents or which could reasonably be expected to result in a Material Adverse Effect. 11 (c) Legality. In the opinion of such Funding Party or its counsel, the transactions contemplated by the Operative Documents shall not violate any Applicable Law, and no change shall have occurred or been proposed in Applicable Law that would make it illegal for such Funding Party to participate in any of the transactions contemplated by the Operative Documents. (d) No Events. (i) No Event of Default, Potential Event of Default, Event of Loss or Event of Taking relating to such Leased Property shall have occurred and be continuing, (ii) no action shall be pending or threatened by a Governmental Authority to initiate a Condemnation or an Event of Taking, and (iii) there shall not have occurred any event that could reasonably be expected to have a Material Adverse Effect since March 31, 1997. (e) Representations. Each representation and warranty of the parties hereto or to any other Operative Document contained herein or in any other Operative Document shall be true and correct in all material respects as though made on and as of the Closing Date. (f) Cutoff Date. The initial Closing Date shall occur on or prior to August 31, 1997. No Closing Date shall occur after the Funding Termination Date. (g) Transaction Expenses. The Lessee shall have paid the Transaction Costs then accrued and invoiced which the Lessee has agreed to pay pursuant to Section 8.8. SECTION 3.2 Additional Conditions for the Initial Closing Date. The obligations of the Lessor and each Lender to carry out their respective obligations under Section 2 of this Master Agreement to be performed on the initial Closing Date shall be subject to the satisfaction of, or waiver by, each such party hereto (acting directly or through its counsel) on or prior to the initial Closing Date of the following conditions precedent in addition to those set forth in Section 3.1, provided that the obligations of any Funding Party shall not be subject to any conditions contained in this Section 3.2 which are required to be performed by such Funding Party: (i) Operative Guaranty. Counterparts of the Operative Guaranty, duly executed by the Affiliate Guarantor, shall have been delivered to each Funding Party. 12 (ii) Lease Participation Agreement. Counterparts of the Lease Participation Agreement, duly executed by the Lessor, the Agent and the Lease Participant, shall have been delivered to each of the parties thereto. (iii) Master Agreement. Counterparts of this Master Agreement, duly executed by the parties hereto, shall have been delivered to each of the parties hereto. (iv) Construction Agency Agreement. Counterparts of the Construction Agency Agreement, duly executed by the parties thereto shall have been delivered to each of the parties hereto. (v) Lease. Counterparts of the Lease, duly executed by the Lessee and the Lessor, shall have been delivered to each Funding Party and the original, chattel paper copy of the Lease shall have been delivered to the Agent. (vi) Lessee's Resolutions and Incumbency Certificate, etc. Each of the Agent and the Lessor shall have received (x) a certificate of the Secretary or an Assistant Secretary of the Lessee, attaching and certifying as to (i) the Board of Directors' resolution duly authorizing the execution, delivery and performance by it of each Operative Document to which it is or will be a party, (ii) the incumbency and signatures of persons authorized to execute and deliver such documents on its behalf, (iii) its articles of incorporation, certified as of a recent date by the Secretary of State of the state of its incorporation and (iv) its by-laws, and (y) good standing certificates for the Lessee from the appropriate offices of the States of such Person's incorporation and principal place of business. (vii) Opinions of Counsel. The opinions of Jones, Day, Reavis & Pogue and of internal counsel to the Lessee, dated the initial Closing Date, substantially in the form set forth in Exhibit G-1, and containing such other matters as the parties to whom it is addressed shall reasonably request, shall have been delivered and addressed to each of the Lessor, the Agent and the Lease Participant. 13 (viii) Lessor's Incumbency Certificate. The Agent shall have received a certificate of secretary of the Lessor attaching and certifying as to the incumbency and signatures of persons authorized to execute and deliver such documents on its behalf. SECTION 3.3 Conditions to the Obligations of Lessee. The obligations of the Lessee to lease from the Lessor are subject to the fulfillment on the related Closing Date to the satisfaction of, or waiver by, the Lessee, of the following conditions precedent: (a) General Conditions. The conditions set forth in Sections 3.1 and 3.2 that require fulfillment by the Lessor or the Lenders shall have been satisfied. (b) Legality. In the opinion of the Lessee or its counsel, the transactions contemplated by the Operative Documents shall not violate any Applicable Law, and no change shall have occurred or been proposed in Applicable Law that would make it illegal for the Lessee to participate in any of the transactions contemplated by the Operative Documents. SECTION 3.4 Conditions to the Obligations of the Funding Parties on each Funding Date. The obligations of the Lessor and each Lender to carry out their respective obligations under Section 2 of this Master Agreement to be performed on each Funding Date shall be subject to the fulfillment to the satisfaction of, or waiver by, each such party hereto (acting directly or through their respective counsel) or prior to each such Funding Date of the following conditions precedent, provided that the obligations of any Funding Party shall not be subject to any conditions contained in this Section 3.4 which are required to be performed by such Funding Party: (a) Funding Request. The Lessor and the Agent shall have received from the Lessee the Funding Request therefor pursuant to Section 2.2(d). (b) Condition Fulfilled. As of such Funding Date, the condition set forth in Section 3.1(d)(i) shall have been satisfied. (c) Representations. As of such Funding Date, both before and after giving effect to the Funding requested by the Lessee on such date, the representations and warranties that the Lessee is deemed to make pursuant to Section 2.2(e) shall be true 14 and correct in all material respects on and as of such Funding Date as though made on and as of such Funding Date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date. (d) No Bonded Stop Notice or Filed Mechanics Lien. As of each Funding Date, and as to any Funded Amount requested for any Leased Property on each such Funding Date, (i) neither the Lessor, the Agent, the Lease Participant nor any Lender has received (with respect to such Leased Property) a bonded notice to withhold Loan funds that has not been discharged by the Lessee, and (ii) no mechanic's liens or materialman's liens have been filed against such Leased Property that have not been discharged by the Lessee, bonded over in a manner reasonably satisfactory to the Agent or insured over by the Title Insurance Company. (e) Security Agreement and Assignment. If Construction is being funded, the Security Agreement and Assignments and related consents described in Section 3.1(a)(iv) shall have been executed and delivered. SECTION 3.5 Completion Date Conditions. The occurrence of the Completion Date with respect to any Leased Property shall be subject to the fulfillment to the satisfaction of, or waiver by, each party hereto (acting directly or through its counsel) of the following conditions precedent: (a) Title Policy Endorsements; Architect's Certificate. The Lessee shall have furnished to each Funding Party (1) the following endorsements to the related Title Policy (each of which shall be subject to no exceptions other than those reasonably acceptable to the Agent): a date-down endorsement (redating and confirming the coverage provided under the Title Policy and each endorsement thereto) and a "Form 9" endorsement (if available in the applicable jurisdiction), in each case, effective as of a date not earlier than the date of completion of the Construction, and (2) a certificate of the Architect dated at or about the Completion Date, in form and substance reasonably satisfactory to the Agent, the Lessor and the Lenders, and stating that (i) the related Building has been completed substantially in accordance with the Plans and Specifications therefor, and such Leased Property is ready for occupancy, (ii) such Plans and Specifications comply in all material respects with all Applicable Laws in effect at such time, and (iii) to the 15 best of the Architect's knowledge, such Leased Property, as so completed, complies in all material respects with all Applicable Laws in effect at such time. The Lessee shall also deliver to the Agent true and complete copies of: (A) an "as built" or "record" set of the Plans and Specifications, (B) a plat of survey of such Leased Property "as built" to a standard reasonably acceptable to the Agent showing all easements, paving, driveways, fences and exterior improvements, and (C) copies of a certificate or certificates of occupancy for such Leased Property or other legally equivalent permission to occupy such Leased Property. (b) Construction Completion. The related Construction shall have been completed substantially in accordance with the related Plans and Specifications, the related Deed and all Applicable Laws, and such Leased Property shall be ready for occupancy and operation. All fixtures, equipment and other property contemplated under the Plans and Specifications to be incorporated into or installed in such Leased Property shall have been substantially incorporated or installed, free and clear of all Liens except for Permitted Liens. (c) Lessee Certification. The Lessee shall have furnished the Lessor, the Agent, the Lease Participant and each Lender with a certification of the Lessee (substantially in the form of Exhibit H) that: (i) all amounts owing to third parties for the related Construction have been paid in full (other than contingent obligations for which the Lessee has made adequate reserves), and no litigation or proceedings are pending, or to the best of the Lessee's knowledge, are threatened, against such Leased Property or the Lessee which could reasonably be expected to have a Material Adverse Effect; (ii) all consents, licenses and permits and other governmental authorizations or approvals required for such Construction and operation of such Leased Property have been obtained and are in full force and effect; (iii) such Leased Property has available all services of public facilities and other utilities necessary for use and operation of such Leased Property for its intended purposes including, without limitation, adequate water, gas and electrical supply, storm and sanitary sewerage facilities, telephone, other required public 16 utilities and means of access between the related Building and public highways for pedestrians and motor vehicles; (iv) all material agreements, easements and other rights, public or private, which are necessary to permit the lawful use and operation of such Leased Property as the Lessee intends to use the Leased Property under the Lease and which are necessary to permit the lawful intended use and operation of all then intended utilities, driveways, roads and other means of egress and ingress to and from the same have been obtained and are in full force and effect and the Lessee has no knowledge of any pending modification or cancellation of any of the same; and the use of such Leased Property does not depend on any variance, special exception or other municipal approval, permit or consent that has not been obtained and is in full force and effect for its continuing legal use; (v) all of the requirements and conditions set forth in Section 3.5(b) hereof have been completed and fulfilled with respect to such Leased Property and the related Construction; and (vi) such Leased Property is in compliance in all material respects with all applicable zoning laws and regulations. SECTION 4 REPRESENTATIONS SECTION 4.1 Representations of Lessee. Effective as of the date of execution hereof, as of each Closing Date and as of each Funding Date, the Lessee represents and warrants to each of the other parties hereto as follows: (a) Corporate Existence; Compliance with Law. The Lessee is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. The Lessee (i) has the corporate power and authority and the legal right to own and operate its property and to conduct its business, (ii) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership of property or the conduct of its business requires such qualification, and (iii) is in compliance with all Requirements of Law, except where the failure 17 to duly qualify or to comply with applicable Requirements of Law would not have a Material Adverse Effect. (b) Corporate Power; Authorization. The Lessee has the corporate power and authority to make, deliver and perform the Operative Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of such Operative Documents. No consent or authorization of, or filing with, any Person (including, without limitation, any governmental authority), is required in connection with the execution, delivery or performance by the Lessee, or the validity or enforceability against the Lessee, of the Operative Documents, other than such consents, authorizations or filings which have been made or obtained. (c) Enforceable Obligations. This Agreement and each other Operative Document to which the Lessee is a party has been duly authorized, executed and delivered by the Lessee, and this Agreement and each other Operative Document to which the Lessee is a party constitute legal, valid and binding obligations of the Lessee enforceable against the Lessee in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. (d) No Contractual or Legal Bar. The execution, delivery and performance by the Lessee of the Operative Documents to which it is a party (i) will not contravene any material provision of any Requirement of Law, (ii) will not conflict with or be inconsistent with or result in any breach of, or constitute a default under, any Contractual Obligations of any Consolidated Company that would result in liability to the Lessee of $500,000 or more in the aggregate or otherwise result in a Material Adverse Effect, (iii) will not violate any provision of the certificate of incorporation (or equivalent thereof) or bylaws (or equivalent thereof) of the Lessee, (iv) will not require the consent, approval or authorization of any governmental or non-governmental authority or Person and (v) will not result in the creation of any Lien upon the assets or properties of the Lessee and its Subsidiaries, other than those Liens permitted under Section 5.2(a). (e) No Material Litigation or Investigations. No litigation, investigations or proceedings of or before any courts, tribunals, arbitrators or governmental authorities are pending or, to the knowledge of the Lessee threatened by or 18 against any of the Consolidated Companies, or against any of their respective properties or rights, existing or future (i) with respect to any Operative Document or any of the transactions contemplated hereby or thereby, or (ii) which, if adversely determined, would reasonably be expected to have a Material Adverse Effect. (f) Investment Company Act, Etc. None of the Consolidated Companies is an "investment company" or a company "controlled" by an "investment company" (as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended). None of the Consolidated Companies is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any foreign, federal or local statute or regulation limiting its ability to incur indebtedness for money borrowed, guarantee such indebtedness, or pledge its assets to secure such indebtedness, as contemplated hereby or by any other Operative Document. (g) Margin Regulations. No part of the proceeds of any of the Funded Amounts will be used for any purpose which violates, or which would be inconsistent or not in compliance with, the provisions of the applicable Margin Regulations. (h) Insurance. The Lessee currently maintains insurance with respect to its properties and businesses, with financially sound and reputable insurers, having coverages against losses or damages of the kinds customarily insured against by reputable companies in the same or similar businesses, such insurance being the types, and in amounts no less than those amounts which are, customary for such companies under similar circumstances; provided, however, that the Lessee may self insure in amounts satisfactory to management, subject to the provisions of Section 5.1(f). The Consolidated Companies have paid all material amounts of insurance premiums now due and owing with respect to such insurance policies and coverages (it being understood that insurance premiums for certain insurance policies and coverages may permit payment on a quarterly basis), and such policies and coverages are in full force and effect. (i) No Default. None of the Consolidated Companies is in default under or with respect to any material Contractual Obligation in any respect. (j) No Burdensome Restrictions. None of the Consolidated Companies is a party to or bound by any Contractual Obliga- 19 tion or Requirement of Law which has had or would reasonably be expected to have a Material Adverse Effect. (k) Taxes. Each of the Consolidated Companies has filed or caused to be filed all declarations, reports and tax returns which are required to have been filed, and has paid all taxes, custom duties, levies, charges and similar contributions ("taxes" in this Section 4.1(k) shown to be due and payable on said returns or on any assessments made against it or its properties, and all other taxes, fees or other charges imposed on it or any of its properties by any governmental authority (other than those the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided in its books or where the aggregate sum of taxes unpaid is less than $500,000); and no tax liens have been filed and, to the knowledge of the Lessee, no claims are being asserted with respect to any such taxes, fees or other charges. (l) Subsidiaries. Schedule 4.1(l) accurately describes as of the initial Closing Date (1) the complete name of each Subsidiary of the Lessee, (2) the jurisdiction of incorporation or organization of each Subsidiary of the Lessee, (3) the ownership of all issued and outstanding Capital Stock of each Subsidiary of the Lessee and (4) whether such Subsidiary is a Material Subsidiary. Except as disclosed on Schedule 4.1(l), the Lessee has no Subsidiaries and neither the Lessee nor any Subsidiary is a joint venture partner or general partner in any partnership. Each of the Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, is duly qualified to transact business in every jurisdiction where the failure to so qualify would have a Material Adverse Effect, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now as now conducted in each case where the failure to have the same would have a Material Adverse Effect. (m) Financial Statements. The unaudited pro forma balance sheet of the Consolidated Companies as of March 31, 1997 (after giving effect to the SpinOff), setting forth the pro forma financial position of the Consolidated Companies, a copy of which has been delivered to the Funding Parties, fairly presents, on a pro forma basis, in conformity with generally accepted accounting principles, the financial position of the Consolidated Companies as of such date and time. The Consolidated Companies do not have any material contingent obligations, contingent liabilities or 20 other obligations which are not reflected in the balance sheet referenced above (the "Pro Forma Financial Statements"). Since March 31, 1997, there have been no changes with respect to the Consolidated Companies which has had or would reasonably be expected to have a Material Adverse Effect. (n) ERISA. (i)(1) Identification of Plans. (A) None of the Consolidated Companies nor any of their respective ERISA Affiliates maintains or contributes to, or has during the past two years maintained or contributed to, any Plan that is subject to Title IV of ERISA other than the Equifax Inc. U.S. Retirement Income Plan, and (B) none of the Consolidated Companies maintains or contributes to any Foreign Plan other than the Equifax Europe (U.K.) Ltd. Pension Plan; (2) Compliance. Each Plan and each Foreign Plan maintained by the Consolidated Companies have at all times been maintained, by their terms and in operation, in compliance with all applicable laws, and the Consolidated Companies are subject to no tax or penalty with respect to any Plan maintained or contributed to by such Consolidated Company or any ERISA Affiliate thereof, including without limitation, any tax or penalty under Title I or Title IV of ERISA or under Chapter 43 of the Tax Code, or any tax or penalty resulting from a loss of deduction under Sections 404, or 419 of the Tax Code, where the failure to comply with such laws, and such taxes and penalties, together with all other liabilities referred to in this Section 4.1(n) (taken as a whole), would in the aggregate have a Material Adverse Effect; (3) Liabilities. The Consolidated Companies are subject to no liabilities (including withdrawal liabilities) with respect to any Plans or Foreign Plans maintained or contributed to by such Consolidated Companies or any of their ERISA Affiliates, including without limitation, any liabilities arising from Titles I or IV of ERISA, other than obligations to fund benefits under an ongoing such Plan and to pay current contributions, expenses and premiums with respect to such Plans or Foreign Plans, where such liabilities, together with all other liabilities referred to in this Section 4.1(n) (taken as a whole), would in the aggregate have a Material Adverse Effect; (4) Funding. The Consolidated Companies and, with respect to any Plan which is subject to Title IV of ERISA, each of their respective ERISA Affiliates, have made full and timely 21 payment of all amounts (A) required to be contributed by any of them under the terms of each Plan and applicable law, and (B) required to be paid as expenses by any of them (including PBGC or other premiums) of each Plan, where the failure to pay such amounts (when taken as a whole, including any penalties attributable to such amounts) would have a Material Adverse Effect. No Plan maintained by a Consolidated Company subject to Title IV of ERISA has an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA, determined as if such Plan terminated on any date on which this representation and warranty is deemed made, in any amount which, together with all other liabilities referred to in this Section 4.1(n) (taken as a whole), would have a Material Adverse Effect if such amount were then due and payable. The Consolidated Companies are subject to no liabilities with respect to post-retirement medical benefits other than those accrued on the Lessee's financial statements. (ii) With respect to any Foreign Plan, reasonable reserves have been established in accordance with prudent business practice or where required by ordinary accounting practices in the jurisdiction where the Foreign Subsidiary maintains its principal place of business or in which the Foreign Plan is maintained. The aggregate unfunded liabilities, after giving effect to any reserves for such liabilities, with respect to such Foreign Plans, together with all other liabilities referred to in this Section 4.1(n) (taken as a whole), would not have a Material Adverse Effect. (o) Possession of Franchises, Licenses, Etc. Each of the Consolidated Companies possesses all franchises, certificates, licenses, permits and other authorizations from governmental political subdivisions or regulatory authorities, that are necessary in any material respect for the ownership, maintenance and operation of its properties and assets, and none of the Consolidated Companies is in violation of any thereof in any material respect. (p) Patents, Trademarks, Licenses, Etc. (i) The Consolidated Companies have obtained and hold in full force and effect all patents, trademarks, service marks, trade names, copyrights, licenses and other such rights, free from burdensome restrictions, which are necessary for the operation of their respective businesses as presently conducted and where the result of a failure to obtain and hold such patents, trademarks, service marks, trade names, copyrights, licenses and other such rights would have a Material Adverse Effect, and (ii) to the best of the Lessee's knowledge, no product, process, method, service or other 22 item presently sold by or employed by any Consolidated Company in connection with such business infringes any patents, trademark, service mark, trade name, copyright, license or other right owned by any other person and there is not presently pending, or to the knowledge of the Lessee, threatened, any claim or litigation against or affecting any Consolidated Company contesting such Person's right to sell or use any such product, process, method, substance or other item where the result of such failure to obtain and hold such benefits or such infringement would have a Material Adverse Effect. (q) Ownership of Property. Each Consolidated Company has good and marketable fee simple title to or a valid leasehold interest in all of its real property and good title to, or a valid leasehold interest in, all of its other material assets, as such properties are reflected in the most recent financial statements (including the Pro Forma Financial Statements) delivered by the Lessee to the Agent, other than properties disposed of in the ordinary course of business since such date or as otherwise permitted by the terms of this Agreement, subject to no Lien or title defect of any kind, except Liens permitted under Section 5.2(a). The Consolidated Companies enjoy peaceful and undisturbed possession under all of their respective leases. (r) Financial Condition. On each Closing Date and after giving effect to the transactions contemplated by this Agreement and the other Operative Documents, including without limitation, the use of the proceeds of the Funded Amounts as provided in Section 2.2, the Lessee is Solvent. (s) Labor Matters. The Consolidated Companies have experienced no strikes, labor disputes, slow downs or work stoppages due to labor disagreements which have had, or would reasonably be expected to have, a Material Adverse Effect, and, to the best knowledge of the Lessee, there are no such strikes, disputes, slow downs or work stoppages threatened against any Consolidated Company which if they occurred, would reasonably be expected to have a Material Adverse Effect. The hours worked and payment made to employees of the Consolidated Companies have not been in violation in any material respect of the Fair Labor Standards Act (in the case of Consolidated Companies that are not Foreign Subsidiaries) or any other applicable law dealing with such matters. All payments due from the Consolidated Companies, or for which any claim may be made against the Consolidated Companies, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as liabilities on the books of the Consolidated Companies in all 23 jurisdictions where the failure to pay or accrue such liabilities would reasonably be expected to have a Material Adverse Effect. (t) Payment or Dividend Restrictions. None of the Consolidated Companies is party to or subject to any agreement or understanding restricting or limiting the payment of any dividends or other distributions by any such Consolidated Company, other than CDB/Infotek. (u) Outstanding Indebtedness. Schedule 4.1(u) lists all outstanding Indebtedness of the Consolidated Companies as of March 31, 1997, and since March 31, 1997, no additional material indebtedness has been incurred by the Consolidated Companies. There exists no default under the provisions of any instrument evidencing or securing Indebtedness of the Lessee or any of its Subsidiaries or of any agreement otherwise relating thereto which has had or would reasonably be expected to have a Material Adverse Effect. (v) Disclosure. No representation or warranty contained in this Agreement (including the Schedules attached hereto) or in any other document furnished from time to time pursuant to the terms of this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make the statements herein or therein not misleading in any material respect as of the date made or deemed to be made. There is no fact known to the Lessee which is having, or is reasonably expected to have, a Material Adverse Effect. (w) Environmental Matters. (i) Neither the Lessee nor any Consolidated Subsidiary is subject to any Environmental Liability which could have or cause a Material Adverse Effect and neither the Lessee nor any Consolidated Subsidiary has been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA where the probable resulting liability would have a Material Adverse Effect. Except as disclosed on Schedule 4.1(w), as revised from time to time, to the knowledge of the Lessee, none of the Properties has been identified on any current or proposed (1) National Priorities List under 40 C.F.R. Section 300, (2) CERCLIS list or (3) any list arising from a state statute similar to CERCLA. (ii) Except as disclosed on Schedule 4.1(w), as revised from time to time, to the knowledge of the Lessee, no Hazardous Materials have been or are being used, produced, manufactured, processed, treated, recycled, generated, stored, 24 disposed of, managed or otherwise handled at, or shipped or transported to or from the Properties or are otherwise present at, on, in or under the Properties, except for Hazardous Materials used, produced manufactured, processed, treated, recycled, generated, stored, disposed of, managed, or otherwise handled in minimal amounts in the ordinary course of business in compliance with all applicable Environmental Requirements, except in such instances where such failure of compliance would not have a Material Adverse Effect. (iii) Except as disclosed on Schedule 4.1(w), as revised from time to time, the Lessee and each of the Subsidiaries has procured all Environmental Authorizations necessary for the conduct of its business, and is in compliance with all Environmental Laws in connection with the operation of the Properties and the Lessee's and each Consolidated Subsidiary's respective businesses, except in such instances where such failure of compliance would not have a Material Adverse Effect. (x) Rights in Respect of the Leased Property. The Lessee is not a party to any contract or agreement to sell any interest in such Leased Property or any part thereof, other than pursuant to the Operative Documents. (y) Hazardous Materials. (i) To the best knowledge of the Lessee, on the Closing Date for each Leased Property, there are no Hazardous Materials present at, upon, under or within such Leased Property or released or transported to or from such Leased Property (except in compliance in all material respects with all Environmental Laws). (ii) On the related Closing Date, no Governmental Actions have been taken or are in process or have been threatened, which could reasonably be expected to subject such Leased Property, any Lender, the Lease Participant or the Lessor with respect to such Leased Property to any Claims or Liens under any Environmental Law which would have a materially adverse effect on the Lessee, the Lessor, any Lender, the Lease Participant or such Leased Property. (iii) The Lessee has, or will obtain on or before the date required by Environmental Laws, all Environmental Permits necessary to operate such Leased Property in accordance with Environmental Laws and is complying with and has at all times complied with all such Environmental Permits, except to the 25 extent the failure to obtain such Environmental Permits or to so comply would not have a Material Adverse Effect. (iv) No notice, notification, demand, request for information, citations, summons, complaint or order has been issued or filed to or with respect to the Lessee, no penalty has been assessed on the Lessee and no investigation or review is pending or, to its best knowledge, threatened by any Governmental Authority or other Person in each case relating to the Leased Property with respect to any alleged material violation or liability of the Lessee under any Environmental Law. No material notice, notification, demand, request for information, citations, summons, complaint or order has been issued or filed to or with respect to any other Person, no material penalty has been assessed on any other Person and no investigation or review is pending or, to its best knowledge, threatened by any Governmental Authority or other Person relating to such Leased Property with respect to any alleged material violation or liability under any Environmental Law by any other Person. (v) Such Leased Property and each portion thereof are presently in compliance in all material respects with all Environmental Laws, and there are no present or, to the Lessee's best knowledge, past facts, circumstances, activities, events, conditions or occurrences regarding such Leased Property (including without limitation the release or presence of Hazardous Materials) that could reasonably be anticipated to (A) form the basis of a material Claim against such Leased Property, any Funding Party or the Lessee, (B) cause such Leased Property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law, (C) require the filing or recording of any notice or restriction relating to the presence of Hazardous Materials in the real estate records in the county or other appropriate municipality in which such Leased Property is located, or (D) prevent or interfere with the continued operation and maintenance of such Leased Property as contemplated by the Operative Documents. (z) Leased Property. The present condition and use of such Leased Property conforms in all material respects with all conditions or requirements of all existing permits and approvals issued with respect to such Leased Property, and the present use of such Leased Property and the Lessee's future intended use of such Leased Property under the Lease does not, in any material respect, violate any Applicable Law. No material notices, complaints or orders of violation or non-compliance have been issued or, to the Lessee's best knowledge, threatened or 26 contemplated by any Governmental Authority with respect to such Leased Property or any present or intended future use thereof. All agreements, easements and other rights, public or private, which are necessary to permit the lawful use and operation of such Leased Property as the Lessee intends to use such Leased Property under the Lease and which are necessary to permit the lawful intended use and operation of all presently intended utilities, driveways, roads and other means of egress and ingress to and from the same have been, or to the Lessee's best knowledge will be, obtained and are in full force and effect, and the Lessee has no knowledge of any pending modification or cancellation of any of the same. SECTION 4.2 Representations of the Lessor. Effective as of the date of execution hereof, as of each Closing Date and as of each Funding Date, in each case, with respect to each of the Leased Properties, the Lessor represents and warrants to the Agent, the Lease Participant, the Lenders and the Lessee as follows: (a) Securities Act. The interest being acquired or to be acquired by the Lessor in such Leased Property is being acquired for its own account, without any view to the distribution thereof or any interest therein, provided that the Lessor shall be entitled to assign, convey or transfer its interest in accordance with Section 6.1 and the Lease Participation Agreement. (b) Employee Benefit Plans. The Lessor is not and will not be making its investment hereunder, and is not performing its obligations under the Operative Documents, with the assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in Section 4975(e)(1)) of the Code. SECTION 4.3 Representations of each Lender. Effective as of the date of any Lender's accession hereto, as of each subsequent Closing Date and as of each subsequent Funding Date, such Lender represents and warrants to the Lessor and to the Lessee as follows: (a) Securities Act. The interest being acquired or to be acquired by such Lender in the Funded Amounts is being acquired for its own account, without any view to the distribution thereof or any interest therein, provided that such Lender shall be entitled to assign, convey or transfer its interest in accordance with Section 6.2. Such Lender is an 27 accredited investor as that term is defined in Rule 501(a) under the Securities Act. (b) Employee Benefit Plans. Such Lender is not and will not be making its investment hereunder, and is not performing its obligations under the Operative Documents, with the assets of an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or "plan" (as defined in Section 4975(e)(1)) of the Code. SECTION 5 COVENANTS OF THE LESSEE SECTION 5.1 Affirmative Covenants. So long as any Commitment remains in effect hereunder or any Funded Amount shall remain outstanding, the Lessee will(unless waived in writing by the Required Funding Parties): (a) Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence (except for mergers, divestitures and consolidations permitted pursuant to Section 5.2(c), and except where the failure to be so qualified would reasonably be expected to have a Material 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. (b) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply with, all Requirements of Law (including, without limitation, the Environmental Laws, ERISA and employee benefit laws) and Contractual Obligations applicable to or binding on any of them where the failure to comply with such Requirements of Law and Contractual Obligations would reasonably be expected to have a Material Adverse Effect. (c) Payment of Taxes and Claims, Etc. Pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and governmental charges imposed upon it or upon its property, and (ii) all claims (including, without limitation, claims for labor, materials, supplies or services) which might, if unpaid, become a Lien upon its property, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and adequate reserves are maintained with respect 28 thereto or the aggregate sum of taxes unpaid is less than $500,000. (d) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, containing complete and accurate entries of all their respective financial and business transactions. (e) Visitation, Inspection, Etc. (i) Prior to the occurrence of a Default, permit, and cause each of its Subsidiaries to permit, any representative of any Funding Party at such Funding Party's expense after reasonable notice during regular business hours (which date of visit shall be mutually agreed upon but shall not be later than 2 weeks after the date requested by such Funding Party) to visit and inspect, in the company of any of the Executive Officers or their designees and their independent public accountants, any of their respective properties, and to examine and make abstracts from any of their respective books and records and to discuss with any of the Executive Officers the respective affairs, finances and accounts of the Lessee and its Subsidiaries. Prior to the occurrence of a Potential Event of Default or an Event of Default, each Lender shall be entitled to no more than two (2) such visits and inspections per year. (ii) After the occurrence of a Default, permit, and cause each of its Subsidiaries to permit, any representative of any Funding Party at the Lessees' expense to visit and inspect, in the company of any of the Executive Officers or their designees and their independent public accountants, any of their respective properties, and to examine and make abstracts from any of their respective books and records and to discuss with any of the Executive Officers the respective affairs, finances and accounts of the Lessee and its Subsidiaries. (iii) To cooperate and assist, and to cause each of its Subsidiaries to cooperate and assist, in such visits and inspections set forth in paragraphs (i) and (ii) above in this Section 5.1(e), in each case at such reasonable times and as often as may reasonably be desired; provided, however, that (i) in no event shall any Funding Party have access to information prohibited by law, and (ii) in the event any Funding Party desires to inspect confidential matters (which matters shall in no event include financial information and data of the Lessee or its Subsidiaries or other information the Funding Parties may require in order to determine compliance this Agreement) under this Section, such Funding Party shall executed a confidentiality 29 agreement relating to such matters, which agreement shall contain reasonable terms acceptable to such Funding Party and its counsel. (f) Insurance; Maintenance of Properties. (i) Maintain or cause to be maintained with financially sound and reputable insurers, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by reputable companies in the same or similar businesses, such insurance to be of such types and in such amounts as are customary for such companies under similar circumstances; provided, however, that the Lessee may self-insure in amounts satisfactory to management. Upon the request of the Agent, Lessee shall file with the Agent a detailed Acord certificate of insurance stating the names of the insurance companies, the limits of liability of insurance, the date of expiration thereof, the Property and risks covered thereby and the insured with respect thereto, and, within 60 days after notice in writing from the Agent, obtain such additional insurance as the Required Funding Parties may reasonably request as a result of a material change in the circumstances or conditions affecting Lessee's business specifically or its type of business generally, provided that such additional insurance is available at a commercially reasonable cost. (ii) Cause, and cause each of the Consolidated Companies to cause, all properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, settlements and improvements thereof, all as in the judgment of the Lessee may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 5.1(f) shall prevent the Lessee from discontinuing the operation or maintenance of any such properties if such discontinuance is, in the judgment of the Lessee, desirable in the conduct of its business or the business of any Consolidated Company. (iii) Maintain in full force and effect all material patents, trademarks, service marks, trade names, copyrights, licenses and other such rights, free from burdensome restrictions, which are necessary for the operation of the businesses of the Consolidated Companies as presently conducted, 30 where the result of failure to obtain and hold such benefits would have a Material Adverse Effect. (g) Reporting Covenants. Furnish to each Funding Party: (i) Annual Financial Statements. As soon as available and in any event within 105 days after the end of each fiscal year of the Lessee, balance sheets of the Consolidated Companies as at the end of such year, presented on a consolidated basis, and the related statements of income, and cash flows of the Consolidated Companies for such fiscal year, presented on a consolidated basis, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by a report thereon of the independent public accountants of comparable recognized national standing, which such report shall be unqualified as to going concern and scope of audit and shall state that such financial statements present fairly in all material respects the financial condition as at the end of such fiscal year on a consolidated basis, and the results of operations and statements of cash flows of the Consolidated Companies for such fiscal year in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (ii) Quarterly Financial Statements. As soon as available and in any event within 60 days after the end of each fiscal quarter of the Lessee (other than the fourth fiscal quarter), balance sheets of the Consolidated Companies as at the end of such quarter presented on a consolidated basis and the related statements of income, shareholders' equity, and cash flows of the Consolidated Companies for such fiscal quarter and for the portion of the Lessee's fiscal year ended at the end of such quarter, presented on a consolidated basis setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Lessee's previous fiscal year, all in reasonable detail and accompanied by a certification by the chief financial officer of the Lessee that such financial statements fairly present in all material respects the financial condition of the Consolidated Companies as at the end of such fiscal quarter on a consolidated basis, and the results of operations and statements of cash flows of the Consolidated 31 Companies for such fiscal quarter and such portion of the Lessee's fiscal year, in accordance with GAAP consistently applied (subject to normal year-end audit adjustments and the absence of certain footnotes); (iii) No Default/Compliance Certificate. Together with the financial statements required pursuant to subsections (i) and (ii) above, a certificate (with supporting details) of the chief financial officer of the Lessee substantially in the form of Exhibit E attached hereto (the "Compliance Certificate") (i) to the effect that, based upon a review of the activities of the Consolidated Companies and such financial statements during the period covered thereby, there exists no Event of Default and no Potential Event of Default under this Agreement, or if there exists an Event of Default or a Potential Event of Default hereunder, specifying the nature thereof and the proposed response thereto, and (ii) demonstrating in reasonable detail compliance as at the end of such fiscal year or such fiscal quarter with Section 5.1(h) and Sections 5.2(a), (d) and (e); (iv) Auditor's Statement. Together with the financial statements required pursuant to subsection (i) above, a statement of the accountants who prepared the report referred to therein, to the effect that, nothing has come to their attention which would cause them to believe that a Default or Event of Default existed as of the date of such financial statements, or if there existed a Default or Event of Default, specifying the nature thereof; (v) Notice of Default. Promptly, and no later than five (5) Business Days after any Executive Officer of the Lessee has notice or knowledge of the occurrence of an Event of Default or a Default, a certificate of the chief financial officer of Borrower specifying the nature thereof and the proposed response thereto; (vi) Litigation and Investigations. Promptly, and no later than ten (10) Business Days after any Executive Officer of the Lessee has notice or knowledge thereof, notice of the institution of or any material adverse development in any material action, suit or proceeding or any governmental investigation or any arbitration, before any court or arbitrator or any governmental or administrative body, agency or official, against any Consolidated Company, or any material property of any 32 thereof, or the threat of any such action, suit, proceeding, investigation or arbitration; (vii) Environmental Notices. Promptly, and no later than ten (10) Business Days after any Executive Officer of the Lessee has notice or knowledge thereof, notice of any actual or alleged violation, or notice of any action, claim or request for information, either judicial or administrative, from any governmental authority relating to any actual or alleged claim, notice of potential responsibility under or violation of any Environmental Law, or any actual or alleged spill, leak, disposal or other release of any waste, petroleum product, or hazardous waste or Hazardous Substance by any Consolidated Company which could result in a Material Adverse Effect; (viii) ERISA. (1)Promptly, and no later than ten (10) Business Days after any Executive Officer of the Lessee has notice or knowledge thereof, (A) with respect to any Plan maintained by any Consolidated Company or any ERISA Affiliate thereof, or any trust established thereunder, notice of a "reportable event" described in Section 4043 of ERISA and the regulations issued from time to time thereunder (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under such regulations); or (B) any other event which could subject any Consolidated Company to any tax, penalty or liability under Title I or Title IV of ERISA or Chapter 43 of the Tax Code, or any tax or penalty resulting from a loss of deduction under Sections 404 or 419 of the Tax Code, or any tax, penalty or liability under any Requirement of Law applicable to any Foreign Plan, where any such taxes, penalties or liabilities could result in a Material Adverse Effect; (2) Promptly after such notice must be provided to the PBGC, or to a Plan participant, beneficiary or alternative payee, any notice required under Section 101(d), 302(f)(4), 303, 307, 4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or under Section 401(a)(29) or 412 of the Tax Code with respect to any Plan maintained by any Consolidated Company or any ERISA Affiliate thereof; (3) Promptly after receipt, any notice received by any Consolidated Company or any ERISA Affiliate thereof concerning the intent of the PBGC or any other governmental authority to terminate a Plan maintained or contributed to by such Company or ERISA Affiliate thereof 33 which is subject to Title IV of ERISA, to impose any liability on such Company or ERISA Affiliate under Title IV of ERISA or Chapter 43 of the Tax Code; (4) Upon the request of the Agent, promptly upon the filing thereof with the Internal Revenue Service ("IRS") or the Department of Labor ("DOL"), a copy of IRS Form 5500 or annual report for each Plan maintained by any Consolidated Company or ERISA Affiliate thereof which is subject to Title IV of ERISA; (5) Upon request of the Agent, but no more frequently than twice each calendar year, (A) true and complete copies of any and all documents, government reports and IRS determination or opinion letters or rulings for any Plan maintained or contributed to by any Consolidated Company from the IRS, PBGC or DOL, received within the preceding 12 months (B) any reports filed with the IRS, PBGC or DOL with respect to a Plan maintained or contributed to by the Consolidated Companies or any ERISA Affiliate thereof filed within the preceding 12 months, or (C) a current statement of withdrawal liability for each Multiemployer Plan maintained or contributed to by any Consolidated Company or any ERISA Affiliate thereof; (6) Promptly, and no later than (5) Business Days after any Executive Officer has notice or knowledge thereof, notice that (i) any material contributions to any Foreign Plan have not been made by the required due date for such contribution and such default cannot immediately be remedied, (ii) any Foreign Plan is not funded to the extent required by the law of the jurisdiction whose law governs such Foreign Plan based on the actuarial assumptions reasonably used at any time, or (iii) a material change is anticipated to any Foreign Plan that may have a Material Adverse Effect. (ix) Liens. Promptly, and no later than five (5) Business Days after any Executive Officer of the Lessee has notice or knowledge thereof, notice of the filing of any federal statutory Lien, tax or other state or local government Lien or any other Lien affecting their respective properties, other than those Liens expressly permitted by Section 5.2(a); (x) Public Filings, Etc. Promptly upon the filing thereof or otherwise becoming available, copies of all 34 financial statements, annual, quarterly and special reports, proxy statements and notices sent or made available generally by the Lessee to its public security holders, of all regular and periodic reports and all registration statements and prospectuses, if any, filed by any of them with any securities exchange, and of all press releases and other statements made available generally to the public containing material developments in the business or financial condition of the Lessee and the other Consolidated Companies; (xi) New Material Subsidiaries. Within 30 days after the formation, acquisition or existence of any new Material Subsidiary, or any other event resulting in the creation of a new Material Subsidiary, or the domestication of any Foreign Subsidiary, notice of the formation or acquisition of such Subsidiary or such occurrence, including a description of the assets of such entity, the activities in which it will be engaged, and such other information as the Agent may request; (xii) Default under Other Debt. Immediately upon its receipt thereof, copies of any notice received by the Lessee or any other Consolidated Company from the holder(s) of Indebtedness of the Consolidated Companies (or from any trustee, agent, attorney, or other party acting on behalf of such holder(s)) in an amount which, in the aggregate, exceeds $5,000,000, where such notice states or claims the existence or occurrence of any default or event of default with respect to such Indebtedness under the terms of any indenture, loan or credit agreement, debenture, note, or other document evidencing or governing such Indebtedness; (xiii) Updates of Schedule 4.1(u). As soon as available and in any event within 60 days after the end of the June 30, 1997 calendar quarter, a revised Schedule 4.1(u) listing all outstanding Indebtedness of the Consolidated Companies as of the end of such quarter, which shall not be materially different from Schedule 4.1(u) provided by the Lessee on the initial Closing Date and which shall automatically be deemed to amend Schedule 4.1(u) delivered by the Lessee pursuant to this clause (xiii) and as soon as soon as available and in any event within 60 days after the end of the September 30, 1997 calendar quarter, a revised Schedule 4.1(u) listing all outstanding Indebtedness of the Consolidated Companies as of the end of such quarter; 35 (xiv) Complete Lien Search Results. As soon as available and in any event within 30 days after the initial Closing Date, copies of all UCC, judgment and tax lien search results for all the Lessee's locations in the United States other than field offices at which is located tangible personal property (having an aggregate value not in excess of $6,000,000); and (xv) Other Information. With reasonable promptness, any other information as the Agent on behalf of any Funding Party may reasonably request from time to time. (h) Financial Covenants. (i) Fixed Charge Coverage Ratio. (i) Maintain as of the last day of each fiscal quarter of 1997 and 1998, a Fixed Charge Coverage Ratio, calculated for the fiscal quarter then ended and the immediately preceding three fiscal quarters, equal to or greater than 2.0:1.0, and (ii) maintain as of the last day of each fiscal quarter of 1999 and thereafter, a Fixed Charge Coverage Ratio, calculated for the fiscal quarter then ended and the immediately preceding three fiscal quarters, equal to or greater than 2.5:1.0. (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 3.5:1.0. (i) Intellectual Property. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its rights, franchises, and licenses, and its patents and copyrights (for the scheduled duration thereof), trademarks, trade names, and service marks, necessary or desirable in the normal conduct of its business, except where the failure to maintain such rights, franchises, and licenses, patents, copyrights trademarks, trade names, and service marks would reasonably be expected to have a Material Adverse Effect. (j) Assignment of Lease and Rents. Execute and deliver a consent to Assignment of Lease and Rents with respect to any Leased Property existing if and when the Loan Agreement is entered into. 36 SECTION 5.2 Negative Covenants. So long as any Commitment remains in effect hereunder or any Funded Amount shall remain unpaid shall remain outstanding, the Lessee will not and will not permit any Subsidiary to (unless waived in writing by the Required Funding Parties): (a) Liens. Create, incur, assume or suffer to exist any Lien on any of its property now owned or hereafter acquired to secure any Indebtedness other than: (i) Liens existing on the initial Closing Date (A) securing an aggregate amount not in excess of $2,400,000 and disclosed in the lien search report delivered under Section 5.1(h)(xiv), (B) securing obligations of CDB/Infotek owing to the Lessee, or (C) securing an amount not to exceed $250,000 in the aggregate; (ii) Liens on any property securing Indebtedness incurred or assumed for the purpose of financing all or any part of the acquisition cost of such property and any refinancing thereof, provided that such Lien does not extend to any other property and further provided that the amount of Indebtedness secured by such Liens does not exceed $10,000,000 in aggregate principal amount at any one time outstanding; (iii) Liens for taxes not yet due and payable, and Liens for taxes which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (iv) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (v) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); 37 (vi) zoning, easements and restrictions on the use of real property which do not materially impair the use of such property; (vii) Liens arising under ERISA; (viii) rights in property reserved or vested in any governmental authority which do not materially impair the use of such property; (ix) Liens on assets of newly acquired Subsidiaries which were in existence at the time of acquisition and not created in contemplation thereof; (x) Liens granted under the Operative Documents; (xi) Liens (other than those permitted by paragraphs (i) through (x) of this Section 5.2(a) securing Indebtedness in an aggregate principal amount outstanding at any time not to exceed fifteen percent (15%) of the Consolidated Net Worth of the Consolidated Companies as of the last day of the immediately preceding fiscal quarter of the Borrower. (b) Guaranties. Create, incur, assume, guarantee, suffer to exist or otherwise become liable on or with respect to, directly or indirectly, any Guaranties other than: (i) endorsements of instruments for deposit or collection in the ordinary course of business; (ii) guarantees of Indebtedness owed by any Consolidated Company to another Consolidated Company; (iii) Guaranties of Indebtedness to the extent such Indebtedness is permitted under Section 5.1(h)(ii). (c) 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 38 the initial Closing Date or substantially related thereto merges or consolidates with the Lessee or any of its Subsidiaries; 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 $75,000,000, 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 or Event of Default exists hereunder; (d) Asset Sales. Sell, lease or otherwise dispose of its accounts, property, stock of its Subsidiaries or other assets; provided, however, that the foregoing restrictions on Asset Sales shall not be applicable to: (i) sales, leases, transfers or dispositions of assets of any Consolidated Company to the Lessee; (ii) sales of inventory in the ordinary course of business and unneeded, worn out or obsolete equipment; (iii) sales of accounts receivable (or of undivided ownership interests therein) pursuant to the asset securitization facilities; (iv) Asset Sales comprised of assets of any Consolidated Company where, on the date of execution of a binding obligation to make such Asset Sale, the assets which are the subject of the proposed Asset Sale, together with all other such Asset Sales of the Consolidated Companies during the current fiscal year of the Lessee, did not generate ten percent (10%) or more of Consolidated EBITDA for the immediately preceding fiscal year of the Lessee; 39 provided that notwithstanding the foregoing, no transaction pursuant to clauses (iii) or (iv) above shall be permitted if any Default or Event of Default exists at the time of such transaction or would exist as a result of such transaction. (e) Investments, Loans, Etc. Make, permit or hold any Investments other than: (i) Investments in the stock of Subsidiaries of the Lessee existing as of the Closing 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 $75,000,000, 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 (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)); (y) no other Default or Event of Default exists hereunder; and (z) as a result of such Investment, such Person becomes a Subsidiary of the Lessee; (iii) marketable direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case supported by the full faith and credit of the United States and maturing within one year from the date of creation thereof; (iv) Investments received in settlement of Indebtedness created in the ordinary course of business, and the endorsement of negotiable instruments in the ordinary course of business; 40 (v) commercial paper issued by corporations, each of which has a consolidated net worth of not less than $500,000,000, and conducts a substantial portion of its business in the United States of America, maturing no more than 365 days from the date of acquisition thereof and having as at any date of determination a rating of P-1, P-2 or P-3 from Standard & Poor's or a rating of A-1, A-2 or A-3 from Moody's; (vi) money market or similar depository accounts, certificates of deposit or bankers acceptances, in each case redeemable upon demand or maturing within one year from the date of acquisition thereof, issued by commercial banks incorporated under the laws of the United States of America or any state thereof or the District of Columbia, provided (x) each such bank has at any date of determination combined capital and surplus of not less than $1,000,000,000 and a rating of its long-term debt of at least A by Standard & Poor's or at least A by Moody's or a long-term deposit rating of at least A issued by Standard & Poor's or at least A issued by Moody's, (y) the aggregate amount of all such certificates of deposit issued by such bank are fully insured at all times by the Federal Deposit Insurance Company; (vii) Loans and advances to officers and employees of the Consolidated Companies made in the ordinary course of business, including, without limitation, loans to executives for the purchase of stock of the Lessee pursuant to a program established by the Board of Directors or a committee thereof from time to time in an amount not to exceed $15,000,000; (viii) Investments in joint ventures in an aggregate amount during any fiscal year of the Lessee not to exceed an amount equal to ten percent (10%) of the Lessee's Consolidated Net Worth as of the end of the immediately preceding fiscal year of the Lessee; and (ix) Investments (other than those permitted by paragraphs (i) through (viii) above) in an aggregate amount during any fiscal year of the Lessee not to exceed an amount equal to five (5%) percent of the Lessee's Consolidated Net Worth as of the end of the immediately preceding fiscal year of the Lessee. 41 (f) 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 or purposes as the property being sold or transferred. (g) Transactions with Affiliates. Enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of any Consolidated Company (but excluding any Affiliate which is also a Subsidiary that is directly or indirectly wholly owned by the Lessee), other than on terms and conditions substantially as favorable to such Consolidated Company as would be obtained by such Consolidated Company at the time in a comparable arm's-length transaction with a Person other than an Affiliate; and (h) ERISA. (i) Take or fail to take any action with respect to any Plan maintained or contributed to by any Consolidated Company or, with respect to its ERISA Affiliates, any Plans which are subject to Title IV of ERISA or to continuation health care requirements for group health plans under Section 4980B of the Tax Code, including without limitation (1) establishing any such Plan, (2) amending any such Plan (except where required to comply with applicable law), (3) terminating or withdrawing from any such Plan, or (4) incurring an amount of unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, or any withdrawal liability under Title IV of ERISA with respect to any such Plan, or any unfunded liabilities under any Foreign Plan, without first obtaining the written approval of the Required Lenders, where such actions or failures could result in a Material Adverse Effect; or (ii) Permit a Plan or Foreign Plan maintained or contributed to by a Consolidated Company or a Plan subject to Title IV of ERISA of any of its ERISA Affiliates: (1) to fail to be funded in accordance with the minimum funding standard required by applicable law, the terms of such Plan or Foreign Plan, Section 412 of the Tax Code or Section 302 of ERISA for any plan year or a waiver of such standard is sought or granted with respect to such Plan or Foreign Plan under applicable law, the terms of such Plan or Foreign Plan or Section 412 of the Tax Code or Section 303 of ERISA; or 42 (2) to be terminated or the subject of termination proceedings under applicable law or the terms of such Plan or Foreign Plan; or (3) to require a Consolidated Company to provide security under applicable law, the terms of such Plan or Foreign Plan, Section 401 or 412 of the Tax Code or Section 306 or 307 of ERISA; or (4) to result for any reason, in a liability (including without limitation, withdrawal liability) to a Consolidated Company under applicable law, the terms of such Plan or Foreign Plan, or Title IV of ERISA; if the result from any such failure, waiver, termination or other event a liability to the PBGC (or any similar Person with respect to any Foreign Plan), a Plan or any other Person that would have a Materially Adverse Effect. (i) Additional Negative Pledges. Create or otherwise cause or suffer to exist or become effective, directly or indirectly, any prohibition or restriction on the creation or existence of any Lien upon any asset of any Consolidated Company, other than the prohibitions and restrictions contained in this Agreement. (j) Changes in Business. Enter into any business which is substantially different from that presently conducted by the Consolidated Companies taken as a whole immediately prior to the SpinOff from Equifax, which includes providing risk management and fraud prevention information and related technology solutions to the property and casualty insurance industry, life and health insurance industry and other industries, (including, without limitation, (1) providing automated and traditional underwriting and claim information services to assist U.S. insurance companies in assessing the insurability of individuals and property and the validity of insurance claims, (2) providing background investigations, (3) performing paramedical exams, (4) furnishing access to motor vehicles reports, (5) maintaining a database of claims histories, (5) providing claim verification and investigative services to both the property and casualty and the life and health insurance markets, (6) providing pre-employment background investigations, pre-employment and regulatory compliance drug testing services and public record information to other corporate and government organizations), unless such business is a strategic extension of 43 the business of the Consolidated Companies immediately prior to the SpinOff. (k) Limitation on Payment Restrictions Affecting Consolidated Companies. Create or otherwise cause or suffer to exist or become effective, any consensual encumbrance or restriction on the ability of any Consolidated Company to (i) pay dividends or make any other distributions to the Lessee or any other Subsidiary on such Consolidated Company's stock, provided that this provision shall not affect CBD/Infotek's payment of dividends or distributions on its stock to Lessee, or (ii) pay any indebtedness owed to the Lessee or any other Consolidated Company, or (iii) transfer any of its property or assets to the Lessee or any other Consolidated Company, except any consensual encumbrance or restriction existing under the Credit Documents or the Operative Documents. (l) Changes in Fiscal Year. Change the calculation of the fiscal year of the Lessee. SECTION 5.3 Environmental Notices. Upon becoming aware of such matters, the Lessee shall furnish to the Funding Parties and the Agent prompt written notice of all Environmental Liabilities, pending or anticipated Environmental Proceedings, Environmental Notices, Environmental Judgments and Orders, and Environmental Releases at, on, in, under or in any way affecting the Properties or any adjacent property, and all facts, events, or conditions that could lead to any of the foregoing, in each case if the same would have a Material Adverse Effect. SECTION 5.4 Environmental Matters. Except as set forth in Schedule 5.14, as revised from time to time, neither the Lessee nor any Consolidated Subsidiary will, and the Lessee will not permit any Third Party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose of, manage at, or otherwise handle, or ship or transport to or from the Properties any Hazardous Materials, except for Hazardous Materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed, managed, or otherwise handled in minimal amounts in the ordinary course of business in compliance with all applicable Environmental Laws in each case where the failure to comply would not have a Material Adverse Effect. SECTION 5.5 Environmental Release. The Lessee agrees that upon the occurrence of an Environmental Release at or on any of the Properties owned by it or any Consolidated Subsidiary, it will take appropriate action required by applicable law, except 44 in such cases where the failure to take such action would not have a Material Adverse Effect. SECTION 5.6 Further Assurances. Upon the written request of the Lessor or the Agent, the Lessee, at its own cost and expense, will cause all financing statements (including precautionary financing statements), fixture filings and other similar documents, to be recorded or filed at such places and times in such manner, as may be necessary to preserve, protect and perfect the interest of the Lessor, the Agent, the Lease Participant and the Lenders in the related Leased Property as contemplated by the Operative Documents. SECTION 5.7 Additional Required Appraisals. If, as a result of any change in Applicable Law after the date hereof, an appraisal of all or any of the Leased Property is required during the Lease Term under Applicable Law with respect to any Funding Party's interest therein, such Funding Party's Funded Amount with respect thereto or the Operative Documents, then the Lessee shall pay the reasonable cost of such appraisal. SECTION 6 TRANSFERS BY LESSOR AND LENDERS SECTION 6.1 Lessor Transfers. The Lessor shall not assign, convey or otherwise transfer all or any portion of its right, title or interest in, to or under any Leased Property (except pursuant to the Lease Participation Agreement and Article V of the Lease) or any of the Operative Documents without the prior written consent of the Lenders and the Lessee, which consent shall not be unreasonably withheld, provided that the Lessor may make any such assignment, conveyance or transfer to any other Funding Party or any Affiliate of any Funding Party, without such consent and provided further that such assignee is not a special purpose entity, has substantial activities other than the leasing of the Leased Property to the Lessee, and has substantial assets other than its rights to the Leased Property, and, if such assignee is not a United States citizen or resident (or the assignee is filing as a foreign corporation, partnership, estate or trust), such assignee shall deliver to the Agent and the Lessee Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service. Any proposed transferee of the Lessor shall make the representation set forth in Section 4.2(b) to the other parties hereto. 45 SECTION 6.2 Loan Agreement; Lender Transfers. The Lessor may enter into the Loan Agreement with a Lender or Lenders who are Eligible Assignees and would qualify as an assignee of a Lender under this Section 6.2. No Lender may grant participations in its Commitment or sell Loans or participations in its Loan and Commitment to any Person (other than an Affiliate) without the prior written consent of the Lessee, which consent shall not be unreasonably withheld. Any approved participation buyer shall not receive voting or waiver rights except with respect to postponing maturities, decreasing interest rates, releasing all or substantially all of the collateral or increasing principal amounts. Assignments will be permitted only with the prior written consent of the Lessee and the Agent, which consent shall not be unreasonably withheld, obtained at least 14 days prior to any proposed assignment, and the payment of a processing fee of $2,500 by the assignor or assignee Lender (as agreed between such Persons) to the Agent. Any such assignment shall be to an Eligible Assignee, shall be of an amount not less than $5,000,000, and if the assignee is not a United States citizen or resident (or the assignee is filing as a foreign corporation, partnership, estate or trust), the assignee shall deliver to the Agent, the Lessor and the Lessee Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service. Assignments shall be evidenced by an assignment and assumption agreement in substantially the form set forth as Exhibit J. SECTION 7 INDEMNIFICATION SECTION 7.1 General Indemnification. The Lessee agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and to indemnify, protect, defend, save and hold harmless each Indemnitee, on an After-Tax Basis, from and against, any and all Claims that may be imposed on, incurred by or asserted, or threatened to be asserted, against such Indemnitee (whether because of action or omission by such Indemnitee or otherwise), whether or not such Indemnitee shall also be indemnified as to any such Claim by any other Person and whether or not such Claim arises or accrues prior to any Closing Date or after the Lease Termination Date, in any way relating to or arising out of: (a) any of the Operative Documents or any of the transactions contemplated thereby, and any amendment, modification or waiver in respect thereof; or 46 (b) any Land, any Building or any part thereof or interest therein; (c) the purchase, design, construction, preparation, installation, inspection, delivery, non- delivery, acceptance, rejection, ownership, management, possession, operation, rental, lease, sublease, repossession, maintenance, repair, alteration, modification, addition, substitution, storage, transfer of title, redelivery, use, financing, refinancing, disposition, operation, condition, sale (including, without limitation, any sale pursuant to the Lease), return or other disposition of all or any part of any interest in any Leased Property or the imposition of any Lien (or incurring of any liability to refund or pay over any amount as a result of any Lien) thereon, including, without limitation: (1) Claims or penalties arising from any violation or alleged violation of law or in tort (strict liability or otherwise), (2) latent or other defects, whether or not discoverable, (3) any Claim based upon a violation or alleged violation of the terms of any restriction, easement, condition or covenant or other matter affecting title to any Leased Property or any part thereof, (4) the making of any Alterations in violation of any standards imposed by any insurance policies required to be maintained by the Lessee pursuant to the Lease which are in effect at any time with respect to any Leased Property or any part thereof, (5) any Claim for patent, trademark or copyright infringement, (6) Claims arising from any public improvements with respect to any Leased Property resulting in any charge or special assessments being levied against any Leased Property or any Claim for utility "tap-in" fees, and (7) Claims for personal injury or real or personal property damage occurring, or allegedly occurring, on any Land, Building or Leased Property; (d) the offer, issuance, sale or delivery of the Notes by the Lessee; (e) the breach or alleged breach by the Lessee of any representation or warranty made by it or deemed made by it in any Operative Document or any certificate required to be delivered by any Operative Document; (f) the retaining or employment of any broker, finder or financial advisor by the Lessee to act on its behalf in connection with this Master Agreement, or the incurring of any fees or commissions to which the Lessor, the Agent, the 47 Lease Participant or any Lender might be subjected by virtue of their entering into the transactions contemplated by this Master Agreement; (g) the existence of any Lien on or with respect to any Leased Property, the Construction, any Basic Rent or Supplemental Rent, title thereto, or any interest therein, including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of any Leased Property or by reason of labor or materials furnished or claimed to have been furnished to the Lessee, or any of its contractors or agents or by reason of the financing of any personalty or equipment purchased or leased by the Lessee or Alterations constructed by the Lessee, except in all cases the Liens listed as items (a) and (b) in the definition of Permitted Liens; (h) the transactions contemplated hereby or by any other Operative Document, in respect of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA and any prohibited transaction described in Section 4975(c) of the Code; or (i) any act or omission by the Lessee under any Purchase Agreement or any other Operative Document, and any breach of any requirement, condition, restriction or limitation in any Deed; (the foregoing being collectively called the "Indemnified Risks"); provided, however, that no Indemnitee shall be entitled to indemnity (or any other payment or reimbursement) for any Indemnified Risks to the extent such Indemnified Risks result from or arise out of one or more of the following (collectively, "Excepted Claims"): (1) any representation or warranty by such Indemnitee in the Operative Documents being incorrect; (2) the willful misconduct or gross negligence of, or the violation of any law, rule or regulation binding upon such Indemnitee unless such violation was caused by some performance or nonperformance on the part of the Lessee; (3) the failure on the part of the Lessor or the Agent to distribute in accordance with this Agreement or any other Operative Document any amounts received and distributable by it under the Operative Documents; (4) claims arising from Liens (other than Permitted Liens) created by any Indemnitee or anyone claiming by, through or under any Indemnitee and are not related to the transactions contemplated by the Operative Documents or are voluntarily created or granted in violation of the terms of the Operative Documents (in each case 48 other than through the acts or omissions of the Lessee whether or not in its capacity as the Lessee or as the Construction Agent); (5) the voluntary transfer by any Indemnitee, other than in accordance with the Operative Documents or in connection with the exercise of rights, powers or remedies under any of the Operative Documents, of any Leased Property or any interest therein; or (6) claims from any acts or omissions occurring after the latest of the Lease Termination Date, the sale of the Leased Property to a Person not affiliated with the Lessee pursuant to the Lease, the termination of the obligations of the Lessee under the Construction Agency Agreement, or the final indefeasible repayment to the Funding Parties in full of the Lease Balance. It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of, and shall be separate and independent from any other remedy under this Master Agreement, any Lease or any other Operative Document. SECTION 7.2 Environmental Indemnity. In addition to and without limitation of Section 7.1, the Lessee agrees to indemnify, hold harmless and defend each Indemnitee from and against any and all claims (including without limitation third party claims for personal injury or real or personal property damage), losses (including but not limited to any loss of value of any Leased Property), damages, liabilities, fines, penalties, charges, suits, settlements, demands, administrative and judicial proceedings (including informal proceedings) and orders, judgments, remedial action, requirements, enforcement actions of any kind, and all reasonable costs and expenses actually incurred in connection therewith (including, but not limited to, reasonable attorneys' and/or paralegals' fees and expenses), including, but not limited to, all costs incurred in connection with any investigation or monitoring of site conditions or any clean-up, remedial, removal or restoration work by any federal, state or local government agency, arising directly or indirectly, in whole or in part, out of (i) the presence on or under any Land of any Hazardous Materials, or any releases or discharges of any Hazardous Materials on, under, from or onto any Land, (ii) any activity, including, without limitation, construction, carried on or undertaken on or off any Land, and whether by the Lessee or any predecessor in title or any employees, agents, contractors or subcontractors of the Lessee or any predecessor in title, or any other Person, in connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any 49 Hazardous Materials that at any time are located or present on or under or that at any time migrate, flow, percolate, diffuse or in any way move onto or under any Land, (iii) loss of or damage to any property or the environment (including, without limitation, clean-up costs, response costs, remediation and removal costs, cost of corrective action, costs of financial assurance, fines and penalties and natural resource damages), or death or injury to any Person, and all expenses associated with the protection of wildlife, aquatic species, vegetation, flora and fauna, and any mitigative action required by or under Environmental Laws, in each case to the extent related to any Leased Property, (iv) any claim concerning any Leased Property's lack of compliance with Environmental Laws, or any act or omission causing an environmental condition on or with respect to any Leased Property that requires remediation or would allow any governmental agency to record a lien or encumbrance on the land records, or (v) any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials on or from any Leased Property; in each case irrespective of whether any of such activities were or will be undertaken in accordance with applicable laws, regulations, codes and ordinances; in any case with respect to the matters described in the foregoing clauses (i) through (v) that arise or occur (w) prior to or during the Lease Term, (x) at any time during which the Lessee or any Affiliate thereof owns any interest in or otherwise occupies or possesses any Leased Property or any portion thereof, (y) during any period after and during the continuance of any Event of Default or (z) during any period of up to three years following the date an Indemnitee takes possession of any Leased Property and during which such Indemnitee retains such possession; 50 provided, however, the Lessee shall not be required to indemnify any Indemnitee under this Section 7.2 for any Claim to the extent that such Claim results from the willful misconduct or gross negligence of such Indemnitee; and provided, further, with respect to matters arising or occurring within the period described in (z) above, that the Lessee also shall not be required to indemnify any Indemnitee under this Section 7.2 for any Claim to the extent that such Claim results from the simple negligence of such Indemnitee. It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any other remedy under this Master Agreement, the Lease or any other Operative Document. SECTION 7.3 Proceedings in Respect of Claims. With respect to any amount that the Lessee is requested by an Indemnitee to pay by reason of Section 7.1 or 7.2, such Indemnitee shall, if so requested by the Lessee and prior to any payment, submit such additional information to the Lessee as the Lessee may reasonably request and which is in the possession of such Indemnitee to substantiate properly the requested payment. In case any action, suit or proceeding shall be brought against any Indemnitee, such Indemnitee shall notify the Lessee of the commencement thereof, and the Lessee shall be entitled, at its expense, to participate in, and, to the extent that the Lessee desires to, assume and control the defense thereof with counsel reasonably satisfactory to such Indemnitee; provided, however, that such Indemnitee may pursue a motion to dismiss such Indemnitee from such action, suit or proceeding with counsel of such Indemnitee's choice at the Lessee's expense; and provided further that the Lessee may assume and control the defense of such proceeding only if the Lessee shall have acknowledged in writing its obligations to fully indemnify such Indemnitee in respect of such action, suit or proceeding, the Lessee shall pay all reasonable costs and expenses related to such action, suit or proceeding as and when incurred and the Lessee shall keep such Indemnitee fully apprised of the status of such action suit or proceeding and shall provide such Indemnitee with all information with respect to such action suit or proceeding as such Indemnitee shall reasonably request; and, provided further, that the Lessee shall not be entitled to assume and control the defense of any such action, suit or proceeding if and to the extent that, (A) in the reasonable opinion of such Indemnitee, (x) such action, suit or proceeding involves any possibility of imposition of criminal liability or any material risk of material civil liability on such Indemnitee or (y) such action, suit or proceeding will involve a material risk of the sale, forfeiture or loss of, or the creation of any 51 Lien (other than a Permitted Lien) on any Leased Property or any part thereof unless the Lessee shall have posted a bond or other security satisfactory to the relevant Indemnitees in respect to such risk or (z) the control of such action, suit or proceeding would involve an actual or potential conflict of interest, (B) such proceeding involves Claims not fully indemnified by the Lessee which the Lessee and the Indemnitee have been unable to sever from the indemnified claim(s), or (C) an Event of Default has occurred and is continuing. The Indemnitee may participate in a reasonable manner at its own expense and with its own counsel in any proceeding conducted by the Lessee in accordance with the foregoing. If the Lessee fails to fulfill the conditions to the Lessee's assuming the defense of any claim on or prior to the date that is 15 days prior to the date that an answer or response is required, the Indemnitee may undertake such defense, at the Lessee's expense. The Lessee shall not enter into any settlement or other compromise with respect to any Claim which is entitled to be indemnified under Section 7.1 or 7.2 without the prior written consent of the related Indemnitee, which consent shall not be unreasonably withheld. Unless an Event of Default shall have occurred and be continuing, no Indemnitee shall enter into any settlement or other compromise with respect to any claim which is entitled to be indemnified under Section 7.1 or 7.2 without the prior written consent of the Lessee, which consent shall not be unreasonably withheld, unless such Indemnitee waives its right to be indemnified under Section 7.1 or 7.2 with respect to such Claim. Upon payment in full of any Claim by the Lessee pursuant to Section 7.1 or 7.2 to or on behalf of an Indemnitee, the Lessee, without any further action, shall be subrogated to any and all claims that such Indemnitee may have relating thereto (other than claims in respect of insurance policies maintained by such Indemnitee at its own expense), and such Indemnitee shall execute such instruments of assignment and conveyance, evidence of claims and payment and such other documents, instruments and agreements as may be reasonably necessary to preserve any such claims and otherwise cooperate with the Lessee and give such further assurances as are reasonably necessary or advisable to enable the Lessee vigorously to pursue such claims. Any amount payable to an Indemnitee pursuant to Section 7.1 or 7.2 shall be paid to such Indemnitee promptly upon, but in no event later than 30 days after, receipt of a written demand therefor from such Indemnitee, accompanied by a written statement 52 describing in reasonable detail the basis for such indemnity and the computation of the amount so payable. If for any reason the indemnification provided for in Section 7.1 or 7.2 is unavailable to an Indemnitee or is insufficient to hold an Indemnitee harmless, then the Lessee agrees to contribute to the amount paid or payable by such Indemnitee as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by such Indemnitee on the one hand and by the Lessee on the other hand but also the relative fault of such Indemnitee as well as any other relevant equitable considerations. It is expressly understood and agreed that the right to contribution provided for herein shall survive the expiration or termination of and shall be separate and independent from any other remedy under this Master Agreement, the Lease or any other Operative Document. SECTION 7.4 General Tax Indemnity. (a) Tax Indemnity. Except as otherwise provided in this Section 7.4, the Lessee shall pay on an After-Tax Basis, and on written demand shall indemnify and hold each Tax Indemnitee harmless from and against, any and all fees (including, without limitation, documentation, recording, license and registration fees), taxes (including, without limitation, income, gross receipts, sales, rental, use, turnover, value-added, property, excise and stamp taxes), levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever, together with any penalties, fines or interest thereon or additions thereto (any of the foregoing being referred to herein as "Taxes" and individually as a "Tax" (for the purposes of this Section 7.4, the definition of "Taxes" includes amounts imposed on, incurred by, or asserted against each Tax Indemnitee as the result of any prohibited transaction, within the meaning of Section 406 or 407 of ERISA or Section 4975(c) of the Code, arising out of the transactions contemplated hereby or by any other Operative Document)) imposed on or with respect to any Tax Indemnitee, the Lessee, any Leased Property or any portion thereof or any Land, or any sublessee or user thereof, by the United States or by any state or local government or other taxing authority in the United States in connection with or in any way relating to (i) the acquisition, financing, mortgaging, construction, preparation, installation, inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership, possession, rental, lease, sublease, maintenance, repair, storage, transfer of title, redelivery, use, operation, condition, sale, return or other application or disposition of all or any part of any Leased Property or the imposition of any 53 Lien (or incurrence of any liability to refund or pay over any amount as a result of any Lien) thereon, (ii) Basic Rent or Supplemental Rent or the receipts or earnings arising from or received with respect to any Leased Property or any part thereof, or any interest therein or any applications or dispositions thereof, (iii) any other amount paid or payable pursuant to the Notes, or any other Operative Documents, (iv) any Leased Property, any Land or any part thereof or any interest therein (including, without limitation, all assessments payable in respect thereof, including, without limitation, all assessments noted on the related Title Policy), (v) all or any of the Operative Documents, any other documents contemplated thereby, any amendments and supplements thereto, and (vi) otherwise with respect to or in connection with the transactions contemplated by the Operative Documents. (b) Exclusions from General Tax Indemnity. Section 7.4(a) shall not apply to: (i) Taxes on, based on, or measured by or with respect to net income of the Lessor, the Lease Participant and the Lenders (including, without limitation, minimum Taxes, capital gains Taxes, Taxes on or measured by items of tax preference or alternative minimum Taxes) other than (A) any such Taxes that are, or are in the nature of, sales, use, license, rental or property Taxes, and (B) withholding Taxes imposed by the United States or any state in which Leased Property is located (i) on payments with respect to the Notes, to the extent imposed by reason of a change in Applicable Law occurring after the date on which the holder of such Note became the holder of such Note or (ii) on Rent, to the extent the net payment of Rent after deduction of such withholding Taxes would be less than amounts currently payable with respect to the Funded Amounts; (ii) Taxes on, based on, or in the nature of or measured by Taxes on doing business, business privilege, franchise, capital, capital stock, net worth, or mercantile license or similar taxes other than (A) any increase in such Taxes imposed on such Tax Indemnitee by any state in which Leased Property is located, net of any decrease in such taxes realized by such Tax Indemnitee, to the extent that such tax increase would not have occurred if on each Funding Date the Lessor, the Lease Participant and the Lenders had advanced funds to the Lessee in the form of loans secured by the Leased Property in an amount equal to the Funded Amounts funded on such Funding Date, with debt service for such 54 loans equal to the Basic Rent payable on each Payment Date and a principal balance at the maturity of such loans in a total amount equal to the Funded Amounts at the end of the Lease Term, or (B) any Taxes that are or are in the nature of sales, use, rental, license or property Taxes; (iii) Taxes that are based on, or measured by, the fees or other compensation received by a Person acting as Agent (in its individual capacities) or any Affiliate of any thereof for acting as trustee under the Loan Agreement or the Lease Participation Agreement; (iv) Taxes that result from any act, event or omission, or are attributable to any period of time, that occurs after the earliest of (A) the expiration of the Lease Term with respect to any Leased Property and, if such Leased Property is required to be returned to the Lessor in accordance with the Lease, such return and (B) the discharge in full of the Lessee's obligations to pay the Lease Balance, or any amount determined by reference thereto, with respect to any Leased Property and all other amounts due under the Lease, unless such Taxes relate to acts, events or matters occurring prior to the earliest of such times or are imposed on or with respect to any payments due under the Operative Documents after such expiration or discharge; (v) Taxes imposed on a Tax Indemnitee that result from any voluntary sale, assignment, transfer or other disposition by such Tax Indemnitee or any related Tax Indemnitee of any interest in any Leased Property or any part thereof, or any interest therein or any interest or obligation arising under the Operative Documents, or from any sale, assignment, transfer or other disposition of any interest in such Tax Indemnitee or any related Tax Indemnitee, it being understood that each of the following shall not be considered a voluntary sale: (A) any substitution, replacement or removal of any of the property by the Lessee, (B) any sale or transfer resulting from the exercise by the Lessee of any termination option, any purchase option or sale option, (C) any sale or transfer while an Event of Default shall have occurred and be continuing under the Lease, and (D) any sale or transfer resulting from the Lessor's exercise of remedies under the Lease; 55 (vi) any Tax which is being contested in accordance with the provisions of Section 7.4(c), during the pendency of such contest; (vii) any Tax that is imposed on a Tax Indemnitee as a result of such Tax Indemnitee's gross negligence or willful misconduct (other than gross negligence or willful misconduct imputed to such Tax Indemnitee solely by reason of its interest in any Leased Property); (viii) any Tax that results from a Tax Indemnitee engaging, with respect to any Leased Property, in transactions other than those permitted by the Operative Documents; (ix) to the extent any interest, penalties or additions to tax result in whole or in part from the failure of a Tax Indemnitee to file a return that it is required to file in a proper and timely manner, unless such failure (A) results from the transactions contemplated by the Operative Documents in circumstances where the Lessee did not give timely notice to such Tax Indemnitee (and such Tax Indemnitee otherwise had no actual knowledge) of such filing requirement that would have permitted a proper and timely filing of such return, or (B) results from the failure of the Lessee to supply information necessary for the proper and timely filing of such return that was not in the possession of such Tax Indemnitee; and (x) any Tax that results from the breach by the Lessor of its representation and warranty made in Section 4.2(b) or the breach of any Lender of its representation and warranty made in Section 4.3(b). (c) Contests. If any claim shall be made against any Tax Indemnitee or if any proceeding shall be commenced against any Tax Indemnitee (including a written notice of such proceeding) for any Taxes as to which the Lessee may have an indemnity obligation pursuant to Section 7.4, or if any Tax Indemnitee shall determine that any Taxes as to which the Lessee may have an indemnity obligation pursuant to Section 7.4 may be payable, such Tax Indemnitee shall promptly notify the Lessee. The Lessee shall be entitled, at its expense, to participate in, and, to the extent that the Lessee desire to, assume and control the defense thereof; provided, however, that the Lessee shall have acknowledged in writing its obligation to fully indemnify such Tax Indemnitee in respect of such action, suit or proceeding 56 if the contest is unsuccessful; and, provided further, that the Lessee shall not be entitled to assume and control the defense of any such action, suit or proceeding (but the Tax Indemnitee shall then contest, at the sole cost and expense of the Lessee, on behalf of the Lessee with representatives reasonably satisfactory to the Lessee) if and to the extent that, (A) in the reasonable opinion of such Tax Indemnitee, such action, suit or proceeding (x) involves any meaningful risk of imposition of criminal liability or any material risk of material civil liability on such Tax Indemnitee or (y) will involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien) on any Leased Property or any part thereof unless the Lessee shall have posted a bond or other security satisfactory to the relevant Tax Indemnitees in respect to such risk, (B) such proceeding involves Claims not fully indemnified by the Lessee which the Lessee and the Tax Indemnitee have been unable to sever from the indemnified claim(s), (C) an Event of Default has occurred and is continuing, (D) such action, suit or proceeding involves matters which extend beyond or are unrelated to the Transaction and if determined adversely could be materially detrimental to the interests of such Tax Indemnitee notwithstanding indemnification by the Lessee or (E) such action, suit or proceeding involves the federal or any state income tax liability of the Tax Indemnitee. With respect to any contests controlled by a Tax Indemnitee, (i) if such contest relates to the federal or any state income tax liability of such Tax Indemnitee, such Tax Indemnitee shall be required to conduct such contest only if the Lessee shall have provided to such Tax Indemnitee an opinion of independent tax counsel selected by the Tax Indemnitee and reasonably satisfactory to the Lessee stating that a reasonable basis exists to contest such claim or (ii) in the case of an appeal of an adverse determination of any contest relating to any Taxes, an opinion of such counsel to the effect that such appeal is more likely than not to be successful, provided, however, such Tax Indemnitee shall in no event be required to appeal an adverse determination to the United States Supreme Court. The Tax Indemnitee may participate in a reasonable manner at its own expense and with its own counsel in any proceeding conducted by the Lessee in accordance with the foregoing. Each Tax Indemnitee shall at the Lessee's expense supply the Lessee with such information and documents in such Tax Indemnitee's possession reasonably requested by the Lessee as are necessary or advisable for the Lessee to participate in any action, suit or proceeding to the extent permitted by this Section 7.4. Unless an Event of Default shall have occurred and 57 be continuing, no Tax Indemnitee shall enter into any settlement or other compromise with respect to any Claim which is entitled to be indemnified under this Section 7.4 without the prior written consent of the Lessee, which consent shall not be unreasonably withheld, unless such Tax Indemnitee waives its right to be indemnified under this Section 7.4 with respect to such Claim. Notwithstanding anything contained herein to the contrary, (a) a Tax Indemnitee will not be required to contest (and the Lessee shall not be permitted to contest) a claim with respect to the imposition of any Tax if such Tax Indemnitee shall waive its right to indemnification under this Section 7.4 with respect to such claim (and any related claim with respect to other taxable years the contest of which is precluded as a result of such waiver) and (b) no Tax Indemnitee shall be required to contest any claim if the subject matter thereof shall be of a continuing nature and shall have previously been decided adversely, unless there has been a change in law which in the opinion of Tax Indemnitee's counsel creates substantial authority for the success of such contest. Each Tax Indemnitee and the Lessee shall consult in good faith with each other regarding the conduct of such contest controlled by either. (d) Reimbursement for Tax Savings. If (x) a Tax Indemnitee shall obtain a credit or refund of any Taxes paid by the Lessee pursuant to this Section 7.4 or (y) by reason of the incurrence or imposition of any Tax for which a Tax Indemnitee is indemnified hereunder or any payment made to or for the account of such Tax Indemnitee by the Lessee pursuant to this Section 7.4, such Tax Indemnitee at any time realizes a reduction in any Taxes for which the Lessee is not required to indemnify such Tax Indemnitee pursuant to this Section 7.4, which reduction in Taxes was not taken into account in computing such payment by the Lessee to or for the account of such Tax Indemnitee, then such Tax Indemnitee shall promptly pay to the Lessee (xx) the amount of such credit or refund, together with the amount of any interest received by such Tax Indemnitee on account of such credit or refund or (yy) an amount equal to such reduction in Taxes, as the case may be; provided that no such payment shall be made so long as an Event of Default shall have occurred and be continuing and, provided, further, that the amount payable to the Lessee by any Tax Indemnitee pursuant to this Section 7.4(d) shall not at any time exceed the aggregate amount of all indemnity payments made by the Lessee under this Section 7.4 to such Tax Indemnitee with respect to the Taxes which gave rise to the credit or refund or with respect to the Tax which gave rise 58 to the reduction in Taxes less the amount of all prior payments made to the Lessee by such Tax Indemnitee under this Section 7.4(d). Each Tax Indemnitee agrees to act in good faith to claim such refunds and other available Tax benefits, and take such other actions as may be reasonable to minimize any payment due from the Lessee pursuant to this Section 7.4. The disallowance or reduction of any credit, refund or other tax savings with respect to which a Tax Indemnitee has made a payment to the Lessee under this Section 7.4(d) shall be treated as a Tax for which the Lessee are obligated to indemnify such Tax Indemnitee hereunder without regard to Section 7.4(b) hereof. (e) Payments. Any Tax indemnifiable under this Section 7.4 shall be paid directly when due to the applicable taxing authority if direct payment is practicable and permitted. If direct payment to the applicable taxing authority is not permitted or is otherwise not made, any amount payable to a Tax Indemnitee pursuant to Section 7.4 shall be paid within thirty (30) days after receipt of a written demand therefor from such Tax Indemnitee accompanied by a written statement describing in reasonable detail the amount so payable, but not before the date that the relevant Taxes are due. Any payments made pursuant to Section 7.4 shall be made to the Tax Indemnitee entitled thereto or the Lessor, as the case may be, in immediately available funds at such bank or to such account as specified by the payee in written directions to the payor, or, if no such direction shall have been given, by check of the payor payable to the order of the payee by certified mail, postage prepaid at its address as set forth in this Master Agreement. Upon the request of any Tax Indemnitee with respect to a Tax that the Lessee are required to pay, the Lessee shall furnish to such Tax Indemnitee the original or a certified copy of a receipt for the Lessee's payment of such Tax or such other evidence of payment as is reasonably acceptable to such Tax Indemnitee. (f) Reports. If the Lessee knows of any report, return or statement required to be filed with respect to any Taxes that are subject to indemnification under this Section 7.4, the Lessee shall, if the Lessee is permitted by Applicable Law, timely file such report, return or statement (and, to the extent permitted by law, show ownership of the applicable Leased Property in the Lessee); provided, however, that if the Lessee is not permitted by Applicable Law or does not have access to the information required to file any such report, return or statement, the Lessee will promptly so notify the appropriate Tax Indemnitee, in which case Tax Indemnitee will file such 59 report. In any case in which the Tax Indemnitee will file any such report, return or statement, the Lessee shall, upon written request of such Tax Indemnitee, prepare such report, return or statement for filing by such Tax Indemnitee or, if such Tax Indemnitee so requests, provide such Tax Indemnitee with such information as is reasonably available to the Lessee. (g) Verification. At the Lessee's request, the amount of any indemnity payment by the Lessee or any payment by a Tax Indemnitee to the Lessee pursuant to this Section 7.4 shall be verified and certified by an independent public accounting firm selected by the Lessee and reasonably acceptable to the Tax Indemnitee. Unless such verification shall disclose an error in the Lessee's favor of 5% or more, the costs of such verification shall be borne by the Lessee. In no event shall the Lessee have the right to review the Tax Indemnitee's tax returns or receive any other confidential information from the Tax Indemnitee in connection with such verification. The Tax Indemnitee agrees to cooperate with the independent public accounting firm performing the verification and to supply such firm with all information reasonably necessary to permit it to accomplish such verification, provided that the information provided to such firm by such Tax Indemnitee shall be for its confidential use. The parties agree that the sole responsibility of the independent public accounting firm shall be to verify the amount of a payment pursuant to this Master Agreement and that matters of interpretation of this Master Agreement are not within the scope of the independent accounting firm's responsibilities. SECTION 7.5 Interest Rate Not Ascertainable, etc. In the event that the Agent shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) that on any date for determining LIBOR for any Rent Period, by reason of any changes arising after the date of this Agreement affecting the London interbank market, or the Agent's position in such market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of LIBOR then, and in any such event, the Agent shall forthwith give notice (by telephone confirmed in writing) to the Lessee and to the other Funding Parties, of such determination and a summary of the basis for such determination. Until the Agent notifies the Lessee that the circumstances giving rise to the suspension described herein no longer exist, the obligations of the other Funding Parties to make or permit portions of the Funded Amounts to remain outstanding past the last day of the then current Rent Periods as LIBOR Advances shall be suspended, and such affected LIBOR Advances shall bear 60 interest or accrue yield, as the case may be, at the Alternative Rate (or at such other rate of interest per annum as the Lessee and each of the Agent and the other Funding Parties shall have agreed to in writing). SECTION 7.6 Illegality. (a) In the event that any Funding Party shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) at any time that the making or continuance of any LIBOR Advance has become unlawful by compliance by such Funding Party in good faith with any applicable law, governmental rule, regulation, guideline or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, in any such event, the Funding Party shall give prompt notice (by telephone confirmed in writing) to the Lessee and to the Agent of such determination and a summary of the basis for such determination (which notice the Agent shall promptly transmit to the other Funding Parties). (b) Upon the giving of the notice to the Lessee referred to in subsection (a) above, (i) the Lessee's right to request and such Funding Party's obligation to make LIBOR Advances shall be immediately suspended, and such Funding Party shall make an Advance as part of the requested Funding of LIBOR Advances, bearing interest or yield at the Alternative Rate (or at such other rate of interest per annum as the Lessee and each of the Agent and the Funding Parties shall have agreed to in writing), which Alternative Rate Advance shall, for all other purposes, be considered part of such Funding and (ii) if the affected LIBOR Advance or Advances are then outstanding, Lessee shall immediately, or if permitted by applicable law, no later than the date permitted thereby, upon at least one Business Day's written notice to the Agent and the affected Funding Party, convert each such LIBOR Advance into a Funded Amount bearing interest or yield at the Alternative Rate, provided that if more than one Funding Party is affected at any time, then all affected Funding Parties must be treated the same pursuant to this Section 7.6(b). SECTION 7.7 Increased Costs. (a) (i) If, by reason of (x) after the date hereof, the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or 61 regulation, or (y) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law): (1) any Funding Party (or its applicable Funding Office) shall be subject to any tax, duty or other charge with respect to its LIBOR Advances, or its obligation to make LIBOR Advances, or the basis of taxation of payments to any Lender of the principal of or interest on its LIBOR Advances or its obligation to make LIBOR Advances shall have changed (except for changes in the tax on the overall net income of such Funding Party or its applicable Funding Office imposed by the jurisdiction in which such Funding Party's principal executive office or applicable Funding Office is located); or (2) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Funding Party's applicable Funding Office shall be imposed or deemed applicable or any other condition affecting its LIBOR Advances, or its obligation to make LIBOR Advances shall be imposed on any Funding Party or its applicable Funding Office or the London interbank market; and as a result thereof there shall be any increase in the cost to such Funding Party of agreeing to make or making, funding or maintaining LIBOR Advances, or there shall be a reduction in the amount received or receivable by such Funding Party or its applicable Funding Office, or (ii) in the event that any Funding Party shall have determined that any law, treaty, governmental (or quasi- governmental) rule, regulation, guideline or order regarding capital adequacy not currently in effect or fully applicable as of the initial Closing Date, or any change therein or in the interpretation or application thereof after the initial Closing Date, or compliance by such Funding Party with any request or directive regarding capital adequacy not currently in effect or fully applicable as of the initial Closing Date (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from a central bank or governmental authority or body having jurisdiction, does or shall have the ef- 62 fect of reducing the rate of return on such Funding Party's capital as a consequence of its obligations hereunder to a level below that which such Funding Party could have achieved but for such law, treaty, rule, regulation, guideline or order, or such change or compliance (taking into consideration such Funding Party's policies with respect to capital adequacy) by an amount deemed by such Funding Party to be material; then, in the case of (i) or (ii) above, upon written notice from and demand by such Funding Party on the Lessee (with a copy of such notice and demand to the Agent), the Lessee shall pay to the Agent for the account of such Funding Party within five Business Days after the date of such notice and demand, additional amounts sufficient to indemnify such Funding Party against such increased cost or reduced yield. A certificate as to the amount of such increased cost or reduced yield submitted to the Lessee and the Agent by such Funding Party in good faith and accompanied by a statement prepared by such Funding Party describing in reasonable detail the basis for and calculation of such increased cost, shall, except for manifest error, be final, conclusive and binding for all purposes. In addition, if at any time a LIBOR Reserve Percentage greater than 0% is imposed on any Funding Party, the Lessee shall pay to such Funding Party additional interest or yield on the unpaid principal amount of the LIBOR Advances of such Funding Party until such principal amount is paid in full at an interest rate per annum equal at all times to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable LIBOR for such LIBOR Advance for such Interest Period by (ii) 1.00 minus the LIBOR Reserve Percentage, payable on each date on which interest is payable on such LIBOR Advance. Such additional interest, if any, shall be determined by such Funding Party and notified to the Lessee through the Agent. (b) If any Funding Party shall advise the Agent that at any time, because of the circumstances described in clauses (x) or (y) in Section 7.7(a) or any other circumstances beyond such Funding Party's reasonable control arising after the date of this Agreement affecting such Funding Party or the London interbank market or such Funding Party's position in such markets, LIBOR as determined by the Agent, will not adequately and fairly reflect the cost to such Funding Party of funding its LIBOR Advances, then, and in any such event: 63 (i) the Agent shall forthwith give notice (by telephone confirmed in writing) to the Lessee and to the other Funding Parties of such advice; (ii) the Lessee's right to request and such Funding Party's obligation to make or permit portions of the Funded Amounts to remain outstanding past the last day of the then current Rent Periods as LIBOR Advances shall be immediately suspended; and (iii) such Funding Party shall make an Advance as part of the requested Funding of LIBOR Advances, as the case may be, bearing interest or accruing yield at the Alternative Rate (or at such other rate of interest per annum as the Lessee and each of the Agent and the Funding Parties shall have agreed to in writing), which Alternative Rate Advance shall, for all other purposes, be considered part of such Funding. (c) Funding Party shall make written demand on the Lessee for indemnification or compensation pursuant to this Section 7.7 no later than 60 days after the event giving rise to the claim for indemnification or compensation occurs. In the event that any Funding Party fails to give the Lessee notice within the time limitations prescribed in the foregoing sentence, the Lessee shall not have any obligation to pay such claim for compensation or indemnification. SECTION 7.8 Funding Offices. (a) Each Funding Party agrees that, if requested by the Lessee, it will use reasonable efforts (subject to overall policy considerations of such Funding Party) to designate an alternate Funding Office with respect to any of its LIBOR Advances affected by the matters or circumstances described in Sections 7.5, 7.6, or 7.7 to reduce the liability of the Lessee or avoid the results provided thereunder, so long as such designation is not materially disadvantageous to such Funding Party as determined by such Funding Party, which determination if made in good faith, shall be conclusive and binding on all parties hereto. Nothing in this Section 7.8 shall affect or postpone any of the obligations of the Lessee or any right of any Funding Party provided hereunder. (b) If any Funding Party that is organized under the laws of any jurisdiction other than the United States of America 64 or any State thereof (including the District of Columbia) issues a public announcement with respect to the closing of its lending offices in the United States such that any withholdings or deductions or additional payments with respect to Taxes may be required to be made by the Lessee thereafter pursuant to Section 7.4, such Funding Party shall use reasonable efforts to furnish the Lessee notice thereof as soon as practicable thereafter; provided, however, that no delay or failure to furnish such notice shall in any event release or discharge the Lessee from its obligations to such Funding Party pursuant to Section 7.4 or otherwise result in any liability of such Funding Party. SECTION 7.9 Funding Losses. The Lessee shall compensate each Funding Party, upon its written request to the Lessee (which request shall set forth the basis for requesting such amounts in reasonable detail and which request shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all of the parties hereto), for all losses, expenses and liabilities (including, without limitation, any interest paid by such Funding Party to lenders of funds borrowed by it to make or carry its Funded Amounts), in either case to the extent not recoverable by such Funding Party in connection with a re-employment of such funds and including loss of anticipated profits, which the Funding Party may sustain: (i) if for any reason (other than a default by such Funding Party) a Funding does not occur on the date specified therefor in a Funding Request or Payment Date Notice (whether or not withdrawn), (ii) if any repayment (including mandatory prepayments and any conversions pursuant to Section 7.6(b)) of any Funding occurs on a date which is not the last day of a Rent Period applicable thereto, or (iii) if, for any reason, the Lessee defaults in its obligation to repay its Rent when required by the terms of the Operative Documents. In no circumstance will Lessee be responsible for losses (other than administrative costs) where interest rates have increased as of the date of determination of funding losses hereunder. SECTION 7.10 Assumptions Concerning Funding of LIBOR Advances. Calculation of all amounts payable to a Funding Party shall be made as though that Funding Party had actually funded its relevant LIBOR Advances through the purchase of deposits in the relevant market bearing interest at the rate applicable to such LIBOR Advances in an amount equal to the amount of the LIBOR Advances and having a maturity comparable to the relevant Rent Period and through the transfer of such LIBOR Advances from an offshore office of that Funding Party to a domestic office of that Funding Party in the United States of America; provided 65 however, that each Funding Party may fund each of its LIBOR Advances in any manner it sees fit and the foregoing assumption shall be used only for calculation of amounts payable under the Operative Documents. SECTION 7.11 End of Term Indemnity. In the event that at the end of the Lease Term for a Leased Property: (i) the Lessee elects the option set forth in Section 14.6 of the Lease, and (ii) after the Lessor receives the sales proceeds from such Leased Property under Section 14.6 or 14.7 of the Lease, together with the Lessee's payment of the Recourse Deficiency Amount, the Lessor shall not have received the entire Lease Balance, then, within 90 days after the end of the Lease Term, the Lessor or the Agent may obtain, at the Lessee's sole cost and expense, a report from the Appraiser (or, if the Appraiser is not available, another appraiser reasonably satisfactory to the Lessor or the Agent, as the case may be, and approved by the Lessee, such approval not to be unreasonably withheld) in form and substance satisfactory to the Lessor and the Agent (the "Report") to establish the reason for any decline in value of such Leased Property from the Lease Balance. The Lessee shall promptly reimburse the Lessor for the amount equal to such decline in value to the extent that the Report indicates that such decline was due to (w) extraordinary use, failure to maintain, to repair, to restore, to rebuild or to replace, failure to comply with all Applicable Laws, failure to use, workmanship, method of installation or removal or maintenance, repair, rebuilding or replacement, or any other cause or condition within the power of the Lessee to control or effect resulting in the Building failing to be an office, store or warehouse of the type and quality contemplated by the Appraisal (excepting in each case ordinary wear and tear), or (x) any Alteration made to, or any rebuilding of, the Leased Property or any part thereof by the Lessee, or (y) any restoration or rebuilding carried out by the Lessee or any condemnation of any portion of the Leased Property pursuant to Article X of the Lease, or (z) any use of such Leased Property or any part thereof by the Lessee other than as permitted by the Lease, or any act or omission constituting a breach of any requirement, condition, restriction or limitation set forth in the related Deed or the related Purchase Agreement. 66 SECTION 8 MISCELLANEOUS SECTION 8.1 Survival of Agreements. The representations, warranties, covenants, indemnities and agreements of the parties provided for in the Operative Documents, and the parties' obligations under any and all thereof, shall survive the execution and delivery and the termination or expiration of this Master Agreement and any of the Operative Documents, the transfer of any Land to the Lessor as provided herein (and shall not be merged into any Deed), any disposition of any interest of the Lessor in any Leased Property, the purchase and sale of the Notes, payment therefor and any disposition thereof and shall be and continue in effect notwithstanding any investigation made by any party hereto or to any of the other Operative Documents and the fact that any such party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Documents. SECTION 8.2 Notices. Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be addressed to such parties at the addresses therefor as set forth in Schedule 8.2, as such other address as any such party shall specify to the other parties hereto, 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. SECTION 8.3 Counterparts. This Master Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 8.4 Amendments. No Operative Document nor any of the terms thereof may be terminated, amended, supplemented, waived or modified with respect to the Lessee or any Funding Party, except (a) in the case of a termination, amendment, supplement, waiver or modification to be binding on the Lessee, with the written agreement or consent of the Lessee, and (b) in 67 the case of a termination, amendment, supplement, waiver or modification to be binding on the Funding Parties, with the written agreement or consent of the Lessor and the Required Funding Parties; provided, however, that (x) notwithstanding the foregoing provisions of this Section 8.4, the consent of each Funding Party affected thereby shall be required for any amendment, modification or waiver directly: (i) modifying any of the provisions of this Section 8.4, changing the definition of "Required Funding Parties", or increasing the Commitment of such Funding Party; (ii) amending, modifying, waiving or supplementing any of the provisions of Section 3 of the Loan Agreement or Section 3 of the Lease Participation Agreement or the representations of such Funding Party in Section 4.2 or 4.3 or the covenants of such Funding Party in Section 6 of this Master Agreement; (iii) reducing any amount payable to such Funding Party under the Operative Documents or extending the time for payment of any such amount, including, without limitation, any Rent, any Funded Amount, any fees, any indemnity, the Leased Property Balance, the Lease Balance, any Funding Party Balance, Recourse Deficiency Amount, interest or Yield; or (iv) consenting to any assignment of the Lease, releasing any of the collateral assigned to the Agent and the Lenders pursuant to any Mortgage and any Assignment of Lease and Rents (but excluding a release of any rights that the Lenders may have in any Leased Property, or the proceeds thereof as contemplated in the definition of "Release Date"), releasing the Lessee from its obligations in respect of the payments of Rent and the Lease Balance, releasing the Lessee from its obligations under the Operative Guaranty or the other Operative Documents or changing the absolute and unconditional character of any such obligation; and (y) no such termination, amendment, supplement, waiver or modification shall, without the written agreement or consent of the Lessor, the Lease Participant and the Lenders, be made to the Lease; and 68 (z) subject to the foregoing clauses (x) and (y), so long as no Event of Default has occurred and is continuing, the Lessor, the Agent, the Lease Participant and the Lenders may not amend, supplement, waive or modify any terms of the Loan Agreement, the Notes, the Mortgages and the Assignments of Lease and Rents without the consent of the Lessee (such consent not to be unreasonably withheld or delayed); the Lessor and the Lessee may not amend, supplement, waive or modify any terms of the Lease or any Security Agreement and Assignment without the consent of the Agent, the Lease Participant and the Lenders. SECTION 8.5 Headings, etc. The Table of Contents and headings of the various Articles and Sections of this Master Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. SECTION 8.6 Parties in Interest. Except as expressly provided herein, none of the provisions of this Master Agreement is intended for the benefit of any Person except the parties hereto, the Lease Participant, and their respective successors and permitted assigns. SECTION 8.7 GOVERNING LAW. THIS MASTER AGREEMENT 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 8.8 Expenses. Whether or not the transactions herein contemplated are consummated, the Lessee agrees to pay, as Supplemental Rent, all actual, reasonable and documented out-of-pocket costs and expenses of the Lessor, the Lease Participant, the Agent and (other than in connection with the initial Closing Date) the Lenders in connection with the preparation, execution and delivery of the Operative Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto (including, without limitation, the fees and disbursements of Mayer, Brown & Platt) and of the Lessor, the Agent, the Lease Participant and the Lenders in connection with the enforcement of the Operative Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and disbursements of counsel for the Lessor, the Agent, the Lease Participant and the Lenders actually incurred). 69 SECTION 8.9 Severability. Any provision of this Master Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 8.10 Liabilities of the Funding Parties. No Funding Party shall have any obligation to any other Funding Party or to the Lessee with respect to the transactions contemplated by the Operative Documents except those obligations of such Funding Party expressly set forth in the Operative Documents or except as set forth in the instruments delivered in connection therewith, and no Funding Party shall be liable for performance by any other party hereto of such other party's obligations under the Operative Documents except as otherwise so set forth. No Lease Participant or Lender shall have any obligation or duty to the Lessee, any other Funding Parties or any other Person with respect to the transactions contemplated hereby except to the extent expressly set forth in this Master Agreement or the Loan Agreement. SECTION 8.11 Submission to Jurisdiction; Waivers. Each party hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Master Agreement or any other Operative Document, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of Georgia sitting in Fulton County, Georgia, the courts of the United States of America for the Northern District of Georgia, and appellate courts from any thereof; (ii) consents that any such action or proceedings may be brought to such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address set forth in Schedule 8.2 or at 70 such other address of which the other parties hereto shall have been notified pursuant to Section 8.2; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. SECTION 8.12 Liabilities of the Agent. The Agent shall have no duty, liability or obligation to any party to this Master Agreement with respect to the transactions contemplated hereby except those duties, liabilities or obligations expressly set forth in this Master Agreement, the Lease Participation Agreement or the Loan Agreement, and any such duty, liability or obligations of the Agent shall be as expressly limited by this Master Agreement, the Lease Participation Agreement or the Loan Agreement, as the case may be. 71 IN WITNESS WHEREOF, the parties hereto have caused this Master Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. CHOICEPOINT INC., as the Lessee By: /s/ Doug C. Curling ---------------------------------- Name Printed: Doug C. Curling Title: Executive Vice President and Chief Financial Officer S-1 SUNTRUST BANKS, INC., as Lessor By: /s/ RC Shufeldt ---------------------------------- Name Printed: RC Shufeldt Title: Junior Vice President S-2 SUNTRUST BANK, ATLANTA, as Agent By: /s/ J. Christopher Deisley ---------------------------------- Name Printed: J. Christopher Deisley ------------------------ Title: First Vice President ------------------------------- By: /s/ Kevin S. MacDonald ---------------------------------- Name Printed: Kevin S. MacDonald ------------------------ Title: Vice President ------------------------------- S-3 APPENDIX A to Master Agreement, Lease, Loan Agreement, Construction Agency Agreement and Lease Participation Agreement DEFINITIONS AND INTERPRETATION A. Interpretation. In each Operative Document, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents; (iii) reference to any gender includes each other gender; (iv) reference to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Operative Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (v) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) reference in any Operative Document to any Article, Section, Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix, Schedule or Exhibit thereto; (vii) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section or other provision hereof; (viii) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (ix) "or" is not exclusive; and (x) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". B. Accounting Terms. In each Operative Document, unless expressly otherwise provided, accounting terms shall be construed and interpreted, and accounting determinations and computations shall be made, in accordance with GAAP. C. Conflict in Operative Documents. If there is any conflict between any Operative Documents, such Operative Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Master Agreement shall prevail and control. D. Legal Representation of the Parties. The Operative Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring the Operative Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. E. Defined Terms. Unless a clear contrary intention appears, terms defined herein have the respective indicated meanings when used in each Operative Document. "A Loan" means the A Percentage of Loans made by Lenders pursuant to the Loan Agreement and the Master Agreement. "A Note" is defined in Section 2.2 of the Loan Agreement. "A Percentage" means 80%. "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary). -2- "Address" means with respect to any Person, its address set forth in Schedule 8.2 to the Master Agreement or such other address as it shall have identified to the parties to the Master Agreement in writing. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with, such Person, whether through the ownership of voting securities or by contract or otherwise. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "After-Tax Basis" means (a) with respect to any payment to be received by an Indemnitee (which, for purposes of this definition, shall include any Tax Indemnitee), the amount of such payment supplemented by a further payment or payments so that, after deducting from such payments the amount of all Taxes (net of any current credits, deductions or other Tax benefits arising from the payment by the Indemnitee of any amount, including Taxes, for which the payment to be received is made) imposed currently on the Indemnitee by any Governmental Authority or taxing authority with respect to such payments, the balance of such payments shall be equal to the original payment to be received and (b) with respect to any payment to be made by any Indemnitee, the amount of such payment supplemented by a further payment or payments so that, after increasing such payment by the amount of any current credits or other Tax benefits realized by the Indemnitee under the laws of any Governmental Authority or taxing authority resulting from the making of such payments, the sum of such payments (net of such credits or benefits) shall be equal to the original payment to be made; provided, however, for the purposes of this definition, and for purposes of any payment to be made to either the Lessee or an Indemnitee on an after-tax basis, it shall be assumed that (i) federal, state and local taxes are payable at the highest combined marginal federal and state statutory income tax rate (taking into account the deductibility of state income taxes for federal income tax purposes) applicable to corporations from time to time and (ii) such Indemnitee or the Lessee has sufficient income to utilize any deductions, credits (other than foreign tax credits, the use of which shall be determined on an actual basis) and other Tax benefits arising from any payments described in clause (b) of this definition. "Agent" means SunTrust Bank, Atlanta, a Georgia banking corporation, in its capacity as agent under the Master Agreement, the Lease Participation Agreement and the Loan Agreement. -3- "Aggregate Construction Costs" means the aggregate amount of all development, transaction and closing costs incurred by the Lessee, including all acquisition costs for any improvements and capitalized expenses, but excluding the purchase price of the Land. "Alterations" means, with respect to any Leased Property, fixtures, alterations, improvements, modifications and additions to such Leased Property. "Alternative Rate" means, for any period, an interest rate per annum equal to the rate of interest most recently announced by the Agent in Atlanta, Georgia from time to time as its prime lending rate (or other comparable reference rate) for calculating interest on certain loans, which need not be the lowest interest rate charged by such bank. If such prime lending rate or equivalent of such bank changes from time to time after the date hereof, the Alternative Rate shall be automatically increased or decreased, as the case may be, without notice to the Lessee as of the effective time of each change in such prime lending rate or equivalent. "Applicable Law" means all existing and future applicable laws (including Environmental Laws), rules, regulations (including proposed, temporary and final income tax regulations), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment (including, without limitation, wetlands) and those pertaining to the construction, use or occupancy of any Leased Property) and any restrictive covenant or deed restriction or easement of record affecting any Leased Property. "Applicable Margin" means the percentage designated on the chart set forth below based on Lessee's ratio of Funded Debt to Consolidated EBITDA, measured quarterly, effective in the first fiscal quarter immediately following the date of delivery of the Compliance Certificate to the Agent: -4-
FUNDED DEBT TO CONSOLIDATED APPLICABLE EBITDA RATIO MARGIN - -------------- ---------- Greater than or Equal to 3.0:1.0 0.625% Less than 3.0:1.0 and Greater than or Equal to 2.5:1.0 0.50% Less than 2.5:1.0 and Greater than or Equal to 2.0:1.0 0.425% Less than 2.0:1.0 0.35%
For purposes of the foregoing, (i) the Applicable Margin on the initial Closing Date is 0.35% and shall remain 0.35% through and including September 30, 1997 (by way of example, as of the first day of the third fiscal quarter of Lessee, the Applicable Margin shall be calculated based upon the ratio of Funded Debt to Consolidated EBITDA of the Lessee reported in the Compliance Certificate delivered by the Lessee for the first fiscal quarter of such fiscal year of Lessee); and (ii) if the Lessee fails to provide the Compliance Certificate and related financial statements required by Section 5.1 of the Master Agreement within the applicable time period set forth therein, the Applicable Margin shall be adjusted to 0.625% on the first day of the following fiscal quarter until such Compliance Certificate and related financial statements are delivered. "Appraisal" is defined in Section 3.1 of the Master Agreement. "Appraiser" means an MAI appraiser satisfactory to the Agent and the Lessor. "Architect" means with respect to any Leased Property the architect engaged in connection with the construction of the related Building, who may be an employee of the General Contractor for such Leased Property. "Architect's Agreement" means, with respect to any Leased Property, the architectural services agreement, if any, between the Lessee and the related Architect. "Assignment of Lease and Rents" means, with respect to any Leased Property, the Assignment of Lease and Rents, dated as of the related Closing Date, from the Lessor to the Agent, substantially in the form of Exhibit B to the Master Agreement. "Awards" means any award or payment received by or payable to the Lessor or the Lessee on account of any Condemnation or -5- Event of Taking (less the actual costs, fees and expenses incurred in the collection thereof, for which the Person incurring the same shall be reimbursed from such award or payment). "B Loan" means the B Percentage of Loans made by a Lender pursuant to the Loan Agreement and the Master Agreement. "B Note" is defined in Section 2.2 of the Loan Agreement. "B Percentage" means 20%. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended. "Base Term" means, with respect to any Leased Property, (a) the period commencing on the Initial Closing Date for the first parcel of Land acquired by the Lessor and ending on the tenth (10th) anniversary of such Closing Date or (b) such shorter period as may result from earlier termination of the Lease as provided therein. "Basic Rent" means, for any Lease Term, the rent payable pursuant to Section 3.1 of the Lease, determined in accordance with the following: each installment of Basic Rent payable on any Payment Date shall be in an amount equal to the sum of (A) the aggregate amount of Lender Basic Rent payable on such Payment Date, plus (B) the aggregate amount of Lessor Basic Rent payable on such Payment Date, in each case for the Leased Property or Properties that are then subject to the Lease. "Board of Directors", with respect to a corporation, means either the Board of Directors or any duly authorized committee of that Board which pursuant to the by-laws of such corporation has the same authority as that Board as to the matter at issue. "Building" means, with respect to any Leased Property, the buildings, structures and improvements located or to be located on the related Land, along with all fixtures used or useful in connection with the operation of such Leased Property, including, without limitation, all furnaces, boilers, compressors, elevators, fittings, pipings, connectives, conduits, ducts, partitions, equipment and apparatus of every kind and description now or hereafter affixed or attached or used or useful in connection with the Building, all equipment financed by the Lessor and/or the Lenders and the Lease Participants and all Alterations (including all restorations, repairs, replacements and rebuilding of such buildings, improvements and structures) thereto (but in each case excluding trade fixtures financed other than by the Lessor, the Lease Participant or the Lenders). -6- "Business Day" means any day other than a Saturday, Sunday or other day on which banks are required or authorized to be closed for business in Atlanta, Georgia and, if the applicable Business Day relates to a LIBOR Advance, on which trading is not carried on by and between banks in the London interbank market. "Capital Stock" means, with respect to any Person, all capital stock of such Person, whether voting or nonvoting, including common stock and preferred stock of such Person. "Casualty" means an event of damage or casualty relating to all or part of any Leased Property that does not constitute an Event of Loss. "CDB/Infotek" means CDB/Infotek, a California corporation. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation and Liability Inventory System established pursuant to CERCLA. "Claims" means liabilities, obligations, damages, losses, demands, penalties, fines, claims, actions, suits, judgments, proceedings, settlements, utility charges, costs, expenses and disbursements (including, without limitation, reasonable legal fees and expenses) of any kind and nature whatsoever. "Closing Date" means, with respect to each parcel of Land, the date on which such Land is acquired by the Lessor and the initial Funding occurs with respect to such Land under the Master Agreement. "Commitment" means as to each Funding Party, its obligation to make Fundings as investments in each Leased Property, or to make Loans to the Lessor, or to fund a Lease Participation as the case may be, in an aggregate amount not to exceed at any one time outstanding the amount set forth for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). "Commitment Percentage" means as to any Funding Party, at a particular time, the percentage of the aggregate Commitments in effect at such time constituted by such Funding Party's Commitment, as such percentage is shown for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). -7- "Completion Costs Payment", which is payable upon the occurrence of a Non-Completion Event, is an amount equal to the sum of (i) the acquisition cost of the Land, (ii) the aggregate amount of all Completion Costs, up to but not in excess of the Completion Costs Payment Limitation, and (iii) all Supplemental Rent and other amounts owing by the Lessee under the Operative Documents (other than any Completion Costs in excess of the Completion Costs Payment Limitation). "Completion Costs" means at any time the sum of (x) the aggregate amount of all development, transaction and closing costs, including all acquisition costs for any improvements and capitalized expenses, but excluding the purchase price of the Land, expended or incurred by the Lessee as of the time of a Non-Completion Event and which it will be necessary thereafter to expend in order to achieve Completion, plus (y) all Taxes thereon. "Completion Costs Payment Limitation" means an amount equal to 89% of the Aggregate Construction Costs. "Completion Date" with respect to any Leased Property means the Business Day on which the conditions specified in Section 3.5 of the Master Agreement have been satisfied with respect to such property. "Compliance Certificate" shall have the meaning set forth in Section 5.1 of the Master Agreement. "Condemnation" means any condemnation, requisition, confiscation, seizure or other taking or sale of the use, occupancy or title to any Leased Property or any part thereof in, by or on account of any actual eminent domain proceeding or other action by any Governmental Authority or other Person under the power of eminent domain or any transfer in lieu of or in anticipation thereof, which in any case does not constitute an Event of Taking. A Condemnation shall be deemed to have "occurred" on the earliest of the dates that use, occupancy or title is taken. "Consolidated Companies" means, collectively, Lessee and all of its Subsidiaries. "Consolidated EBIT" means, for any fiscal period of Lessee, an amount equal to (A) the sum for such fiscal period of Consolidated Net Income (Loss) and, to the extent deducted in determining such Consolidated Net Income (Loss), provisions for (i) taxes based on income and (ii) Consolidated Interest Expense, minus (B) any items of gain (or plus any items of loss) which were included in determining such Consolidated Net Income (Loss) and were (x) not realized in the ordinary course of business -8- (whether or not classified as "ordinary" by GAAP), (y) the result of any sale of assets, or (z) resulting from minority investments, together in the case of (x), (y) or (z), any related provision for taxes included in Consolidated Net Income (Loss) with respect thereto, plus (C) non-recurring non-cash charges, including without limitation, accruals related to any acquisition and earnouts incurred in connection with any acquisition to the extent not paid in cash. "Consolidated EBITDA" means, for any four fiscal-quarter period of Lessee, an amount equal to the sum of (A) Consolidated EBIT plus (B) depreciation and amortization expense to the extent deducted in determining Consolidated Net Income (Loss), plus (C) without duplication, the sum of the following items to the extent not included in Consolidated EBITDA for such period: (1) the net income (or net loss) for such four fiscal quarter period of any Person which became a Subsidiary during such period (a "New Subsidiary"); (2) the net income (or net loss) derived during such four fiscal quarter period from any assets acquired by any Consolidated Company during such period ("New Assets"); (3) the sum of (x) taxes based on income, (y) Consolidated Interest Expense and (z) depreciation and amortization expense, in each case to the extent deducted in determining net income of any New Subsidiary or derived from any New Assets during such four fiscal quarter period, minus any items of gain (or plus any items of loss) which were included in determining such net income and were (aa) not realized in the ordinary course of business (whether or not classified as "ordinary" by GAAP), (bb) the result of any sale of assets, or (cc) resulting from minority investments, together in the case of (aa), (bb) or (cc), any related provision for taxes included in such net income with respect thereto; and (4) non-recurring non-cash charges of any New Subsidiary or derived from any New Assets during such four fiscal quarter period, including without limitation, accruals related to any acquisition and earnouts incurred in connection with any acquisition to the extent not paid in cash. "Consolidated EBITR" means, for any fiscal period of Lessee, an amount equal to the sum of Consolidated EBIT plus Consolidated Rental Expense for such period. "Consolidated Fixed Charges" means, for any fiscal period of Lessee, the sum of (A) Consolidated Interest Expense, plus (B) -9- Consolidated Rental Expense, plus (C) dividends and distributions on Capital Stock paid in cash during such fiscal period by Lessee or any other Consolidated Company, but excluding the one-time dividend paid by Lessee to Equifax as of the Spin-Off Date and any repurchases of Capital Stock of Lessee. "Consolidated Interest Expense" means, for any fiscal period of Lessee, total interest expense of the Consolidated Companies (including without limitation, interest expense attributable to capitalized leases in accordance with GAAP, all commissions, discounts and other fees and charges owed with respect to bankers acceptance financing, and total interest expense (whether shown as interest expense or as loss and expenses on sale of receivables) under a receivables purchase facility) determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income (Loss)" means, for any fiscal period of Lessee, the net income (or loss) of the Consolidated Companies for such period (taken as a single accounting period), but excluding therefrom (to the extent otherwise included therein) the income of any Consolidated Company to the extent that the declaration or payment of dividends or similar distributions by such Consolidated Company of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation; provided that the foregoing exclusion shall not apply to CDB/Infotek so long as there is at least $1 of outstanding intercompany debt owed by CDB/Infotek to another Consolidated Company. "Consolidated Net Worth" means, as of any date of determination, shareholders' equity of Lessee, determined on a consolidated basis in conformity with GAAP. "Consolidated Rental Expense" shall mean, for any fiscal period of Lessee, the operating lease expense of the Consolidated Companies determined in accordance with GAAP for leases with an initial term greater than one year, as derived from the notes to Lessee's consolidated financial statements of the Consolidated Companies, determined on a consolidated basis in accordance with GAAP. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Lessee in its consolidated financial statements as of such date. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the -10- Lessee are treated as a single employer under Section 414 of the Code. "Construction" means, with respect to any Leased Property, the construction of the related Building pursuant to the related Plans and Specifications. "Construction Agency Agreement" means the Construction Agency Agreement, dated as of July 31, 1997, between the Lessee and the Lessor. "Construction Agent" means the Lessee in its capacity as construction agent pursuant to the Construction Agency Agreement. "Construction Conditions" means the conditions set forth in Section 3.5 of the Master Agreement. "Construction Contract" means, with respect to any Leased Property, that certain construction contract, if any, between the Lessee and a General Contractor for the construction of the related Building, provided that such contract shall be assigned by the Lessee to the Lessor, and such assignment shall be consented to by such General Contractor, pursuant to an assignment of such construction contract substantially in the form of the Security Agreement and Assignment set forth as Exhibit D to the Master Agreement. "Construction Force Majeure Event" means, with respect to any Leased Property: (a) an act of God arising after the related Closing Date, or (b) any change in any state or local law, regulation or other legal requirement arising after such Closing Date and relating to the use of the Land or the construction of a building on the Land, or (c) strikes, lockouts, labor troubles, unavailability of materials, riots, insurrections or other causes beyond the Lessee's control which prevents the Lessee from completing the Construction prior to the Scheduled Construction Termination Date and which could not have been avoided or which cannot be remedied by the Lessee through the exercise of all commercially reasonable efforts or the expenditure of funds and, in the case of (b) above, the existence or potentiality of which was not known to and could not have been discovered prior to such Closing Date through the exercise of due diligence by the Lessee. -11- "Construction Land Interest" means each parcel of Land for which the Completion Date has not yet occurred. "Construction Term" means, with respect to any Leased Property, the period commencing on the related Closing Date and ending on the related Construction Term Expiration Date, or such shorter period as may result from earlier termination of the Lease as provided therein. "Construction Term Expiration Date" means, with respect to any Leased Property, the earlier of the following: (a) the related Completion Date, and (b) the related Scheduled Construction Termination Date. "Contractual Obligation" of any Person means any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property owned by it is bound. "Deed" means, with respect to any Land, a General Warranty Deed, dated the applicable Closing Date, from the applicable Seller to the Lessor, conveying such Land. "Eligible Assignee" means any of the following: (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $100,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $100,000,000; (iii) a commercial bank organized under the laws of any other country having total assets in excess of $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (iv) a finance company, insurance company or other financial institution, lender or fund (whether a corporation, partnership or other entity) which is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, and having total assets in excess of at least $100,000,000; (v) any Funding Party or any Affiliate of any Funding Party; or (vi) any other Person consented to by the Lessee and the Agent, such consent not unreasonably to be withheld. "Environmental Audit" means, with respect to each parcel of Land, a Phase I Environmental Assessment, which meets or exceeds ASTM Standard E1527-97 and is dated no more than 60 days prior to the related Closing Date, by an environmental services firm satisfactory to the Funding Parties. -12- "Environmental Authority" means any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Law. "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Lessee or any Consolidated Subsidiary required by any Environmental Law. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Law, whether or not entered upon consent or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Law, whether or not incorporated in a judgment, decree or other. "Environmental Laws" means and include the Resource Conservation and Recovery Act of 1976, (RCRA) 42 U.S.C. Section Section 6901-6987, as amended by the Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section Section 9601-9657, (CERCLA), the Clean Air Act, 42 U.S.C. Section Section 7401 et seq., the Occupational Safety and Health Act, the Toxic Substances Control Act, the Emergency Planning and Community Right to Know Act and any comparable or implementing federal, state or local environmental laws, ordinances, rules, orders, statutes, decrees, judgments, injunctions, codes and regulations, and any other federal, state or local laws, ordinances, rules, codes and regulations, and any other federal, state or local laws, ordinances, rules, codes and regulations relating to the environment, human health or natural resources or the regulation or control of or imposing liability or standards of conduct concerning human health, the environment, Hazardous Materials or the clean-up or other remediation of any Leased Property, or any part thereof, as any of the foregoing may have been from time to time amended, supplemented or supplanted. "Environmental Liabilities" means any liabilities, whether accrued, contingent or otherwise, arising from and in any way associated with any Environmental Law. "Environmental Notices" means notice from any Environmental Authority or by any other person or entity, of possible or alleged noncompliance with or liability under any Environmental Law, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any, violation of any Environmental Law or any investigations concerning any violation of any Environmental Law. -13- "Environmental Permits" means all permits, licenses, authorizations, certificates and approvals of Governmental Authorities required by Environmental Law. "Environmental Proceedings" means any judicial or administrative proceedings arising from or in any way associated with any Environmental Law. "Environmental Releases" means releases as defined in CERCLA or under any applicable Environmental Law. "Equifax" means Equifax Inc., a Georgia corporation. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. "ERISA Affiliate" means, with respect to any Person, each trade or business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of the regulations promulgated under Section 414 of the Tax Code. "Event of Default" means any event or condition designated as an "Event of Default" in Article XII of the Lease. "Event of Loss" is defined in Section 10.1 of the Lease. "Event of Taking" is defined in Section 10.2 of the Lease. "Excepted Claims" is defined in Section 7.1 of the Master Agreement. "Executive Officer" means, with respect to any Person, Chief Executive Officer, President, Chief Financial Officer, the Chief Legal Officer, the Treasurer, any Assistant Treasurer and any Person holding comparable offices or duties. "Fair Market Rental Value" means, with respect to any Leased Property, the fair market rental value as determined by an independent appraiser chosen by the Lessor that would be obtained in an arm's-length lease between an informed and willing lessee and an informed and willing lessor, in either case under no compulsion to lease, and neither of which is related to the Lessor or Lessee for the lease of such Leased Property on the terms set forth, or referred to, in the Lease. Such fair market rental value shall be calculated as the value for the use of such Leased Property to be leased in place at the Land, assuming, in the determination of such fair market rental value, that such Leased Property is in the condition and repair required to be maintained by the terms of the related Lease (unless such fair market rental value is being determined for the purposes of -14- Section 13.1 of the Lease and except as otherwise specifically provided in the Lease, in which case this assumption shall not be made). "Fair Market Sales Value" means, with respect to any Leased Property or any portion thereof, the fair market sales value as determined by an independent appraiser chosen by the Lessor or, so long as the Funded Amounts are outstanding, the Agent that would be obtained in an arm's-length transaction between an informed and willing buyer (other than a lessee currently in possession) and an informed and willing seller, under no compulsion, respectively, to buy or sell and neither of which is related to the Lessor or Lessee, for the purchase of such Leased Property. Such fair market sales value shall be calculated as the value for the use of such Leased Property, assuming, in the determination of such fair market sales value, that such Leased Property is in the condition and repair required to be maintained by the terms of the Lease (unless such fair market sales value is being determined for purposes of Section 13.1 of the Lease and except as otherwise specifically provided in the Lease or the Master Agreement, in which case this assumption shall not be made). "Final Rent Payment Date" with respect to any Leased Property is defined in Section 13.1(e) of the Lease. "Fiscal Quarter" means any fiscal quarter of the Lessee. "Fiscal Year" means any fiscal year of the Lessee. "Fixed Charge Coverage Ratio" means, as of the last day of any fiscal quarter of Lessee, the ratio of (A) Consolidated EBITR to (B) Consolidated Fixed Charges, in each case calculated with respect to the immediately preceding four fiscal quarters ending on such date. "Foreign Plan" means any pension, profit sharing, deferred compensation, or other employee benefit plan, program or arrangement maintained by any Foreign Subsidiary which, under applicable local law, is required to be funded through a trust or other funding vehicle, but shall not include any benefit provided by a foreign government or its agencies. "Foreign Subsidiary" means each Consolidated Company that is organized under the laws of a jurisdiction other than the United States of America or any State thereof. "Funded Amount" means, as to the Lessor, the Lessor's Invested Amounts, and, as to each Lender, the outstanding principal of such Lender's Loans. -15- "Funded Debt" means all Indebtedness for money borrowed, Indebtedness evidenced or secured by purchase money Liens, capitalized leases, outstandings under asset securitization vehicles, conditional sales contracts and similar title retention debt instruments, including any current maturities of the foregoing, which by its terms matures more than one year from the date of any calculation thereof or which is renewable or extendable at the option of the obligor to a date beyond one year from such date. The calculation of Funded Debt shall include (i) all Funded Debt of the Consolidated Companies, plus (ii) all Funded Debt of other Persons to the extent guaranteed by a Consolidated Company, to the extent supported by a letter of credit issued for the account of a Consolidated Company, or as to which and to the extent which a Consolidated Company or its assets otherwise have become liable for payment thereof, plus (iii) the redemption amount with respect to the stock of the Lessee required to be redeemed during the next succeeding twelve months at the option of the holder or its Subsidiaries. Notwithstanding the foregoing, "Funded Debt" shall exclude the Operative Documents and all operating lease obligations. "Funding" means any funding by the Funding Parties pursuant to Section 2.2 of the Master Agreement. "Funding Date" means collectively, each Closing Date and each other date during the Construction Term on which a Funding occurs under Section 2 of the Master Agreement. "Funding Office" means for each Funding Party the office such Funding Party may designate in writing from time to time to the Lessee and the Agent as its funding office. "Funding Parties" means the Lessor, the Agent, the Lease Participant and the Lenders, collectively. "Funding Party Balance" means, with respect to any Leased Property, (i) for the Lessor as of any date of determination, an amount equal to the sum of the outstanding related Lessor's Invested Amount (less the related Lease Participant Amount), all accrued and unpaid Yield on such outstanding related Lessor's Invested Amount (less the related Lease Participant Amount), all unpaid related fees owing to the Lessor under the Operative Documents, and all other related amounts owing to the Lessor by the Lessee under the Operative Documents, (ii) for the Lease Participant as of any date of determination, an amount equal to the sum of the outstanding related Lease Participant Amount, all accrued and unpaid Yield thereon, all unpaid related fees owing to the Lease Participant under the Operative Documents, and all other related amounts owing to the Lease Participant by the Lessee under the Operative Documents, and (iii) for any Lender as of any date of determination, an amount equal to the sum of the -16- outstanding related Loans of such Lender, all accrued and unpaid interest thereon, all unpaid related fees owing to such Lender under the Operative Documents, and all other related amounts owing to such Lender by the Lessee under the Operative Documents. "Funding Request" is defined in Section 2.2 of the Master Agreement. "Funding Termination Date" means January 31, 1999. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "General Contractor" means with respect to any Leased Property the general contractor under the related Construction Contract as may be selected by the Lessee. "Governmental Action" means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law and shall include, without limitation, all citings, environmental and operating permits and licenses that are required for the use, occupancy, zoning and operation of any Leased Property. "Governmental Authority" means any foreign or domestic federal, state, county, municipal or other governmental or regulatory authority, agency, board, body, commission, instrumentality, court or any political subdivision thereof. "Guarantor" means the Lessee, in its capacity as guarantor under the Operative Guaranty. "Guaranty" means any contractual obligation, contingent or otherwise, of a Person with respect to any Indebtedness or other obligation or liability of another Person, including without limitation, any such Indebtedness, obligation or liability directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including contractual obligations (contingent or otherwise) arising through any agreement to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or any agreement to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make any payment other than for value received. The amount of any Guaranty shall be deemed to be an -17- amount equal to the stated or determinable amount of the primary obligation in respect of which guaranty is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Hazardous Materials" means any pollutant, contaminant, waste, hazardous or toxic chemical including asbestos containing materials in any form or condition; urea formaldehyde foam insulation; polychlorinated biphenyls (PCBs) in any form or condition; including, without limitation, any solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. Section 6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, any "hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in any applicable state or local law or regulation; gasoline, or any other petroleum product or by-product, including, crude oil or any fraction thereof; toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable state or local law or regulation; or insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Indebtedness" of any Person means, without duplication (i) all obligations of such Person which in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (ii) all rental obligations under leases required to be capitalized under GAAP; (iii) all Guaranties of such Person (including contingent reimbursement obligations under undrawn letters of credit); (iv) Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; and (v) obligations or other liabilities under currency contracts, interest rate hedging contracts, or similar agreements or combinations thereof to the extent required to be disclosed in such Person's financial statements in accordance with GAAP. "Indemnified Risks" is defined in Section 7.1 of the Master Agreement. "Indemnitee" means the Agent (in its individual capacity and in its capacity as Agent), the Lease Participant, each Lender, and the Lessor, and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents; provided, however, that in no event shall the Lessee be an Indemnitee. -18- "Indemnitee Group" means the respective Affiliates, employees, officers, directors and agents of the Agent (in its individual capacity), the Lease Participant, each Lender or the Lessor, as applicable; provided, however, that in no event shall the Lessee be a member of the Indemnitee Group. "Initial Closing Date" means the Closing Date for the first Leased Property acquired by the Lessor. "Investment" means, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, Capital Stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. Each Investment shall be valued as of the date made; provided that any Investment or portion of an Investment consisting of Indebtedness shall be valued at the outstanding principal balance thereof as of the date of determination. "Land" means the land described in Appendix B to the related Lease Supplement. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, treaties or decrees of any governmental or political subdivision or agency thereof, or of any court or similar entity established by any thereof. "Lease" means the Lease Agreement, dated as of July 31, 1997, together with each Lease Supplement thereto, between the Lessee and the Lessor, with such modifications as are satisfactory to the Lessor and the Agent in conformity with Applicable Law to assure customary remedies in favor of the Funding Parties in the jurisdiction where the Leased Property is located. "Lease Balance" means, with respect to the Leased Properties, as of any date of determination, an amount equal to the sum of all Funding Party Balances. "Lease Participant" means SunTrust Bank, Atlanta and such other Persons, if any, who may become parties to the Lease Participation Agreement as Lease Participants, provided that, unless such other Person is an Affiliate of SunTrust Bank, Atlanta, Lessee consents to such other Person, which consent shall not be unreasonably withheld. -19- "Lease Participation Agreement" means the Lease Participation Agreement dated as of July 31, 1997, between the Lessor and the Lease Participant. "Lease Participant Amount" means the amounts funded by the Lease Participant pursuant to Section 2.2 of the Lease Participation Agreement (as increased during the related Construction Term by an amount equal to the Lease Participant's Percentage of the increase in the related Lessor's Invested Amount pursuant to Section 2.3(c) of the Master Agreement), as the purchase price for the Lease Participation. "Lease Participant Commitment" is defined in Section 2.2 of the Lease Participation Agreement. "Lease Participation" is defined in Section 2.1 of the Lease Participation Agreement. "Lease Supplement" is defined in Section 2.1 of the Lease. "Lease Term" with respect to the Lease means (a) the Base Term, as it may be renewed pursuant to Section 14.9 of the Lease or (b) such shorter period as may result from earlier termination of the Lease as provided therein. "Lease Termination Date" means the last day of the Lease Term, as the same may be accelerated pursuant to the Lease. "Leased Property" means Land and the related Building(s). For purpose of the Lease, "Leased Property" means the property subject to a Lease Supplement, unless the context provides otherwise. "Leased Property Balance" means, with respect to any Leased Property, as of any date of determination, an amount equal to that portion of the Lease Balance which relates to such Leased Property. "Lender Basic Rent" means, for any Rent Period under the Lease when a Loan is outstanding, the aggregate amount of interest accrued on the Loans related to the Leased Property subject to the Lease pursuant to Section 2.5 of the Loan Agreement during such Rent Period. "Lenders" means such financial institutions as are, or who may hereafter become, parties to the Loan Agreement as Lenders to the Lessor. "Lessee" is defined in the preamble to the Master Agreement. "Lessor" is defined in the preamble to the Master Agreement. -20- "Lessor Basic Rent" means, for any Rent Period under any Lease, the aggregate amount of Yield accrued on the Lessor's Invested Amounts under the Lease under Section 2.3(a) of the Master Agreement during such Rent Period. "Lessor Liens" means Liens on or against any Leased Property, the Lease, any other Operative Document or any payment of Rent (a) which result from any act or omission of, or any Claim against, the Lessor unrelated to the transactions contemplated by the Operative Documents or (b) which result from any Tax owed by the Lessor, except any Tax for which the Lessee is obligated to indemnify (including, without limitation, in the foregoing exception, any assessments with respect to any Leased Property noted on the related Title Policy or assessed in connection with any construction or development by the Lessee). "Lessor's Invested Amount" means the amounts funded by the Lessor pursuant to Section 2 of the Master Agreement that are not proceeds of Loans by a Lender, as increased during the related Construction Term pursuant to Section 2.3(c) of the Master Agreement. "LIBOR Advance" means that portion of the Funded Amount hearing interest based on the LIBOR Rate. "LIBOR Rate" means, with respect to any Rent Period, the rate per annum equal to the offered rate for deposits in U.S. Dollars of amounts equal or comparable to the aggregate principal amount of the related LIBOR Advance offered for a term comparable to such Rent Period, which rates appear on the Telerate Page 3750 (if the foregoing rate is unavailable from the Telerate for any reason, then such rate shall be determined by the Agent from the Reuters Screen LIBO Page) as of 11:00 a.m. London time, two (2) Business Days prior to the first day of such Rent Period, provided that (x) if more than one such offered rate appears on the Reuters Screen LIBO Page, the rate used to determine the LIBOR Rate will be the arithmetic average (rounded upward, if necessary, to the next higher 1/16th of 1%) of such offered rates), or (y) if no such offered rates appear on such pages, the rate used for such Rent Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/16th of 1%) of rates quoted by not less than two major banks in New York, New York, selected by the Agent, at approximately 10:00 a.m., New York time, two (2) Business Days prior to the first day of such Rent Period, for deposits in U.S. Dollars offered to leading European banks for a period comparable to such Period in an amount comparable to the principal amount of the Lease Participant Amounts and the Loans, the rate so determined to be rounded upwards to the nearest multiple of 1/100th of 1%. All determinations of Yield, interest, Lessor Basic Rent, Lender Basic Rent, LIBOR Rate, Alternative Rate, and Overdue Rate by the -21- Agent shall, in the absence of demonstrable error, be binding and conclusive upon the Lessee. "LIBOR Reserve Percentage" means, for any Rent Period and for any Funding Party, the aggregate reserve requirement (including any basic, emergency, supplemental, marginal or other reserve requirement) which is actually imposed on such Funding Party during such Rent Period under Regulation D of the Board of Governors of the Federal Reserve System with respect to liabilities or assets consisting of or including "Eurocurrency liabilities" having a term equal to the applicable Rent Period. "Lien" means any mortgage, deed of trust, security deed, pledge, security interest, encumbrance, lien, easement, servitude or charge of any kind, including, without limitation, any irrevocable license, conditional sale or other title retention agreement, any lease in the nature thereof, or any other right of or arrangement with any creditor to have its claim satisfied out of any specified property or asset with the proceeds therefrom prior to the satisfaction of the claims of the general creditors of the owner thereof, whether or not filed or recorded, or the filing of, or agreement to execute as "debtor", any financing or continuation statement under the Uniform Commercial Code of any jurisdiction or any federal, state or local lien imposed pursuant to any Environmental Law. "Loan" shall have the meaning specified in Section 2.1 of the Loan Agreement. "Loan Agreement" means the Loan Agreement among the Lessor, the Agent and the Lenders, substantially in the form of Exhibit K to the Master Agreement. "Loan Documents" means the Loan Agreement, the Notes, the Assignments of Lease and Rents, the Mortgages and all documents and instruments executed and delivered in connection with each of the foregoing. "Loan Event of Default" means any of the events specified in Section 5.1 of the Loan Agreement, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, event or act has been satisfied. "Loan Potential Event of Default" means any event, condition or failure which, with notice or lapse of time or both, would become a Loan Event of Default. "Loss Proceeds" is defined in Section 10.6 of the Lease. "Margin Regulations" means Regulation G, Regulation T, Regulation U and Regulation X of the Board of Governors of the -22- Federal Reserve System, as the same may be in effect from time to time. "Margin Stock" means "margin stock" as defined in Regulations G, T, U or X. "Master Agreement" means the Master Agreement, dated as of July 31, 1997, among the Lessee, the Guarantor, the Lessor, the Agent and the Lenders. "Material Adverse Effect" means a material adverse effect upon the financial condition, operations, performance or properties of the Lessee, or the ability of the Lessee to perform in any material respect under the Operative Documents or the value, utility or useful life of any Leased Property, or the validity, enforceability or legality of any of the Operative Documents, or the priority, perfection or status of any Funding Party's interest in any Leased Property. "Material Subsidiary" means each Subsidiary of Lessee, now existing or hereafter established or acquired, that at any time prior to the Lease Termination Date (i) has or acquires assets which constitute fifteen percent (15%) or more of the Total Assets or (ii) accounts for or produces fifteen percent (15%) or more of Consolidated EBITDA during the most recently completed fiscal year of Lessee. "Mortgage" means, with respect to any Leased Property, that certain mortgage, deed of trust or security deed, dated as of the related Closing Date, by the Lessor to the Agent, in the form of Exhibit D attached to the Master Agreement, with such modifications as are satisfactory to the Lessor and the Agent in conformity with Applicable Law to assure customary remedies in favor of the Agent in the jurisdiction where the Leased Property is located. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Non-Completion Event" means the failure to complete construction on any Leased Property on the Construction Term Expiration Date therefor in accordance with the Construction Agency Agreement. "Notes" means the A Note and the B Note issued by the Lessor under the Loan Agreement, and any and all notes issued in replacement or exchange therefor in accordance with the provisions thereof. -23- "Obligations" means all amounts owed by, and obligations of, the Lessor to the Lenders or the Agent under the Loan Agreement, Notes and other Operative Documents. "Officer's Certificate" of a Person means a certificate signed by the Chairman of the Board or the President or any Executive Vice President or any Senior Vice President or any other Vice President of such Person signing with the Treasurer or any Assistant Treasurer or the Controller or any Assistant Controller or the Secretary or any Assistant Secretary of the such Person, or by any Vice President who is also Controller or Treasurer signing alone. "Operative Documents" means the Master Agreement, the Operative Guaranty, the Purchase Agreements, the Deeds, the Lease, the Lease Participation Agreement, the Security Agreement and Assignment, the Notes, the Loan Agreement, the Assignments of Lease and Rents, the Mortgages and the other documents delivered in connection with the transactions contemplated by the Master Agreement. "Operative Guaranty" means the Guaranty dated as of July 31, 1997 by the Guarantor in favor of the Funding Parties. "Overdue Rate" means the lesser of (a) the highest interest rate permitted by Applicable Law and (b)(i) during the Rent Period in which the payment default first occurs, the LIBOR Rate for such Rent Period plus the Applicable Margin plus 2%, and (ii) after such Rent Period, an interest rate per annum (calculated on the basis of a 365-day (or 366-day, if appropriate) year equal to 2.0% above the Alternative Rate in effect from time to time. "Payment Date" means the last day of each Rent Period (and if such Rent Period is longer than 90 days or three months, the day that is 90 days after the first day of such Rent Period) or, if such day is not a Business Day, the next Business Day. "Payment Date Notice" is defined in Section 2.3(e) of the Master Agreement. "PBGC" means the Pension Benefit Guaranty Corporation, and any successor thereto. "Permitted Liens" means the following with respect to any Leased Property: (a) the respective rights and interests of the Lessee, the Lessor, the Agent, the Lease Participant and any Lender, as provided in the Operative Documents, (b) Liens for Taxes either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (c) materialmen's, mechanics', workers', repairmen's, employees' or other like Liens arising -24- after the related Closing Date in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (d) Liens arising after such Closing Date out of judgments or awards with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith, so long as the enforcement thereof has been stayed pending such appeal or review, (e) easements, rights of way, reservations, servitudes and rights of others against the Land which do not materially and adversely affect the value or the utility of such Leased Property, (f) other Liens incidental to the conduct of Lessee's business which were not incurred in connection with the borrowing of money or the obtaining of advances or credit and which do not in the aggregate materially detract from the value of such Leased Property or materially impair the use thereof, and (g) assignments, leases and subleases expressly permitted by the Operative Documents. "Person" means any individual, limited liability company, partnership, firm, corporation, association, joint venture, trust or other entity, or any government or political subdivision or agency, department or instrumentality thereof. "Plan" means any "employee benefit plan" (as defined in Section 3(3) of ERISA), including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits, but shall exclude any Foreign Plan. "Plans and Specifications" means with respect to any Building the final plans and specifications for such Building prepared by the Architect, and referred to by the Appraiser in the Appraisal, as such Plans and Specifications may be hereafter amended, supplemented or otherwise modified from time to time. "Potential Event of Default" means any event, condition or failure which, with notice or lapse of time or both, would become an Event of Default. "Properties" means all real property owned, leased or otherwise used or occupied by the Lessee or any Consolidated Subsidiary, wherever located. "Purchase Agreement" means with respect to any Land, the purchase agreement with the Seller for the conveyance of such Land to the Lessor. -25- "Purchase Option" is defined in Section 14.1 of the Lease. "Recourse Deficiency Amount" means, as of any date of determination thereof, the sum of (i) the aggregate principal amount of the A Loans then outstanding, plus the A Percentage of the Lessor's Invested Amounts then outstanding, plus (ii) all accrued and unpaid Yield on the A Percentage of the Lessor's Invested Amounts and all accrued and unpaid interest on the A Loans. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation G" means Regulation G of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulations" means the income tax regulations promulgated from time to time under and pursuant to the Code. "Release" means the release, deposit, disposal or leak of any Hazardous Material into or upon or under any land or water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying, placement and the like. "Release Date" means, with respect to any Leased Property, the earlier of (i) the date that the related Leased Property Balance has been paid in full, and (ii) the date on which the Agent gives notice to the Lessor that the Lease Participant and the Lenders release any and all interest they may have in such Leased Property, and all proceeds thereof, and any rights to -26- direct, consent or deny consent to any action by the Lessor with respect to such Leased Property. "Remarketing Option" is defined in Section 14.6 of the Lease. "Rent" means Basic Rent and Supplemental Rent, collectively. "Rent Period" means in the case of LIBOR Advances, either a 1, 2, 3 or 6 month period; provided that: (a) The initial Rent Period for any Funding shall commence on the Funding Date of such Funding and each Rent Period occurring thereafter in respect of such Funding shall commence on the day on which the next preceding Rent Period expires; (b) If any Rent Period would otherwise expire on a day which is not a Business Day, such Rent Period shall expire on the next succeeding Business Day, provided that if any Rent Period in respect of LIBOR Advances would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Rent Period shall expire on the next preceding Business Day; (c) Any Rent Period in respect of LIBOR Advances which begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Rent Period shall, subject to paragraph (d) below, expire on the last Business Day of such calendar month; and (d) No Rent Period shall extend beyond the Lease Termination Date. "Report" is defined in Section 7.6 of the Master Agreement. "Required Lenders" means, at any time, Lenders holding an aggregate outstanding principal amount of Loans equal to at least 66-2/3% of the aggregate outstanding principal amount of all Loans. "Required Funding Parties" means, at any time, Funding Parties holding an aggregate outstanding principal amount of Funded Amounts equal to at least 66-2/3% of the aggregate outstanding principal amount of all Funded Amounts. "Requirements of Law" means, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation, permit, approval, authorization, license or variance, order or determination of an -27- arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including, without limitation, the Securities Act, the Securities Exchange Act, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, and any building, environmental or land use requirement or permit or occupational safety or health law, rule or regulation. "Responsible Financial Officer" is defined in Section 5.1(c) of the Master Agreement. "Responsible Officer" means the Chairman or Vice Chairman of the Board of Directors, the Chairman or Vice Chairman of the Executive Committee of the Board of Directors, the President, any Senior Vice President or Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer. "Scheduled Construction Termination Date" means with respect to any Building January 31, 1999. "SEC" means the United States Securities and Exchange Commission. "Securities" means any stock, shares, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities", or any certificates of interest, shares, or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Security Agreement and Assignment" means, with respect to any Leased Property, the Security Agreement and Assignment (Construction Contract, Architect's Agreement, Permits, Licenses and Governmental Approvals, and Plans, Specifications and Drawings) from the Lessee to the Lessor, substantially in the form of Exhibit C to the Master Agreement. "Seller" means as to any Leased Property, the seller thereof to the Lessor on the related Closing Date. -28- "Solvent" means, as to Lessee at any time, that (i) each of the fair value and the present fair saleable value of such Person's assets (including any rights of subrogation or contribution to which such Person is entitled, under any of the Operative Documents or otherwise) is greater than such Person's debts and other liabilities (including contingent, unmatured and unliquidated debts and liabilities) and the maximum estimated amount required to pay such debts and liabilities as such debts and liabilities mature or otherwise become payable; (ii) such Person is able and expects to be able to pay its debts and other liabilities (including, without limitation, contingent, unmatured and unliquidated debts and liabilities) as they mature; and (iii) such Person does not have unreasonably small capital to carry on its business as conducted and as proposed to be conducted. "Spin Off" means the spinoff of stock of the Lessee by Equifax to shareholders of Equifax. "Spin Off Date" means the date on which the Spin Off is consummated. "Subsidiary" means, with respect to any Person, any corporation or other entity (including, without limitation, partnerships, joint ventures, and associations) regardless of its jurisdiction of organization or formation, at least a majority of the total combined voting power of all classes of voting stock or other ownership interests of which shall, at the time as of which any determination is being made, be owned by such Person, either directly or indirectly through one or more other Subsidiaries. "SunTrust" means SunTrust Banks, Inc., a Georgia corporation. "SunTrust Bank" is defined in the preamble to the Master Agreement. "Supplemental Rent" means any and all amounts, liabilities and obligations other than Basic Rent which the Lessee assumes or agrees or is otherwise obligated to pay under the Lease or any other Operative Document (whether or not designated as Supplemental Rent) to the Lessor, the Agent, the Lease Participant, any Lender or any other party, including, without limitation, amounts under Article XVI of the Lease, and indemnities and damages for breach of any covenants, representations, warranties or agreements, and all overdue or late payment charges in respect of any Funded Amount. "Tax" or "Taxes" is defined in Section 7.4 of the Master Agreement. -29- "Tax Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. "Tax Indemnitee" means the Lessor, the Lease Participant, the Agent, any Lender and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents thereof, provided, however, that in no event shall the Lessee be a Tax Indemnitee. "Telerate" means, when used in connection with any designated page and LIBOR, the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Title Insurance Company" means the company that has or will issue the title policies with respect to a Leased Property, which company shall be reasonably acceptable to the Funding Parties. "Title Policy" is defined in Section 3.1 of the Master Agreement. "Total Assets" means the total assets of the Consolidated Companies, determined in accordance with GAAP. "Transaction" means all the transactions and activities referred to in or contemplated by the Operative Documents. "UCC" means the Uniform Commercial Code of Georgia, as in effect from time to time. "Unfunded Benefit Liabilities" means with respect to any Plan or Multiemployer Plan at any time, the amount of unfunded benefit liabilities of such Plan or Multiemployer Plan at such time as determined under ERISA Section 4001(a)(18) which shall not be less than the accumulated benefit obligation, as disclosed in accordance with FAS 87, over the fair market value of Plan or Multiemployer Plan assets. "Voting Stock" shall mean the securities of any class or classes of the Lessee the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors of the Lessee (or persons performing similar functions). "Wholly Owned Subsidiary" means any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Lessee. "Yield" is defined in Section 2.3 of the Master Agreement. -30- EX-10.30 9 g87580exv10w30.txt EX-10.30 LEASE AGREEMENT Exhibit 10.30 ================================================================================ ================================================================================ LEASE AGREEMENT Dated as of July 31, 1997 between SUNTRUST BANKS, INC., as Lessor, and CHOICEPOINT INC., as Lessee ================================================================================ ================================================================================ TABLE OF CONTENTS (Lease Agreement)
Page ARTICLE I. DEFINITIONS.................................................................................... 1 ARTICLE II. LEASE OF LEASED PROPERTY....................................................................... 1 Section 2.1 Acceptance and Lease of Property...................................................... 1 Section 2.2 Acceptance Procedure.................................................................. 2 ARTICLE III. RENT........................................................................................... 2 Section 3.1 Basic Rent............................................................................ 2 Section 3.2 Supplemental Rent..................................................................... 2 Section 3.3 Method of Payment..................................................................... 3 Section 3.4 Late Payment.......................................................................... 3 Section 3.5 Net Lease; No Setoff, Etc............................................................. 3 Section 3.6 Certain Taxes......................................................................... 5 Section 3.7 Utility Charges....................................................................... 6 ARTICLE IV. WAIVERS........................................................................................ 6 ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES.......................................................... 7 ARTICLE VI. MAINTENANCE AND REPAIR; ALTERATIONS, MODIFICATIONS AND ADDITIONS....................................................... 8 Section 6.1 Maintenance and Repair; Compliance With Law................................................................... 8 Section 6.2 Alterations........................................................................... 9 Section 6.3 Title to Alterations.................................................................. 9 ARTICLE VII. USE............................................................................................ 9 ARTICLE VIII. INSURANCE..................................................................................... 10 ARTICLE IX. ASSIGNMENT AND SUBLEASING..................................................................... 12 ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE..................................................... 12 Section 10.1 Event of Loss........................................................................ 12 Section 10.2 Event of Taking...................................................................... 13 Section 10.3 Casualty............................................................................. 14 Section 10.4 Condemnation......................................................................... 14 Section 10.5 Verification of Restoration and Rebuilding........................................................................... 14 Section 10.6 Application of Payments.............................................................. 14 Section 10.7 Prosecution of Awards................................................................ 16 Section 10.8 Application of Certain Payments Not Relating to an Event of Taking....................................................... 16 Section 10.9 Other Dispositions................................................................... 16 Section 10.10 No Rent Abatement.................................................................... 17

Page ARTICLE XI. INTEREST CONVEYED TO LESSEE................................................................... 17 ARTICLE XII. EVENTS OF DEFAULT............................................................................. 18 ARTICLE XIII. ENFORCEMENT................................................................................... 21 Section 13.1 Remedies............................................................................. 21 Section 13.2 Remedies Cumulative; No Waiver; Consents............................................. 23 ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL ...................................................................................... 24 Section 14.1 Lessee's Option to Purchase.......................................................... 24 Section 14.2 Conveyance to Lessee................................................................. 25 Section 14.3 Acceleration of Purchase Obligation.................................................. 25 Section 14.4 Determination of Purchase Price...................................................... 25 Section 14.5 Purchase Procedure................................................................... 25 Section 14.6 Option to Remarket................................................................... 26 Section 14.7 Rejection of Sale.................................................................... 29 Section 14.8 Return of Leased Property............................................................ 30 Section 14.9 Renewal.............................................................................. 30 ARTICLE XV. LESSEE'S EQUIPMENT............................................................................ 31 ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE................................................................... 32 ARTICLE XVII. MISCELLANEOUS................................................................................. 32 Section 17.1 Reports.............................................................................. 32 Section 17.2 Binding Effect; Successors and Assigns; Survival............................................................................. 33 Section 17.3 Quiet Enjoyment...................................................................... 33 Section 17.4 Notices.............................................................................. 33 Section 17.5 Severability......................................................................... 34 Section 17.6 Amendment; Complete Agreements....................................................... 34 Section 17.7 Construction......................................................................... 34 Section 17.8 Headings............................................................................. 35 Section 17.9 Counterparts......................................................................... 35 Section 17.10 GOVERNING LAW........................................................................ 35 Section 17.11 Discharge of Lessee's Obligations by its Affiliates.................................................................... 35 Section 17.12 Liability of Lessor Limited.......................................................... 35 Section 17.13 Estoppel Certificates................................................................ 36 Section 17.14 No Joint Venture..................................................................... 36 Section 17.15 No Accord and Satisfaction........................................................... 36 Section 17.16 No Merger............................................................................ 36 Section 17.17 Survival............................................................................. 37 Section 17.18 Chattel Paper........................................................................ 37 Section 17.19 Time of Essence...................................................................... 37 Section 17.20 Recordation of Lease................................................................. 37 Section 17.21 Investment of Security Funds......................................................... 37
(ii) APPENDICES AND EXHIBITS APPENDIX A Defined Terms EXHIBIT A Lease Supplement (iii) THIS LEASE AGREEMENT (as from time to time amended or supplemented, this "Lease"), dated as of July 31, 1997 is between SUNTRUST BANKS, INC., a Georgia corporation (together with its successors and assigns hereunder, the "Lessor"), as Lessor, and CHOICEPOINT INC., a Georgia corporation (together with its successors and permitted assigns hereunder, the "Lessee"), as Lessee. PRELIMINARY STATEMENT A. Lessor will purchase from one or more third parties designated by Lessee, on each Closing Date, certain parcels of real property to be specified by Lessee, together with any improvements thereon. B. Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor, each such property. C. Lessee will construct certain improvements on such parcels of real property which as constructed will be the property of Lessor and will become part of such property subject to the terms of this Lease. In consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, Lessor and Lessee hereby agree as follows: ARTICLE I. DEFINITIONS Terms used herein and not otherwise defined shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof. ARTICLE II. LEASE OF LEASED PROPERTY Section 2.1 Acceptance and Lease of Property. On each Closing Date, Lessor, subject to the satisfaction or waiver of the conditions set forth in Section 3 of the Master Agreement, hereby agrees to accept delivery on such Closing Date of the Land designated by Lessee to be delivered on such Closing Date pursuant to the terms of the Master Agreement, together with any improvements thereon and simultaneously to lease to Lessee hereunder for the Lease Term, Lessor's interest in such Land and in such improvements, together with any Building which thereafter may be constructed thereon pursuant to the Construction Agency Agreement, and Lessee hereby agrees, expressly for the direct benefit of Lessor, commencing on such Closing Date for the Lease Term, to lease from Lessor's interest in such Land to be delivered on such Closing Date together with Lessor's interest in any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Construction Agency Agreement. Section 2.2 Acceptance Procedure. Lessor hereby authorizes one or more employees of Lessee, to be designated by Lessee, as the authorized representative or representatives of Lessor to accept delivery on behalf of Lessor of that Leased Property identified on the applicable Funding Request. Lessee hereby agrees that such acceptance of delivery by such authorized representative or representatives and the execution and delivery by Lessee on each Closing Date of a Lease Supplement in substantially the form of Exhibit A hereto (appropriately completed) shall, without further act, constitute the irrevocable acceptance by Lessee of that Leased Property which is the subject thereof for all purposes of this Lease and the other Operative Documents on the terms set forth therein and herein, and that such Leased Property, together with any improvements constructed thereon pursuant to the Construction Agency Agreement, shall be deemed to be included in the leasehold estate of this Lease and shall be subject to the terms and conditions of this Lease as of such Closing Date. The demise and lease of each Building pursuant to this Section 2.2 shall include any additional right, title or interest in such Building which may at any time be acquired by Lessor, the intent being that all right, title and interest of Lessor in and to such Building shall at all times be demised and leased to Lessee hereunder. ARTICLE III. RENT Section 3.1 Basic Rent. Beginning with and including the first Payment Date occurring after the Closing Date, Lessee shall pay to the Agent the Basic Rent for the Leased Properties, in installments, payable in arrears on each Payment Date during the Lease Term, subject to Section 2.3(c) of the Master Agreement. Section 3.2 Supplemental Rent. Lessee shall pay to the Agent, or to whomever shall be entitled thereto as expressly provided herein or in any other Operative Document, any and all Supplemental Rent within five (5) Business Days of the date the same shall become due and payable and in the event of any failure on the part of Lessee to pay any Supplemental Rent, the Agent shall have all rights, powers and remedies provided for herein or by law or in equity or otherwise in the case of nonpayment of Basic Rent. All Supplemental Rent to be paid pursuant to this 2 Section 3.2 shall be payable in the type of funds and in the manner set forth in Section 3.3. Section 3.3 Method of Payment. Basic Rent shall be paid to the Agent, and Supplemental Rent (including amounts due under Article XIV hereof) shall be paid to the Agent (or to such Person as may be entitled thereto) or, in each case, to such Person as the Agent (or such other Person) shall specify in writing to Lessee, and at such place as the Agent (or such other Person) shall specify in writing to Lessee, which specifications by the Agent shall be given by the Agent at least five (5) Business Days prior to the due date therefor. Each payment of Rent (including payments under Article XIV hereof) shall be made by Lessee prior to 12:00 p.m. (noon) Atlanta, Georgia time at the place of payment in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding Business Day. Section 3.4 Late Payment. If any Basic Rent shall not be paid on the date when due, Lessee shall pay to the Agent, as Supplemental Rent, interest (to the maximum extent permitted by law) on such overdue amount from and including the due date thereof to but excluding the Business Day of payment thereof at the Overdue Rate. Section 3.5 Net Lease; No Setoff, Etc. This Lease is a net lease and notwithstanding any other provision of this Lease, Lessee shall pay all Basic Rent and Supplemental Rent, and all costs, charges, taxes (other than taxes covered by the exclusion described in Section 7.4(b) of the Master Agreement), assessments and other expenses foreseen or unforeseen, for which Lessee or any Indemnitee is or shall become liable by reason of Lessee's or such Indemnitee's estate, right, title or interest in the Leased Properties, or that are connected with or arise out of the acquisition (except the initial costs of purchase by Lessor of its interest in any Leased Property, which costs, subject to the terms of the Master Agreement, shall be funded by the Funding Parties pursuant to the Master Agreement), installation, possession, use, occupancy, maintenance, ownership, leasing, repairs and rebuilding of, or addition to, the Leased Properties or any portion thereof, and any other amounts payable hereunder and under the other Operative Documents without counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and Lessee's obligation to pay all such amounts throughout the Lease Term, including the Construction Term, is absolute and unconditional. The obligations and liabilities of Lessee hereunder shall in no way be released, discharged or otherwise affected for any reason, 3 including without limitation: (a) any defect in the condition, merchantability, design, quality or fitness for use of any Leased Property or any part thereof, or the failure of any Leased Property to comply with all Applicable Law, including any inability to occupy or use any Leased Property by reason of such non-compliance; (b) any damage to, removal, abandonment, salvage, loss, contamination of or Release from, scrapping or destruction of or any requisition or taking of any Leased Property or any part thereof; (c) any restriction, prevention or curtailment of or interference with any use of any Leased Property or any part thereof including eviction; (d) any defect in title to or rights to any Leased Property or any Lien on such title or rights or on any Leased Property; (e) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by Lessor, the Agent, any Lease Participant or any Lender; (f) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to Lessee, Lessor, any Lease Participant, any Lender, the Agent or any other Person, or any action taken with respect to this Lease by any trustee or receiver of Lessee, Lessor, any Lease Participant, any Lender, the Agent or any other Person, or by any court, in any such proceeding; (g) any claim that Lessee has or might have against any Person, including without limitation, Lessor, any vendor, manufacturer, contractor of or for any Building or any part thereof, the Agent, any Lease Participant or any Lender; (h) any failure on the part of Lessor to perform or comply with any of the terms of this Lease, any other Operative Document or of any other agreement; (i) any invalidity or unenforceability or illegality or disaffirmance of this Lease against or by Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof whether or not related to the Transaction; (j) the impossibility or illegality of performance by Lessee, Lessor or both; (k) any action by any court, administrative agency or other Governmental Authority; (l) any restriction, prevention or curtailment of or interference with the Construction or any use of any Leased Property or any part thereof; or (m) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not Lessee shall have notice or knowledge of any of the foregoing. Except as specifically set forth in Articles XIV or X of this Lease, this Lease shall be noncancellable by Lessee in any circumstance whatsoever and Lessee, to the extent permitted by Applicable Law, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Lease, or to any diminution, abatement or reduction of Rent payable by Lessee hereunder. Each payment of Rent made by Lessee hereunder shall be final and Lessee shall not seek or have any right to recover all or any part of such payment from Lessor, the Agent, any Lease Participant, any Lender or any party to any agreements related 4 thereto for any reason whatsoever. Lessee assumes the sole responsibility for the condition, use, operation, maintenance, and management of the Leased Properties and Lessor shall have no responsibility in respect thereof and shall have no liability for damage to the property of either Lessee or any subtenant of Lessee on any account or for any reason whatsoever, other than solely by reason of Lessor's willful misconduct or gross negligence. Section 3.6 Certain Taxes. Without limiting the generality of Section 3.5, Lessee agrees to pay when due all real estate taxes, personal property taxes, gross sales taxes, including any sales or lease tax imposed upon the rental payments hereunder or under a sublease, occupational license taxes, water charges, sewer charges, assessments of any nature and all other governmental impositions and charges of every kind and nature whatsoever (the "tax(es)"), when the same shall be due and payable without penalty or interest; provided, however, that this Section shall not apply to any of the taxes covered by the exclusion described in Section 7.4(b) of the Master Agreement. It is the intention of the parties hereto that, insofar as the same may lawfully be done, Lessor shall be, except as specifically provided for herein, free from all expenses in any way related to the Leased Properties and the use and occupancy thereof. Any tax relating to a fiscal period of any taxing authority falling partially within and partially outside the Lease Term, shall be apportioned and adjusted between Lessor and Lessee. Lessee covenants to furnish Lessor and the Agent, upon the Agent's request, within forty-five (45) days after the last date when any tax must be paid by Lessee as provided in this Section 3.6, official receipts of the appropriate taxing, authority or other proof satisfactory to Lessor, evidencing the payment thereof. So long as no Event of Default has occurred and is continuing, Lessee may defer payment of a tax so long as the validity or the amount thereof is contested by Lessee with diligence and in good faith; provided, however, that Lessee shall pay the tax in sufficient time to prevent delivery of a tax deed. Such contest shall be at Lessee's sole cost and expense. Lessee covenants to indemnify and save harmless Lessor, the Agent, each Lease Participant and each Lender from any actual and reasonable costs or expenses incurred by Lessor, the Agent, any Lease Participant or any Lender as a result of such contest. Section 3.7 Utility Charges. Lessee agrees to pay or cause to be paid as and when the same are due and payable all charges for gas, water, sewer, electricity, lights, heat, power, telephone or other communication service and all other utility 5 services used, rendered or supplied to, upon or in connection with the Leased Properties. ARTICLE IV. WAIVERS During the Lease Term, Lessor's interest in the Building(s) (whether or not completed) and the Land is demised and let by Lessor "AS IS" subject to (a) the rights of any parties in possession thereof, (b) the state of the title thereto existing at the time Lessor acquired its interest in the Leased Properties, (c) any state of facts which an accurate survey or physical inspection might show (including the survey delivered on the Closing Date), (d) all Applicable Law, and (e) any violations of Applicable Law which may exist upon or subsequent to the commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT, ALTHOUGH LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTIES, LESSOR IS NOT RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT, ANY LEASE PARTICIPANT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, MERCHANTABILITY, TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE LEASED PROPERTIES (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTIES (OR ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY DISCLAIMED, AND NEITHER LESSOR, THE AGENT, ANY LEASE PARTICIPANT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY LEASED PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that Lessor hereby represents and warrants that each Leased Property is and shall be free of Lessor Liens. As between Lessor and Lessee, Lessee has been afforded full opportunity to inspect each Leased Property, is satisfied with the results of its inspections of such Leased Property and is entering into this Lease solely on the basis of the results of its own inspections and all risks incident to the matters discussed in the two preceding sentences, as between Lessor, the Agent, the Lease Participants or the Lenders on the one hand, and Lessee, on the other, are to be borne by Lessee. The provisions of this Article IV have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by Lessor, the Agent, the Lease Participants or the Lenders, express or implied, with respect to the Leased Properties, that may arise pursuant to any law now or hereafter in effect, or otherwise. 6 ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES Lessee shall not directly or indirectly create, incur or assume, any Lien on or with respect to any Leased Property, the title thereto, or any interest therein, including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of any Leased Property or by reason of labor or materials furnished or claimed to have been furnished to Lessee, or any of its contractors or agents or by reason of the financing of any personalty or equipment purchased or leased by Lessee from third parties and not financed by Lessor or Alterations constructed by Lessee, except, in all cases, Permitted Liens. Notwithstanding the foregoing paragraph, at the request of Lessee, Lessor shall, from time to time during the Lease Term and upon reasonable advance written notice from Lessee, and receipt of the materials specified in the next succeeding sentence, consent to and join in any (i) grant of easements, licenses, rights of way and other rights in the nature of easements, including, without limitation, utility easements to facilitate Lessee's use, development and construction of the Leased Properties, (ii) release or termination of easements, licenses, rights of way or other rights in the nature of easements which are for the benefit of the Land or the Building(s) or any portion thereof, (iii) dedication or transfer of portions of the Land, not improved with a building, for road, highway or other public purposes, (iv) execution of agreements for ingress and egress and amendments to any covenants and restrictions affecting the Land or the Building(s) or any portion thereof and (v) request to any Governmental Authority for platting or subdivision or replatting or resubdivision approval with respect to the Land or any portion thereof or any parcel of land of which the Land or any portion thereof forms a part or a request for any variance from zoning or other governmental requirements. Lessor's obligations pursuant to the preceding sentence shall be subject to the requirements that: (a) any such action shall be at the sole cost and expense of Lessee and Lessee shall pay all actual and reasonable out-of-pocket costs of Lessor and the Agent in connection therewith (including, without limitation, the reasonable fees of attorneys, architects, engineers, planners, appraisers and other professionals reasonably retained by Lessor or the Agent in connection with any such action), (b) Lessee shall have delivered to Lessor and Agent a certificate of a Responsible Officer of Lessee stating that 7 (1) such action will not cause any Leased Property, the Land or any Building or any portion thereof to fail to comply in any material respect with the provisions of the Lease or any other Operative Documents, or in any material respect with Applicable Law; and (2) such action will not materially reduce the Fair Market Sales Value, utility or useful life of any Leased Property, the Land or any Building nor Lessor's interest therein; and (c) in the case of any release or conveyance, if Lessor, the Agent, any Lease Participant or any Lender so reasonably requests, Lessee will cause to be issued and delivered to Lessor and the Agent by the Title Insurance Company an endorsement to the Title Policy pursuant to which the Title Insurance Company agrees that its liability for the payment of any loss or damage under the terms and provisions of the Title Policy will not be affected by reason of the fact that a portion of the real property referred to in Schedule A of the Title Policy has been released or conveyed by Lessor. ARTICLE VI. MAINTENANCE AND REPAIR; ALTERATIONS, MODIFICATIONS AND ADDITIONS Section 6.1 Maintenance and Repair; Compliance With Law. Lessee, at its own expense, shall at all times (a) maintain each Leased Property in good repair and condition (subject to ordinary wear and tear), in accordance with prudent industry standards and, in any event, in no less a manner as other similar office, warehouse and distribution centers, as the case may be, owned or leased by Lessee or its Affiliates, (b) make all Alterations in accordance with, and maintain (whether or not such maintenance requires structural modifications or Alterations) and operate and otherwise keep each Leased Property in compliance in all material respects with, all Applicable Laws and insurance requirements, and (c) make all material repairs, replacements and renewals of each Leased Property or any part thereof which may be required to keep such Leased Property in the condition required by the preceding clauses (a) and (b). Lessee shall perform the foregoing maintenance obligations regardless of whether any Leased Property is occupied or unoccupied. Lessee waives any right that it may now have or hereafter acquire to (i) require Lessor, the Agent, any Lease Participant or any Lender to maintain, repair, replace, alter, remove or rebuild all or any part of any Leased Property or (ii) make repairs at the expense of Lessor, the Agent, any Lease Participant or any Lender pursuant to any Applicable Law or other agreements or otherwise. 8 NEITHER LESSOR, THE AGENT, ANY LEASE PARTICIPANT NOR ANY LENDER SHALL BE LIABLE TO LESSEE OR TO ANY CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN, SUPPLIERS OR VENDORS FOR SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN CONNECTION WITH ANY LEASED PROPERTY OR ANY PART THEREOF. Neither Lessor, the Agent, any Lease Participant nor any Lender shall be required to maintain, alter, repair, rebuild or replace any Leased Property in any way. Section 6.2 Alterations. Lessee may, without the consent of Lessor, at Lessee's own cost and expense, make Alterations which do not materially diminish the value, utility or useful life of any Leased Property. Section 6.3 Title to Alterations. Title to all Alterations shall without further act vest in Lessor (subject to Lessee's right to remove trade fixtures, personal property and equipment which were not acquired with funds advanced by Lessor, any Lease Participant or any Lender at a time when no Event of Default has occurred and is continuing) and shall be deemed to constitute a part of the Leased Properties and be subject to this Lease. ARTICLE VII. USE Lessee may use each Leased Property or any part thereof for any lawful purpose, and in a manner consistent with the standards applicable to properties of a similar nature in the geographic area in which such Leased Property is located, provided that such use does not materially adversely affect the Fair Market Sales Value, utility, remaining useful life or residual value of such Leased Property, and does not materially violate or conflict with, or constitute or result in a material default under, any Applicable Law or any insurance policy required hereunder. In the event Lessee's use substantially changes the character of any Building in a manner or to an extent that, in Lessor's, the Lease Participants' or the Lenders' reasonable opinion, adversely affects the Fair Market Sales Value and/or marketability of such Building, Lessee shall, upon the termination or expiration of this Lease, at Lessor's request, restore such Leased Property to its general character at the Completion Date (ordinary wear and tear excepted). Lessee shall not commit or permit any waste of any Leased Property or any material part thereof. ARTICLE VIII. INSURANCE (a) At any time during which any part of any Building or any Alteration is under construction and as to any part of any 9 Building or any Alteration under construction, Lessee shall maintain, or cause to be maintained, at its sole cost and expense, as a part of its blanket policies or otherwise, "all risks" non-reporting completed value form of builder's risk insurance. (b) During the Lease Term, Lessee shall maintain, at its sole cost and expense, as a part of its blanket policies or otherwise, insurance against loss or damage to any Building by fire and other risks, including comprehensive boiler and machinery coverage, on terms and in amounts no less favorable than insurance covering other similar properties owned or leased by Lessee and that are in accordance with normal industry practice, but in no event less than the replacement cost of such Building from time to time. (c) During the Lease Term, Lessee shall maintain, at its sole cost and expense, commercial general liability insurance with respect to the Leased Properties, as is ordinarily procured by Persons who own or operate similar properties in the same geographic area. Such insurance shall be on terms and in amounts that are no less favorable than insurance maintained by Lessee or its Affiliates with respect to similar properties that it owns or leases and that are in accordance with normal industry practice, but in no event less than $1,000,000 per occurrence. Such insurance policies shall also provide that Lessee's insurance shall be considered primary insurance. Nothing in this Article VIII shall prohibit Lessor, the Agent, any Lease Participant or any Lender from carrying at its own expense other insurance on or with respect to the Leased Properties, provided that any insurance carried by Lessor, the Agent, any Lease Participant or any Lender shall not prevent Lessee from carrying the insurance required hereby. (d) Each policy of insurance maintained by Lessee pursuant to clauses (a) and (b) of this Article VIII shall provide that all insurance proceeds in respect of any loss or occurrence shall be adjusted by Lessee, except (a) that with respect to any loss, the estimated cost of restoration of which is in excess of 50% of the Funded Amounts with respect to the related Leased Property, the adjustment thereof shall be subject to the prior written approval of the Agent (or of Lessor if the Funded Amounts have been fully paid) and the insurance proceeds therefor shall be paid to the Agent (or to Lessor if the Funded Amounts have been fully paid) for application in accordance with this Lease, and (b) if, and for so long as an Event of Default exists, all losses shall be adjusted solely by, and all insurance proceeds shall be paid solely to, the Agent (or Lessor if the Funded Amounts have been fully paid) for application pursuant to this Lease. 10 (e) On the Closing Date for each Leased Property, on the Completion Date and within 15 days after each anniversary of the insurance policies, Lessee shall furnish Lessor with Acord certificates showing the insurance required under this Article VIII to be in effect and naming Lessor, the Agent, the Lease Participants and the Lenders as additional insureds. Such certificates shall include a provision for thirty (30) days' advance written notice by the insurer to Lessor and the Agent in the event of cancellation with respect to such insurance, and shall include a customary breach of warranty clause. (f) Each policy of insurance maintained by Lessee pursuant to this Article VIII shall (1) contain the waiver of any right of subrogation of the insurer against Lessor, the Agent, the Lease Participants and the Lenders (and any policy of insurance maintained by Lessor with respect to the Leased Property shall contain the waiver of any right of subrogation of the insurer against Lessee), and (2) provide that in respect of the interests of Lessor, the Agent, the Lease Participants and the Lenders, such policies shall not be invalidated by any action (excluding fraud), inaction or misrepresentation of Lessee or any other Person acting on behalf of Lessee. (g) All insurance policies carried in accordance with this Article VIII shall be maintained with insurers rated at least A by A.M. Best & Company, and in all cases the insurer shall be qualified to insure risks in the State where such Leased Property is located or be pre-approved by Lessor. ARTICLE IX. ASSIGNMENT AND SUBLEASING Lessee may not assign any of its right, title or interest in, to or under this Lease, except as set forth in the following sentence. Lessee may assign any of its right, title or interest in, to or under the Lease to an Affiliate of the Lessee and may sublease all or any portion of any Leased Property, provided that (a) all obligations of Lessee shall continue in full effect as obligations of a principal and not of a guarantor or surety, as though no assignment or sublease had been made; (b) such assignment or sublease, as the case may be, shall be expressly subject to and, in the case of such sublease, subordinate to this Lease, the Lease Participation Agreement, the Loan Agreement and the other Operative Documents; and (c) each such sublease shall terminate on or before the Lease Termination Date. Except pursuant to an Operative Document, this Lease shall not be mortgaged or pledged by Lessee, nor shall Lessee mortgage 11 or pledge any interest in any Leased Property or any portion thereof. Any such mortgage or pledge shall be void. ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE Section 10.1 Event of Loss. Any event (i) which would otherwise constitute a Casualty during the Base Term, and (ii) which, in the good-faith judgment of Lessee, renders repair and restoration of a Leased Property impractical or uneconomical, and (iii) as to which Lessee, within sixty (60) days after the occurrence of such event, delivers to Lessor an Officer's Certificate notifying Lessor of such event and of such judgment, shall constitute an "Event of Loss". In the case of any other event which constitutes a Casualty, Lessee shall restore such Leased Property pursuant to Section 10.3. If an Event of Loss other than an Event of Taking shall occur, Lessee shall pay to Lessor on the next Payment Date following delivery of the Officer's Certificate pursuant to clause (iii) above an amount equal to the related Leased Property Balance. Upon Lessor's receipt of such Leased Property Balance on such date, Lessor shall cause Lessor's interest in such Leased Property to be conveyed to Lessee in accordance with and subject to the provisions of Section 14.5 hereof; upon completion of such purchase, but not prior thereto, this Lease and all obligations hereunder with respect to such Leased Property shall terminate, except with respect to obligations and liabilities hereunder, actual or contingent, that have arisen or relate to events occurring on or prior to such date of purchase, or which are expressly stated herein to survive termination of this Lease. Upon the consummation of the purchase of any Leased Property pursuant to this Section 10.1, any proceeds derived from insurance required to be maintained by Lessee pursuant to this Lease for any Leased Property remaining after payment of such purchase price shall be paid over to, or retained by, Lessee or as it may direct, and Lessor shall assign to Lessee, without warranty, all of Lessor's rights to and interest in insurance required to be maintained by Lessee pursuant to this Lease. Section 10.2 Event of Taking. Any event (i) which constitutes a Condemnation of all of, or substantially all of, a Leased Property, or (ii) (A) which would otherwise constitute a Condemnation, (B) which, in the good-faith judgment of Lessee, renders restoration and rebuilding of a Leased Property impossible, impractical or uneconomical, and (C) as to which Lessee, within sixty (60) days after the occurrence of such event, delivers to Lessor an Officer's Certificate notifying Lessor of such event and of such judgment, shall constitute an 12 "Event of Taking". In the case of any other event which constitutes a Condemnation, Lessee shall restore and rebuild such Leased Property pursuant to Section 10.4. If an Event of Taking shall occur, Lessee shall pay to Lessor (1) on the next Payment Date following the occurrence of such Event of Taking, in the case of an Event of Taking described in clause (i) above, or (2) on the next Payment Date following delivery of the Officer's Certificate pursuant to clause (ii) above, in the case of an Event of Taking described in clause (ii) above, an amount equal to the related Leased Property Balance. Upon Lessor's receipt of such Leased Property Balance on such date, Lessor shall cause Lessor's interest in such Leased Property to be conveyed to Lessee in accordance with and subject to the provisions of Section 14.5 hereof (provided that such conveyance shall be subject to all rights of the condemning authority); upon completion of such purchase, but not prior thereto, this Lease and all obligations hereunder with respect to such Leased Property shall terminate, except with respect to obligations and liabilities hereunder, actual or contingent, that have arisen or relate to events occurring on or prior to such date of purchase, or which are expressly stated herein to survive termination of this Lease. Upon the consummation of the purchase of such Leased Property pursuant to this Section 10.2, all Awards received by Lessor, after deducting any reasonable costs incurred by Lessor in collecting such Awards, received or payable on account of an Event of Taking with respect to such Leased Property during the related Lease Term shall be paid to Lessee, and all rights of Lessor in Awards not then received shall be assigned to Lessee by Lessor. Section 10.3 Casualty. If a Casualty shall occur, Lessee shall rebuild and restore the affected Leased Property, will complete the same prior to the Lease Termination Date, and will cause the condition set forth in Section 3.5 (c) of the Master Agreement to be fulfilled with respect to such restoration and rebuilding prior to the Lease Termination Date, regardless of whether insurance proceeds received as a result of such Casualty are sufficient for such purpose. Section 10.4 Condemnation. If a Condemnation shall occur, Lessee shall rebuild and restore the affected Leased Property, will complete the same prior to the Lease Termination Date, and will cause the condition set forth in Section 3.5 (c) of the Master Agreement to be fulfilled with respect to such restoration and rebuilding prior to the Lease Termination Date. Section 10.5 Verification of Restoration and Rebuilding. In the event of Casualty or Condemnation, to verify Lessee's 13 compliance with the foregoing Sections 10.3 and 10.4, Lessor, the Agent and their respective authorized representatives may, upon five (5) Business Days' notice to Lessee, make inspections of the affected Leased Property with respect to (i) the extent of the Casualty or Condemnation and (ii) the restoration and rebuilding of the related Building and the Land. All actual and reasonable out-of-pocket costs of such inspections incurred by Lessor and the Agent will be paid by Lessee promptly after written request. No such inspection shall unreasonably interfere with Lessee's operations or the operations of any other occupant of such Leased Property. None of the inspecting parties shall have any duty to make any such inspection or inquiry and none of the inspecting parties shall incur any liability or obligation by reason of making or not making any such inspection or inquiry. Section 10.6 Application of Payments. All proceeds (except for payments under insurance policies maintained other than pursuant to Article VIII of this Lease) received at any time by Lessor, Lessee or the Agent from any Governmental Authority or other Person with respect to any Condemnation or Casualty to any Leased Property or any part thereof or with respect to an Event of Loss or an Event of Taking, plus the amount of any payment that would have been due from an insurer but for Lessee's self-insurance or deductibles ("Loss Proceeds"), shall (except to the extent Section 10.9 applies) be applied as follows: (a) In the event Lessee purchases such Leased Property pursuant to Section 10.1 or Section 10.2, such Loss Proceeds shall be applied as set forth in Section 10.1 or Section 10.2, as the case may be; (b) In the event of a Casualty at such time when no Event of Default has occurred and is continuing and Lessee is obligated to repair and rebuild such Leased Property pursuant to Section 10.3, Lessee may, in good faith and subsequent to the date of such Casualty, certify to Lessor and to the applicable insurer that no Event of Default has occurred and is continuing, in which event the applicable insurer shall pay the Loss Proceeds to Lessee, unless the estimated cost of restoration exceeds 50% of the original cost of such Leased Property, in which case the Loss Proceeds shall be paid to the Agent (or Lessor if the Funded Amounts have been paid in full), and shall be promptly released to Lessee upon certification by Lessee to Lessor and the Agent that Lessee has incurred costs in the amount requested to be released for the repair and rebuilding of such Leased Property; (c) In the event of a Condemnation at such time when no Event of Default has occurred and is continuing and 14 Lessee is obligated to repair and rebuild such Leased Property pursuant to Section 10.4, Lessor shall upon Lessee's request assign to Lessee Lessor's interest in any applicable Awards; and (d) As provided in Section 10.8, if such section is applicable. During any period of repair or rebuilding pursuant to this Article X, this Lease will remain in full force and effect and Basic Rent shall continue to accrue and be payable without abatement or reduction. Lessee shall maintain records setting forth information relating to the receipt and application of payments in accordance with this Section 10.6. Such records shall be kept on file by Lessee at its offices and shall be made available to Lessor, the Lease Participants, the Lenders and the Agent upon request. Section 10.7 Prosecution of Awards. (a) If, during the continuance of any Event of Default, any Condemnation shall occur, Lessee shall give to Lessor and the Agent promptly, but in any event within thirty (30) days after the occurrence thereof, written notice of such occurrence and the date thereof, generally describing the nature and extent of such Condemnation. With respect to any Event of Taking or any Condemnation, Lessee shall control the negotiations with the relevant Governmental Authority as to any proceeding in respect of which Awards are required, under Section 10.6, to be assigned or released to Lessee, unless an Event of Default shall have occurred and be continuing, in which case (1) the Agent (or Lessor if the Funded Amounts have been fully paid) shall control such negotiations; and (2) Lessee hereby irrevocably assigns, transfers and sets over to Lessor all rights of Lessee to any Award made during the continuance of an Event of Default on account of any Event of Taking or any Condemnation and, if there will not be separate Awards to Lessor and Lessee on account of such Event of Taking or Condemnation, irrevocably authorizes and empowers the Agent (or Lessor if the Funded Amounts have been fully paid) during the continuance of an Event of Default, with full power of substitution, in the name of Lessee or otherwise (but without limiting the obligations of Lessee under this Article X), to file and prosecute what would otherwise be Lessee's claim for any such Award and to collect, receipt for and retain the same; provided, however, that in any event Lessor and the Agent may participate in such negotiations, and no settlement will be made without the prior consent of the Agent (or Lessor if the Funded Amounts have been fully paid), not to be unreasonably withheld. (b) Notwithstanding the foregoing, Lessee may prosecute, and Lessor shall have no interest in, any claim with respect to 15 Lessee's personal property and equipment not financed by Lessor and Lessee's relocation expenses. Section 10.8 Application of Certain Payments Not Relating to an Event of Taking. In case of a requisition for temporary use of all or a portion of any Leased Property which is not an Event of Taking, this Lease shall remain in full force and effect with respect to such Leased Property, without any abatement or reduction of Basic Rent, and the Awards for such Leased Property shall, unless an Event of Default has occurred and is continuing, be paid to Lessee. Section 10.9 Other Dispositions. Notwithstanding the foregoing provisions of this Article X, so long as an Event of Default shall have occurred and be continuing, any amount that would otherwise be payable to or for the account of, or that would otherwise be retained by, Lessee pursuant to this Article X shall be paid to the Agent (or Lessor if the Funded Amounts have been fully paid) as security for the obligations of Lessee under this Lease and, at such time thereafter as no Event of Default shall be continuing, such amount shall be paid promptly to Lessee to the extent not previously applied by Lessor or the Agent in accordance with the terms of this Lease or the other Operative Documents. Section 10.10 No Rent Abatement. Rent shall not abate hereunder by reason of any Casualty, any Event of Loss, any Event of Taking or any Condemnation of any Leased Property, and Lessee shall continue to perform and fulfill all of Lessee's obligations, covenants and agreements hereunder notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation until the Lease Termination Date. ARTICLE XI. INTEREST CONVEYED TO LESSEE Lessor and Lessee intend that this Lease be treated, for accounting purposes, as an operating lease. For all other purposes, Lessee and Lessor intend that the transaction represented by this Lease be treated as a financing transaction; for such purposes, it is the intention of the parties hereto (i) that this Lease be treated as a mortgage or deed of trust (whichever is applicable in the jurisdictions in which the Leased Properties are located) and security agreement, encumbering the Leased Property, and that Lessee, as grantor, hereby grants to Lessor, as mortgagee or beneficiary and secured party, or any successor thereto, a first and paramount Lien on each Leased Property, (ii) that Lessor shall have, as a result of such determination, all of the rights, powers and remedies of a 16 mortgagee or deed of trust beneficiary available under Applicable Law to take possession of and sell (whether by foreclosure or otherwise) any Leased Property, (iii) that the effective date of such mortgage or deed of trust shall be the effective date of this Lease, (iv) that the recording of this Lease or a Lease Supplement shall be deemed to be the recording of such mortgage or deed of trust, and (v) that the obligations secured by such mortgage or deed of trust shall include the Funded Amounts and all Basic Rent and Supplemental Rent hereunder and all other obligations of and amounts due from Lessee hereunder and under the Operative Documents. ARTICLE XII. EVENTS OF DEFAULT The following events shall constitute Events of Default (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) Lessee shall fail to make any payment of Basic Rent when due, and such failure shall continue for five (5) or more days; (b) Lessee shall fail to make any payment of Rent (other than Basic Rent) or any other amount payable hereunder or under any of the other Operative Documents (other than Basic Rent and other than as set forth in clause (c)), and such failure shall continue for a period of ten (10) days; (c) Lessee shall fail to pay the Funded Amount or Lease Balance when due pursuant to Sections 10.1, 10.2, 14.1 or 14.2, or Lessee shall fail to pay the Recourse Deficiency Amount when required pursuant to Article XIV or Lessee shall fail to make any Completion Costs Payment when due under the Construction Agency Agreement; (d) Lessee shall fail to maintain insurance as required by Article VIII hereof, and such failure shall continue until the earlier of (i) 15 days after written notice thereof from Lessor and (ii) the day immediately preceding the date on which any applicable insurance coverage would otherwise lapse or terminate; (e) a default shall have occurred and be continuing under any instrument or agreement evidencing, securing or providing for the issuance of indebtedness individually or in the aggregate in excess of $5,000,000 of, or guaranteed by, Lessee or any 17 Subsidiary of Lessee, which default is a failure to pay any amount when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), which default continues after the applicable grace period, if any, or any other default which, if unremedied, uncured or unwaived, would permit acceleration of the maturity of such indebtedness; or any such indebtedness shall be required to be prepaid (other than by a regularly scheduled required prepayment) in whole or in part prior to its stated maturity; (f) Lessee shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of itself or of a substantial part of its property, (ii) be unable, or admit in writing inability, to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in bankruptcy, or a petition or answer seeking reorganization or an arrangement with creditors to take advantage of any insolvency law or an answer admitting the material allegations of a bankruptcy, reorganization or insolvency petition filed against it, (vi) take corporate action for the purpose of effecting any of the foregoing, or (vii) have an order for relief entered against it in any proceeding under any bankruptcy law; (g) An order, judgment or decree shall be entered, without the application, approval or consent of Lessee, by any court of competent jurisdiction, approving a petition seeking reorganization of such entity or appointing a receiver, trustee or liquidator of such entity or of all or a substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of 60 consecutive days; (h) any representation or warranty by Lessee in any Operative Document or in any certificate or document delivered to Lessor, the Agent, any Lease Participant or any Lender pursuant to any Operative Document shall have been incorrect in any material respect when made or deemed to be made or submitted; (i) Lessee shall repudiate or terminate the Operative Guaranty, or the Operative Guaranty shall at any time cease to be in full force and effect or cease to be the legal, valid and binding obligation of Lessee; (j) Lessee shall fail to observe or perform any covenant or agreement (i) contained in Section 5.2(h) of the Master Agreement and, if capable of being remedied, such failure shall remain unremedied for fifteen (15) days after the earlier of (A) an Executive Officer's obtaining knowledge thereof, or (B) written notice thereof shall have been given to the Lessee by the Agent 18 or any Funding Party, (ii) contained in Section 5.2(e) and if capable of being remedied, such failure shall remain unremedied for ten (10) days after the earlier of (A) an Executive Officer's obtaining knowledge thereof, or (B) written notice thereof shall have been given to the Lessee by the Agent or any Funding Party, or (iii) contained in Sections 2.2(d)(relating to use of Fundings), 5.1(a), 5.1(e), 5.1(g)(v), 5.1(h) or 5.2(c) of the Master Agreement; (k) Lessee shall fail to observe or perform any covenant or agreement contained herein or in any other Operative Document (other than those referred to in clauses (a) through (j) of this Article XII and other than a failure giving rise to a Non- Completion Event) and, if capable of being remedied, such failure shall remain unremedied for thirty (30) days after the earlier of (i) an Executive Officer of Lessee's obtaining knowledge thereof, or (ii) written notice thereof shall have been given to Lessee by the Agent or any Funding Party; (l) A judgment or order for the payment of money in excess of $5,000,000 not covered by insurance or otherwise having a Material Adverse Effect shall be rendered against the Lessee or any other Consolidated Company and such judgment or order shall continue unsatisfied and in effect for a period of 60 days during which execution shall not be effectively stayed or deferred (whether by action of a court, by agreement or otherwise); (m) An attachment or similar action shall be made on or taken against any of the assets of any Consolidated Company with an aggregate value (based upon the greater of the book value of such assets as established in accordance with GAAP or the fair market value of such assets as determined in good faith by such Consolidated Company) exceeding $5,000,000 in aggregate and is not removed, suspended or enjoined within 60 days of the same being made or any suspension or injunction being lifted; (n) Lessee shall become a Subsidiary of any other Person and the Funded Debt of such Person and the Consolidated Companies is 50% or more of the sum of (i) the Funded Debt of such Person and the Consolidated Companies and (ii) Consolidated Net Worth of such Person and the Consolidated Companies; or (o) any Reportable Event shall have occurred, or any finding or determination shall be made with respect to a Plan under Section 4041 (c) or (e) of ERISA or any fact or circumstance shall occur with respect to a Plan which, in the opinion of the Lessor, provides for the commencement of any proceeding under Section 4042 of ERISA, or any proceeding shall be commenced with respect to a Plan under Section 4042 of ERISA. 19 ARTICLE XIII. ENFORCEMENT Section 13.1 Remedies. Upon the occurrence and during the continuance of any Event of Default, but in all respects subject to the right of Lessee to purchase the Leased Property pursuant to Section 14.1, Lessor may do one or more of the following as Lessor in its sole discretion shall determine, without limiting any other right or remedy Lessor may have on account of such Event of Default (including, without limitation, the obligation of Lessee to purchase the Leased Properties as set forth in Section 14.3): (a) Lessor may, by notice to Lessee, rescind or terminate this Lease as of the date specified in such notice; however, (A) no reletting, reentry or taking of possession of any Leased Property by Lessor will be construed as an election on Lessor's part to terminate this Lease unless a written notice of such intention is given to Lessee, (B) notwithstanding any reletting, reentry or taking of possession, Lessor may at any time thereafter elect to terminate this Lease for a continuing Event of Default, and (C) no act or thing done by Lessor or any of its agents, representatives or employees and no agreement accepting a surrender of any Leased Property shall be valid unless the same be made in writing and executed by Lessor; (b) Lessor may (i) demand that Lessee, and Lessee shall upon the written demand of Lessor, return the Leased Properties promptly to Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Articles VI and XIV hereof as if the Leased Properties were being returned at the end of the Lease Term, and Lessor shall not be liable for the reimbursement of Lessee for any costs and expenses incurred by Lessee in connection therewith and (ii) without prejudice to any other remedy which Lessor may have for possession of the Leased Properties, and to the extent and in the manner permitted by Applicable Law, enter upon any Leased Property and take immediate possession of (to the exclusion of Lessee) any Leased Property or any part thereof and expel or remove Lessee and any other person who may be occupying such Leased Property, by summary proceedings or otherwise, all without liability to Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in addition to Lessor's other damages, Lessee shall be responsible for the actual and reasonable costs and expenses of reletting, including brokers' fees and the reasonable costs of any alterations or repairs made by Lessor; (c) Lessor may (i) sell all or any part of any Leased Property at public or private sale, as Lessor may determine, free 20 and clear of any rights of Lessee and without any duty to account to Lessee with respect to such action or inaction or any proceeds with respect thereto (except to the extent required by clause (ii) below if Lessor shall elect to exercise its rights thereunder) in which event Lessee's obligation to pay Basic Rent hereunder for periods commencing after the date of such sale shall be terminated or proportionately reduced, as the case may be; and (ii) if Lessor shall so elect, demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (the parties agreeing that Lessor's actual damages would be difficult to predict, but the aforementioned liquidated damages represent a reasonable approximation of such amount) (in lieu of Basic Rent due for periods commencing on or after the Payment Date coinciding with such date of sale (or, if the sale date is not a Payment Date, the Payment Date next preceding the date of such sale)), an amount equal to (a) the excess, if any, of (1) the sum of (A) all Rent due and unpaid to and including such Payment Date and (B) the Funded Amounts with respect to such Leased Property, computed as of such date, over (2) the net proceeds of such sale (that is, after deducting all costs and expenses incurred by Lessor, the Agent, any Lease Participant or any Lender incident to such conveyance (including, without limitation, all costs, expenses, fees, premiums and taxes described in Section 14.5(b))); plus (b) interest at the Overdue Rate on the foregoing amount from such Payment Date until the date of payment; (d) Lessor may, at its option, not terminate this Lease, and continue to collect all Basic Rent, Supplemental Rent, and all other amounts (including, without limitation, the Funded Amount) due Lessor (together with all costs of collection) and enforce Lessee's obligations under this Lease as and when the same become due, or are to be performed, and at the option of Lessor, upon any abandonment of any Leased Property by Lessee or re-entry of same by Lessor, Lessor may, in its sole and absolute discretion, elect not to terminate this Lease with respect thereto and may make such reasonable alterations and necessary repairs in order to relet such Leased Property, and relet such Leased Property or any part thereof for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rental or rentals and upon such other terms and conditions as Lessor in its reasonable discretion may deem advisable; and upon each such reletting all rentals actually received by Lessor from such reletting shall be applied to Lessee's obligations hereunder in such order, proportion and priority as Lessor may elect in Lessor's sole and absolute discretion; it being agreed that under no circumstances shall Lessee benefit from its default from any increase in market rents. If such rentals received from such reletting during any Rent Period are less than the Rent to 21 be paid during that Rent Period by Lessee hereunder, Lessee shall pay any deficiency, as calculated by Lessor, to Lessor on the Payment Date for such Rent Period; (e) If any Leased Property has not been sold, or if a Non- Completion Event has occurred and Lessee has not exercised the Remarketing Option pursuant to Section 14.6 within the time permitted thereby, Lessor may, whether or not Lessor shall have exercised or shall thereafter at any time exercise any of its rights under paragraph (b), (c) or (d) of this Article XIII with respect to such Leased Property, demand, by written notice to Lessee specifying a date (the "Final Rent Payment Date") not earlier than 30 days after the date of such notice, that Lessee purchase, on the Final Rent Payment Date, such Leased Property in accordance with the provisions of Sections 14.2, 14.4 and 14.5; provided, however, that (1) such purchase shall occur on the date set forth in such notice, notwithstanding the provision in Section 14.2 calling for such purchase to occur on the Lease Termination Date; and (2) Lessor's obligations under Section 14.5(a) shall be limited to delivery of a special warranty deed and quit claim bill of sale of such Leased Property, without recourse or warranty, but free and clear of Lessor Liens; (f) Lessor may exercise any other right or remedy that may be available to it under Applicable Law, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any Rent Period(s), and such suits shall not in any manner prejudice Lessor's right to collect any such damages for any subsequent Rent Period(s), or Lessor may defer any such suit until after the expiration of the Lease Term, in which event such suit shall be deemed not to have accrued until the expiration of the Lease Term; or (g) Lessor may retain and apply against Lessor's damages all sums which Lessor would, absent such Event of Default, be required to pay to, or turn over to, Lessee pursuant to the terms of this Lease. Section 13.2 Remedies Cumulative; No Waiver; Consents. To the extent permitted by, and subject to the mandatory requirements of, Applicable Law, each and every right, power and remedy herein specifically given to Lessor or otherwise in this Lease shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by Lessor, and 22 the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any right, power or remedy. No delay or omission by Lessor in the exercise of any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of Lessee or to be an acquiescence therein. Lessor's consent to any request made by Lessee shall not be deemed to constitute or preclude the necessity for obtaining Lessor's consent, in the future, to all similar requests. No express or implied waiver by Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Potential Event of Default or Event of Default. To the extent permitted by Applicable Law, Lessee hereby waives any rights now or hereafter conferred by statute or otherwise that may require Lessor to sell, lease or otherwise use any Leased Property or part thereof in mitigation of Lessor's damages upon the occurrence of an Event of Default or that may otherwise limit or modify any of Lessor's rights or remedies under this Article XIII. ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL Section 14.1 Lessee's Option to Purchase. Subject to the terms, conditions and provisions set forth in this Article XIV, Lessee shall have the option (the "Purchase Option"), to be exercised as set forth below, to purchase from Lessor, Lessor's interest in all of the Leased Properties; provided that such option must be exercised with respect to all, but not less than all, of the Leased Properties. Such option must be exercised by written notice to Lessor not later than whichever is applicable of (i) twelve months prior to the Lease Termination Date or (ii) ten Business Days after the occurrence of an Event of Default, which notice shall be irrevocable; such notice shall specify the date that such purchase shall take place, which date shall be a date occurring not less than thirty (30) days after such notice or the Lease Termination Date (whichever is earlier). If the Purchase Option is exercised pursuant to the foregoing, then, subject to the provisions set forth in this Article XIV, on the applicable purchase date or the Lease Termination Date, as the case may be, Lessor shall convey to Lessee, without recourse or warranty (other than as to the absence of Lessor Liens) and Lessee shall purchase from Lessor, Lessor's interest in the Leased Properties. Section 14.2 Conveyance to Lessee. Unless (a) Lessee shall have properly exercised the Purchase Option and purchased the Leased Properties pursuant to Section 14.1(a) hereof, or (b) 23 Lessee shall have properly exercised the Remarketing Option and shall have fulfilled all of the conditions of Section 14.6 hereof, then, subject to the terms, conditions and provisions set forth in this Article XIV, Lessee shall purchase from Lessor, and Lessor shall convey to Lessee, on the Lease Termination Date all of Lessor's interest in the Leased Properties. Lessee may designate, in a notice given to Lessor not less than ten (10) Business Days prior to the closing of such purchase (time being of the essence), the transferee to whom the conveyance shall be made (if other than to Lessee), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee; provided, however, that such designation of a transferee shall not cause Lessee to be released, fully or partially, from any of its obligations under this Lease. Section 14.3 Acceleration of Purchase Obligation. Lessee shall be obligated to purchase Lessor's interest in the Leased Properties immediately, automatically and without notice upon the occurrence of any Event of Default specified in clause (g) of Article XII, for the purchase price set forth in Section 14.4. Upon the occurrence and during the continuance of any other Event of Default, Lessee shall be obligated to purchase Lessor's interest in the Leased Properties for the purchase price set forth in Section 14.4 upon notice of such obligation from Lessor. Section 14.4 Determination of Purchase Price. Upon the purchase by Lessee of Lessor's interest in the Leased Properties upon the exercise of the Purchase Option or pursuant to Section 14.2 or 14.3, the aggregate purchase price for all of the Leased Properties shall be an amount equal to the Lease Balance as of the closing date for such purchase, plus any amount due pursuant to Section 7.5(f) of the Master Agreement as a result of such purchase. Section 14.5 Purchase Procedure. (a) If Lessee shall purchase Lessor's interest in a Leased Property pursuant to any provision of this Lease, (i) Lessee shall accept from Lessor and Lessor shall convey such Leased Property by a duly executed and acknowledged special warranty deed and quit claim bill of sale of such Leased Property in recordable form, (ii) upon the date fixed for any purchase of Lessor's interest in Leased Property hereunder, Lessee shall pay to the order of the Agent (or Lessor if the Lease Participant Amounts and the Loans have been paid in full) the Lease Balance or Leased Property Balance, as applicable, plus any amount due pursuant to Section 7.5(f) of the Master Agreement as a result of such purchase by wire transfer of immediately available funds, and (iii) Lessor will execute and deliver to Lessee such other documents, including releases, termination agreements and termination statements, as may be legally required or as may be reasonably requested by Lessee in 24 order to effect such conveyance, free and clear of Lessor Liens and the Liens of the Operative Documents. (b) Lessee shall, at Lessee's sole cost and expense, obtain all required governmental and regulatory approval and consents and shall make such filings as required by Applicable Law; in the event that Lessor is required by Applicable Law to take any action in connection with such purchase and sale, Lessee shall pay all costs incurred by Lessor in connection therewith. In addition, all charges incident to such conveyance, including, without limitation, Lessee's attorneys' fees, Lessor's attorneys' fees, commissions, Lessee's and Lessor's escrow fees, recording fees, title insurance premiums and all applicable documentary transfer or other transfer taxes and other taxes required to be paid in order to record the transfer documents that might be imposed by reason of such conveyance and the delivery of such deed shall be borne entirely and paid by Lessee. (c) Upon expiration or termination of this Lease resulting in conveyance of Lessor's interest in the title to the Leased Properties to Lessee, there shall be no apportionment of rents (including, without limitation, water rents and sewer rents), taxes, insurance, utility charges or other charges payable with respect to the Leased Properties, all of such rents, taxes, insurance, utility or other charges due and payable with respect to the Leased Properties prior to termination being payable by Lessee hereunder and all due after such time being payable by Lessee as the then owner of the Leased Properties. Section 14.6 Option to Remarket. Subject to the fulfillment of each of the conditions set forth in this Section 14.6, Lessee shall have the option to market all of, but not less than all of, the Leased Properties for Lessor (the "Remarketing Option"). Lessee's effective exercise and consummation of the Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions, the failure of any of which shall render the Remarketing Option and Lessee's exercise thereof null and void, in which event, Lessee shall be obligated to perform its obligations under Section 14.2. (a) Not later than whichever is applicable of (i) twelve months prior to the Lease Termination Date or (ii) ten Business Days after the occurrence of a Non-Completion Event, Lessee shall give to Lessor and the Agent written notice of Lessee's exercise of the Remarketing Option which exercise shall be irrevocable and shall state whether Lessee has exercised the Remarketing Option. 25 (b) Not later than whichever is applicable of (i) ten (10) Business Days prior to the Lease Termination Date or ten Business Days after the occurrence of the Non-Completion Event, Lessee shall deliver to Lessor and the Agent an environmental assessment of each Leased Property dated not later than forty-five (45) days prior to the Lease Termination Date. Such environmental assessment shall be prepared by an environmental consultant selected by the Required Funding Parties, shall be in form, detail and substance reasonably satisfactory to the Required Funding Parties, and shall otherwise indicate the environmental condition of each Leased Property to be the same as described in the related Environmental Audit. (c) On the date of Lessee's notice to Lessor and the Agent of Lessee's exercise of the Remarketing Option each of the Construction Conditions shall have been timely satisfied (except in the case of a Non-Completion Event) and no Event of Default or Potential Event of Default shall exist, and thereafter, no Event of Default or Potential Event of Default shall exist under this Lease. (d) Except in the case of a Non-Completion Event, Lessee shall have completed all Alterations, restoration and rebuilding of the Leased Properties pursuant to Sections 6.1, 6.2, 10.3 and 10.4 (as the case may be) and shall have fulfilled all of the conditions and requirements in connection therewith pursuant to said Sections, in each case by the date on which Lessor and the Agent receive Lessee's notice of Lessee's exercise of the Remarketing Option (time being of the essence), regardless of whether the same shall be within Lessee's control. (e) Lessee shall promptly provide any maintenance records relating to each Leased Property to Lessor, the Agent and any potential purchaser upon request, and shall otherwise do all things necessary to deliver possession of such Leased Property to the purchaser. Lessee shall allow Lessor, the Agent and any potential purchaser access to any Leased Property for the purpose of inspecting the same. (f) On the Lease Termination Date, Lessee shall surrender the Leased Properties in accordance with Section 14.8 hereof. (g) In connection with any such sale of the Leased Properties, Lessee will provide to the purchaser all customary "seller's" indemnities, representations and warranties regarding title, absence of Liens (except Lessor Liens) and the condition of the Leased Properties, 26 including, without limitation, an environmental indemnity. Lessee shall fulfill all of the requirements set forth in clause (b) of Section 14.5, and such requirements are incorporated herein by reference. As to Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by Lessor, other than the absence of Lessor Liens. (h) In connection with any such sale of Leased Properties, Lessee shall pay directly, and not from the sale proceeds, all prorations, credits, costs and expenses of the sale of the Leased Properties, whether incurred by Lessor, any Lease Participant, any Lender, the Agent or Lessee, including without limitation, the cost of all title insurance, surveys, environmental reports, appraisals, transfer taxes, Lessor's and the Agent's attorneys' fees, Lessee's attorneys' fees, commissions, escrow fees, recording fees, and all applicable documentary and other transfer taxes. (i) Lessee shall pay to the Agent on the Lease Termination Date (or to such other Person as Agent shall notify Lessee in writing, or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to the Recourse Deficiency Amount (or, in the case of a Non- Completion Event, the Completion Costs Payment), plus all Basic Rent and Supplemental Rent, and all other amounts hereunder which have accrued prior to or as of such date, in the type of funds specified in Section 3.3 hereof. If Lessee has exercised the Remarketing Option, the following additional provisions shall apply: During the period commencing on the date twelve months prior to the scheduled expiration of the Lease Term or, with respect to a Non-Completion Event, the date of Lessee's notice pursuant to Section 14.6(a), Lessee shall, as nonexclusive agent for Lessor, use commercially reasonable efforts to sell Lessor's interest in the Leased Properties and will attempt to obtain the highest purchase price therefor. All such marketing of the Leased Properties shall be at Lessee's sole expense. Lessee shall submit all bids to Lessor and the Agent and Lessor and the Agent will have the right to review the same and the right to submit any one or more bids. All bids shall be on an all-cash basis. In no event shall such bidder be Lessee or any Subsidiary or Affiliate of Lessee. The written offer must specify the Lease Termination Date as the closing date. If, and only if, the selling price (net of closing costs and prorations, as reasonably estimated by the Agent) is less than the difference between the Lease Balance at such time minus the Recourse Deficiency Amount, then Lessor or the Agent may, in its sole and absolute discretion, by notice to Lessee, 27 reject such offer to purchase, in which event the parties will proceed according to the provisions of Section 14.7 hereof. If neither Lessor nor the Agent rejects such purchase offer as provided above, the closing of such purchase of the Leased Properties by such purchaser shall occur on the Lease Termination Date, contemporaneously with Lessee's surrender of the Leased Properties in accordance with Section 14.8 hereof, and the gross proceeds of the sale (i.e., without deduction for any marketing, closing or other costs, prorations or commissions) shall be paid directly to the Agent (or Lessor if the Funded Amounts have been fully paid); provided, however, that if the sum of the gross proceeds from such sale plus the Recourse Deficiency Amount (or, if a Non-Completion Event has occurred, the Completion Costs Payment) paid by Lessee on the Lease Termination Date pursuant to Section 14.6(i), minus any and all costs and expenses (including broker fees, appraisal costs, legal fees and transfer taxes) incurred by the Agent or Lessor in connection with the marketing of the Leased Properties or the sale thereof exceeds the Lease Balance as of such date, then the excess shall be paid to Lessee on the Lease Termination Date. Lessee shall have no right, power or authority to bind Lessor in connection with any proposed sale of the Leased Properties. Section 14.7 Rejection of Sale. Notwithstanding anything contained herein to the contrary, if Lessor or the Agent rejects the purchase offer for the Leased Properties as provided in Section 14.6, then (a) Lessee shall pay to the Agent the Recourse Deficiency Amount (or, if a Non-Completion Event has occurred, the Completion Costs Payment) pursuant to Section 14.6(i), (b) Lessor shall retain title to the Leased Properties, and (c) in addition to Lessee's other obligations hereunder, Lessee will reimburse Lessor and the Agent, within ten (10) Business Days after written request, for all reasonable costs and expenses incurred by Lessor or Agent during the period ending on the first anniversary of the Lease Termination Date in connection with the marketing, sale, closing or transfer of the Leased Properties, which obligation shall survive the Lease Termination Date and the termination or expiration of this Lease. Section 14.8 Return of Leased Property. If Lessor retains title to any Leased Property pursuant to Section 14.7 hereof then Lessee shall, on the Lease Termination Date, and at its own expense, return possession of such Leased Property to Lessor for retention by Lessor or, if Lessee properly exercises the Remarketing Option and fulfills all of the conditions of Section 14.6 hereof and neither Lessor nor the Agent rejects such purchase offer pursuant to Section 14.6, then Lessee shall, on such Lease Termination Date, and at its own cost, transfer possession of the Leased Property to the independent purchaser thereof, in each case by surrendering the same into the 28 possession of Lessor or such purchaser, as the case may be, free and clear of all Liens other than Lessor Liens, in as good condition as it was on the Completion Date (as modified by Alterations permitted by this Lease), ordinary wear and tear excepted, and in compliance in all material respects with Applicable Law. Lessee shall, on and within a reasonable time before and after the Lease Termination Date, cooperate with Lessor and the independent purchaser of such Leased Property in order to facilitate the ownership and operation by such purchaser of such Leased Property after the Lease Termination Date, which cooperation shall include the following, all of which Lessee shall do on or before the Lease Termination Date or as soon thereafter as is reasonably practicable: providing all books and records regarding the maintenance and ownership of such Leased Property and all know-how, data and technical information relating thereto, providing a copy of the Plans and Specifications, granting or assigning all licenses (to the extent assignable) necessary for the operation and maintenance of such Leased Property, and cooperating in seeking and obtaining all necessary Governmental Action. Lessee shall have also paid the cost of all Alterations commenced prior to the Lease Termination Date. The obligations of Lessee under this Article XIV shall survive the expiration or termination of this Lease. Section 14.9 Renewal. Subject to the conditions set forth herein, Lessee may, by written notice to Lessor and the Agent given not later than twelve months and not earlier than sixteen months, prior to the Lease Termination Date then in effect, renew this Lease, for up to five years commencing on the date following the Lease Termination Date then in effect, provided that Lessee may only exercise such renewal option once. No later than the date that is 45 days after the date the request to renew has been delivered to each of Lessor and the Agent, the Agent will notify Lessee whether or not Lessor, the Lease Participants and the Lenders consent to such renewal request (which consent, in the case of Lessor, the Lease Participants and the Lenders, may be granted or denied in their sole discretion, and may be conditioned on such conditions precedent as may be specified by Lessor, the Lease Participants and the Lenders). If the Agent fails to respond within such time frame, such failure shall be deemed to be a rejection of such request. If the Agent notifies Lessee of Lessor's, the Lease Participants' and the Lenders' consent to such renewal, such renewal shall be effective. Any renewal of this Lease shall be on the same terms and conditions as are set forth herein for the original Lease Term, except that the amount of Basic Rent to be paid by Lessee shall be as mutually agreed upon among Lessee, Lessor, the Lease Participants and the Lenders prior to such renewal. 29 ARTICLE XV. LESSEE'S EQUIPMENT After any repossession of any Leased Property (whether or not this Lease has been terminated), Lessee, at its expense and so long as such removal of such Alteration shall not result in a violation of Applicable Law, shall, within a reasonable time after such repossession or within sixty (60) days after Lessee's receipt of Lessor's written request (whichever shall first occur), remove all of Lessee's trade fixtures, personal property and equipment from such Leased Property (to the extent that the same can be readily removed from such Leased Property without causing material damage to such Leased Property); provided, however, that Lessee shall not remove any such trade fixtures, personal property or equipment that (i) has been financed by Lessor under the Operative Documents or otherwise constituting Leased Property (or that constitutes a replacement of such property) or (ii) with respect to which Lessor notifies Lessee that it is exercising its purchase option (in which case, Lessor shall pay to Lessee the fair market value of such trade fixture, personal property or equipment on such date of repossession and Lessee shall execute and deliver a bill of sale therefor to Lessor), provided that the purchase option set forth in this clause (ii) shall not apply to Lessee's inventory. Any of Lessee's trade fixtures, personal property and equipment not so removed by Lessee within such period shall be considered abandoned by Lessee, and title thereto shall without further act vest in Lessor, and may be appropriated, sold, destroyed or otherwise disposed of by Lessor without notice to Lessee and without obligation to account therefor and Lessee will pay Lessor, upon written demand, all reasonable costs and expenses incurred by Lessor in removing, storing or disposing of the same and all costs and expenses incurred by Lessor to repair any damage to such Leased Property caused by such removal. Lessee will immediately repair at its expense all damage to such Leased Property caused by any such removal (unless such removal is effected by Lessor, in which event Lessee shall pay all reasonable costs and expenses incurred by Lessor for such repairs). Lessor shall have no liability in exercising Lessor's rights under this Article XV except as set forth in clause (ii) of the first sentence hereof, nor shall Lessor be responsible for any loss of or damage to Lessee's personal property and equipment. ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE If Lessee shall fail to perform or comply with any of its agreements contained herein, Lessor may perform or comply with such agreement (after giving five days' prior notice thereof to 30 Lessee which prior notice shall not be required if in Lessor's good faith judgment a Material Adverse Effect could occur without earlier performance or compliance), and Lessor shall not thereby be deemed to have waived any default caused by such failure, and the amount of such payment and the amount of the expenses of Lessor (including actual and reasonable attorneys' fees and expenses) incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, shall be deemed Supplemental Rent, payable by Lessee to Lessor within thirty (30) days after written demand therefor. ARTICLE XVII. MISCELLANEOUS Section 17.1 Reports. To the extent required under Applicable Law and to the extent it is reasonably practical for Lessee to do so, Lessee shall prepare and file in timely fashion, or, where such filing is required to be made by Lessor or it is otherwise not reasonably practical for Lessee to make such filing, Lessee shall prepare and deliver to Lessor (with a copy to the Agent) within a reasonable time prior to the date for filing and Lessor shall file, any material reports with respect to the condition or operation of such Leased Property that shall be required to be filed with any Governmental Authority. Section 17.2 Binding Effect; Successors and Assigns; Survival. The terms and provisions of this Lease, and the respective rights and obligations hereunder of Lessor and Lessee, shall be binding upon their respective successors, legal representatives and assigns (including, in the case of Lessor, any Person to whom Lessor may transfer any Leased Property or any interest therein in accordance with the provisions of the Operative Documents), and inure to the benefit of their respective permitted successors and assigns, and the rights hereunder of the Agent, the Lease Participants and the Lenders shall inure (subject to such conditions as are contained herein) to the benefit of their respective permitted successors and assigns. Lessee hereby acknowledges that Lessor has assigned all of its right, title and interest to, in and under this Lease to the Agent, the Lease Participants and the Lenders, and that all of Lessor's rights hereunder may be exercised by the Agent. Section 17.3 Quiet Enjoyment. Lessor covenants that it will not interfere in Lessee's or any of its permitted sublessees' quiet enjoyment of the Leased Properties in accordance with this Lease during the Lease Term, so long as no Event of Default has occurred and is continuing. Such right of quiet enjoyment is independent of, and shall not affect, Lessor's 31 rights otherwise to initiate legal action to enforce the obligations of Lessee under this Lease. Section 17.4 Notices. Unless otherwise specified herein, all notices, offers, acceptances, rejections, consents, requests, demands or other communications to or upon the respective parties hereto shall be in writing and shall be deemed to have been given as set forth in Section 8.2 of the Master Agreement. All such notices, offers, acceptances, rejections, consents, requests, demands or other communications shall be addressed as follows or to such other address as any of the parties hereto may designate by written notice: If to Lessor: SunTrust Banks, Inc. c/o SunTrust Capital Markets 303 Peachtree Street 24th Floor Mail Code 3943 Atlanta, Georgia 30308 If to Lessee: ChoicePoint Inc. 1000 Alderman Drive Alpharetta, Georgia 30302 Attn: Chief Financial Officer If to Agent: SunTrust Bank, Atlanta 25 Park Place Atlanta, Georgia 30303 Attn: Center 127 Atlanta Corporate Banking If to a Lease Participant or Lender, to the address provided in the Master Agreement. Section 17.5 Severability. Any provision of this Lease that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction, and Lessee shall remain liable to perform its obligations hereunder except to the extent of such unenforceability. To the extent permitted by Applicable Law, Lessee hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect. Section 17.6 Amendment; Complete Agreements. Neither this Lease nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, except by an instrument 32 in writing signed by Lessor and Lessee in accordance with the provisions of Section 8.4 of the Master Agreement. This Lease, together with the other Operative Documents, is intended by the parties as a final expression of their lease agreement and as a complete and exclusive statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein and therein. No course of prior dealings between the parties or their officers, employees, agents or Affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease or any other Operative Document. Acceptance of, or acquiescence in, a course of performance rendered under this or any prior agreement between the parties or their Affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease or any other Operative Document. No representations, undertakings, or agreements have been made or relied upon in the making of this Lease other than those specifically set forth in the Operative Documents. Section 17.7 Construction. This Lease shall not be construed more strictly against any one party, it being recognized that both of the parties hereto have contributed substantially and materially to the preparation and negotiation of this Lease. Section 17.8 Headings. The Table of Contents and headings of the various Articles and Sections of this Lease are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof. Section 17.9 Counterparts. This Lease may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 17.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE LOCATED. Section 17.11 Discharge of Lessee's Obligations by its Affiliates. Lessor agrees that performance of any of Lessee's obligations hereunder by one or more of Lessee's Affiliates or one or more of Lessee's sublessees of the Leased Properties or any part thereof shall constitute performance by Lessee of such 33 obligations to the same extent and with the same effect hereunder as if such obligations were performed by Lessee, but no such performance shall excuse Lessee from any obligation not performed by it or on its behalf under the Operative Documents. Section 17.12 Liability of Lessor Limited. Except as otherwise expressly provided below in this Section 17.12, it is expressly understood and agreed by and between Lessee, Lessor and their respective successors and assigns that nothing herein contained shall be construed as creating any liability of Lessor or any of its Affiliates or any of their respective officers, directors, employees or agents, individually or personally, to perform any covenant, either express or implied, contained herein, all such liability, if any, being expressly waived by Lessee and by each and every Person now or hereafter claiming by, through or under Lessee, and that, so far as Lessor or any of its Affiliates or any of their respective officers, directors, employees or agents, individually or personally, is concerned, Lessee and any Person claiming by, through or under Lessee shall look solely to the right, title and interest of Lessor in the Leased Properties and any proceeds from Lessor's sale or encumbrance thereof (provided, however, that Lessee shall not be entitled to any double recovery) for the performance of any obligation under this Lease and under the Operative Documents and the satisfaction of any liability arising therefrom. Section 17.13 Estoppel Certificates. Each party hereto agrees that at any time and from time to time during the Lease Term, it will promptly, but in no event later than thirty (30) days after request by the other party hereto, execute, acknowledge and deliver to such other party or to any prospective purchaser (if such prospective purchaser has signed a commitment or letter of intent to purchase any Leased Property or any part thereof or any Note or Lease Participation), assignee or mortgagee or third party designated by such other party, a certificate stating (a) that this Lease is unmodified and in force and effect (or if there have been modifications, that this Lease is in force and effect as modified, and identifying the modification agreements); (b) the date to which Basic Rent has been paid; (c) whether or not there is any existing default by Lessee in the payment of Basic Rent or any other sum of money hereunder, and whether or not there is any other existing default by either party with respect to which a notice of default has been served, and, if there is any such default, specifying the nature and extent thereof; (d) whether or not, to the knowledge of the signer after due inquiry and investigation, there are any setoffs, defenses or counterclaims against enforcement of the obligations to be performed hereunder existing in favor of the party executing such certificate and (e) other items that may be reasonably requested; provided that no such certificate may be 34 requested unless the requesting party has a good faith reason for such request. Section 17.14 No Joint Venture. Any intention to create a joint venture or partnership relation between Lessor and Lessee is hereby expressly disclaimed. Section 17.15 No Accord and Satisfaction. The acceptance by Lessor of any sums from Lessee (whether as Basic Rent or otherwise) in amounts which are less than the amounts due and payable by Lessee hereunder is not intended, nor shall be construed, to constitute an accord and satisfaction of any dispute between Lessor and Lessee regarding sums due and payable by Lessee hereunder, unless Lessor specifically deems it as such in writing. Section 17.16 No Merger. In no event shall the leasehold interests, estates or rights of Lessee hereunder, or of the holder of any Notes secured by a security interest in this Lease, or of any Lease Participant, merge with any interests, estates or rights of Lessor in or to the Leased Properties, it being understood that such leasehold interests, estates and rights of Lessee hereunder, and of the holder of any Notes secured by a security interest in this Lease, and of the Lease Participants, shall be deemed to be separate and distinct from Lessor's interests, estates and rights in or to the Leased Properties, notwithstanding that any such interests, estates or rights shall at any time or times be held by or vested in the same person, corporation or other entity. Section 17.17 Survival. The obligations of Lessee to be performed under this Lease prior to the Lease Termination Date and the obligations of Lessee pursuant to Article III, Articles X, XI, XIII, Sections 14.2, 14.3, 14.4, 14.5, 14.8, Articles XIV, XV, and XVI, and Sections 17.10 and 17.12 shall survive the expiration or termination of this Lease. The extension of any applicable statute of limitations by Lessor, Lessee, the Agent or any Indemnitee shall not affect such survival. Section 17.18 Chattel Paper. To the extent that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart other than the original counterpart, which shall be identified as the original counterpart by the receipt of the Agent. Section 17.19 Time of Essence. Time is of the essence of this Lease. 35 Section 17.20 Recordation of Lease. Lessee will, at its expense, cause this Lease or memorandum of lease (if permitted by Applicable Law) to be recorded in the proper office or offices in the States and the municipalities in which the Land is located. Section 17.21 Investment of Security Funds. Any amounts not payable to Lessee pursuant to any provision of Article VIII, X or XIV or this Section 17.21 solely because an Event of Default shall have occurred and be continuing shall be held by the Agent (or Lessor if the Funded Amounts have been fully paid) as security for the obligations of Lessee under this Lease and the Master Agreement. At such time as no Event of Default shall be continuing, such amounts, net of any amounts previously applied to Lessee's obligations hereunder or under the Master Agreement, shall be paid to Lessee. Any such amounts which are held by the Agent (or Lessor if the Funded Amounts have been fully paid) pending payment to Lessee shall until paid to Lessee, as provided hereunder or, as long as the Lease Participation Agreement or the Loan Agreement is in effect, until applied against Lessee's obligations herein and under the Master Agreement and distributed as provided in the Lease Participation Agreement and the Loan Agreement or herein (after the Lease Participation Agreement and the Loan Agreement are no longer in effect) in connection with any exercise of remedies hereunder, be invested by the Agent or Lessor, as the case may be as directed from time to time in writing by Lessee (provided, however, if an Event of Default has occurred and is continuing it will be directed by the Agent or, if the Funded Amounts have been fully paid, Lessor) and at the expense and risk of Lessee, in Permitted Investments. Any gain (including interest received) realized as the result of any such investment (net of any fees, commissions and other expenses, if any, incurred in connection with such investment) shall be applied in the same manner as the principal invested. [Signature pages follow] 36 IN WITNESS WHEREOF, the undersigned have each caused this Lease Agreement to be duly executed and delivered and attested by their respective officers thereunto duly authorized as of the day and year first above written. CHOICEPOINT INC. as Lessee By/s/ Doug C. Curling ---------------------------- Name: Doug C. Curling Title: Executive Vice President - CFO S-1 SUNTRUST BANKS, INC., as Lessor By/s/ R.C. Shufeldt ------------------------------ Name: R.C. Shufeldt Title: SVP S-2 Recording requested by EXHIBIT A TO and when recorded mail to: THE LEASE ------------ - ------------------------------------ - ------------------------------------ - ------------------------------------ - ------------------------------------ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - LEASE SUPPLEMENT NO. __ AND MEMORANDUM OF LEASE THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of [ ], between SUNTRUST BANKS, INC., as the lessor (the "Lessor"), and CHOICEPOINT INC., a Georgia corporation, as lessee (the "Lessee"). WHEREAS Lessor is the owner of the Land described on Schedule I hereto and wishes to lease the Land together with any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Lease to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Interpretation. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Lease Agreement, dated as of July 31, 1997, between Lessee and Lessor; and the rules of interpretation set forth in Appendix A to the Lease shall apply to this Lease Supplement. SECTION 2. The Properties. Attached hereto as Schedule I is the description of certain Land (the "Subject Property"). Effective upon the execution and delivery of this Lease Supplement by Lessor and Lessee, such Land, together with any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Lease shall be subject to the terms and provisions of the Lease and Lessor hereby grants, conveys, transfers and assigns to Lessee those interests, rights, titles, estates, powers and privileges provided for in the Lease with respect to the Subject Property. SECTION 3. Amendments to Lease with Respect to Subject Property. Effective upon the execution and delivery of this Lease Supplement by A-1 Lessor and Lessee, the following terms and provisions shall apply to the Lease with respect to the Subject Property: [Insert Applicable Sections per Local Law] SECTION 4. Ratification; Incorporation. Except as specifically modified hereby, the terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. The terms of the Lease (as amended by this Lease Supplement) are by this reference incorporated herein and made a part hereof. SECTION 5. Original Lease Supplement. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATE HEREUNDER, AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATE IS LOCATED. SECTION 7. Counterpart Execution. This Lease Supplement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. A-2 IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. SUNTRUST BANKS, INC., as the Lessor By -------------------------------- Name: Title: CHOICEPOINT INC., as the Lessee By -------------------------------- Name: Title: S-1 STATE OF _________________ ) ) ss.: COUNTY OF ________________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ______________, ____ ____, this _____ day of __________, _______________, by _____________________, as ____________________ of SunTrust Banks, Inc., on behalf of such corporation. [Notarial Seal] ----------------------------------- Notary Public My commission expires: _____________ STATE OF _________________ ) ) ss.: COUNTY OF ________________ ) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ______________, ___ ____, this _____ day of __________, __________, by ___________, as _____________, of ChoicePoint Inc., a Georgia corporation, on behalf of the corporation. [Notarial Seal] ----------------------------------- Notary Public My commission expires: ______________ S-2 Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as of the date hereof. SUNTRUST BANK, ATLANTA, as the Agent By ---------------------------- Name: Title: By ---------------------------- Name: Title: S-3 APPENDIX A to Master Agreement, Lease, Loan Agreement, Construction Agency Agreement and Lease Participation Agreement DEFINITIONS AND INTERPRETATION A. Interpretation. In each Operative Document, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents; (iii) reference to any gender includes each other gender; (iv) reference to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Operative Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (v) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) reference in any Operative Document to any Article, Section, Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix, Schedule or Exhibit thereto; (vii) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section or other provision hereof; (viii) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; (ix) "or" is not exclusive; and (x) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". B. Accounting Terms. In each Operative Document, unless expressly otherwise provided, accounting terms shall be construed and interpreted, and accounting determinations and computations shall be made, in accordance with GAAP. C. Conflict in Operative Documents. If there is any conflict between any Operative Documents, such Operative Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Master Agreement shall prevail and control. D. Legal Representation of the Parties. The Operative Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring the Operative Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. E. Defined Terms. Unless a clear contrary intention appears, terms defined herein have the respective indicated meanings when used in each Operative Document. "A Loan" means the A Percentage of Loans made by Lenders pursuant to the Loan Agreement and the Master Agreement. "A Note" is defined in Section 2.2 of the Loan Agreement. "A Percentage" means 80%. "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary). -2- "Address" means with respect to any Person, its address set forth in Schedule 8.2 to the Master Agreement or such other address as it shall have identified to the parties to the Master Agreement in writing. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with, such Person, whether through the ownership of voting securities or by contract or otherwise. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "After-Tax Basis" means (a) with respect to any payment to be received by an Indemnitee (which, for purposes of this definition, shall include any Tax Indemnitee), the amount of such payment supplemented by a further payment or payments so that, after deducting from such payments the amount of all Taxes (net of any current credits, deductions or other Tax benefits arising from the payment by the Indemnitee of any amount, including Taxes, for which the payment to be received is made) imposed currently on the Indemnitee by any Governmental Authority or taxing authority with respect to such payments, the balance of such payments shall be equal to the original payment to be received and (b) with respect to any payment to be made by any Indemnitee, the amount of such payment supplemented by a further payment or payments so that, after increasing such payment by the amount of any current credits or other Tax benefits realized by the Indemnitee under the laws of any Governmental Authority or taxing authority resulting from the making of such payments, the sum of such payments (net of such credits or benefits) shall be equal to the original payment to be made; provided, however, for the purposes of this definition, and for purposes of any payment to be made to either the Lessee or an Indemnitee on an after-tax basis, it shall be assumed that (i) federal, state and local taxes are payable at the highest combined marginal federal and state statutory income tax rate (taking into account the deductibility of state income taxes for federal income tax purposes) applicable to corporations from time to time and (ii) such Indemnitee or the Lessee has sufficient income to utilize any deductions, credits (other than foreign tax credits, the use of which shall be determined on an actual basis) and other Tax benefits arising from any payments described in clause (b) of this definition. "Agent" means SunTrust Bank, Atlanta, a Georgia banking corporation, in its capacity as agent under the Master Agreement, the Lease Participation Agreement and the Loan Agreement. -3- "Aggregate Construction Costs" means the aggregate amount of all development, transaction and closing costs incurred by the Lessee, including all acquisition costs for any improvements and capitalized expenses, but excluding the purchase price of the Land. "Alterations" means, with respect to any Leased Property, fixtures, alterations, improvements, modifications and additions to such Leased Property. "Alternative Rate" means, for any period, an interest rate per annum equal to the rate of interest most recently announced by the Agent in Atlanta, Georgia from time to time as its prime lending rate (or other comparable reference rate) for calculating interest on certain loans, which need not be the lowest interest rate charged by such bank. If such prime lending rate or equivalent of such bank changes from time to time after the date hereof, the Alternative Rate shall be automatically increased or decreased, as the case may be, without notice to the Lessee as of the effective time of each change in such prime lending rate or equivalent. "Applicable Law" means all existing and future applicable laws (including Environmental Laws), rules, regulations (including proposed, temporary and final income tax regulations), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment (including, without limitation, wetlands) and those pertaining to the construction, use or occupancy of any Leased Property) and any restrictive covenant or deed restriction or easement of record affecting any Leased Property. "Applicable Margin" means the percentage designated on the chart set forth below based on Lessee's ratio of Funded Debt to Consolidated EBITDA, measured quarterly, effective in the first fiscal quarter immediately following the date of delivery of the Compliance Certificate to the Agent: -4-
FUNDED DEBT TO CONSOLIDATED APPLICABLE EBITDA RATIO MARGIN - ------------ ---------- Greater than or Equal to 3.0:1.0 0.625% Less than 3.0:1.0 and Greater than or Equal to 2.5:1.0 0.50% Less than 2.5:1.0 and Greater than or Equal to 2.0:1.0 0.425% Less than 2.0:1.0 0.35%
For purposes of the foregoing, (i) the Applicable Margin on the initial Closing Date is 0.35% and shall remain 0.35% through and including September 30, 1997 (by way of example, as of the first day of the third fiscal quarter of Lessee, the Applicable Margin shall be calculated based upon the ratio of Funded Debt to Consolidated EBITDA of the Lessee reported in the Compliance Certificate delivered by the Lessee for the first fiscal quarter of such fiscal year of Lessee); and (ii) if the Lessee fails to provide the Compliance Certificate and related financial statements required by Section 5.1 of the Master Agreement within the applicable time period set forth therein, the Applicable Margin shall be adjusted to 0.625% on the first day of the following fiscal quarter until such Compliance Certificate and related financial statements are delivered. "Appraisal" is defined in Section 3.1 of the Master Agreement. "Appraiser" means an MAI appraiser satisfactory to the Agent and the Lessor. "Architect" means with respect to any Leased Property the architect engaged in connection with the construction of the related Building, who may be an employee of the General Contractor for such Leased Property. "Architect's Agreement" means, with respect to any Leased Property, the architectural services agreement, if any, between the Lessee and the related Architect. "Assignment of Lease and Rents" means, with respect to any Leased Property, the Assignment of Lease and Rents, dated as of the related Closing Date, from the Lessor to the Agent, substantially in the form of Exhibit B to the Master Agreement. "Awards" means any award or payment received by or payable to the Lessor or the Lessee on account of any Condemnation or -5- Event of Taking (less the actual costs, fees and expenses incurred in the collection thereof, for which the Person incurring the same shall be reimbursed from such award or payment). "B Loan" means the B Percentage of Loans made by a Lender pursuant to the Loan Agreement and the Master Agreement. "B Note" is defined in Section 2.2 of the Loan Agreement. "B Percentage" means 20%. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended. "Base Term" means, with respect to any Leased Property, (a) the period commencing on the Initial Closing Date for the first parcel of Land acquired by the Lessor and ending on the tenth (10th) anniversary of such Closing Date or (b) such shorter period as may result from earlier termination of the Lease as provided therein. "Basic Rent" means, for any Lease Term, the rent payable pursuant to Section 3.1 of the Lease, determined in accordance with the following: each installment of Basic Rent payable on any Payment Date shall be in an amount equal to the sum of (A) the aggregate amount of Lender Basic Rent payable on such Payment Date, plus (B) the aggregate amount of Lessor Basic Rent payable on such Payment Date, in each case for the Leased Property or Properties that are then subject to the Lease. "Board of Directors", with respect to a corporation, means either the Board of Directors or any duly authorized committee of that Board which pursuant to the by-laws of such corporation has the same authority as that Board as to the matter at issue. "Building" means, with respect to any Leased Property, the buildings, structures and improvements located or to be located on the related Land, along with all fixtures used or useful in connection with the operation of such Leased Property, including, without limitation, all furnaces, boilers, compressors, elevators, fittings, pipings, connectives, conduits, ducts, partitions, equipment and apparatus of every kind and description now or hereafter affixed or attached or used or useful in connection with the Building, all equipment financed by the Lessor and/or the Lenders and the Lease Participants and all Alterations (including all restorations, repairs, replacements and rebuilding of such buildings, improvements and structures) thereto (but in each case excluding trade fixtures financed other than by the Lessor, the Lease Participant or the Lenders). -6- "Business Day" means any day other than a Saturday, Sunday or other day on which banks are required or authorized to be closed for business in Atlanta, Georgia and, if the applicable Business Day relates to a LIBOR Advance, on which trading is not carried on by and between banks in the London interbank market. "Capital Stock" means, with respect to any Person, all capital stock of such Person, whether voting or nonvoting, including common stock and preferred stock of such Person. "Casualty" means an event of damage or casualty relating to all or part of any Leased Property that does not constitute an Event of Loss. "CDB/Infotek" means CDB/Infotek, a California corporation. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. ss. 9601 et. seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation and Liability Inventory System established pursuant to CERCLA. "Claims" means liabilities, obligations, damages, losses, demands, penalties, fines, claims, actions, suits, judgments, proceedings, settlements, utility charges, costs, expenses and disbursements (including, without limitation, reasonable legal fees and expenses) of any kind and nature whatsoever. "Closing Date" means, with respect to each parcel of Land, the date on which such Land is acquired by the Lessor and the initial Funding occurs with respect to such Land under the Master Agreement. "Commitment" means as to each Funding Party, its obligation to make Fundings as investments in each Leased Property, or to make Loans to the Lessor, or to fund a Lease Participation as the case may be, in an aggregate amount not to exceed at any one time outstanding the amount set forth for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). "Commitment Percentage" means as to any Funding Party, at a particular time, the percentage of the aggregate Commitments in effect at such time constituted by such Funding Party's Commitment, as such percentage is shown for such Funding Party on Schedule 2.2 to the Master Agreement (as it may be adjusted from time to time pursuant to Section 6 of the Master Agreement). -7- "Completion Costs Payment", which is payable upon the occurrence of a Non-Completion Event, is an amount equal to the sum of (i) the acquisition cost of the Land, (ii) the aggregate amount of all Completion Costs, up to but not in excess of the Completion Costs Payment Limitation, and (iii) all Supplemental Rent and other amounts owing by the Lessee under the Operative Documents (other than any Completion Costs in excess of the Completion Costs Payment Limitation). "Completion Costs" means at any time the sum of (x) the aggregate amount of all development, transaction and closing costs, including all acquisition costs for any improvements and capitalized expenses, but excluding the purchase price of the Land, expended or incurred by the Lessee as of the time of a Non- Completion Event and which it will be necessary thereafter to expend in order to achieve Completion, plus (y) all Taxes thereon. "Completion Costs Payment Limitation" means an amount equal to 89% of the Aggregate Construction Costs. "Completion Date" with respect to any Leased Property means the Business Day on which the conditions specified in Section 3.5 of the Master Agreement have been satisfied with respect to such property. "Compliance Certificate" shall have the meaning set forth in Section 5.1 of the Master Agreement. "Condemnation" means any condemnation, requisition, confiscation, seizure or other taking or sale of the use, occupancy or title to any Leased Property or any part thereof in, by or on account of any actual eminent domain proceeding or other action by any Governmental Authority or other Person under the power of eminent domain or any transfer in lieu of or in anticipation thereof, which in any case does not constitute an Event of Taking. A Condemnation shall be deemed to have "occurred" on the earliest of the dates that use, occupancy or title is taken. "Consolidated Companies" means, collectively, Lessee and all of its Subsidiaries. "Consolidated EBIT" means, for any fiscal period of Lessee, an amount equal to (A) the sum for such fiscal period of Consolidated Net Income (Loss) and, to the extent deducted in determining such Consolidated Net Income (Loss), provisions for (i) taxes based on income and (ii) Consolidated Interest Expense, minus (B) any items of gain (or plus any items of loss) which were included in determining such Consolidated Net Income (Loss) and were (x) not realized in the ordinary course of business -8- (whether or not classified as "ordinary" by GAAP), (y) the result of any sale of assets, or (z) resulting from minority investments, together in the case of (x), (y) or (z), any related provision for taxes included in Consolidated Net Income (Loss) with respect thereto, plus (C) non-recurring non-cash charges, including without limitation, accruals related to any acquisition and earnouts incurred in connection with any acquisition to the extent not paid in cash. "Consolidated EBITDA" means, for any four fiscal-quarter period of Lessee, an amount equal to the sum of (A) Consolidated EBIT plus (B) depreciation and amortization expense to the extent deducted in determining Consolidated Net Income (Loss), plus (C) without duplication, the sum of the following items to the extent not included in Consolidated EBITDA for such period: (1) the net income (or net loss) for such four fiscal quarter period of any Person which became a Subsidiary during such period (a "New Subsidiary"); (2) the net income (or net loss) derived during such four fiscal quarter period from any assets acquired by any Consolidated Company during such period ("New Assets"); (3) the sum of (x) taxes based on income, (y) Consolidated Interest Expense and (z) depreciation and amortization expense, in each case to the extent deducted in determining net income of any New Subsidiary or derived from any New Assets during such four fiscal quarter period, minus any items of gain (or plus any items of loss) which were in cluded in determining such net income and were (aa) not realized in the ordinary course of business (whether or not classified as "ordinary" by GAAP), (bb) the result of any sale of assets, or (cc) resulting from minority investments, together in the case of (aa), (bb) or (cc), any related provision for taxes included in such net income with respect thereto; and (4) non-recurring non-cash charges of any New Subsidiary or derived from any New Assets during such four fiscal quarter period, including without limitation, accruals related to any acquisition and earnouts incurred in connection with any acquisition to the extent not paid in cash. "Consolidated EBITR" means, for any fiscal period of Lessee, an amount equal to the sum of Consolidated EBIT plus Consolidated Rental Expense for such period. "Consolidated Fixed Charges" means, for any fiscal period of Lessee, the sum of (A) Consolidated Interest Expense, plus (B) -9- Consolidated Rental Expense, plus (C) dividends and distributions on Capital Stock paid in cash during such fiscal period by Lessee or any other Consolidated Company, but excluding the one-time dividend paid by Lessee to Equifax as of the Spin-Off Date and any repurchases of Capital Stock of Lessee. "Consolidated Interest Expense" means, for any fiscal period of Lessee, total interest expense of the Consolidated Companies (including without limitation, interest expense attributable to capitalized leases in accordance with GAAP, all commissions, discounts and other fees and charges owed with respect to bankers acceptance financing, and total interest expense (whether shown as interest expense or as loss and expenses on sale of receivables) under a receivables purchase facility) determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income (Loss)" means, for any fiscal period of Lessee, the net income (or loss) of the Consolidated Companies for such period (taken as a single accounting period), but excluding therefrom (to the extent otherwise included therein) the income of any Consolidated Company to the extent that the declaration or payment of dividends or similar distributions by such Consolidated Company of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation; provided that the foregoing exclusion shall not apply to CDB/Infotek so long as there is at least $1 of outstanding intercompany debt owed by CDB/Infotek to another Consolidated Company. "Consolidated Net Worth" means, as of any date of determination, shareholders' equity of Lessee, determined on a consolidated basis in conformity with GAAP. "Consolidated Rental Expense" shall mean, for any fiscal period of Lessee, the operating lease expense of the Consolidated Companies determined in accordance with GAAP for leases with an initial term greater than one year, as derived from the notes to Lessee's consolidated financial statements of the Consolidated Companies, determined on a consolidated basis in accordance with GAAP. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Lessee in its consolidated financial statements as of such date. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the -10- Lessee are treated as a single employer under Section 414 of the Code. "Construction" means, with respect to any Leased Property, the construction of the related Building pursuant to the related Plans and Specifications. "Construction Agency Agreement" means the Construction Agency Agreement, dated as of July 31, 1997, between the Lessee and the Lessor. "Construction Agent" means the Lessee in its capacity as construction agent pursuant to the Construction Agency Agreement. "Construction Conditions" means the conditions set forth in Section 3.5 of the Master Agreement. "Construction Contract" means, with respect to any Leased Property, that certain construction contract, if any, between the Lessee and a General Contractor for the construction of the related Building, provided that such contract shall be assigned by the Lessee to the Lessor, and such assignment shall be consented to by such General Contractor, pursuant to an assignment of such construction contract substantially in the form of the Security Agreement and Assignment set forth as Exhibit D to the Master Agreement. "Construction Force Majeure Event" means, with respect to any Leased Property: (a) an act of God arising after the related Closing Date, or (b) any change in any state or local law, regulation or other legal requirement arising after such Closing Date and relating to the use of the Land or the construction of a building on the Land, or (c) strikes, lockouts, labor troubles, unavailability of materials, riots, insurrections or other causes beyond the Lessee's control which prevents the Lessee from completing the Construction prior to the Scheduled Construction Termination Date and which could not have been avoided or which cannot be remedied by the Lessee through the exercise of all commercially reasonable efforts or the expenditure of funds and, in the case of (b) above, the existence or potentiality of which was not known to and could not have been discovered prior to such Closing Date through the exercise of due diligence by the Lessee. -11- "Construction Land Interest" means each parcel of Land for which the Completion Date has not yet occurred. "Construction Term" means, with respect to any Leased Property, the period commencing on the related Closing Date and ending on the related Construction Term Expiration Date, or such shorter period as may result from earlier termination of the Lease as provided therein. "Construction Term Expiration Date" means, with respect to any Leased Property, the earlier of the following: (a) the related Completion Date, and (b) the related Scheduled Construction Termination Date. "Contractual Obligation" of any Person means any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property owned by it is bound. "Deed" means, with respect to any Land, a General Warranty Deed, dated the applicable Closing Date, from the applicable Seller to the Lessor, conveying such Land. "Eligible Assignee" means any of the following: (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $100,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $100,000,000; (iii) a commercial bank organized under the laws of any other country having total assets in excess of $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (iv) a finance company, insurance company or other financial institution, lender or fund (whether a corporation, partnership or other entity) which is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, and having total assets in excess of at least $100,000,000; (v) any Funding Party or any Affiliate of any Funding Party; or (vi) any other Person consented to by the Lessee and the Agent, such consent not unreasonably to be withheld. "Environmental Audit" means, with respect to each parcel of Land, a Phase I Environmental Assessment, which meets or exceeds ASTM Standard E1527-97 and is dated no more than 60 days prior to the related Closing Date, by an environmental services firm satisfactory to the Funding Parties. -12- "Environmental Authority" means any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Law. "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Lessee or any Consolidated Subsidiary required by any Environmental Law. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Law, whether or not entered upon consent or written agreements with an Environmental Authority or other entity arising from or in any way associated with any Environmental Law, whether or not incorporated in a judgment, decree or other. "Environmental Laws" means and include the Resource Conservation and Recovery Act of 1976, (RCRA) 42 U.S.C. ss.ss. 6901-6987, as amended by the Hazardous and Solid Waste Amendments of 1984, the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601-9657, (CERCLA), the Clean Air Act, 42 U.S.C. ss.ss.7401 et seq., the Occupational Safety and Health Act, the Toxic Substances Control Act, the Emergency Planning and Community Right to Know Act and any comparable or implementing federal, state or local environmental laws, ordinances, rules, orders, statutes, decrees, judgments, injunctions, codes and regulations, and any other federal, state or local laws, ordinances, rules, codes and regulations, and any other federal, state or local laws, ordinances, rules, codes and regulations relating to the environment, human health or natural resources or the regulation or control of or imposing liability or standards of conduct concerning human health, the environment, Hazardous Materials or the clean-up or other remediation of any Leased Property, or any part thereof, as any of the foregoing may have been from time to time amended, supplemented or supplanted. "Environmental Liabilities" means any liabilities, whether accrued, contingent or otherwise, arising from and in any way associated with any Environmental Law. "Environmental Notices" means notice from any Environmental Authority or by any other person or entity, of possible or alleged noncompliance with or liability under any Environmental Law, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any, violation of any Environmental Law or any investigations concerning any violation of any Environmental Law. -13- "Environmental Permits" means all permits, licenses, authorizations, certificates and approvals of Governmental Authorities required by Environmental Law. "Environmental Proceedings" means any judicial or administrative proceedings arising from or in any way associated with any Environmental Law. "Environmental Releases" means releases as defined in CERCLA or under any applicable Environmental Law. "Equifax" means Equifax Inc., a Georgia corporation. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. "ERISA Affiliate" means, with respect to any Person, each trade or business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of the regulations promulgated under Section 414 of the Tax Code. "Event of Default" means any event or condition designated as an "Event of Default" in Article XII of the Lease. "Event of Loss" is defined in Section 10.1 of the Lease. "Event of Taking" is defined in Section 10.2 of the Lease. "Excepted Claims" is defined in Section 7.1 of the Master Agreement. "Executive Officer" means, with respect to any Person, Chief Executive Officer, President, Chief Financial Officer, the Chief Legal Officer, the Treasurer, any Assistant Treasurer and any Person holding comparable offices or duties. "Fair Market Rental Value" means, with respect to any Leased Property, the fair market rental value as determined by an independent appraiser chosen by the Lessor that would be obtained in an arm's-length lease between an informed and willing lessee and an informed and willing lessor, in either case under no compulsion to lease, and neither of which is related to the Lessor or Lessee for the lease of such Leased Property on the terms set forth, or referred to, in the Lease. Such fair market rental value shall be calculated as the value for the use of such Leased Property to be leased in place at the Land, assuming, in the determination of such fair market rental value, that such Leased Property is in the condition and repair required to be maintained by the terms of the related Lease (unless such fair market rental value is being determined for the purposes of -14- Section 13.1 of the Lease and except as otherwise specifically provided in the Lease, in which case this assumption shall not be made). "Fair Market Sales Value" means, with respect to any Leased Property or any portion thereof, the fair market sales value as determined by an independent appraiser chosen by the Lessor or, so long as the Funded Amounts are outstanding, the Agent that would be obtained in an arm's-length transaction between an informed and willing buyer (other than a lessee currently in possession) and an informed and willing seller, under no compulsion, respectively, to buy or sell and neither of which is related to the Lessor or Lessee, for the purchase of such Leased Property. Such fair market sales value shall be calculated as the value for the use of such Leased Property, assuming, in the determination of such fair market sales value, that such Leased Property is in the condition and repair required to be maintained by the terms of the Lease (unless such fair market sales value is being determined for purposes of Section 13.1 of the Lease and except as otherwise specifically provided in the Lease or the Master Agreement, in which case this assumption shall not be made). "Final Rent Payment Date" with respect to any Leased Property is defined in Section 13.1(e) of the Lease. "Fiscal Quarter" means any fiscal quarter of the Lessee. "Fiscal Year" means any fiscal year of the Lessee. "Fixed Charge Coverage Ratio" means, as of the last day of any fiscal quarter of Lessee, the ratio of (A) Consolidated EBITR to (B) Consolidated Fixed Charges, in each case calculated with respect to the immediately preceding four fiscal quarters ending on such date. "Foreign Plan" means any pension, profit sharing, deferred compensation, or other employee benefit plan, program or arrangement maintained by any Foreign Subsidiary which, under applicable local law, is required to be funded through a trust or other funding vehicle, but shall not include any benefit provided by a foreign government or its agencies. "Foreign Subsidiary" means each Consolidated Company that is organized under the laws of a jurisdiction other than the United States of America or any State thereof. "Funded Amount" means, as to the Lessor, the Lessor's Invested Amounts, and, as to each Lender, the outstanding principal of such Lender's Loans. -15- "Funded Debt" means all Indebtedness for money borrowed, Indebtedness evidenced or secured by purchase money Liens, capitalized leases, outstandings under asset securitization vehicles, conditional sales contracts and similar title retention debt instruments, including any current maturities of the foregoing, which by its terms matures more than one year from the date of any calculation thereof or which is renewable or extendable at the option of the obligor to a date beyond one year from such date. The calculation of Funded Debt shall include (i) all Funded Debt of the Consolidated Companies, plus (ii) all Funded Debt of other Persons to the extent guaranteed by a Consolidated Company, to the extent supported by a letter of credit issued for the account of a Consolidated Company, or as to which and to the extent which a Consolidated Company or its assets otherwise have become liable for payment thereof, plus (iii) the redemption amount with respect to the stock of the Lessee required to be redeemed during the next succeeding twelve months at the option of the holder or its Subsidiaries. Notwithstanding the foregoing, "Funded Debt" shall exclude the Operative Documents and all operating lease obligations. "Funding" means any funding by the Funding Parties pursuant to Section 2.2 of the Master Agreement. "Funding Date" means collectively, each Closing Date and each other date during the Construction Term on which a Funding occurs under Section 2 of the Master Agreement. "Funding Office" means for each Funding Party the office such Funding Party may designate in writing from time to time to the Lessee and the Agent as its funding office. "Funding Parties" means the Lessor, the Agent, the Lease Participant and the Lenders, collectively. "Funding Party Balance" means, with respect to any Leased Property, (i) for the Lessor as of any date of determination, an amount equal to the sum of the outstanding related Lessor's Invested Amount (less the related Lease Participant Amount), all accrued and unpaid Yield on such outstanding related Lessor's Invested Amount (less the related Lease Participant Amount), all unpaid related fees owing to the Lessor under the Operative Documents, and all other related amounts owing to the Lessor by the Lessee under the Operative Documents, (ii) for the Lease Participant as of any date of determination, an amount equal to the sum of the outstanding related Lease Participant Amount, all accrued and unpaid Yield thereon, all unpaid related fees owing to the Lease Participant under the Operative Documents, and all other related amounts owing to the Lease Participant by the Lessee under the Operative Documents, and (iii) for any Lender as of any date of determination, an amount equal to the sum of the -16- outstanding related Loans of such Lender, all accrued and unpaid interest thereon, all unpaid related fees owing to such Lender under the Operative Documents, and all other related amounts owing to such Lender by the Lessee under the Operative Documents. "Funding Request" is defined in Section 2.2 of the Master Agreement. "Funding Termination Date" means January 31, 1999. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "General Contractor" means with respect to any Leased Property the general contractor under the related Construction Contract as may be selected by the Lessee. "Governmental Action" means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law and shall include, without limitation, all citings, environmental and operating permits and licenses that are required for the use, occupancy, zoning and operation of any Leased Property. "Governmental Authority" means any foreign or domestic federal, state, county, municipal or other governmental or regulatory authority, agency, board, body, commission, instrumentality, court or any political subdivision thereof. "Guarantor" means the Lessee, in its capacity as guarantor under the Operative Guaranty. "Guaranty" means any contractual obligation, contingent or otherwise, of a Person with respect to any Indebtedness or other obligation or liability of another Person, including without limitation, any such Indebtedness, obligation or liability directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including contractual obligations (contingent or otherwise) arising through any agreement to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or any agreement to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make any payment other than for value received. The amount of any Guaranty shall be deemed to be an -17- amount equal to the stated or determinable amount of the primary obligation in respect of which guaranty is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Hazardous Materials" means any pollutant, contaminant, waste, hazardous or toxic chemical including asbestos containing materials in any form or condition; urea formaldehyde foam insulation; polychlorinated biphenyls (PCBs) in any form or condition; including, without limitation, any solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, any "hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in any applicable state or local law or regulation; gasoline, or any other petroleum product or by-product, including, crude oil or any fraction thereof; toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable state or local law or regulation; or insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Indebtedness" of any Person means, without duplication (i) all obligations of such Person which in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (ii) all rental obligations under leases required to be capitalized under GAAP; (iii) all Guaranties of such Person (including contingent reimbursement obligations under undrawn letters of credit); (iv) Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; and (v) obligations or other liabilities under currency contracts, interest rate hedging contracts, or similar agreements or combinations thereof to the extent required to be disclosed in such Person's financial statements in accordance with GAAP. "Indemnified Risks" is defined in Section 7.1 of the Master Agreement. "Indemnitee" means the Agent (in its individual capacity and in its capacity as Agent), the Lease Participant, each Lender, and the Lessor, and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents; provided, however, that in no event shall the Lessee be an Indemnitee. -18- "Indemnitee Group" means the respective Affiliates, employees, officers, directors and agents of the Agent (in its individual capacity), the Lease Participant, each Lender or the Lessor, as applicable; provided, however, that in no event shall the Lessee be a member of the Indemnitee Group. "Initial Closing Date" means the Closing Date for the first Leased Property acquired by the Lessor. "Investment" means, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, Capital Stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. Each Investment shall be valued as of the date made; provided that any Investment or portion of an Investment consisting of Indebtedness shall be valued at the outstanding principal balance thereof as of the date of determination. "Land" means the land described in Appendix B to the related Lease Supplement. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, treaties or decrees of any governmental or political subdivision or agency thereof, or of any court or similar entity established by any thereof. "Lease" means the Lease Agreement, dated as of July 31, 1997, together with each Lease Supplement thereto, between the Lessee and the Lessor, with such modifications as are satisfactory to the Lessor and the Agent in conformity with Applicable Law to assure customary remedies in favor of the Funding Parties in the jurisdiction where the Leased Property is located. "Lease Balance" means, with respect to the Leased Properties, as of any date of determination, an amount equal to the sum of all Funding Party Balances. "Lease Participant" means SunTrust Bank, Atlanta and such other Persons, if any, who may become parties to the Lease Participation Agreement as Lease Participants, provided that, unless such other Person is an Affiliate of SunTrust Bank, Atlanta, Lessee consents to such other Person, which consent shall not be unreasonably withheld. -19- "Lease Participation Agreement" means the Lease Participation Agreement dated as of July 31, 1997, between the Lessor and the Lease Participant. "Lease Participant Amount" means the amounts funded by the Lease Participant pursuant to Section 2.2 of the Lease Participation Agreement (as increased during the related Construction Term by an amount equal to the Lease Participant's Percentage of the increase in the related Lessor's Invested Amount pursuant to Section 2.3(c) of the Master Agreement), as the purchase price for the Lease Participation. "Lease Participant Commitment" is defined in Section 2.2 of the Lease Participation Agreement. "Lease Participation" is defined in Section 2.1 of the Lease Participation Agreement. "Lease Supplement" is defined in Section 2.1 of the Lease. "Lease Term" with respect to the Lease means (a) the Base Term, as it may be renewed pursuant to Section 14.9 of the Lease or (b) such shorter period as may result from earlier termination of the Lease as provided therein. "Lease Termination Date" means the last day of the Lease Term, as the same may be accelerated pursuant to the Lease. "Leased Property" means Land and the related Building(s). For purpose of the Lease, "Leased Property" means the property subject to a Lease Supplement, unless the context provides otherwise. "Leased Property Balance" means, with respect to any Leased Property, as of any date of determination, an amount equal to that portion of the Lease Balance which relates to such Leased Property. "Lender Basic Rent" means, for any Rent Period under the Lease when a Loan is outstanding, the aggregate amount of interest accrued on the Loans related to the Leased Property subject to the Lease pursuant to Section 2.5 of the Loan Agreement during such Rent Period. "Lenders" means such financial institutions as are, or who may hereafter become, parties to the Loan Agreement as Lenders to the Lessor. "Lessee" is defined in the preamble to the Master Agreement. "Lessor" is defined in the preamble to the Master Agreement. -20- "Lessor Basic Rent" means, for any Rent Period under any Lease, the aggregate amount of Yield accrued on the Lessor's Invested Amounts under the Lease under Section 2.3(a) of the Master Agreement during such Rent Period. "Lessor Liens" means Liens on or against any Leased Property, the Lease, any other Operative Document or any payment of Rent (a) which result from any act or omission of, or any Claim against, the Lessor unrelated to the transactions contemplated by the Operative Documents or (b) which result from any Tax owed by the Lessor, except any Tax for which the Lessee is obligated to indemnify (including, without limitation, in the foregoing exception, any assessments with respect to any Leased Property noted on the related Title Policy or assessed in connection with any construction or development by the Lessee). "Lessor's Invested Amount" means the amounts funded by the Lessor pursuant to Section 2 of the Master Agreement that are not proceeds of Loans by a Lender, as increased during the related Construction Term pursuant to Section 2.3(c) of the Master Agreement. "LIBOR Advance" means that portion of the Funded Amount hearing interest based on the LIBOR Rate. "LIBOR Rate" means, with respect to any Rent Period, the rate per annum equal to the offered rate for deposits in U.S. Dollars of amounts equal or comparable to the aggregate principal amount of the related LIBOR Advance offered for a term comparable to such Rent Period, which rates appear on the Telerate Page 3750 (if the foregoing rate is unavailable from the Telerate for any reason, then such rate shall be determined by the Agent from the Reuters Screen LIBO Page) as of 11:00 a.m. London time, two (2) Business Days prior to the first day of such Rent Period, provided that (x) if more than one such offered rate appears on the Reuters Screen LIBO Page, the rate used to determine the LIBOR Rate will be the arithmetic average (rounded upward, if necessary, to the next higher 1/16th of 1%) of such offered rates), or (y) if no such offered rates appear on such pages, the rate used for such Rent Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/16th of 1%) of rates quoted by not less than two major banks in New York, New York, selected by the Agent, at approximately 10:00 a.m., New York time, two (2) Business Days prior to the first day of such Rent Period, for deposits in U.S. Dollars offered to leading European banks for a period comparable to such Period in an amount comparable to the principal amount of the Lease Participant Amounts and the Loans, the rate so determined to be rounded upwards to the nearest multiple of 1/100th of 1%. All determinations of Yield, interest, Lessor Basic Rent, Lender Basic Rent, LIBOR Rate, Alternative Rate, and Overdue Rate by the -21- Agent shall, in the absence of demonstrable error, be binding and conclusive upon the Lessee. "LIBOR Reserve Percentage" means, for any Rent Period and for any Funding Party, the aggregate reserve requirement (including any basic, emergency, supplemental, marginal or other reserve requirement) which is actually imposed on such Funding Party during such Rent Period under Regulation D of the Board of Governors of the Federal Reserve System with respect to liabilities or assets consisting of or including "Eurocurrency liabilities" having a term equal to the applicable Rent Period. "Lien" means any mortgage, deed of trust, security deed, pledge, security interest, encumbrance, lien, easement, servitude or charge of any kind, including, without limitation, any irrevocable license, conditional sale or other title retention agreement, any lease in the nature thereof, or any other right of or arrangement with any creditor to have its claim satisfied out of any specified property or asset with the proceeds therefrom prior to the satisfaction of the claims of the general creditors of the owner thereof, whether or not filed or recorded, or the filing of, or agreement to execute as "debtor", any financing or continuation statement under the Uniform Commercial Code of any jurisdiction or any federal, state or local lien imposed pursuant to any Environmental Law. "Loan" shall have the meaning specified in Section 2.1 of the Loan Agreement. "Loan Agreement" means the Loan Agreement among the Lessor, the Agent and the Lenders, substantially in the form of Exhibit K to the Master Agreement. "Loan Documents" means the Loan Agreement, the Notes, the Assignments of Lease and Rents, the Mortgages and all documents and instruments executed and delivered in connection with each of the foregoing. "Loan Event of Default" means any of the events specified in Section 5.1 of the Loan Agreement, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, event or act has been satisfied. "Loan Potential Event of Default" means any event, condition or failure which, with notice or lapse of time or both, would become a Loan Event of Default. "Loss Proceeds" is defined in Section 10.6 of the Lease. "Margin Regulations" means Regulation G, Regulation T, Regulation U and Regulation X of the Board of Governors of the -22- Federal Reserve System, as the same may be in effect from time to time. "Margin Stock" means "margin stock" as defined in Regulations G, T, U or X. "Master Agreement" means the Master Agreement, dated as of July 31, 1997, among the Lessee, the Guarantor, the Lessor, the Agent and the Lenders. "Material Adverse Effect" means a material adverse effect upon the financial condition, operations, performance or properties of the Lessee, or the ability of the Lessee to perform in any material respect under the Operative Documents or the value, utility or useful life of any Leased Property, or the validity, enforceability or legality of any of the Operative Documents, or the priority, perfection or status of any Funding Party's interest in any Leased Property. "Material Subsidiary" means each Subsidiary of Lessee, now existing or hereafter established or acquired, that at any time prior to the Lease Termination Date (i) has or acquires assets which constitute fifteen percent (15%) or more of the Total Assets or (ii) accounts for or produces fifteen percent (15%) or more of Consolidated EBITDA during the most recently completed fiscal year of Lessee. "Mortgage" means, with respect to any Leased Property, that certain mortgage, deed of trust or security deed, dated as of the related Closing Date, by the Lessor to the Agent, in the form of Exhibit D attached to the Master Agreement, with such modifications as are satisfactory to the Lessor and the Agent in conformity with Applicable Law to assure customary remedies in favor of the Agent in the jurisdiction where the Leased Property is located. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Non-Completion Event" means the failure to complete construction on any Leased Property on the Construction Term Expiration Date therefor in accordance with the Construction Agency Agreement. "Notes" means the A Note and the B Note issued by the Lessor under the Loan Agreement, and any and all notes issued in replacement or exchange therefor in accordance with the provisions thereof. -23- "Obligations" means all amounts owed by, and obligations of, the Lessor to the Lenders or the Agent under the Loan Agreement, Notes and other Operative Documents. "Officer's Certificate" of a Person means a certificate signed by the Chairman of the Board or the President or any Executive Vice President or any Senior Vice President or any other Vice President of such Person signing with the Treasurer or any Assistant Treasurer or the Controller or any Assistant Controller or the Secretary or any Assistant Secretary of the such Person, or by any Vice President who is also Controller or Treasurer signing alone. "Operative Documents" means the Master Agreement, the Operative Guaranty, the Purchase Agreements, the Deeds, the Lease, the Lease Participation Agreement, the Security Agreement and Assignment, the Notes, the Loan Agreement, the Assignments of Lease and Rents, the Mortgages and the other documents delivered in connection with the transactions contemplated by the Master Agreement. "Operative Guaranty" means the Guaranty dated as of July 31, 1997 by the Guarantor in favor of the Funding Parties. "Overdue Rate" means the lesser of (a) the highest interest rate permitted by Applicable Law and (b)(i) during the Rent Period in which the payment default first occurs, the LIBOR Rate for such Rent Period plus the Applicable Margin plus 2%, and (ii) after such Rent Period, an interest rate per annum (calculated on the basis of a 365-day (or 366-day, if appropriate) year equal to 2.0% above the Alternative Rate in effect from time to time. "Payment Date" means the last day of each Rent Period (and if such Rent Period is longer than 90 days or three months, the day that is 90 days after the first day of such Rent Period) or, if such day is not a Business Day, the next Business Day. "Payment Date Notice" is defined in Section 2.3(e) of the Master Agreement. "PBGC" means the Pension Benefit Guaranty Corporation, and any successor thereto. "Permitted Liens" means the following with respect to any Leased Property: (a) the respective rights and interests of the Lessee, the Lessor, the Agent, the Lease Participant and any Lender, as provided in the Operative Documents, (b) Liens for Taxes either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (c) materialmen's, mechanics', workers', repairmen's, employees' or other like Liens arising -24- after the related Closing Date in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings, so long as enforcement thereof is stayed pending such proceedings, (d) Liens arising after such Closing Date out of judgments or awards with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith, so long as the enforcement thereof has been stayed pending such appeal or review, (e) easements, rights of way, reservations, servitudes and rights of others against the Land which do not materially and adversely affect the value or the utility of such Leased Property, (f) other Liens incidental to the conduct of Lessee's business which were not incurred in connection with the borrowing of money or the obtaining of advances or credit and which do not in the aggregate materially detract from the value of such Leased Property or materially impair the use thereof, and (g) assignments, leases and subleases expressly permitted by the Operative Documents. "Person" means any individual, limited liability company, partnership, firm, corporation, association, joint venture, trust or other entity, or any government or political subdivision or agency, department or instrumentality thereof. "Plan" means any "employee benefit plan" (as defined in Section 3(3) of ERISA), including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits, but shall exclude any Foreign Plan. "Plans and Specifications" means with respect to any Building the final plans and specifications for such Building prepared by the Architect, and referred to by the Appraiser in the Appraisal, as such Plans and Specifications may be hereafter amended, supplemented or otherwise modified from time to time. "Potential Event of Default" means any event, condition or failure which, with notice or lapse of time or both, would become an Event of Default. "Properties" means all real property owned, leased or otherwise used or occupied by the Lessee or any Consolidated Subsidiary, wherever located. "Purchase Agreement" means with respect to any Land, the purchase agreement with the Seller for the conveyance of such Land to the Lessor. -25- "Purchase Option" is defined in Section 14.1 of the Lease. "Recourse Deficiency Amount" means, as of any date of determination thereof, the sum of (i) the aggregate principal amount of the A Loans then outstanding, plus the A Percentage of the Lessor's Invested Amounts then outstanding, plus (ii) all accrued and unpaid Yield on the A Percentage of the Lessor's Invested Amounts and all accrued and unpaid interest on the A Loans. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation G" means Regulation G of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Regulations" means the income tax regulations promulgated from time to time under and pursuant to the Code. "Release" means the release, deposit, disposal or leak of any Hazardous Material into or upon or under any land or water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying, placement and the like. "Release Date" means, with respect to any Leased Property, the earlier of (i) the date that the related Leased Property Balance has been paid in full, and (ii) the date on which the Agent gives notice to the Lessor that the Lease Participant and the Lenders release any and all interest they may have in such Leased Property, and all proceeds thereof, and any rights to -26- direct, consent or deny consent to any action by the Lessor with respect to such Leased Property. "Remarketing Option" is defined in Section 14.6 of the Lease. "Rent" means Basic Rent and Supplemental Rent, collectively. "Rent Period" means in the case of LIBOR Advances, either a 1, 2, 3 or 6 month period; provided that: (a) The initial Rent Period for any Funding shall commence on the Funding Date of such Funding and each Rent Period occurring thereafter in respect of such Funding shall commence on the day on which the next preceding Rent Period expires; (b) If any Rent Period would otherwise expire on a day which is not a Business Day, such Rent Period shall expire on the next succeeding Business Day, provided that if any Rent Period in respect of LIBOR Advances would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Rent Period shall expire on the next preceding Business Day; (c) Any Rent Period in respect of LIBOR Advances which begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Rent Period shall, subject to paragraph (d) below, expire on the last Business Day of such calendar month; and (d) No Rent Period shall extend beyond the Lease Termination Date. "Report" is defined in Section 7.6 of the Master Agreement. "Required Lenders" means, at any time, Lenders holding an aggregate outstanding principal amount of Loans equal to at least 66-2/3% of the aggregate outstanding principal amount of all Loans. "Required Funding Parties" means, at any time, Funding Parties holding an aggregate outstanding principal amount of Funded Amounts equal to at least 66-2/3% of the aggregate outstanding principal amount of all Funded Amounts. "Requirements of Law" means, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation, permit, approval, authorization, license or variance, order or determination of an -27- arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including, without limitation, the Securities Act, the Securities Exchange Act, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, and any building, environmental or land use requirement or permit or occupational safety or health law, rule or regulation. "Responsible Financial Officer" is defined in Section 5.1(c) of the Master Agreement. "Responsible Officer" means the Chairman or Vice Chairman of the Board of Directors, the Chairman or Vice Chairman of the Executive Committee of the Board of Directors, the President, any Senior Vice President or Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer. "Scheduled Construction Termination Date" means with respect to any Building January 31, 1999. "SEC" means the United States Securities and Exchange Commission. "Securities" means any stock, shares, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities", or any certificates of interest, shares, or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire any of the foregoing. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Security Agreement and Assignment" means, with respect to any Leased Property, the Security Agreement and Assignment (Construction Contract, Architect's Agreement, Permits, Licenses and Governmental Approvals, and Plans, Specifications and Drawings) from the Lessee to the Lessor, substantially in the form of Exhibit C to the Master Agreement. "Seller" means as to any Leased Property, the seller thereof to the Lessor on the related Closing Date. -28- "Solvent" means, as to Lessee at any time, that (i) each of the fair value and the present fair saleable value of such Person's assets (including any rights of subrogation or contribution to which such Person is entitled, under any of the Operative Documents or otherwise) is greater than such Person's debts and other liabilities (including contingent, unmatured and unliquidated debts and liabilities) and the maximum estimated amount required to pay such debts and liabilities as such debts and liabilities mature or otherwise become payable; (ii) such Person is able and expects to be able to pay its debts and other liabilities (including, without limitation, contingent, unmatured and unliquidated debts and liabilities) as they mature; and (iii) such Person does not have unreasonably small capital to carry on its business as conducted and as proposed to be conducted. "Spin Off" means the spinoff of stock of the Lessee by Equifax to shareholders of Equifax. "Spin Off Date" means the date on which the Spin Off is consummated. "Subsidiary" means, with respect to any Person, any corporation or other entity (including, without limitation, partnerships, joint ventures, and associations) regardless of its jurisdiction of organization or formation, at least a majority of the total combined voting power of all classes of voting stock or other ownership interests of which shall, at the time as of which any determination is being made, be owned by such Person, either directly or indirectly through one or more other Subsidiaries. "SunTrust" means SunTrust Banks, Inc., a Georgia corporation. "SunTrust Bank" is defined in the preamble to the Master Agreement. "Supplemental Rent" means any and all amounts, liabilities and obligations other than Basic Rent which the Lessee assumes or agrees or is otherwise obligated to pay under the Lease or any other Operative Document (whether or not designated as Supplemental Rent) to the Lessor, the Agent, the Lease Participant, any Lender or any other party, including, without limitation, amounts under Article XVI of the Lease, and indemnities and damages for breach of any covenants, representations, warranties or agreements, and all overdue or late payment charges in respect of any Funded Amount. "Tax" or "Taxes" is defined in Section 7.4 of the Master Agreement. -29- "Tax Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. "Tax Indemnitee" means the Lessor, the Lease Participant, the Agent, any Lender and their respective Affiliates, successors, permitted assigns, permitted transferees, employees, officers, directors and agents thereof, provided, however, that in no event shall the Lessee be a Tax Indemnitee. "Telerate" means, when used in connection with any designated page and LIBOR, the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Title Insurance Company" means the company that has or will issue the title policies with respect to a Leased Property, which company shall be reasonably acceptable to the Funding Parties. "Title Policy" is defined in Section 3.1 of the Master Agreement. "Total Assets" means the total assets of the Consolidated Companies, determined in accordance with GAAP. "Transaction" means all the transactions and activities referred to in or contemplated by the Operative Documents. "UCC" means the Uniform Commercial Code of Georgia, as in effect from time to time. "Unfunded Benefit Liabilities" means with respect to any Plan or Multiemployer Plan at any time, the amount of unfunded benefit liabilities of such Plan or Multiemployer Plan at such time as determined under ERISA Section 4001(a)(18) which shall not be less than the accumulated benefit obligation, as disclosed in accordance with FAS 87, over the fair market value of Plan or Multiemployer Plan assets. "Voting Stock" shall mean the securities of any class or classes of the Lessee the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors of the Lessee (or persons performing similar functions). "Wholly Owned Subsidiary" means any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Lessee. "Yield" is defined in Section 2.3 of the Master Agreement. -30- EX-10.31 10 g87580exv10w31.txt EX-10.31 GEORGIA LEASE SUPPLEMENT EXHIBIT 10.31 Prepared by and after recording, return to: Rex A. Palmer, Esq. Mayer, Brown & Platt 190 S. LaSalle Street Chicago, IL 60603 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - GEORGIA LEASE SUPPLEMENT NO. ONE AND SHORT FORM THIS GEORGIA LEASE SUPPLEMENT NO. ONE (this "Lease Supplement") dated as of July 31, 1997 between SUNTRUST BANKS, INC., with an address at 25 Park Place, Atlanta, Georgia 30303, as the lessor (the "Lessor"), and CHOICEPOINT INC., with an address of 1000 Alderman Drive, Alpharetta, Georgia 30005, a Georgia corporation, as lessee (the "Lessee"). WHEREAS Lessor is the owner of the Land described on Schedule I hereto and wishes to lease the Land together with any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Lease to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Interpretation. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Lease Agreement, dated as of July 31, 1997, between Lessee and Lessor; and the rules of interpretation set forth in Appendix A to the Lease shall apply to this Lease Supplement. 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). 1 SECTION 2. The Properties. Attached hereto as Schedule I is the description of certain Land (the "Subject Property"). Effective upon the execution and delivery of this Lease Supplement by Lessor and Lessee, such Land, together with any Building and other improvements thereon or which thereafter may be constructed thereon pursuant to the Lease shall be subject to the terms and provisions of the Lease and Lessor hereby 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: 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 2 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 Lease be treated as a deed to secure debt and security agreement, creating for Lessor and any successor thereto legal title to a portion of the Subject Property constituting real property pursuant to the laws of the State of Georgia governing deeds to secure debt and a present and continuing security interest and security title in the portion of the Subject Property constituting personal property or fixtures, and not as a mortgage, (ii) 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, (iii) that the effective date of such deed to secure debt shall be the effective date of this Lease, (iv) that the recording of this Lease or a Lease Supplement shall be deemed to be the recording of such deed to secure debt, (v) that for such purposes the Lessee hereby GRANTS, BARGAINS, SELLS, CONVEYS, AND TRANSFERS, the Subject Property to the Lessor, and (vi) that such deed to secure debt shall secure payment and performance of: (a) the Lease and the other Operative Documents and all of the other Obligations (collectively, the "Lessee Liabilities"), together with any and all renewals and/or extensions of the Lessee Liabilities, bearing interest and default interest and payable as therein provided in installments, the final installment of which is due and payable on July 31, 2007, if not sooner paid or accelerated; provided, however, that notwithstanding anything herein to the contrary, the maximum principal amount of the Lessee Liabilities secured hereby at any one time shall not exceed Twenty-Two Million 3 Dollars ($22,000,000), plus all costs of enforcement and collection of this 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(c) of the Lease is hereby deleted in its entirety and inserted in lieu thereof is the following: (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 Lessee Liabilities. Lessor may immediately declare all or any portion of the Lessee 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 4 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 Lessee 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 Lessee 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 Lessee 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 Lessee 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 5 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 weeks (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 6 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. Lessor may hold one or more sales hereunder until the Lessee 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 Lessee 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 Lessee 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 Lessee Liabilities in full, Lessor shall determine, at Lessor's option and in Lessor's discretion, the portions of the Lessee 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 7 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 Lessee 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 expressly set forth in Exhibit "B" attached hereto and by this reference made a part hereof, 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 8 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" and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA. SECTION 7. Counterpart Execution. This Lease Supplement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. 9 IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. Signed, sealed and delivered SUNTRUST BANKS, INC., as the before me this 28th day of Lessor July, 1997. By /s/ W. P. O'Halloran ----------------------------------- /s/ R. Todd Shutley Name: William P. O'Halloran - -------------------------------- ----------------------------- Unofficial Witness Title: SVP & Controller ----------------------------- /s/ Cheryl T. Lee - -------------------------------- Notary Public [NOTARIAL SEAL] My Commission Expires: 1-30-2000 - --------------------- LEASE AGREEMENT S-1 Signed, sealed and delivered CHOICEPOINT INC., as the before me this 28th day of Lessee July, 1997. By:/s/ Doug C. Curling ------------------------------ /s/ Kathleen J. Watkins Name: Doug C. Curling - ----------------------------------- --------------------------- Unofficial Witness Title: Executive Vice President ------------------------ Chief Financial Officer ------------------------ /s/ Laura K. Peterson - ----------------------------------- Notary Public [NOTARIAL SEAL] My Commission Expires: Notary Public Cobb County, Georgia My Commission Expires June 24, 2000 - ----------------------------------- S-2 EX-10.34 11 g87580exv10w34.txt EX-10.34 OPERATIVE GUARANTY ================================================================================ EXHIBIT 10.34 OPERATIVE GUARANTY from CHOICEPOINT INC. Dated as of July 31, 1997 ================================================================================ TABLE OF CONTENTS Page SECTION 1. Operative Guaranty................................................1 SECTION 2. Bankruptcy........................................................2 SECTION 3. Right of Set-Off..................................................3 SECTION 4. Continuing Operative Guaranty.....................................3 SECTION 5. Reinstatement.....................................................3 SECTION 6. Certain Actions...................................................3 SECTION 7. Application.......................................................4 SECTION 8. Waiver............................................................4 SECTION 9. Assignment........................................................4 SECTION 10. Miscellaneous.....................................................4 OPERATIVE GUARANTY THIS OPERATIVE GUARANTY, dated as of July 31, 1997, is made by ChoicePoint Inc., a Georgia corporation (the "Guarantor"). W I T N E S S E T H: WHEREAS, the Guarantor as Lessee and Guarantor, SunTrust Banks, Inc. as Lessor, and SunTrust Bank, Atlanta, as Agent, have entered into that certain Master Agreement, dated as of July 31, 1997 (as it may be modified, amended or restated from time to time as and to the extent permitted thereby, the "Master Agreement"; and, unless otherwise defined herein, terms which are defined or defined by reference in the Master Agreement (including Appendix A thereto) shall have the same meanings when used herein as such terms have therein); and WHEREAS, it is a condition precedent to the Funding Parties consummating the transactions to be consummated on each Closing Date that the Guarantor execute and deliver this Operative Guaranty; and WHEREAS, it is in the best interests of the Guarantor that the transactions contemplated by the Master Agreement be consummated on each Closing Date; and WHEREAS, this Operative Guaranty, and the execution, delivery and performance hereof, have been duly authorized by all necessary corporate action of the Guarantor; and WHEREAS, this Operative Guaranty is offered by the Guarantor as an inducement to the Funding Parties to consummate the transactions contemplated in the Master Agreement, which transactions, if consummated, will be of benefit to the Guarantor; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor hereby agrees as follows: SECTION 1. Operative Guaranty. The Guarantor hereby unconditionally guarantees the full and prompt payment when due, whether by acceleration or otherwise, and at all times thereafter, and the full and prompt performance, of all of the Liabilities (as hereinafter defined), including interest and earnings on any such Liabilities whether accruing before or after any bankruptcy or insolvency case or proceeding involving the Guarantor or any other Person and, if interest or earnings on any portion of such obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, including such interest and yield as would have accrued on any such portion of such obligations if such case or proceeding had not commenced, and further agrees to pay all reasonable expenses (including reasonable attorneys' fees and legal expenses actually incurred) actually paid or incurred by each of the Funding Parties in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this Operative Guaranty. The term "Liabilities", as used herein, shall mean all of the following, in each case howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due: (i) all amounts payable by the Lessee under the Lease (including, without limitation, Basic Rent, Supplemental Rent and Recourse Deficiency Amounts), the Master Agreement or any other Operative Document, and (ii) all principal of the Notes and interest accrued thereon, Lease Participant Amounts, accrued Yield and all additional amounts and other sums at any time due and owing, and required to be paid, to the Funding Parties under the terms of the Master Agreement, the Lease Participation Agreement, the Loan Agreement, the Assignment of Lease and Rent, the Mortgages, the Notes or any other Operative Document; provided, however, that the Guarantor will not be obligated to pay under this Operative Guaranty any amounts greater than the Lessee would have had to pay, under the Lease, the Master Agreement and the other Operative Documents assuming that such documents were enforced in accordance with their terms (and without giving effect to any discharge or limitation thereon resulting or arising by reason of the bankruptcy or insolvency of the Lessee), plus all actual and reasonable costs of enforcing this Operative Guaranty. By way of extension but not in limitation of any of its other obligations hereunder, the Guarantor stipulates and agrees that in the event any foreclosure proceedings are commenced and result in the entering of a foreclosure judgment, any such foreclosure judgment, to the extent related to the Liabilities, shall be treated as part of the Liabilities, and the Guarantor unconditionally guarantees the full and prompt payment of such judgment. SECTION 2. Bankruptcy. The Guarantor agrees that, in the event of the dissolution, bankruptcy or insolvency of the Guarantor, or the inability or failure of the Guarantor generally to pay debts as they become due, or an assignment by the Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of the Guarantor under any bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, the Guarantor will pay to the Funding Parties 2 forthwith the full amount which would be payable hereunder by the Guarantor if all Liabilities were then due and payable. SECTION 3. Right of Set-Off. To secure all obligations of the Guarantor hereunder, each Funding Party shall have a right to set-off, without demand or notice of any kind, at any time and from time to time when any amount shall be due and payable by the Guarantor hereunder against any and all balances, credits, deposits, accounts or moneys of or in the Guarantor's name now or hereafter, for any reason or purpose whatsoever, in the possession or control of, or in transit to, any Funding Party or any agent or bailee for any Funding Party, and apply any such amounts toward the payment of the Liabilities then due in such order as the Agent may elect in accordance with the Operative Documents. SECTION 4. Continuing Operative Guaranty. This Operative Guaranty shall in all respects be a continuing, absolute and unconditional Operative Guaranty of prompt and complete payment and performance (and not merely of collection), and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of the Guarantor) until the termination of the Commitments and the full and final payment of all of the Liabilities. SECTION 5. Reinstatement. The Guarantor further agrees that, if at any time all or any part of any payment theretofore applied to any of the Liabilities is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Guarantor), such Liabilities shall, for the purposes of this Operative Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application, and this Operative Guaranty shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application had not been made. SECTION 6. Certain Actions. The Funding Parties may, from time to time at their discretion and without notice to the Guarantor, take any or all of the following actions: (a) retain or obtain (i) a security interest in the Lessee's interests in the Lease and (ii) a lien or a security interest hereafter granted by any Person upon or in any property, in each case to secure any of the Liabilities or any obligation hereunder; (b) retain or obtain the primary or secondary obligation of any obligor or obligors, in addition to the Guarantor, with respect to any of the Liabilities; (c) extend or renew for one or more periods (regardless of whether longer than the original period), or release or compromise any obligation of the Guarantor hereunder or any obligation of any nature of any other obligor 3 (including, without limitation, the Lessor) with respect to any of the Liabilities; (d) release or fail to perfect its Lien upon or security interest in, or impair, surrender, release or permit any substitution or exchange for, all or any part of any property securing any of the Liabilities or any obligation hereunder, or extend or renew for one or more periods (regardless of whether longer than the original period) or release or compromise any obligations of any nature of any obligor with respect to any such property; and (e) resort to the Guarantor for payment of any of the Liabilities, regardless of whether the Agent or any other Person shall have resorted to any property securing any of the Liabilities or any obligation hereunder or shall have proceeded against any other obligor primarily or secondarily obligated with respect to any of the Liabilities (all of the actions referred to in this clause (e) being hereby expressly waived by the Guarantor). SECTION 7. Application. Any amounts received by any Funding Party from whatever source on account of the Liabilities shall be applied by it toward the payment of such of the Liabilities, and in such order of application, as is set forth in the Operative Documents. SECTION 8. Waiver. The Guarantor hereby expressly waives: (a) notice of the acceptance of this Operative Guaranty; (b) notice of the existence or creation or non-payment of all or any of the Liabilities; (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever; and (d) all diligence in collection or protection of or realization upon the Liabilities or any thereof, any obligation hereunder, or any security for or Operative Guaranty of any of the foregoing. SECTION 9. Assignment. Subject to Section 6 of the Master Agreement, each Funding Party may, from time to time, whether before or after any discontinuance of this Operative Guaranty, at its sole discretion and without notice to the Guarantor, assign or transfer any or all of its portion of the Liabilities or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Liabilities shall be and remain Liabilities for the purposes of this Operative Guaranty, and each and every such immediate and successive assignee or transferee of any of the Liabilities or of any interest therein shall, to the extent of such assignee's or transferee's interest in the Liabilities, be entitled to the benefits of this Operative Guaranty to the same extent as if such assignee or transferee were such Funding Party. SECTION 10. Miscellaneous. No delay in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or 4 remedy; nor shall any modification or waiver of any of the provisions of this Operative Guaranty be binding upon any Funding Party except as expressly set forth in a writing duly signed and delivered on its behalf. No action permitted hereunder shall in any way affect or impair any Funding Party's rights or the Guarantor's obligations under this Operative Guaranty. For the purposes of this Operative Guaranty, Liabilities shall include all of the obligations described in the definition thereof, notwithstanding any right or power of the Lessee or the Lessor or anyone else to assert any claim or defense (other than final payment) as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the obligations of the Guarantor hereunder. The Guarantor's obligations under this Operative Guaranty shall be absolute and unconditional irrespective of any circumstance whatsoever which might constitute a legal or equitable discharge or defense of the Guarantor. The Guarantor hereby acknowledges that there are no conditions to the effectiveness of this Operative Guaranty. This Operative Guaranty shall be binding upon the Guarantor and upon the Guarantor's successors and permitted assigns; and all references herein to the Guarantor shall be deemed to include any successor or successors, whether immediate or remote, to such Person; provided that the Guarantor shall not assign its obligations hereunder without the prior written consent of the Funding Parties. Wherever possible each provision of this Operative Guaranty shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Operative Guaranty shall be prohibited by or invalid thereunder, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Operative Guaranty. THE GUARANTOR: (A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS OPERATIVE GUARANTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF GEORGIA SITTING IN FULTON COUNTY, GEORGIA, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF GEORGIA, AND APPELLATE COURTS FROM ANY THEREOF; (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDINGS MAY BE BROUGHT TO SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY DELIVERING A COPY THEREOF TO IT AT ITS ADDRESS SET FORTH BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE 5 OTHER PARTIES TO THE MASTER AGREEMENT SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 8.2 OF THE MASTER AGREEMENT; AND (D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE FUNDING PARTIES TO SUE IN ANY OTHER JURISDICTION. All notices, demands, declarations, consents, directions, approvals, instructions, requests and other communications required or permitted by this Operative Guaranty shall be in writing and shall be deemed to have been duly given when addressed to the appropriate Person and delivered in the manner specified in Section 8.2 of the Master Agreement. The initial address for notices to each Guarantor is set forth below. THIS OPERATIVE GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. 6 IN WITNESS WHEREOF, the Guarantor has caused this Operative Guaranty to be executed and delivered as of the date first above written. CHOICEPOINT INC. By: Doug C. Curling -------------------------------- Name Printed:Doug C. Curling Title:Executive Vice President-CFO Address: 1000 Alderman Drive Alpharetta, Georgia 30202 S-1 EX-10.35 12 g87580exv10w35.txt EX-10.35 CONSTRUCTION AGENCY AGREEMENT ================================================================================ EXHIBIT 10.35 CONSTRUCTION AGENCY AGREEMENT dated as of July 31, 1997 among SUNTRUST BANKS, INC. and CHOICEPOINT INC. as Construction Agent ================================================================================ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS 1.1. Defined Terms..................................................2 ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT 2.1. Appointment....................................................2 2.2. Acceptance; Construction.......................................2 2.3. Commencement of Construction...................................2 2.4. Supplements to this Agreement..................................2 2.5. Term...........................................................3 2.6. Identification of Properties; Construction Documents...........3 2.7. Scope of Authority.............................................3 2.8. Covenants of the Construction Agent............................4 ARTICLE III THE BUILDINGS 3.1. Construction...................................................5 3.2. Amendments; Modifications......................................5 3.3. Casualty, Condemnation and Construction Force Majeure Events.........................................................6 ARTICLE IV PAYMENT OF FUNDS 4.1. Funding of Property Acquisition Costs and Property Buildings Costs................................................6 ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT 5.1. Construction Agency Events of Default..........................7 5.2. Damages........................................................8 5.3. Remedies; Remedies Cumulative..................................8 ARTICLE VI NO CONSTRUCTION AGENCY FEE 6.1. Lease as Fulfillment of Lessor's Obligations...................8 i Page ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS 7.1. Exercise of the Lessor's Rights................................9 7.2. Lessor's Right to Cure Construction Agent's Defaults...........9 ARTICLE VIII MISCELLANEOUS 8.1. Notices........................................................9 8.2. Successors and Assigns.........................................9 8.3. GOVERNING LAW.................................................10 8.4. Amendments and Waivers........................................10 8.5. Counterparts..................................................10 8.6. Severability..................................................10 8.7. Headings and Table of Contents................................10 || EXHIBITS Exhibit A Form of Supplement to Construction Agency Agreement Exhibit B Form of Assignment of Construction Contracts ii CONSTRUCTION AGENCY AGREEMENT CONSTRUCTION AGENCY AGREEMENT, dated as of July 31, 1997 (as amended, supplemented or otherwise modified from time to time, this "Agreement"), between SUNTRUST BANKS, INC., a Georgia corporation, (the "Lessor"), and CHOICEPOINT INC., a Georgia corporation (in its capacity as construction agent, the "Construction Agent"). PRELIMINARY STATEMENT A. ChoicePoint Inc., as lessee (the "Lessee"), and Lessor, as lessor, are parties to that certain Lease (as amended, supplemented or otherwise modified from time to time pursuant thereto, the "Lease"), pursuant to which the Lessee has agreed to lease from Lessor, and Lessor have agreed to lease to Lessee, Lessor's interests in certain Leased Properties. B. Lessor, the Lessee, and SunTrust Bank, Atlanta, as agent (in such capacity, the "Agent") are parties to that certain Master Agreement, dated as of even date herewith (as amended, supplemented or otherwise modified from time to time pursuant thereto, the "Master Agreement"). C. Subject to the terms and conditions hereof, (i) the Lessor desires to appoint the Construction Agent as its sole and exclusive agent for the identification and acquisition of the Land pursuant to the Master Agreement and construction of the Buildings in accordance with the Plans and Specifications and pursuant to the Master Agreement, and (ii) the Construction Agent desires, for the benefit of the Lessor, to cause the Buildings to be constructed in accordance with the Plans and Specifications and pursuant to the Master Agreement and this Agreement, in each case in accordance with the terms herein set forth. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS 1.1. Defined Terms. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings set forth in the Master Agreement. ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT 2.1. Appointment. Pursuant to and subject to the terms and conditions set forth herein and in the Master Agreement and the other Operative Documents, the Lessor hereby irrevocably designates and appoints the Construction Agent as its exclusive agent for the identification and acquisition from time to time of Land to be acquired by the Lessor and construction of the Buildings in accordance with the Plans and Specifications on such Land. 2.2. Acceptance; Construction. The Construction Agent hereby unconditionally accepts the designation and appointment as Construction Agent. The Construction Agent will cause the Buildings to be constructed on the Land in substantial accordance with the Plans and Specifications and equipped in substantial compliance in all material respects with all Requirements of Law and insurance requirements. 2.3. Commencement of Construction. Subject to Construction Force Majeure Events, the Construction Agent hereby agrees, unconditionally and for the benefit of the Lessor, to commence construction of a Building on each parcel of Land as soon as is practicable after the Closing Date in respect of such Property. For purposes hereof, construction of a Building shall be deemed to commence on the date (the "Construction Commencement Date") on which [excavation for the foundation for such Building] commences, as certified by the Construction Agent to the Lessor and the Agent in writing. Without limiting the foregoing, no phase of such construction shall be undertaken until all permits required for such phase have been issued therefor. 2.4. Supplements to this Agreement. On the Closing Date of each parcel of Land, the Lessor and the Construction Agent shall each execute and deliver to the Agent a supplement to this Agreement in the form of Exhibit A to this Agreement, appropriately completed, pursuant to which the Lessor and the Construction Agent shall, among other things, each acknowledge and agree that the construction and development of such Land will be governed by the terms of this Agreement. Following the 2 execution and delivery of a supplement to this Agreement as provided above, such supplement and all supplements previously delivered under this Agreement shall constitute a part of this Agreement. 2.5. Term. This Agreement shall commence on the date hereof and shall terminate with respect to any given Leased Property upon the first to occur of: (a) payment by the Lessee of the Leased Property Balance and termination of the Lease with respect to such Leased Property in accordance with the Lease; (b) the expiration or earlier termination of the ease; and (c) termination of this Agreement pursuant to Article V hereof. 2.6. Identification of Properties; Construction Documents. The Construction Agent may execute any of its duties and obligations under this Agreement by or through agents, contractors, employees or attorneys-in-fact, and the Construction Agent shall enter into such agreements with architects and contractors as the Construction Agent deems necessary or desirable for the construction of the Buildings pursuant hereto (the "Construction Documents"); provided, however, that no such delegation shall limit or reduce in any way the Construction Agent's duties and obligations under this Agreement; provided, further, that contemporaneously with the execution and delivery of a Construction Document, the Construction Agent will execute and deliver to the Lessor the Assignment of Construction Documents in the form of Exhibit B attached hereto, pursuant to which the Construction Agent assigns to the Lessor, among other things, all of the Construction Agent's rights under and interests in such Construction Documents. 2.7. Scope of Authority. (a) Subject to the terms, conditions, restrictions and limitations set forth in the Operative Documents, the Lessor hereby expressly authorizes the Construction Agent, or any agent or contractor of the Construction Agent, and the Construction Agent unconditionally agrees, for the benefit of the Lessor, to take all action necessary or desirable for the performance and satisfaction of all of the Construction Agent's obligations hereunder with respect to the Leased Properties acquired by the Lessor, including, without limitation: (i) the identification and assistance with the acquisition of Land in accordance with the terms and conditions of the Master Agreement; 3 (ii) all design and supervisory functions relating to the construction of the Buildings and performing all engineering work related to the construction of the Buildings; (iii) negotiating and entering into all contracts or arrangements to procure the equipment and services necessary to construct the Buildings on such terms and conditions as are customary and reasonable in light of local standards and practices; (iv) obtaining all necessary permits, licenses, consents, approvals and other authorizations, including those required under Applicable Law (including Environmental Laws), from all Governmental Authorities in connection with the development and construction of the Buildings on the Land in accordance with the Plans and Specifications; (v) maintaining all books and records with respect to the construction, operation and management of the Leased Properties; and (vi) performing any other acts necessary in connection with the identification and acquisition of the Land and construction and development of the Buildings in accordance with the Plans and Specifications. (b) Neither the Construction Agent nor any of its Affiliates or agents shall enter into any contract which would, directly or indirectly, impose any liability or obligation on the Lessor unless such contract expressly contains an acknowledgment by the other party or parties thereto that the obligations of the Lessor are non-recourse, and that the Lessor shall have no personal liability with respect to such obligations. Subject to the foregoing, the Lessor shall execute such documents and take such other actions as the Construction Agent shall reasonably request, at the Construction Agent's expense, to permit the Construction Agent to perform its duties hereunder. (c) Subject to the terms and conditions of this Agreement and the other Operative Documents, the Construction Agent shall have sole management and control over the construction means, methods, sequences and procedures with respect to the construction of the Buildings. 2.8. Covenants of the Construction Agent. The Construction Agent hereby covenants and agrees that it will: (a) following the Construction Commencement Date for each parcel of Land, cause construction of a Building on such Land to be prosecuted diligently and without undue 4 interruption substantially in accordance with the Plans and Specifications for such Land and in compliance in all material respects with all Requirements of Law and insurance requirements; (b) notify the Lessor and the Agent in writing not less than five (5) Business Days after the occurrence of each Construction Force Majeure Event; (c) take all reasonable and practical steps to minimize the disruption of the construction process arising from Construction Force Majeure Events; (d) take all reasonable and practical steps to cause the Completion Date for such Leased Property to occur on or prior to the Scheduled Construction Termination Date for such Leased Property, and cause all Liens (including, without limitation, Liens or claims for materials supplied or labor or services performed in connection with the construction of the Buildings), other than Permitted Liens and Lessor Liens, to be discharged; (e) following the Completion Date for each Leased Property, cause all outstanding punch list items with respect to the Buildings on such Leased Property to be completed within sixty (60) days after said Completion Date; and (f) at all times during construction of any Building, cause all title to all personalty financed by the Lessor on or within such Leased Property to be and remain vested in the Lessor and cause to be on file with the applicable filing office all necessary documents under Article 9 of the Uniform Commercial Code to perfect such title free of all Liens other than Permitted Liens, it being understood and acknowledged that such Lessor's rights, title and interest in and to said personalty have been assigned to the Agent pursuant to the Operative Documents. ARTICLE III THE BUILDINGS 3.1. Construction. The Construction Agent shall cause the Buildings to be constructed, equipped, maintained and used in compliance in all material respects with all Requirements of Law and insurance requirements. 3.2. Amendments; Modifications. The Construction Agent may, subject to the conditions, restrictions and limitations set 5 forth herein and in the Operative Documents (but not otherwise), at any time during the term hereof revise, amend or modify the Plans and Specifications without the consent of the Lessor; provided, however, that the Lessor's prior written consent will be required in the following instances: (x) such revision, amendment or modification would result in the Completion Date of the Buildings occurring after the Scheduled Construction Termination Date, or (y) such revision, amendment or modification would result in the cost for such Leased Property exceeding the then remaining Commitments, or (z) the aggregate effect of such revision, amendment or modification, when taken together with any previous or contemporaneous revision, amendment or modification to the Plans and Specifications for such Leased Property, would be to reduce the Fair Market Sales Value of such Leased Property in a material respect when completed. 3.3. Casualty, Condemnation and Construction Force Majeure Events. If at any time prior to the Completion Date with respect to any Building there occurs a Casualty or a Construction Force Majeure Event or the Lessor or the Construction Agent receives notice of a Condemnation, then, except as otherwise provided in the Lease, in each case the Construction Agent shall promptly and diligently take all reasonable and practical steps to complete the construction of the Building substantially in accordance with the Plans and Specifications and with the terms hereof, and cause the Completion Date to occur on or prior to the Scheduled Construction Termination Date. ARTICLE IV PAYMENT OF FUNDS 4.1. Funding of Property Acquisition Costs and Property Buildings Costs. (a) In connection with the acquisition of any Land and during the course of the construction of the Buildings on any Land, the Construction Agent may request that the Lessor advance funds for the payment of acquisition, transaction and closing costs or property improvements costs, and the Lessor will comply with such request to the extent provided for under, and subject to the conditions, restrictions and limitations contained in, the Master Agreement and the other Operative Documents. (b) The proceeds of any funds made available to the Lessor to pay acquisition, transaction and closing costs or improvements costs shall be made available to the Construction Agent in accordance with the Funding Request relating thereto and the terms of the Master Agreement. The Construction Agent will use such proceeds only to pay the acquisition, transaction and closing costs or improvements costs for Leased Properties set forth in the Funding Request relating to such funds. 6 ARTICLE V CONSTRUCTION AGENCY EVENTS OF DEFAULT 5.1. Construction Agency Events of Default. If any one or more of the following events (each a "Construction Agency Event of Default") shall occur and be continuing: (a) the Construction Agent fails to apply any funds paid by, or on behalf of, the Lessor to the Construction Agent for the acquisition of the Land and the construction of the Buildings to the payment of acquisition, transaction and closing costs or improvements costs for such Leased Property; (b) subject to Construction Force Majeure Events, the Construction Commencement Date with respect to any Leased Property shall fail to occur for any reason on or prior to the Scheduled Construction Termination Date; (c) the Completion Date with respect to any Leased Property shall fail to occur for any reason on or prior to the Funding Termination Date; (d) any Lease Event of Default shall have occurred and be continuing; or (e) the Construction Agent shall fail to observe or perform any term, covenant or condition of this Agreement (except those specified in clauses (a) through (d) above), and such failure shall remain uncured for a period of thirty (30) days after notice thereof to the Construction Agent; provided, however, no Construction Agency Event of Default shall be deemed to occur if such failure or breach cannot reasonably be cured within such period, so long as the Construction Agent shall have promptly commenced the cure thereof and continues to act with diligence to cure such failure or breach and such failure or breach is cured within 180 days after notice thereof to the Construction Agent; then, in any such event, the Lessor may, in addition to the other rights and remedies provided for in this Article, immediately terminate this Agreement as to any Leased Property or Properties or all of the Leased Properties, separately, successively or concurrently (all in Lessor's sole discretion) by giving the Construction Agent written notice of such termination, and upon the giving of such notice, this Agreement shall terminate as to such Leased Property or Properties or all of the Leased Properties (as the case may be) and all rights of the Construction Agent and all obligations of the Lessor under this Agreement with respect to such Leased Property or Properties or 7 all of the Leased Properties (as the case may be) shall cease. The Construction Agent shall pay upon demand all reasonable costs, expenses, losses, expenditures and damages (including, without limitation, attorneys' fees and disbursements) actually incurred by or on behalf of the Lessor in connection with any Construction Agency Event of Default and, in the case of a Non- Completion Event, the Construction Agent shall make the Completion Costs Payment to the Lessor. 5.2. Damages. The termination of this Agreement pursuant to Section 5.1 shall in no event relieve the Construction Agent of its liability and obligations hereunder, all of which shall survive any such termination. 5.3. Remedies; Remedies Cumulative. (a) If a Construction Agency Event of Default shall have occurred and be continuing, the Lessor shall have all rights and remedies available under the Operative Documents or available at law, equity or otherwise. Notwithstanding the foregoing, if a Construction Agency Event of Default hereunder relates only to a specific Leased Property or specific Leased Properties but not all Leased Properties (but in any event excluding any Lease Event of Default), the Construction Agent shall have the right to cure such Construction Agency Event of Default by purchasing such Leased Property or Properties for the Leased Property Balance(s) therefor from the Lessor in accordance with the terms and subject to the conditions, restrictions and limitations of Section 14.5 of the Lease. (b) No failure to exercise and no delay in exercising, on the part of the Lessor, any right, remedy, power or privilege under this Agreement or under the other Operative Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. ARTICLE VI NO CONSTRUCTION AGENCY FEE 6.1. Lease as Fulfillment of Lessor's Obligations. All obligations, duties and requirements imposed upon or allocated to the Construction Agent shall be performed by the Construction Agent at the Construction's Agent's sole cost and expense, and the Construction Agent will not be entitled to, and the Lessor shall not have any obligation to pay, any agency fee or other fee 8 or compensation, and the Construction Agent shall not be entitled to, and the Lessor shall not have any obligation to make or pay, any reimbursement therefor, it being understood that this Agreement is being entered into as consideration for and as an inducement to the Lessor entering into the Lease and the other Operative Documents. ARTICLE VII LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS 7.1. Exercise of the Lessor's Rights. The Construction Agent hereby acknowledges and agrees that, subject to and in accordance with the terms of the Construction Agency Agreement Assignment made by the Lessor in favor of the Agent, the rights and powers of the Lessor under this Agreement have been assigned to and may be exercised by the Agent. 7.2. Lessor's Right to Cure Construction Agent's Defaults. The Lessor, without waiving or releasing any obligation or Construction Agency Event of Default, may (but shall be under no obligation to) remedy any Construction Agency Event of Default for the account of and at the sole cost and expense of the Construction Agent. All reasonable out of pocket costs and expenses so incurred (including actual and reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Lessor, shall be paid by the Construction Agent to the Lessor on demand. ARTICLE VIII MISCELLANEOUS 8.1. Notices. All notices, consents, directions, approvals, instructions, requests, demands and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing in the manner provided in, shall be sent to the respective addresses set forth in, and the effectiveness thereof shall be governed by the provisions of, Section 8.2 of the Master Agreement. 8.2. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Lessor, the Construction Agent and their respective legal representatives, successors and permitted assigns. The Construction Agent shall not assign its rights or obligations hereunder without the prior written consent of the Lessor and the Agent. 9 8.3. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 8.4. Amendments and Waivers. The Lessor and the Construction Agent may from time to time, enter into written amendments, supplements or modifications hereto. 8.5. Counterparts. This Agreement may be executed on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same agreement. 8.6. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 8.7. Headings and Table of Contents. The headings and table of contents contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CHOICEPOINT INC. By /s/ Doug C. Curling ----------------------------------- Name: Doug C. Curling Title: Executive Vice President-CFO SUNTRUST BANKS, INC. By R.C. Shufeldt ----------------------------------- Name: R.C. Shufeldt Title: SVP S-1 EXHIBIT A Supplement to Construction Agency Agreement SUPPLEMENT to Construction Agency Agreement, dated as of ______________, 199_, between SUNTRUST BANKS, INC., (the "Lessor"), and CHOICEPOINT INC., a Georgia corporation (in its capacity as construction agent, the "Construction Agent"). Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Construction Agency Agreement. The Lessor and the Construction Agent are parties to that certain Construction Agency Agreement, dated as of July 31, 1997 (as amended, supplemented or otherwise modified, the "Construction Agency Agreement"), pursuant to which (i) the Lessor has appointed the Construction Agent as its sole and exclusive agent in connection with the identification and acquisition of Land and construction of the Buildings in accordance with the Plans and Specifications, and (ii) the Construction Agent has agreed, for the benefit of the Lessor, to cause the construction of the Buildings to be completed in accordance with the Plans and Specifications. Subject to the terms and conditions of the Construction Agency Agreement, the Lessor and the Construction Agent desire that the terms of the Construction Agency Agreement apply to the Land described in Schedule 1 and wish to execute this Supplement to provide therefor. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: 1. The Construction Agent agrees to act as Construction Agent and to perform its obligations under the Construction Agency Agreement in connection with the completion of construction of the Building on the Land described in Schedule 1 in accordance with the Plans and Specifications for such Land. The Construction Agent hereby represents and warrants to Lessor that the Construction Agent has heretofore delivered to Lessor a true, correct and complete copy of the Plans and Specifications for the Building on the Land described in Schedule 1 or, if not available on the date hereof, will deliver such Plans and Specifications as soon as available. 2. Each of the Lessor and the Construction Agent acknowledges, and agrees, that the construction and development of the Land described in Schedule 1 shall be governed by the terms of the Construction Agency Agreement. 3. The anticipated construction budget relating to the construction and development of the Building on the Land described in Schedule 1 is $__________. The acquisition cost of the Land described in Schedule 1 is $___________. 4. This Supplement shall, upon its execution and delivery, constitute a part of the Construction Agency Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. CHOICEPOINT INC. By ------------------------ Name: Title: SUNTRUST BANKS, INC. By ------------------------ Name: Title: 2 Schedule 1 to Supplement Description of Land Interest 3 EXHIBIT B Assignment of Construction Documents See Exhibit C to Master Agreement. 4 EX-13 13 g87580exv13.txt EX-13 PORTION OF 2002 ANNUAL REPORT TO SHAREHOLDER . . . ChoicePoint 2003 Annual Report Exhibit 13 FINANCIAL HIGHLIGHTS (a)
(In thousands, except per share and employee data) 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- Revenue from products and services $ 750,351 $ 690,803 $ 602,648 $ 547,618 $ 462,255 Reimbursable expenses 45,395 38,520 38,028 37,392 38,131 ----------- ----------- ----------- ----------- ----------- Total revenue 795,746 729,323 640,676 585,010 500,386 Operating income(b) 178,560 182,522 111,314 83,481 76,238 Other operating charges and (loss) gain on sale of business included in operating income above(b) (30,942) (7,342) (28,718) (28,419) 513 Income from continuing operations 108,108 107,672 45,702 40,166 38,200 EPS from continuing operations, diluted 1.21 1.21 0.52 0.48 0.47 Total assets 1,021,284 979,010 832,392 704,439 667,780 Debt 52,029 182,446 158,816 142,276 187,790 Total shareholders' equity 790,495 622,607 484,821 401,069 319,309 Employees (full-time equivalents) 3,700 4,400 4,200 4,200 4,000 ----------- ----------- ----------- ----------- -----------
(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, the stock splits paid in the form of stock dividends effective November 24, 1999, March 7, 2001 and June 6, 2002, and the discontinued operations related to the sale of CP Commercial Specialists as of February 28, 2003. (b) Included in operating income are (loss) gain on sale of business and other operating charges which include merger-related costs, unusual items and realignment charges that management excludes in its assessments of operating results and in determining operational incentive awards. 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 (P&C) 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. ChoicePoint 2003 Annual Report Management's Discussion and Analysis 10 Report of Management 20 Independent Auditors' Report 21 Consolidated Statements of Income 22 Consolidated Balance Sheets 23 Consolidated Statements of Shareholders' Equity 24 Consolidated Statements of Cash Flows 25 Notes to Consolidated Financial Statements 26 Shareholder Information and Elected Officers 44 Board of Directors and Corporate Governance 45 ChoicePoint is committed to full disclosure of its accounting policies. For instance, as of December 31, 2003, 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 contributed retirement funds to a variety of investment vehicles, only one of which is ChoicePoint stock. Shareholders who have any questions or concerns about corporate policies, governance and/or disclosure are encouraged to contact the Company's Investor Relations office. ChoicePoint has established a toll-free telephone number to receive complaints about accounting, internal accounting controls, auditing or other legitimate concerns anonymously. The whistleblower hotline number is 800-762-0056. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS ChoicePoint 2003 Annual Report OVERVIEW Over the past six years, ChoicePoint Inc. ("ChoicePoint" or "the Company") has transformed from a predominantly manually-driven and insurance customer-focused asset base into the diversified, technology driven, data intensive business it is today. This transformation, coupled with strong execution, has enabled the Company to deliver strong growth in revenue, earnings and cash flows. Given our unique data and analytical and distribution capabilities, ChoicePoint is the leading provider of identification and credential verification services for making smarter decisions in a world challenged by increased 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. INCOME FROM TOTAL REVENUE REVENUE FROM CONTINUING in millions PRODUCTS AND SERVICES OPERATIONS (Graph) (Pie Chart) in millions (Graph) CASH FLOWS FREE CASH FLOW FROM CONTINUING CAPITAL EXPENDITURES (Cash flow from continuing OPERATIONS in millions operations less capital expenditures) in millions in millions (Graph) (Graph) (Graph) Across our markets, we compete on data, analytics and distribution. A majority of our revenue streams are transaction based, earning revenue each time our databases are accessed and further promoting the scalability of our products and services.
(In thousands) 2003 2002 Change 2001 Change ---- ---- ------ ---- ------ Core Revenue(a) $750,351 $690,731 9% $578,405 19% Divested and discontinued product lines -- 72 24,243 -------- -------- ---- -------- ------ Revenue from products and services 750,351 690,803 602,648 Reimbursable expenses per EITF 01-14 45,395 38,520 38,028 -------- -------- ---- -------- ------ Total Revenue $795,746 $729,323 9% $640,676 14% ======== ======== ==== ======== ======
(a) Core revenue represents revenue from continuing business lines and is used by management to assess and manage its ongoing businesses and to determine operational incentive awards. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS continued ChoicePoint 2003 Annual Report INSURANCE SERVICES (BAR GRAPH) Consistent with historical trends, Insurance Services continued to be our top performer in 2003, achieving 14.4% total revenue growth over 2002. During 2003, we helped property and casualty ("P&C") auto and property insurers assess underwriting risk in more than 115 million renewal or new policy transactions through industry-leading data and analytical solutions. New product offerings such as Current Carrier(R), PolicyWatch(SM) and additional motor vehicle registry ("MVR") activity files, add to our strong product portfolio servicing the personal lines P&C market. Our MVR activity file product continues to generate solid growth, providing a low cost alternative for insurance companies to price risk. Further expanding our services to the P&C insurance industry, our Insurity operations provide industry-leading software solutions and business process outsourcing services to help our customers solve complex business challenges and better focus on managing their businesses around their core competencies. BUSINESS & GOVERNMENT SERVICES (BAR GRAPH) During 2003, the Business & Government Services segment's ("B&G") team successfully grew market share, expanded the number of industries serviced, completed acquisitions and rolled-out new products, enabling them to deliver 10% total revenue growth. Additionally, the team quickly responded to changes in revenue streams due to the impact of economic pressures on its customers and exceptional $20 million of homeland security revenues in 2002 that compared to $10 million in 2003. They also effectively controlled costs in areas impacted by the economy, positioning the B&G businesses well for the future. The WorkPlace Solutions business screened job applicants for over 20,000 companies, identifying over 300,000 individuals with criminal records, and continued to benefit from the success of our National Criminal File and ScreenNow(R) products. This unit continues to look for opportunities to expand its offerings to alert and monitoring services that position the Company to service the ongoing employee management needs of its customers that are less sensitive to macro-economic hiring trends. During 2003, we further expanded our tenant screening business to include almost all of the major U.S. apartment markets - growing from approximately 400,000 units serviced in 2002 to nearly one million units serviced in 2003. Our public records unit continues to assist local, state and federal government agencies to accelerate investigations and locate individuals of interest through our access to more than 17 billion public records. The public records group also continues to expand its offerings to non-governmental customers, including the financial services industry with such products as LienGuard(R), DEBTOR Discovery(SM) and several customer enrollment/USA PATRIOT Act solutions. The other offerings in B&G include our VitalChek(R) vital records network which rolled out identification authentication solutions in 2003, Bode Labs, our forensic DNA lab, our consumer team and our "nursery" group which focuses on research and development including utilizing biometric technology to improve credentialing and verification applications. MARKETING SERVICES (BAR GRAPH) During the last half of 2003, the Marketing Services ("Marketing") segment experienced softness in demand for our print and e-mail product offerings resulting in a 9% decline in revenue from products and services and a 2% decline in total revenue including reimbursable expenses. In response to this softness in demand and the impact of proposed anti-SPAM legislation, the Company reengineered certain of our direct marketing businesses, managing costs, downsizing our e-mail business, focusing on our competitive strengths and better positioning Marketing Services for long-term growth opportunities given the current economic and regulatory environment. The "Do Not Call" legislation introduced in 2003 initially impacted our teleservices business as our customers adjusted their processes to comply with the new legislation. Toward the end of 2003, we began to see increased demand for teleservices as lists and selling efforts conformed to new requirements and customers sought out more reliable providers. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS continued ChoicePoint 2003 Annual Report ROYALTY Royalty revenue from laser technology patents held by the Company decreased to $5.1 million in 2003 primarily due to consolidations in the industries served by these patents and the development of new technologies. The remaining patents underlying this revenue expire between November 2004 and May 2005 (see Note 3 to the Consolidated Financial Statements). DISCONTINUED OPERATIONS AND DIVESTED AND DISCONTINUED PRODUCT LINES In February 2003, the Company sold its CP Commercial Specialists ("CPCS") business for $87.0 million in cash, culminating our efforts to exit the highly manual, labor intensive businesses that characterized the Company in its early existence. Due to changes in accounting rules in 2002, CPCS is reported as discontinued operations and its revenues and operating results are excluded from continuing operations and from the discussions that follow (see Note 4 to the Consolidated Financial Statements for CPCS results). The gain on sale of CPCS was approximately $32.9 million net of taxes. Divested and discontinued product lines referenced below primarily include the operating results from the laboratory services business sold in August 2001. FINANCIAL RESULTS The fundamentals that drive revenues are numerous and varied across and within our business segments. On a macro level, low unemployment, a changing regulatory environment and new initiatives, such as homeland security, contribute to enhanced opportunities for ChoicePoint. The following table provides additional details of revenues from products and services (and total revenues including reimbursable expenses for Marketing) and operating income included in the consolidated statements of income (in thousands):
DECEMBER 31, 2003 December 31, 2002 December 31, 2001 ----------------------- ---------------------- -------------------------------------------- OPERATING Operating Operating Unaudited Pro forma REVENUE INCOME Revenue Income Revenue Income Operating Income(a) --------- --------- --------- --------- --------- ---------- ------------------- Insurance Services $ 309,124 $ 172,518 $ 270,282 $ 144,639 $ 227,727 $ 119,407 $ 120,507 B&G 339,483 71,080 308,761 69,424 267,409 45,089 56,203 Marketing revenue from products and services 96,642 21,849 105,833 32,866 76,461 22,185 26,391 Reimbursable expenses 45,395 -- 38,520 -- 38,028 -- -- --------- --------- --------- --------- --------- --------- --------- Marketing total revenue 142,037 21,849 144,353 32,866 114,489 22,185 26,391 --------- --------- --------- --------- --------- --------- --------- Royalty 5,102 2,068 5,855 3,326 6,808 4,400 4,400 Divested and discontinued -- -- 72 (206) 24,243 (1,771) (968) Corporate and shared -- (58,013) -- (60,185) -- (49,278) (49,278) --------- --------- --------- --------- --------- --------- --------- Total before other operating charges and loss on sale of business 795,746 209,502 729,323 189,864 640,676 140,032 157,255 Other operating charges -- (30,942) -- (7,342) -- (17,865) (17,865) Loss on sale of business -- -- -- -- -- (10,853) (10,853) --------- --------- --------- --------- --------- --------- --------- Totals from operations $ 795,746 $ 178,560 $ 729,323 $ 182,522 $ 640,676 $ 111,314 $ 128,537 ========= ========= ========= ========= ========= ========= =========
(a)Unaudited pro forma operating income represents operating results as if the discontinuation of goodwill amortization was effective January 1, 2001. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS continued ChoicePoint 2003 Annual Report
COMPARISON OF 2003 WITH 2002 COMPARISON OF 2002 WITH 2001 CONSOLIDATED RESULTS CONSOLIDATED RESULTS -------------------- -------------------- REVENUE TOTAL REVENUE grew 9%, or TOTAL REVENUE grew 14%, or $88.6 $66.4 million, to $795.7 million, to $729.3 million in 2002. million in 2003. CORE REVENUE, which excludes revenue CORE REVENUE grew 19% or $112.3 million from reimbursable expenses and divested to $690.7 million in 2002, which excludes and discontinued product lines, grew 9% $24.2 million of revenue from our laboratory services or $59.6 million to $750.4 million in business sold in August 2001. Revenue growth in 2002 2003. Revenue growth in 2003 resulted was primarily driven from strong unit performances in primarily from unit growth in our all Insurance Services, contributions from our homeland Insurance Services segment, base B&G security initiatives in our B&G product lines and business and revenues from the eleven acquisitions in our Marketing Services segment. Excluding acquisitions we completed during 2003 acquisitions, internal revenue growth was 11% in 2002. and the fourth quarter of 2002. This revenue growth was offset by difficult homeland security comparables to 2002 in our B&G segment and softness in our print and e-mail direct marketing product lines. Excluding acquisitions, internal revenue growth was 2% in 2003. OPERATING INCOME OPERATING INCOME decreased slightly from PRO FORMA OPERATING INCOME (excluding goodwill $182.5 million in 2002 to $178.6 million amortization in 2001) increased 42% from $128.5 million in 2003 due to $30.9 million of 2003 in 2001 to $182.5 million in 2002. Operating income other operating charges. These charges including goodwill amortization in 2001 improved 64% from relate to the consolidation of some of $111.3 million in 2001 to $182.5 million in 2002. 2001 our operations to better streamline operating income includes the $10.9 million loss on sale customer service and operating of our laboratory services business and a $17.9 million performance, the re-engineering of our other operating charge primarily related to the direct marketing business to focus on integration of our public records business after the future growth areas and the realignment merger with DBT Online, Inc. ("DBT") in 2000 and asset of our technology infra-structure and impairments. 2002 operating income includes an other operations following the divestiture of operating charge of $7.3 million related to asset our CPCS business and transition to our impairments and the write-down of minority investments in new data center. Operating income in startup companies. Operating income from the business Insurance Services and B&G improved segments is primarily due to the strong revenue primarily due to increased revenues and performance discussed above, the introduction of higher cost control initiatives employed in our margin products and our continued focus on improving cost more economically sensitive B&G efficiencies, offset slightly by increased investment in businesses which experienced no revenue new business initiatives and resources to support the growth. Without the revenue and related growth of the Company. operating income decline in our Marketing Services segment, we would have realized a 190 basis point improvement in operating margins from our ongoing operations as the highly scalable nature of our operations enable us to improve margins as revenues expand.
13 MANAGEMENT'S DISCUSSION AND ANALYSIS continued ChoicePoint 2003 Annual Report
COMPARISON OF 2003 WITH 2002 COMPARISON OF 2002 WITH 2001 CONSOLIDATED RESULTS CONSOLIDATED RESULTS -------------------- -------------------- Interest Expense Interest expense decreased $4.7 million Interest expense decreased $2.7 million to $3.1 million in 2003 due to lower to $7.8 million in 2002 as a result of interest rates and our ability to capital- lower average outstanding debt com- ize on our increased earnings and our bined with lower average interest strong cash position to significantly rates due to the expiration of a high reduce borrowings. interest rate swap (see Note 5 to the Consolidated Financial Statements). Income Taxes Income taxes for continuing operations Income taxes for continuing operations for 2003 and 2002 were provided at the for 2002 were provided at the effective effective rate of 38.4%. rate of 38.4%, a decrease from the effective rate of 54.7% in 2001. The 2001 tax provision includes $10.5 mil- lion related to the sale of our laboratory services business. Excluding the impact of the sale, the effective rate in 2001 was 39.9%, slightly higher than 2002 due to non-deductible goodwill amortization.
CASH FLOW AND LIQUIDITY REVIEW CAPITAL RESOURCES The Company's sources of capital include, but are not limited to, cash from continuing operations, amounts available under credit facilities and other bank borrowings, the issuance of equity securities and other external sources of funds. ChoicePoint'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 bank borrowings. We believe that available short-term and long-term capital resources are sufficient to fund capital expenditures and working capital requirements, scheduled debt payments, interest and tax obligations for the next twelve months. We currently estimate 2004 capital expenditures will be approximately $50 - $55 million. However, any material variance of our operating results from our projections or investments in or acquisitions of businesses, products, or technologies could require us to obtain additional equity or debt financing. 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 we do not anticipate paying any cash dividends on our common stock in the near future. The Company may desire to obtain additional long-term financing for other strategic reasons. We anticipate 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 outstanding at December 31, 2003 or 2002. At December 31, 2003, there were no borrowings under the Company's $325 million unsecured revolving credit facility ("Credit Facility") which expires in May 2005. Borrowings under the Credit Facility were $95.0 million at December 31, 2002. In July 2001, to obtain an additional source of financing, 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 up to $100 million. Net proceeds from the Receivables Facility were $50.0 million at December 31, 2003 and $85.0 million at December 31, 2002. At December 31, 2003, we had approximately $375 million of available capacity under these facilities. 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. We have maintained compliance with these financial covenants. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS continued ChoicePoint 2003 Annual Report CONTRACTUAL OBLIGATIONS AND THE RELATED FUTURE PAYMENTS
Payments Due by Period (In thousands) Total 2004 2005 2006 Thereafter -------- -------- -------- -------- ------------ Debt* $ 51,970 $ 50,140 $ 145 $ 155 $ 1,530 Capital lease obligations 59 54 5 -- -- Operating leases and other commitments 58,229 15,870 13,468 10,110 18,781 -------- -------- -------- -------- -------- Total contractual cash obligations $110,258 $ 66,064 $ 13,618 $ 10,265 $ 20,311
Interest and tax pay payments totaling $84.9 million were made in 2003. Similar payments are expected in future years. *Excludes a $4.4 million liability related to the fair market valuation of our interest rate swaps discussed below. OFF-BALANCE SHEET ITEMS In 1997, the Company entered into a $25 million synthetic lease agreement for our headquarters building. In 2001, the Company entered into another synthetic lease agreement for up to $48 million, as amended, to finance the construction of our data center facility that was completed in the second quarter of 2003. Both leases expire in 2007, at which time we have 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 we elect 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. During 2003, we modified our $48 million synthetic lease to, among other things, continue to qualify for off-balance sheet treatment in accordance with the provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." If the Company had elected to purchase the properties instead of entering into the synthetic leases, total assets and debt would have increased by $67.3 million at December 31, 2003 and we would have recorded additional depreciation expense of approximately $1.7 million ($1.0 million after tax) related to the synthetic leases for 2003. DERIVATIVES Derivative financial instruments at December 31, 2003 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, 2003, 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%. ChoicePoint has designated all of these swaps as cash flow hedges of the variability in expected future interest payments on $67 million of borrowings. 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, 2003, the fair value of the outstanding interest rate swap agreements was a liability of $4.4 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 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 swap agreement was also designated as a cash flow hedge and expired in August 2002. INTEREST RATE RISK MANAGEMENT As of December 31, 2003, $67.3 million is outstanding under the synthetic lease agreements, of which $67.0 million of LIBOR-based payments are hedged with the swap agreements. In addition, $50.0 million is outstanding under the Receivables Facility. Based on the Company's overall interest rate exposure at December 31, 2003, a 1% change in interest rates would result in a change in annual pretax interest expense of approximately $500,000 based on our current level of borrowing. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS continued ChoicePoint 2003 Annual Report
SUMMARY OF CASH ACTIVITIES 2003 2002 2001 PRIMARY SOURCES OF CASH Cash from continuing oper- Cash from continuing oper- Cash from continuing oper- ations of $194.3 million ations of $158.7 million ations of $120.7 million, and cash proceeds from and $85.0 million of cash proceeds of $49.0 mil- the sale of CPCS of borrowings under the lion from the sale of our $87.0 million less approxi- Receivables Facility. laboratory services business mately $28.3 million of and $16.0 million of net applicable taxes on the sale. borrowings under our former credit facility. PRIMARY USES OF CASH Acquisitions totaled Acquisitions totaled Acquisitions totaled $93.6 million in 2003, $187.0 million in 2002, $154.3 million in 2001 capital expenditures prima- capital expenditures and capital expenditures rily for hardware, software, primarily for hardware, primarily for hardware, databases and R&D initia- software and databases software and our public tives were $41.9 million were $49.0 million and records integration were and net debt repayments net debt repayments $50.7 million. totaled $130.4 million. under the credit facilities were $60.0 million. OPERATING ACTIVITIES Cash flows from continuing Cash flows from continuing Cash flows from continuing operations increased 22% operations increased 31% operations increased 14% from $158.7 million in to $158.7 million in 2002 to $120.7 million in 2001 2002 to $194.3 million in from $120.7 million in from $106.3 million in 2003 primarily due to our 2001 primarily due to the 2000 primarily due to the operating performance pre- operating performance of strong operating perform- viously discussed. our business segments pre- ance of our business seg- viously discussed. ments and good working capital management. INVESTING ACTIVITIES Our continued acquisitions In 2002 we acquired 6 enti- In 2001 we acquired 7 enti- of complementary businesses ties and continued to make ties, divested our laboratory (8 in 2003) and capital capital investments in tech- services business and con- investments in technology nology and databases which tinued to make capital and databases, offset by the resulted in net cash used in investments in technology proceeds generated from investing activities of and infrastructure resulting the sale of CPCS, resulted $235.3 million. in net cash used in investing in net cash used in investing activities of $155.9 million. activities of $48.5 million. FINANCING ACTIVITIES In 2003, we used the In 2002, we refinanced In 2001, we borrowed proceeds from the sale our outstanding revolving additional funds under of CPCS and operations facility with the Credit our Former Credit Facility to repay outstanding debt, Facility and borrowed and used proceeds from the resulting in net cash used additional funds under exercise of stock options to by financing activities of the Receivables Facility to fund our more significant $118.1 million. fund our more significant acquisitions resulting in net acquisitions resulting in net cash provided by financing cash provided by financing activities of $36.5 million. activities of $47.9 million.
16 MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2003 Annual Report ACCOUNTING DEVELOPMENTS 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). 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. The adoption of this standard in 2003 did not have a material impact on the Company's operating results or financial position. 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. The adoption of this standard did not have a material impact on the Company's operating results or financial position. 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 were applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of this standard did not have a material impact on the Company's operating results or financial position. In November 2002, the EITF reached a consensus on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"). EITF 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets. The provisions of EITF 00-21 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 did not have a material impact on the Company's results of operations and financial position. 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 was effective immediately for VIEs created after January 31, 2003 and was effective for the quarter ending June 30, 2003 for all VIEs that existed prior to January 31, 2003. The Company has accounted for the synthetic leases as operating leases and has recorded rent expense. During the second quarter of 2003, the Company modified its $48 million synthetic lease to, among other things, continue to qualify for off-balance sheet treatment in accordance with the provisions of FIN 46 (see Note 5 to the Consolidated Financial Statements). In December 2003, the FASB redeliberated certain proposed modifications and revised FIN 46 ("FIN 46-R"). The revised provisions are applicable no later than the first reporting period ending after March 15, 2004. The Company is currently evaluating the impact of adopting FIN 46-R. In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 also amends SFAS No. 133 for decisions made (1) as part of the Derivatives Implementation Group process that effectively required amendments to SFAS No. 133, (2) in connection with other FASB projects dealing with financial instruments, and (3) in connection with implementation issues raised in relation to the application of the definition of a derivative. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and hedging relationships designated after June 30, 2003. The adoption of this standard did not have a material impact on the Company's results of operations and financial position. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2003 Annual Report In May 2003, the FASB issued SFAS No.150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. The adoption of SFAS 150 did not have a material effect on the Company's results of operations or financial position. In December 2003, the FASB issued a revision to SFAS No. 132, "Employers' Disclosures About Pensions and Other Post Retirement Benefits," which revises employers' disclosures about pension and other postretirement benefit plans to provide additional information so that users can develop a clearer picture regarding the status and health of a company's plan. Certain of the provisions of SFAS No. 132 are effective for fiscal years ending on or after December 15, 2003, and have been adopted by the Company (see Note 8 to the Consolidated Financial Statements). 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, 2003, certain of our 2003 purchase price allocations were based on preliminary estimates which may be revised in 2004 as estimates and assumptions are finalized (see Note 4 to the Consolidated Financial Statements). We do not anticipate that these revisions would be significant to the financial statements taken as a whole. IMPAIRMENT TESTING OF GOODWILL AND OTHER ASSETS -- SFAS No. 142 requires the testing of intangible assets with indefinite lives and goodwill for impairment at least annually. We completed our initial impairment test in 2002 and our annual impairment tests in both 2002 and 2003 as required by SFAS No. 142 (see Notes 3 and 4 to the Consolidated Financial Statements). Upon completion of our analysis for goodwill impairment in the second quarter of 2002, we recorded a non-cash charge of $39.1 million ($24.4 million net of taxes) to reduce the carrying value of our 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 was due to increased competition and pricing pressures and related primarily to goodwill recorded in the 1998 acquisition of EquiSearch Services, Inc. and goodwill related to the Internet business acquired as part of the DBT merger in May 2000. No additional impairment charge was recorded as a result of the annual reviews in 2003 or 2002 based on estimated future cash flows as compared to the current book value of long-lived assets. These impairment tests are impacted by the determination of future cash flow assumptions for the related assets. Changes in assumptions could materially impact the fair value estimates. If the Company had assumed a 10% reduction in its estimated annual cash flows in the initial impairment test or subsequent annual tests, it would have recorded additional impairment of less than $3 million. 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 2003, $6.0 million of these assets were written down and recorded as other operating expense as indicators of impairment related to these assets were identified. The Company periodically reviews and reevaluates the assumptions used for assessing the recoverability of its intangible assets and adjusts them as necessary. 18 MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED ChoicePoint 2003 Annual Report 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. We periodically review and reevaluate these assumptions and adjust 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 circumstances suggest a possible impairment may exist in accordance with SFAS No. 144. Primarily in connection with the recent realignment of our technology infrastructure and the integration of our public records businesses subsequent to the DBT merger in 2000, capitalized software costs were written down by $5.1 million in 2003, $3.0 million in 2002, and $2.7 million in 2001. Amortization of capitalized software costs amounted to $13.7 million in 2003, $10.1 million in 2002, and $6.7 million in 2001. 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 our independent actuaries including a discount rate of 5.75% and an initial health care cost trend rate of approximately 12%. A 0.25% decrease or increase in the discount rate (to 6.0% or 5.5%) would result in a change in the liability of approximately $700,000. 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. FORWARD-LOOKING STATEMENTS Certain written and oral statements made by or on behalf of the Company, including information in this Annual Report, may 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 our data supply, maintaining secure systems, ability to minimize system interruptions, ability to control costs, the impact of federal, state, and local regulatory requirements on the Company's business, specifically the direct marketing and public records markets 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, the ability to mitigate material litigation 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. 19 REPORT OF MANAGEMENT ChoicePoint 2003 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. The systems of internal control are documented, evaluated and tested by the Company's internal auditors on a continuing basis. 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 and individuals may execute transactions without the proper authority or disclosure. Management believes that the Company has maintained an effective system of internal control over the preparation of its financial information, including the Consolidated Financial Statements of the Company for the year ended December 31, 2003. Independent auditors were engaged by the Company's Audit Committee to audit the Consolidated Financial Statements of the Company and issue their report thereon. The Company's independent auditors 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 deemed to be independent in accordance with applicable rules and laws, meets periodically with financial management, internal audit, and the independent auditors to review internal accounting controls, the scope and results of audits and accounting, auditing, and financial reporting matters. The Audit Committee has a member who is an "audit committee financial expert" as defined by the Securities and Exchange Commission. The Audit 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 ------------------------------ Derek V. Smith Chairman and Chief Executive Officer /s/ Steven W. Surbaugh ------------------------------ Steven W. Surbaugh Chief Financial Officer /s/ David E. Trine ------------------------------ David E. Trine Treasurer and Corporate Controller 20 INDEPENDENT AUDITORS' REPORT ChoicePoint 2003 Annual Report To the Board of Directors and Shareholders of ChoicePoint Inc.: We have audited the consolidated balance sheets of ChoicePoint Inc. and subsidiaries (the "Company") as of December 31, 2003 and 2002 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. 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 audits. We conducted our audits 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 audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2003 and 2002 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. 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," which was adopted by the Company as of January 1, 2002. /s/ Deloitte & Touche LLP ------------------------------ Deloitte & Touche LLP Atlanta, Georgia February 25, 2004 21 CONSOLIDATED STATEMENTS OF INCOME ChoicePoint 2003 Annual Report
(In thousands, except per share data) Year Ended December 31, 2003 2002 2001 - -------------------------------------------------------------------------------------------------------------------- Revenue from products and services $ 750,351 $ 690,803 $ 602,648 Reimbursable expenses (Note 3) 45,395 38,520 38,028 - -------------------------------------------------------------------------------------------------------------------- Total revenue 795,746 729,323 640,676 - -------------------------------------------------------------------------------------------------------------------- Costs and expenses: Cost of services 402,148 360,131 344,567 Reimbursable expenses 45,395 38,520 38,028 Selling, general, and administrative 138,701 140,808 118,049 Other operating charges (Note 10) 30,942 7,342 17,865 Loss on sale of business - - 10,853 - -------------------------------------------------------------------------------------------------------------------- Total costs and expenses 617,186 546,801 529,362 - -------------------------------------------------------------------------------------------------------------------- Operating income 178,560 182,522 111,314 Interest expense 3,061 7,772 10,487 - -------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 175,499 174,750 100,827 Provision for income taxes 67,391 67,078 55,125 - -------------------------------------------------------------------------------------------------------------------- Income from continuing operations 108,108 107,672 45,702 Income from discontinued operations, net of tax (Note 4) 991 6,571 4,632 Gain on sale of discontinued operations, net of tax (Note 4) 32,893 - - - -------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of change in accounting principle 141,992 114,243 50,334 Cumulative effect of change in accounting principle, net of tax (Note 3) - (24,416) - - -------------------------------------------------------------------------------------------------------------------- Net income $ 141,992 $ 89,827 $ 50,334 ==================================================================================================================== Earnings per share (Notes 3 and 7) Basic: Income from continuing operations $ 1.26 $ 1.28 $ 0.55 Income from discontinued operations, net 0.01 0.08 0.06 Gain on sale of discontinued operations, net 0.38 - - - -------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of change in accounting principle 1.65 1.36 0.61 Cumulative effect of change in accounting principle, net - (0.29) - - -------------------------------------------------------------------------------------------------------------------- Net income $ 1.65 $ 1.07 $ 0.61 ==================================================================================================================== Diluted: Income from continuing operations $ 1.21 $ 1.21 $ 0.52 Income from discontinued operations, net 0.01 0.07 0.05 Gain on sale of discontinued operations, net 0.37 - - - -------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of change in accounting principle 1.58 1.28 0.58 Cumulative effect of change in accounting principle, net - (0.27) - - -------------------------------------------------------------------------------------------------------------------- Net income $ 1.58 $ 1.01 $ 0.58 ==================================================================================================================== Weighted average shares - basic 85,957 84,313 82,417 Dilutive effect of stock options 3,729 4,881 4,734 - -------------------------------------------------------------------------------------------------------------------- Weighted average shares - diluted 89,686 89,194 87,151 - --------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 22 CONSOLIDATED BALANCE SHEETS ChoicePoint 2003 Annual Report
(In thousands, except par values) December 31, 2003 2002 - --------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 23,410 $ 34,359 Accounts receivable, net of allowance for doubtful accounts of $5,450 in 2003 and $4,978 in 2002 153,661 143,610 Deferred income tax assets 9,160 6,557 Other current assets 17,721 20,809 - --------------------------------------------------------------------------------------------------------------- Total current assets 203,952 205,335 Property and equipment, net 56,968 66,221 Goodwill 645,172 578,608 Other acquisition intangible assets 47,081 42,572 Deferred income tax assets 871 12,672 Other 67,240 73,602 - --------------------------------------------------------------------------------------------------------------- Total assets $ 1,021,284 $ 979,010 =============================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt and current maturities of long-term debt $ 50,194 $ 85,387 Accounts payable 31,823 31,825 Accrued salaries and bonuses 34,480 37,801 Other current liabilities 61,984 47,683 - --------------------------------------------------------------------------------------------------------------- Total current liabilities 178,481 202,696 Long-term debt, less current maturities 1,835 97,059 Postretirement benefit obligations 30,815 37,853 Other long-term liabilities 19,658 18,795 - --------------------------------------------------------------------------------------------------------------- Total liabilities 230,789 356,403 =============================================================================================================== 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 - 87,748 in 2003 and 86,555 in 2002 8,775 8,655 Paid-in capital 374,929 345,426 Retained earnings 429,779 287,787 Accumulated other comprehensive loss, net (2,589) (2,881) Treasury stock, at cost, 1,193 shares in 2003 and 1,065 shares in 2002 (20,399) (16,380) - --------------------------------------------------------------------------------------------------------------- Total shareholders' equity 790,495 622,607 - --------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 1,021,284 $ 979,010 ===============================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 23 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated Other Comprehensive Comprehensive Common Paid-in Retained Loss, Treasury (In thousands) Income Stock Capital Earnings Net Stock Total - ---------------------------------------------------------------------------------------------------------------------------------- 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 Net income $ 141,992 - - 141,992 - - 141,992 Change in fair value of derivatives, net of deferred taxes of $166 249 - - - 249 - 249 Other 43 - - - 43 - 43 ----------- Comprehensive income $ 142,284 ----------- Restricted stock plans, net 6 3,659 - - - 3,665 Stock options exercised 114 16,180 - - - 16,294 Common stock redeemed - - - - (99) (99) Stock purchased by employee benefit trusts, net - 22 - - (3,920) (3,898) Tax benefit of stock options exercised - 9,642 - - - 9,642 - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE, DECEMBER 31, 2003 $ 8,775 $ 374,929 $ 429,779 $ (2,589) $ (20,399) $790,495 ==================================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 24 CONSOLIDATED STATEMENTS OF CASH FLOWS ChoicePoint 2003 Annual Report
(In thousands) Year Ended December 31, 2003 2002 2001 - ----------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 141,992 $ 89,827 $ 50,334 Cumulative effect of change in accounting principle, net of tax - 24,416 - Income from discontinued operations, net of tax (991) (6,571) (4,632) Gain on sale of discontinued operations, net of tax (32,893) - - - ----------------------------------------------------------------------------------------------------------------------------- Income from continuing operations 108,108 107,672 45,702 - ----------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net cash provided by continuing operations: Depreciation and amortization 53,120 44,850 58,100 Provision for other operating charges 21,164 5,405 12,703 Compensation recognized under employee stock plans, net 3,665 2,782 2,544 Tax benefit of stock options exercised 9,642 19,040 11,407 Loss on sale of business, pretax - - 10,853 Changes in assets and liabilities, excluding effects of acquisitions and divestitures: Accounts receivable, net (14,179) (10,497) (7,228) Other current assets 4,703 3,571 (10,491) Deferred income taxes 8,859 10,039 6,169 Current liabilities, excluding debt 6,007 (16,336) (7,405) Other long-term liabilities, excluding debt (6,802) (7,812) (1,607) - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by continuing operations 194,287 158,714 120,747 - ----------------------------------------------------------------------------------------------------------------------------- Net cash (used) provided by discontinued operations (38,609) 10,036 6,844 Cash flows from investing activities: Acquisitions, net of cash acquired, and equity investment (93,567) (186,990) (154,259) Cash proceeds from sale of businesses 87,000 650 49,000 Additions to property and equipment, net (20,645) (19,796) (18,880) Additions to other assets, net (21,286) (29,207) (31,797) - ----------------------------------------------------------------------------------------------------------------------------- Net cash used by investing activities (48,498) (235,343) (155,936) - ----------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Payments on Former Credit Facility - (155,000) (74,000) Payments on Credit Facility (153,000) (40,000) - Borrowings under Credit Facility 58,000 135,000 - Borrowings under Former Credit Facility - - 90,000 Payments on Receivables Facility (35,000) - - Borrowings under Receivables Facility - 85,000 - Payments on other debt, net (426) (1,531) (1,982) Purchases of stock held by employee benefit trusts, net (3,898) - (1,972) Redemption of common stock (99) (814) (2,176) Proceeds from exercise of stock options 16,294 25,264 26,599 - ----------------------------------------------------------------------------------------------------------------------------- Net cash (used) provided by financing activities (118,129) 47,919 36,469 - ----------------------------------------------------------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents (10,949) (18,674) 8,124 Cash and cash equivalents, beginning of year 34,359 53,033 44,909 - ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 23,410 $ 34,359 $ 53,033 =============================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ChoicePoint 2003 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 increased 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 ("P&C") insurers. Major offerings to the personal lines P&C market include claims history data, motor vehicle records ("MVR"), police records, credit information and modeling services. Additionally, ChoicePoint provides customized policy rating and issuance software to the commercial insurance market. Prior to the divestiture in February 2003 (Note 4), ChoicePoint also provided property inspections and audits to the commercial 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, vital record services, 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 and balances between entities included in the consolidated financial statements have been eliminated. 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") - In accordance with Statement of Accounting Standards ("SFAS") No. 128, "Earnings Per Share," the Company has computed basic and diluted EPS using the treasury stock method. Options outstanding to purchase approximately 2.5 million, 900,000, and 200,000 shares of common stock at December 31, 2003, 2002 and 2001, respectively, were not included in the computation of diluted EPS because the exercise prices of the options were greater than the average market prices of the Company's common shares during the applicable year (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 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 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report 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 $597.6 million in 2003, $491.7 million in 2002 and $423.2 million in 2001. 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 to comply with the guidance in EITF 01-14. The application of EITF 01-14 had no impact on operating income, net income or earnings per share. Reimbursed materials, shipping and postage charges in the Company's Marketing Services segment for 2003, 2002 and 2001 amounting to $45.4 million, $38.5 million and $38.0 million, respectively, have been presented as revenues and expenses in the corresponding Consolidated Statements of Income. STOCK OPTIONS - As of December 31, 2003, 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 fair market value of ChoicePoint common stock on the date of grant. In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," which amends SFAS No. 123, "Accounting for Stock-Based Compensations," and provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation. Furthermore, SFAS No. 148 requires more prominent and frequent disclosures in the financial statements about the effects of stock-based compensation. The Company adopted SFAS No. 148 as of January 1, 2003 with respect to the disclosure requirements. The Company has elected to account for stock-based compensation using the intrinsic value method prescribed in APB No. 25 and related interpretations. If the Company had elected to apply the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" 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, 2003 2002 2001 - ----------------------------------------------------------------------- Net income, as reported $ 141,992 $ 89,827 $ 50,334 Deduct: Total stock-based employee compensation expense determined under fair value based method for stock option awards, net of related tax effects 13,154 15,360 9,696 - ----------------------------------------------------------------------- Pro forma net income $ 128,838 $ 74,467 $ 40,638 ======================================================================= Earnings per share: Basic - as reported $ 1.65 $ 1.07 $ 0.61 Basic - pro forma 1.50 0.88 0.50 Diluted - as reported $ 1.58 $ 1.01 $ 0.58 Diluted - pro forma 1.45 0.85 0.47
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, 2003 2002 2001 - ---------------------------------------------------------------- Dividend yield 0% 0% 0% Expected volatility 33% 33% 29% Risk-free interest rate 2.8% 4.4% 4.6% Expected life in years 4.23 4.77 6.53 Weighted average fair value of options granted $10.00 $14.31 $ 11.61
PROPERTY AND EQUIPMENT - Property and equipment at December 31, 2003 and 2002 consisted of the following (in thousands):
December 31, 2003 2002 - -------------------------------------------------------------------------------- Land, buildings, and improvements $ 23,541 $ 30,824 Data processing equipment and furniture 143,726 135,718 Less accumulated depreciation (110,299) (100,321) - -------------------------------------------------------------------------------- $ 56,968 $ 66,221 ================================================================================
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 - The Company accounts for 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 or independent third-party appraisals. Goodwill for acquisitions prior to July 1, 2001 was amortized on a straight-line basis over ten to 40 years. 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report In June 2001, the 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 on December 31, 2001. Any goodwill resulting from acquisitions completed after June 30, 2001 is not 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 Online, Inc. merger in May 2000. The Company also completed its annual goodwill impairment reviews as of October 31, 2003 and October 31, 2002. No additional impairment charge was recorded as a result of these reviews. A summary of the change in goodwill during the years ended December 31, 2003 and 2002, by business segment, is as follows:
Net Goodwill at Acquisitions NET GOODWILL AT (In thousands) December 31, 2002 & Adjustments Divestiture DECEMBER 31, 2003 - ------------------------------------------------------------------------------------------------------------------ Insurance $ 45,659 $13,206 $(10,829) $ 48,036 B&G 354,764 51,618 - 406,382 Marketing 178,185 12,569 - 190,754 - ------------------------------------------------------------------------------------------------------------------ Total $578,608 $77,393 $(10,829) $645,172 ==================================================================================================================

Net Goodwill at Acquisitions Net Goodwill At (In thousands) December 31, 2001 & Adjustments Impairment 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 results on a historical basis do not reflect the provisions of SFAS No. 142. Had ChoicePoint adopted SFAS No. 142 on January 1, 2001, 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) 2003 2002 2001 - --------------------------------------------------------------------------------------------------------------------- Income before cumulative change in accounting principle $141,992 $114,243 $50,334 Goodwill amortization, net of taxes - - 13,242 - --------------------------------------------------------------------------------------------------------------------- Adjusted income before cumulative change in accounting principle 141,992 114,243 63,576 - --------------------------------------------------------------------------------------------------------------------- Cumulative change in accounting principle, net of tax - (24,416) - - --------------------------------------------------------------------------------------------------------------------- Adjusted net income $141,992 $ 89,827 $63,576 ===================================================================================================================== Basic EPS, income before cumulative change in accounting principle $ 1.65 $ 1.36 $ 0.61 Goodwill amortization - - 0.16 - --------------------------------------------------------------------------------------------------------------------- Adjusted EPS, income before cumulative change in accounting principle 1.65 1.36 0.77 - --------------------------------------------------------------------------------------------------------------------- Cumulative change in accounting principle, net - (0.29) - - --------------------------------------------------------------------------------------------------------------------- Adjusted basic EPS $ 1.65 $ 1.07 $ 0.77 ===================================================================================================================== Diluted EPS, income before cumulative change in accounting principle $ 1.58 $ 1.28 $ 0.58 Goodwill amortization - - 0.15 - --------------------------------------------------------------------------------------------------------------------- Adjusted EPS, income before cumulative change in accounting principle 1.58 1.28 0.73 - --------------------------------------------------------------------------------------------------------------------- Cumulative change in accounting principle, net - (0.27) - - --------------------------------------------------------------------------------------------------------------------- Adjusted diluted EPS $ 1.58 $ 1.01 $ 0.73 =====================================================================================================================
28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report OTHER ACQUISITION INTANGIBLE ASSETS - Other acquisition intangibles, excluding trademarks/tradenames totaling $3.5 million included in other intangible assets below, are being amortized on a straight-line basis over three to eleven years. Amortization expense was $9.5 million for 2003, $6.1 million for 2002 and $5.3 million for 2001. Estimated amortization expense for the next five years is $9.3 million for 2004, $8.6 million for 2005, $7.6 million for 2006, $7.0 million for 2007 and $5.4 million for 2008. Other Acquisition Intangible Assets at December 31, 2003 and 2002 consisted of the following:
2003 2002 ---- ---- Accumulated Accumulated (In thousands) Gross Amortization Net Gross Amortization Net - --------------------------------------------------------------------------------------------------------------------- Customer relationships $36,918 $ (7,288) $29,630 $23,353 $ (3,404) $19,949 Purchased data files 2,107 (945) 1,162 14,815 (14,066) 749 Internally developed software 15,050 (11,210) 3,840 14,232 (9,264) 4,968 Non-compete agreements 10,141 (2,471) 7,670 11,767 (2,828) 8,939 Other intangible assets 12,187 (7,408) 4,779 11,300 (3,333) 7,967 - --------------------------------------------------------------------------------------------------------------------- $76,403 $(29,322) $47,081 $75,467 $(32,895) $42,572 =====================================================================================================================
Other Assets- Other assets at December 31, 2003 and 2002 consisted of the following (in thousands):
December 31, 2003 2002 - --------------------------------------------------------------------------------------------------------------------- System development and other deferred costs, net $ 65,813 $ 70,504 Royalty patents, net 1,427 3,098 - --------------------------------------------------------------------------------------------------------------------- $ 67,240 $ 73,602 =====================================================================================================================
For the years ended December 31, costs of software developed for internal use of approximately $13.2 million in 2003, $19.3 million in 2002 and $24.9 million in 2001 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 Statement of Position ("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 $59.3 million as of December 31, 2003 and $47.9 million as of December 31, 2002. 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, 2003 and 2002, approximately $7.2 million and $5.4 million of other long-lived assets were written down to fair value and recognized as other operating charges, respectively (Note 10). DEPRECIATION AND AMORTIZATION EXPENSE - Depreciation and amortization expense from continuing operations for 2003, 2002 and 2001 consisted of the following:
(In thousands) Year Ended December 31, 2003 2002 2001 - ----------------------------------------------------------------------- Property and equipment $21,205 $19,366 $22,417 Goodwill - - 17,070 Other acquisition intangibles 9,539 6,133 5,413 Royalty patents 1,695 1,695 1,695 System development and other deferred costs 20,681 17,656 11,505 - ----------------------------------------------------------------------- $53,120 $44,850 $58,100 =======================================================================
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 $81.8 million in 2003, $43.7 million in 2002 and $46.6 million in 2001. Interest paid on long-term debt totaled $3.1 million in 2003, $8.5 million in 2002 and $10.0 million in 2001. 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report In 2003, 2002 and 2001, 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, 2003 2002 2001 - ------------------------------------------------------------------ Fair value of assets acquired $102,779 $ 201,058 $ 181,570 Cash paid for acquisitions 94,644 192,582 157,348 - ------------------------------------------------------------------ Liabilities assumed $ 8,135 $ 8,476 $ 24,222 ==================================================================
FINANCIAL INSTRUMENTS AND DERIVATIVES - The Company's financial instruments recorded on the balance sheet consist primarily of cash and cash equivalents, accounts receivable, 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. The Company's derivative financial instruments are accounted for under the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, which was adopted by the Company effective January 1, 2001. The effect of such adoption was not material. Such derivatives at December 31, 2003 and 2002 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. 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 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 was a liability of $4.4 million as of December 31, 2003 and a liability of $4.8 million at December 31, 2002. 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. The adoption of this standard in 2003 did not have a material impact on the Company's operating results or financial position. 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. The adoption of this standard in 2003 did not have a material effect on the Company's operating results or financial position. 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 were applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of this standard did not have a material impact on the Company's operating results or financial position. In November 2002, the EITF reached a consensus on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"). EITF 00-21 provides guidance on how to account for arrangements that involve the delivery 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report or performance of multiple products, services and/or rights to use assets. The provisions of EITF 00-21 apply to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 did not have a material impact on the Company's results of operations and financial position because all multiple deliverable arrangements are being accounted for under SOP 97-2, "Software Revenue Recognition." 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 was effective immediately for VIEs created after January 31, 2003 and was effective for the quarter ending June 30, 2003 for all VIEs that existed prior to January 31, 2003. The Company has accounted for the synthetic leases as operating leases and has recorded rent expense. During the second quarter of 2003, the Company modified its $48 million synthetic lease to, among other things, continue to qualify for off-balance sheet treatment in accordance with the provisions of FIN 46 (Note 5). In December 2003, the FASB redeliberated certain proposed modifications and revised FIN 46 ("FIN 46-R"). The revised provisions are applicable no later than the first reporting period ending after March 15, 2004. The Company is currently evaluating the impact of adopting FIN 46-R. In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 also amends SFAS No. 133 for decisions made (1) as part of the Derivatives Implementation Group process that effectively required amendments to SFAS No. 133, (2) in connection with other FASB projects dealing with financial instruments, and (3) in connection with implementation issues raised in relation to the application of the definition of a derivative. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and hedging relationships designated after June 30, 2003. The adoption of this standard did not have a material impact on the Company's results of operations and financial position. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. The adoption of SFAS No. 150 did not have a material effect on the Company's results of operations or financial position. In December 2003, the FASB issued a revision to SFAS No. 132, "Employers' Disclosures About Pensions and Other Post Retirement Benefits," which revises employers' disclosures about pension and other postretirement benefit plans to provide additional information so that users can develop a clearer picture regarding the status and health of a company's plan. Certain of the provisions of SFAS No. 132 are effective for fiscal years ending on or after December 15, 2003, and have been adopted by the Company (see Note 8). 4 ACQUISITIONS AND DIVESTITURES ACQUISITIONS - During 2003, 2002 and 2001, the Company acquired either stock or assets of the following businesses:
Date Business Acquired - ------------------------------------------------------------------------- CITI NETWORK, Inc. d/b/a Applicant Screening and Processing October 2003 Bridger Systems, Inc. September 2003 insuranceDecisions, Inc. September 2003 TML Information Services, Inc. August 2003 Identico Systems, LLC July 2003 Mortgage Asset Research Institute, Inc. June 2003 The List Source, Inc. d/b/a Kramer Lead Marketing Group January 2003 National Data Retrieval, Inc. January 2003 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 - -------------------------------------------------------------------------
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 2003, the Company acquired 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; The List 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report Source, Inc. d/b/a/ Kramer Lead Marketing Group, a marketing company servicing the life and health insurance and financial services markets based in Dallas, Texas; Mortgage Asset Research Institute, Inc., which operates databases that help monitor and identify fraud, misrepresentation and misconduct in the mortgage industry based in Reston, Virginia; Identico Systems, LLC, a real-time provider of customer identity verification via face-to-face transactions at the point of sale based in Nashua, New Hampshire; CITI NETWORK, Inc. d/b/a Applicant Screening and Processing, a tenant screening company based in Orlando, Florida and certain assets of TML Information Services, Inc., a provider of MVRs in the insurance industry based in Forest Hills, New York; Bridger Systems, Inc., which assists customers with their compliance of OFAC, USA PATRIOT Act and other requirements based in Bozeman, Montana and insuranceDecisions, Inc., a provider of full service claims administration applications to the insurance industry based in Ridgefield, Connecticut. These acquisitions extend ChoicePoint's current product and service offerings in Insurance Services, Marketing Services and B&G. 2003 acquisitions had an aggregate purchase price of $94.6 million which was paid in cash, $77.4 million was allocated to goodwill, substantially all of which is expected to be fully deductible for tax purposes, and $20.0 million to other acquisition intangible assets as follows based on preliminary allocations:
Weighted Average Amortization (In thousands) Amount Period - ----------------------------------------------------------------------------- Customer relationships $ 16,380 4 to 7 years Purchased data files 1,529 5 to 9 years Software 1,018 5 years Patents 688 11 years Trademark/tradename 200 indefinite life asset Noncompete agreements 190 4 to 5 years - ----------------------------------------------------------------------------- $ 20,005 =============================================================================
On December 2, 2002, ChoicePoint acquired 100 percent of the outstanding common stock of Vital Chek Network, Inc. and Vital Chek Network 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 extended 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 an additional earnout ending June 30, 2006 if VitalChek exceeds certain financial targets. As of December 31, 2003, no additional earnouts had been paid. The following table summarizes the fair values of assets acquired and liabilities assumed (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 $ 751,196 $ 658,044 Income from continuing operations 107,049 40,364 Income before cumulative effect of change in accounting principle 113,620 44,996 Net income 89,204 44,996 EPS, basic $ 1.06 $ 0.55 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. 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report 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 Amortization (In thousands) Amount 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. 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 $2.9 million as of December 31, 2003 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 2003, 2002 and 2001 purchased acquisitions, other than VitalChek, is not material individually or in the aggregate to the consolidated financial statements. DIVESTITURES - In February 2003, the Company sold its CP Commercial Specialists ("CPCS") business to New Mountain Capital, L.L.C. for $87.0 million in cash. The sale of CPCS was the culmination of ChoicePoint's efforts to exit the highly manual, labor-intensive businesses that characterized the Company in its early days and focus on data and technology intensive solutions. CPCS is reported as a discontinued operation for all periods presented in the accompanying consolidated financial statements, and the operating results of CPCS through February 28, 2003, the date of sale, are reflected separately from the results of continuing operations. The gain on sale of CPCS is approximately $32.9 million net of taxes and includes transaction expenses of $9.4 million, which includes investment banker fees and severance and retention benefits. Summarized operating results and gain on sale for the two months ended February 28, 2003 and the years ended December 31, 2002 and December 31, 2001 are as follows:
TWO MONTHS Year Year ENDED Ended Ended FEBRUARY 28, December 31, December 31, (In thousands) 2003 2002 2001 - ------------------------------------------------------------------------------------- Total revenue $ 11,234 $ 62,239 $ 53,319 ===================================================================================== Income from operations before income taxes $ 1,609 $ 10,710 $ 8,194 Provision for income taxes 618 4,139 3,562 - ------------------------------------------------------------------------------------- Income from discontinued operations, net of tax $ 991 $ 6,571 $ 4,632 ===================================================================================== Gain on sale of discontinued operations $ 61,201 $ - $ - Provision for income taxes 28,308 - - - ------------------------------------------------------------------------------------- Gain on sale of discontinued operations, net of tax $ 32,893 $ - $ - =====================================================================================
33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report In August 2001, the Company sold its laboratory services business for approximately $49.0 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. 5 DEBT AND OTHER FINANCING Long-term debt at December 31, 2003 and 2002 was as follows:
(In thousands) December 31, 2003 2002 - ----------------------------------------------------------- Credit Facility $ - $ 95,000 Receivables Facility 50,000 85,000 Other long-term debt 1,970 2,100 Capital leases 59 346 - ----------------------------------------------------------- 52,029 182,446 Less current maturities (50,194) (85,387) - ----------------------------------------------------------- $ 1,835 $ 97,059 ===========================================================
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, 2003 was 1.6% and 2.0% at December 31, 2002. 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 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 through June 2004. Due to certain contractual removal-of-accounts provisions, the Receivables Facility has been recorded as an on-balance sheet financing transaction in accordance with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." 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 $50.0 million at December 31, 2003 and $85.0 million at December 31, 2002. The average interest rate based on the terms of the Receivables Facility at December 31, 2003 was approximately 1.5%. 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 $48 million to finance the construction of its new data center facility. 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. If the Company had elected to purchase the properties instead of entering into the synthetic leases, total assets and debt would have increased by $67.3 million at December 31, 2003 and $54.3 million at December 31, 2002 and the Company would have recorded additional depreciation expense for the year ended December 31 of approximately $1.7 million in 2003 ($1.0 million after tax) and $800,000 in both 2002 and 2001. 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report At December 31, 2003, 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 have a total notional amount of $42 million, became 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 cash flow 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. This swap agreement was also designated as a cash flow hedge and expired in August 2002. The Company is exposed to credit loss in the event of nonperformance 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, 2003 are as follows: $50.2 million in 2004, $150,000 in 2005, $155,000 in 2006, $160,000 in 2007, $170,000 in 2008 and $1.2 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, 2003 2002 2001 - -------------------------------------------------------------------------- Current: Federal $ 78,029 $ 55,306 $ 51,304 State 9,792 5,791 3,827 Foreign - - 256 - -------------------------------------------------------------------------- 87,821 61,097 55,387 - -------------------------------------------------------------------------- Deferred: Federal 8,008 (4,744) 1,979 State 488 164 1,313 Foreign - - 8 - -------------------------------------------------------------------------- 8,496 (4,580) 3,300 - -------------------------------------------------------------------------- Total $ 96,317 $ 56,517 $ 58,687 ==========================================================================
The provision for income taxes is based upon income before income taxes, as follows:
(In thousands) Year Ended December 31, 2003 2002 2001 - --------------------------------------------------------------------------- United States $ 238,309 $ 146,344 $ 108,429 Foreign - - 592 - --------------------------------------------------------------------------- $ 238,309 $ 146,344 $ 109,021 ===========================================================================
The provision for income taxes is reconciled with the federal statutory rate, as follows:
Year Ended December 31, 2003 2002 2001 - ----------------------------------------------------------------------------------- Federal statutory rate 35.0% 35.0% 35.0% State and local taxes, net of federal tax benefit 2.3 2.4 2.3 Tax effect resulting from foreign activities - - 0.1 Goodwill amortization - - 1.5 Other operating charges - - 14.1 Other 1.1 1.0 1.7 - ----------------------------------------------------------------------------------- Effective rate for continuing operations 38.4 38.4 54.7 - ----------------------------------------------------------------------------------- Effective rate impact from discontinued operations 2.0 - (0.9) - ----------------------------------------------------------------------------------- Effective rate impact for cumulative change in accounting principle - 0.2 - - ----------------------------------------------------------------------------------- Overall effective rate 40.4% 38.6% 53.8% ===================================================================================
Components of the Company's deferred income tax assets and liabilities at December 31, 2003 and 2002 are as follows:
(In thousands) December 31, 2003 2002 - ----------------------------------------------------------------------------------- Deferred income tax assets: Postretirement benefits $ 13,109 $ 15,682 Reserves and accrued expenses 9,281 7,515 Employee compensation programs 10,149 7,179 Goodwill 2,896 14,700 Other 24,015 6,773 - ----------------------------------------------------------------------------------- 59,450 51,849 - ----------------------------------------------------------------------------------- Deferred income tax liabilities: Purchased software, data files, technology, and other assets (27,400) (14,000) Depreciation (5,130) (3,576) Deferred expenses (11,659) (9,820) Other (5,230) (5,224) - ----------------------------------------------------------------------------------- (49,419) (32,620) - ----------------------------------------------------------------------------------- Net deferred income tax assets $ 10,031 $ 19,229 ===================================================================================
35 NOTES TO CONSOLIDATED FINANCIAL INFORMATION CONTINUED Choicepoint 2003 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 - On April 29, 2003, the shareholders of the Company approved the ChoicePoint Inc. 2003 Omnibus Incentive Plan ("2003 Plan"). The 2003 Plan provides for 3,500,000 shares of common stock that may be issued or equivalents paid with respect to awards made under the plan. The ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan (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 2003, options for 1.6 million shares were granted at fair market value of the underlying stock under these two plans with a weighted average option price of $33.56. A summary of changes in all outstanding options and the related weighted average exercise price per share is as follows (shares in thousands):
2003 2002 2001 ------------------------- ------------------------- ------------------------- December 31, Shares Avg. Price Shares Avg. Price Shares Avg. Price ----------- ---------- ----------- ---------- ----------- ---------- Balance, beginning of year 12,260 $21.44 11,840 $15.31 11,986 $12.56 Granted 1,571 33.56 2,946 40.04 2,554 26.39 Canceled/forfeited (547) 32.24 (327) 32.49 (580) 19.64 Exercised (1,163) 14.71 (2,199) 11.67 (2,120) 11.89 ------ ------ ------ ------ ------ ------ Balance, end of year 12,121 $23.17 12,260 $21.44 11,840 $15.31 ------ ------ ------ ------ ------ ------ Exercisable at end of year 7,128 $14.97 7,285 $13.82 6,699 $11.20 ====== ====== ====== ====== ====== ======
The following table summarizes information about stock options outstanding at December 31, 2003 (shares in thousands):
Options Outstanding Options Exercisable ---------------------------------------------- ----------------------- Weighted Average Weighted Remaining Weighted Average Contractual Life Average Exercise Range of Exercise Prices Shares in Years Exercise Price Shares Price - ------------------------ ------ ----------------- -------------- ------ -------- $ 0.001 - $13.340 3,122 3.2 $ 8.46 3,122 $ 8.46 $13.341 - $17.788 1,571 4.8 14.01 1,571 14.01 $17.789 - $22.235 1,257 5.6 19.13 1,131 19.14 $22.236 - $26.682 1,739 6.9 25.98 847 25.96 $26.683 - $35.576 1,889 8.5 32.49 303 28.75 $35.577 - $40.630 1,614 8.0 38.71 152 38.68 $40.631 - $50.000 929 8.3 42.40 2 42.80
On a periodic basis, certain key officers, employees and directors of ChoicePoint are granted restricted stock under the Omnibus Plan and 2003 Plan. As of December 31, 2003, 154,000 restricted shares were outstanding. The compensation cost charged against income for restricted stock was $5.4 million in 2003, $5.9 million in 2002, and $5.9 million in 2001. 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. 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report 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 including 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 $18.4 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 $17.3 million have been used to purchase 1.1 million shares of ChoicePoint common stock, which are reflected as treasury stock, at cost, in the December 31, 2003 balance sheet. Cash remaining in the grantor trusts of approximately $1.1 million at December 31, 2003 and $3.1 million at December 31, 2002 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 2,800 shares of common stock in 2003 and 24,000 shares in 2002 at market price in consideration of the minimum tax obligations for restricted stock vestings at a total cost of $99,000 in 2003 and $814,000 in 2002. 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 61% for 2003, 64% for 2002 and 55% in 2001. 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 plan was $3.3 million in 2003, $4.8 million in 2002 and $4.8 million in 2001. 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 $1.5 million in 2003, and $1.7 million in both 2002 and 2001. 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, 2003 and 2002, related to these plans, the Company has recorded a liability of $17.7 million and $17.3 million, respectively. 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report 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, net of the estimated amount of participant contributions. These postretirement benefit plans are unfunded. The accounting for the health care plans anticipates future cost-sharing changes to the written plans that are consistent with the Company's expressed intent to increase retiree contributions equal to a percentage of health care cost increases. ChoicePoint uses December 31 as the measurement date for these plans. The following table presents a reconciliation of the changes in the plan's benefit obligations and fair value of assets at December 31, 2003 and 2002:
(In thousands) December 31, 2003 2002 -------- -------- Change in benefit obligation: Obligation at beginning of year $ 33,176 $ 32,737 Service cost 51 158 Interest cost 2,108 2,338 Actuarial loss 10,685 4,187 Benefit payments, net of participant contributions (5,673) (6,244) -------- -------- Obligation at end of year 40,347 33,176 -------- -------- Change in plan assets: Fair value of plan assets at beginning of year -- -- Employer contributions 5,673 6,244 Benefit payments (5,673) (6,244) -------- -------- Fair value of plan assets at end of year -- -- -------- -------- Funded status: Funded status at end of year and net amount recognized (40,347) (33,176) Unrecognized prior service cost (1,117) (2,719) Unrecognized loss (gain) 5,649 (5,107) -------- -------- Net amount recognized (35,815) (41,002) Less current portion (5,000) (3,600) -------- -------- Accrued benefit cost $(30,815) $(37,402) ======== ========
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, 2003 2002 2001 ------- ------- ------- Service cost $ 51 $ 158 $ 394 Interest cost on accumulated benefit obligation 2,108 2,338 2,831 Amortization of prior service cost (583) (1,066) (1,847) Amortization of losses (71) (1,047) (371) Curtailment gain (1,020) -- (712) ------- ------- ------- Net periodic postretirement benefit expense $ 485 $ 383 $ 295 ======= ======= =======
In 2003 and 2001, the Company recognized curtailment gains due to the sales of CPCS and 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, 2003 2002 2001 ----- ----- ---- Discount rate used to determine accumulated postretirement benefit obligation at December 31 5.75% 6.75% 7.50% Initial health care cost trend rate 12.33% 13.38% 9.27% Ultimate health care cost trend rate 5.50% 5.50% 5.00% Year ultimate health care cost trend rate reached 2012 2012 2007
Assumed health care trend rates have a significant effect on the amounts reported for health care plans. If the health care cost trend rate were changed by 1% for all future years, the accumulated postretirement benefit obligation ("APBO") as of December 31, 2003 would have been impacted as follows:
1-Percentage 1-Percentage (In thousands) Point Increase Point Decrease -------------- -------------- ~~Effect on total APBO $975 $(854) Effect on total service cost plus interest cost 69 (61)~~
38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report 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 had a defined benefit pension plan which covered substantially all of the permanent employees of VitalChek and was terminated by the Company 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 $17.3 million in 2003, $19.2 million in 2002, and $19.4 million in 2001. 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 $67.3 million at December 31, 2003 and the Company would have recorded additional depreciation expense of $1.7 million in 2003. 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, 2003:
(In thousands) Year Amount - ------------ -------- 2004 $15,870 2005 13,468 2006 10,110 2007 5,909 2008 2,435 Thereafter 10,437 ------- $58,229 =======
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, 2003, the maximum contingent liability under the agreements or plans was approximately $63.3 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 class action lawsuit against the Company was filed in the United States District Court for the Middle District of Florida on May 30, 2003 (last styled Russell V. Rosen and Rabbi Joel Levine et al. v. ChoicePoint Inc.) alleging violations of the federal Driver's Privacy Protection Act ("DPPA"). The plaintiffs recently dismissed this case against all defendants. Three ChoicePoint entities have been added as defendants in a similar complaint filed in the United States District Court for the Southern District of Florida (styled Fresco, et al. v. Automotive Directions Inc., et al.). Additionally, Russell V. Rosen and Rabbi Joel Levine have been added as plaintiffs in this case. The complaints allege that the Company has obtained, disclosed and used information obtained from the Florida Department of Highway Safety and Motor Vehicles ("Florida DHSMV") in violation of the DPPA. The plaintiffs seek to represent classes of individuals whose personal information from Florida DHSMV records has been obtained, disclosed and used for marketing purposes or other allegedly impermissible uses by ChoicePoint without the express written consent of the individual. A number of the Company's competitors have also been sued in the same or similar litigation in Florida. In addition, on July 10, 2003, a plaintiff filed a class action lawsuit against the Company in the United States District Court for the Eastern District of Louisiana (styled Betty D. Russell v. ChoicePoint Services, Inc.) that alleges substantially similar violations of the DPPA. The plaintiff sought to represent a national class of all individuals whose information the Company has obtained from motor vehicle records and a subclass of all individuals domiciled in Louisiana whose information the Company has obtained from motor vehicle records in Louisiana. ChoicePoint filed a Motion to Dismiss. The Court granted such motion in part and denied in part. Each of these complaints seeks certification as a class action, compensatory damages, attorney's fees and costs, and injunctive and other relief. The Company intends to defend against these actions vigorously. While the ultimate resolution of these cases cannot presently be determined, an unfavorable outcome in any of these cases could have a material adverse effect on the Company's financial condition or results of operations. 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report ChoicePoint also is involved in other litigation from time to time in the ordinary course of its business. The Company provides for estimated legal fees and settlements relating to pending lawsuits when they are probable and reasonably estimable. The Company does not believe that the outcome of any such pending or threatened litigation in the ordinary course of business will have a material adverse effect on the financial position or results of operations of ChoicePoint. However, as is inherent in legal proceedings where issues may be decided by finders of fact, there is a risk that unpredictable decisions adverse to the Company could be reached. 10 OTHER OPERATING CHARGES The Company recorded other operating charges of $30.9 million in 2003, $7.3 million in 2002 and $17.9 million in 2001. The categories of costs incurred and the accrued balances at December 31, 2003 are summarized below:
Remaining Accrual at 2003 2002 2001 (In thousands) December 31, 2003 Expense Expense Expense --------------------- ------- ------- ------- Asset impairments $ -- $21,350 $ 2,985 $12,693 Personnel-related merger costs -- -- -- 1,832 Other merger integration costs -- -- -- 2,433 Write down of minority investments -- -- 2,370 -- Nonmerger severance 1,562 4,354 567 838 Other one-time charges 3,964 5,238 1,420 69 ------- ------- ------- ------- $ 5,526 $30,942 $ 7,342 $17,865 ======= ======= ======= =======
During the year ended December 31, 2003, the Company recorded other operating charges of $30.9 million ($19.1 million net of taxes) as a result of the realignment of our technology infrastructure and operations following the divestiture of our CPCS business, the transition to our new data center, the further consolidation of some of our public records and workplace solutions operations, and the re-engineering of certain of our direct marketing businesses. This charge included asset impairments of $21.4 million primarily related to closed facilities or abandoned technology in the realignment and re-engineering, $4.4 million in severance and termination benefits, and $5.2 million of abandoned lease (net of estimated sublease income where applicable) and other contractual commitments that are expected to be satisfied at various dates through August 2008. During the second quarter of 2002, the Company recorded an unusual item charge of $7.3 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 finalized in the first quarter of 2001. 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 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 to 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, 2003 December 31, 2002 December 31, 2001 ---------------------- ---------------------- ------------------------------------ Unaudited Pro forma OPERATING Operating Operating Operating (In thousands) REVENUE INCOME Revenue Income Revenue Income Income(b) --------- --------- --------- --------- --------- --------- --------- Insurance $ 309,124 $ 172,518 $ 270,282 $ 144,639 $ 227,727 $ 119,407 $ 120,507 B&G 339,483 71,080 308,761 69,424 267,409 45,089 56,203 Marketing revenue from products and services 96,642 21,849 105,833 32,866 76,461 22,185 26,391 Reimbursable expenses 45,395 -- 38,520 -- 38,028 -- -- --------- --------- --------- --------- --------- --------- --------- Marketing 142,037 21,849 144,353 32,866 114,489 22,185 26,391 --------- --------- --------- --------- --------- --------- --------- Royalty (Note 3) 5,102 2,068 5,855 3,326 6,808 4,400 4,400 Divested and discontinued -- -- 72 (206) 24,243 (1,771) (968) Corporate and shared(a) -- (58,013) -- (60,185) -- (49,278) (49,278) Other operating charges (Note 10) -- (30,942) -- (7,342) -- (17,865) (17,865) Loss on sale of business -- -- -- -- -- (10,853) (10,853) --------- --------- --------- --------- --------- --------- --------- Total $ 795,746 $ 178,560 $ 729,323 $ 182,522 $ 640,676 $ 111,314 $ 128,537 ========= ========= ========= ========= ========= ========= =========

(In thousands) Unallocated Continuing December 31, Insurance B&G Marketing Royalty & Other(c) Operations CPCS Total --------- -------- -------- ------ ----------- ---------- ---- ---------- 2003 ASSETS $174,909 $574,439 $216,371 $4,317 $51,248 $1,021,284 $ -- $1,021,284 DEPRECIATION & AMORTIZATION 9,583 28,081 8,049 1,697 5,710 53,120 159 53,279 -------- -------- -------- ------ ------- ---------- ------ ---------- 2002 Assets 158,773 519,129 217,203 5,709 56,494 957,308 21,702 979,010 Depreciation & amortization 8,675 21,634 8,682 1,697 4,162 44,850 909 45,759 -------- -------- -------- ------ ------- ---------- ------ ---------- 2001 Assets(d) 135,439 393,186 190,621 5,902 86,010 811,158 21,234 832,392 Depreciation & amortization 8,521 30,798 10,189 1,700 6,892 58,100 1,412 59,512 -------- -------- -------- ------ ------- ---------- ------ ----------
(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, 2001. (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. 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report 12 RELATED PARTY TRANSACTIONS During 2003, one director of ChoicePoint served as Director Emeritus of The Home Depot, Inc. and two directors of ChoicePoint served as directors of The Home Depot, Inc. During 2003, the Company performed services for The Home Depot, Inc. through the Business & Government Services segment totaling approximately $15.6 million ($11.7 million net of pass-through expenses). These services were the result of arm's length negotiations in the ordinary course of business. One director of the Company 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, 2003, there are no borrowings outstanding under the Credit Facility. Total interest paid to Fleet National Bank in 2003 related to this transaction for borrowings outstanding during a synthetic lease with a total commitment of up to $48 million, in which Fleet National Bank participates in the amount of $13.8 million. As of December 31, 2003, $42.3 million was outstanding under the synthetic lease, of which ChoicePoint is liable to Fleet National Bank for $12.2 million. Interest paid to Fleet National Bank in 2003 related to this transaction was approximately $268,000. In addition, during 2003, 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. One director of ChoicePoint served as a director of Allmerica Financial Corporation until July 1, 2003. During 2003, the Company provided database claims information and credentialing services for Allmerica Financial Corporation totaling approximately $3.9 million. These services were the result of arm's length negotiations in the ordinary course of business. 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED ChoicePoint 2003 Annual Report 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, 2003 and 2002:
(IN THOUSANDS, EXCEPT PER SHARE DATA) FIRST SECOND THIRD FOURTH YEAR ENDED DECEMBER 31, 2003 QUARTER QUARTER QUARTER QUARTER TOTAL ---------- ---------- ---------- ---------- ---------- Revenue from products and services $ 184,005 $ 188,779 $ 189,116 $ 188,451 $ 750,351 Reimbursable expenses 10,944 10,470 12,402 11,579 45,395 ---------- ---------- ---------- ---------- ---------- Total revenue 194,949 199,249 201,518 200,030 795,746 Operating income(a) 51,803 34,663 47,774 44,320 178,560 Income from continuing operations 31,291 20,853 29,055 26,909 108,108 Net income 65,175 20,853 29,055 26,909 141,992 EPS from continuing operations, basic 0.37 0.24 0.34 0.31 1.26 EPS from continuing operations, diluted 0.35 0.23 0.32 0.30 1.21 Year Ended December 31, 2002 Revenue from products and services $ 158,642 $ 172,236 $ 178,832 $ 181,093 $ 690,803 Reimbursable expenses 10,019 9,923 10,098 8,480 38,520 ---------- ---------- ---------- ---------- ---------- Total revenue 168,661 182,159 188,930 189,573 729,323 Operating income(a) 44,222 38,733 49,990 49,577 182,522 Income from continuing operations 25,839 22,406 29,558 29,869 107,672 Income before cumulative effect of 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 from continuing operations, basic 0.31 0.27 0.35 0.35 1.28 EPS from continuing operations, diluted 0.29 0.25 0.33 0.34 1.21
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. (a) Operating income decreased in the second, third and fourth quarters of 2003 and the second quarter of 2002 due to $19.8 million, $4.0 million, $7.1 million and $7.3 million of other operating charges, respectively (Note 10). The net effect of these items on net income was $12.2 million or $0.14 per share in the second quarter of 2003, $2.5 million or $0.03 per share in the third quarter of 2003, $4.4 million or $0.05 per share in the fourth quarter of 2003 and $4.5 million or $0.05 per share in the second quarter of 2002. 43 Shareholder Information and Elected Officers ChoicePoint Annual Report ELECTED OFFICERS DEREK V. SMITH STEVEN W. SURBAUGH DAVID W. DAVIS Chairman and Chief Executive Officer Chief Financial Officer Corporate Secretary and Joined Company 1997* Joined Company 2002 Vice President of Government Affairs Joined Company 2003 DOUG C. CURLING J. MICHAEL DE JANES President and Chief Operating Officer General Counsel DAVID E. TRINE Joined Company 1997* Joined Company 1997* Treasurer and Corporate Controller Joined Company 1997* DAVID T. LEE Executive Vice President Joined Company 1997*

* Also member of the ChoicePoint senior management team prior to the Spinoff in 1997. ANNUAL MEETING The Annual Meeting of Shareholders will be held on April 29, 2004 at ChoicePoint's headquarters, 1000 Alderman Drive, Alpharetta, GA 30005. Shareholders are encouraged to attend the meeting, which will begin at 10:00 a.m. 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 February 29, 2004, there were 88.0 million common shares outstanding and ChoicePoint common stock was held by 3,808 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 2002 and 2003.
High Low -------- -------- Q1 2002 $ 44.21 $ 35.55 Q2 2002 48.15 40.50 Q3 2002 47.56 32.00 Q4 2002 40.30 29.75 Q1 2003 $ 42.04 $ 28.30 Q2 2003 38.51 32.00 Q3 2003 39.75 31.90 Q4 2003 38.97 33.39
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. 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, 2003 (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 1000 Alderman Drive Alpharetta, GA 30005 Email: investors@choicepoint.com Phone: 770-752-6171 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. 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 INDEPENDENT PUBLIC ACCOUNTANTS Deloitte & Touche LLP Atlanta, GA TRADEMARKS ChoicePoint, the ChoicePoint logo, ScreenNow, Current Carrier, VitalChek, Actionable Intelligence and Lienguard are registered trademarks; and DEBTOR Discovery, PolicyWatch and VolunteerSelect are service marks of ChoicePoint Asset Company. (c) 2004 ChoicePoint Asset Company. All rights reserved. 44 BOARD OF DIRECTORS ChoicePoint 2003 Annual Report Thomas M. Coughlin 1, 2+, 5 Vice Chairman Wal-Mart Stores, Inc. Director Since 2001 Doug C. Curling 3 President and Chief Operating Officer ChoicePoint Inc. Director Since 2000 James M. Denny 2 Retired Vice Chairman Sears, Roebuck & Co. Director Since 1997 Dr. John J. Hamre 3+, 4, 5 President and Chief Executive Officer Center for Strategic and International Studies Director Since 2002 Bonnie G. Hill 4 President B. Hill Enterprises LLC Director Since 2001 Kenneth G. Langone 1, 5+ Chairman, President, and Chief Executive Officer Invemed Associates LLC Director Since 2000 Bernard Marcus Co-Founder The Home Depot, Inc. Director Since 2000 John B. McCoy 2 Retired Chairman Bank One Corporation Director Since 2003 Terrence Murray 1, 4+, 5 Retired Chairman FleetBoston Financial Corporation Director Since 2002 Derek V. Smith 1+ Chairman and Chief Executive Officer ChoicePoint Inc. Director Since 1997 Charles I. Story 3 President and Chief Executive Officer INROADS, Inc. Director Since 1997 Board Committees 1. Executive Committee 2. Audit Committee 3. Privacy Committee 4. Management Compensation & Benefits Committee 5. Corporate Governance & Nominating Committee + Denotes Committee Chairperson CORPORATE GOVERNANCE ChoicePoint is committed to maintaining the highest standards of corporate governance and continues to seek ways to strengthen the Board of Directors' responsibility to its shareholders, employees, customers, and to the communities where it operates. As a leader and advocate for the responsible use of information, we believe it is an inherent part of our corporate mandate to strive for the highest standards in the areas of corporate governance, shareholder responsibility and professional, ethical conduct. The Company is in full compliance with all corporate governance measures required by the SEC and NYSE. During this past year, our corporate governance practices were further strengthened by the approval of a limitation on the number of committees that directors may chair. This action limits directors to one chair position and as a result, the Board of Directors approved changes to the committee structures. The new committee compositions and chairs are indicated above. Additionally, new executive compensation guidelines were approved by the Management Compensation and Benefits Committee, which limits the number of shares that may be granted annually to employees and specifically the top officers under the ChoicePoint Inc. 2003 Omnibus Incentive Plan. A copy of the ChoicePoint Inc. Code of Conduct, Code of Ethics for senior financial officers and business unit leaders, the Corporate Governance Guidelines and charters for the Audit Committee, Management Compensation and Benefits Committee and Corporate Governance and Nominating Committee may be found on the Company's Web site at www.choicepoint.com. Designed and produced by Corporate Reports Inc./Atlanta www.corporatereport.com 45 EX-21 14 g87580exv21.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 CITI NETWORK, Inc. Florida CPPM Inc. Georgia DataMart Processing LLC Georgia EquiSearch Services Inc. Georgia Identico Systems, LLC Delaware Insurity Inc. Georgia KnowX LLC Georgia Mortgage Asset Research Institute, Inc. Virginia 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 The Templar Corporation Virginia Vital Chek Network, Inc. Tennessee Vital Chek Network of Canada, Inc. Delaware

EX-23 15 g87580exv23.txt EX-23 CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-32453, 333-37498, 333-102249 and 333-105174 of ChoicePoint Inc. (the "Company") on Forms S-8 of our reports dated February 25, 2004 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to certain disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002), appearing in and incorporated by reference in this Annual Report on Form 10-K of ChoicePoint Inc. for the year ended December 31, 2003. /s/ Deloitte & Touche LLP Atlanta, Georgia March 11, 2004 EX-31.1 16 g87580exv31w1.htm EX-31.1 CERTIFICATION OF DEREK V. SMITH, CEO exv31w1

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

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

      a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

      b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

~~22 EX-31.2 17 g87580exv31w2.htm EX-31.2 CERTIFICATION OF STEVEN W. SURBAUGH, CFO exv31w2~~

~~23 EX-32.1 18 g87580exv32w1.htm EX-32.1 CERTIFICATION OF DEREK V. SMITH, CEO exv32w1~~


(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, 2003

or
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number 1-13069


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

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



Signature	Title	Date


/s/ DEREK V. SMITH Derek V. Smith	Chairman and Chief Executive Officer and Director	March 5, 2004

/s/ STEVEN W. SURBAUGH Steven W. Surbaugh	Chief Financial Officer	March 5, 2004

/s/ THOMAS M. COUGHLIN Thomas M. Coughlin	Director	March 12, 2004

/s/ DOUGLAS C. CURLING Douglas C. Curling	President, Chief Operating Officer and Director	March 8, 2004

/s/ JAMES M. DENNY James M. Denny	Director	March 9, 2004

/s/ DR. JOHN J. HAMRE Dr. John J. Hamre	Director	March 11, 2004

/s/ BONNIE G. HILL Bonnie G. Hill	Director	March 12, 2004

/s/ KENNETH G. LANGONE Kenneth G. Langone	Director	March 11, 2004

/s/ BERNARD MARCUS Bernard Marcus	Director	March 8, 2004

/s/ JOHN B. MCCOY John B. McCoy	Director	March 10, 2004

Terrence Murray	Director

/s/ CHARLES I. STORY Charles I. Story	Director	March 12, 2004


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


(In thousands)
Year ended December 31, 2003
Allowance for Doubtful Accounts	$	4,978	$	1,656	$	—		$	(1,184	)	$	5,450
Exit Cost Reserves		4,817		9,592		2,325	(1)		(8,245	)		8,489
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


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				1
	Item 1.	Business		1
	Item 2.	Properties		5
	Item 3.	Legal Proceedings		6
	Item 4.	Submission of Matters to a Vote of Security Holders		6
	Item X	Executive Officers of the Registrant		7
Part II				8
	Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		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
	Item 9A.	Controls and Procedures		13
Part III				13
	Item 10.	Directors and Executive Officers of the Registrant		13
	Item 11.	Executive Compensation		14
	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.	Principal Accountant Fees and Services		14
Part IV				14
	Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		14
Signatures				20
EX-10.11 1997 OMNIBUS STOCK INCENTIVE PLAN
EX-10.13 FIRST AMENDMENT TO THE 2003 OMNIBUS
EX-10.20 FOURTH AMENDMENT TO THE DEFERRED COMPEN.
EX-10.21 FIFTH AMENDMENT TO THE DEFERRED COMPEN.
EX-10.23 EMPLOYEE BENEFITS AGREEMENT
EX-10.26 MASTER AGREEMENT
EX-10.30 LEASE AGREEMENT
EX-10.31 GEORGIA LEASE SUPPLEMENT
EX-10.34 OPERATIVE GUARANTY
EX-10.35 CONSTRUCTION AGENCY AGREEMENT
EX-13 PORTION OF 2002 ANNUAL REPORT TO SHAREHOLDER
EX-21 SUBSIDIARIES OF THE COMPANY
EX-23 CONSENT OF DELOITTE & TOUCHE LLP
EX-31.1 CERTIFICATION OF DEREK V. SMITH, CEO
EX-31.2 CERTIFICATION OF STEVEN W. SURBAUGH, CFO
EX-32.1 CERTIFICATION OF DEREK V. SMITH, CEO
EX-32.2 CERTIFICATION OF STEVEN W. SURBAUGH, CFO
EX-99 INDEPENDENT AUDITORS' REPORT



		2003					2002					2001

		Amount		%			Amount		%			Amount		%


		(Dollars in thousands)
Insurance Services		$	309,124		41	%	$	270,282		39	%	$	227,727		38	%
Business & Government Services			339,483		45			308,761		45			267,409		44
Marketing Services			96,642		13			105,833		15			76,461		13
Royalty			5,102		1			5,855		1			6,808		1
Divested & Discontinued Product Lines			—		—			72		—			24,243		4

Revenue from Products and Services			750,351		100	%		690,803		100	%		602,648		100	%
Reimbursable Expenses			45,395					38,520					38,028

	Total	$	795,746				$	729,323				$	640,676


Name and Position	Age		Executive Officer Since

Derek V. Smith, Chairman and Chief Executive Officer		49		1997
Douglas C. Curling, President and Chief Operating Officer		49		1997
David T. Lee, Executive Vice President		44		1997
J. Michael de Janes, General Counsel		46		1997
David W. Davis, Corporate Secretary and Vice President, Government Affairs		51		2003
Steven W. Surbaugh, Chief Financial Officer		54		2002
David E. Trine, Treasurer and Corporate Controller		43		2000


Item 5.	*Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*


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


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	—	Amendment No. 1 to the Form of Employment and Compensation Agreement between the Company and Derek V. Smith dated as of February 4, 2003 (incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002)*
	10	.4	—	Amendment No. 2 to the Form of Employment and Compensation Agreement between the Company and Derek V. Smith dated as of July 23, 2003 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003)*


	a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

	b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


	a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


	/s/ DEREK V. SMITH

	Derek V. Smith
	Chairman and Chief Executive Officer


	/s/ STEVEN W. SURBAUGH

	Steven W. Surbaugh
	Chief Financial Officer