Equifax 2006 Annual Report Download - page 70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
68 EQUIFAX 2006 ANNUAL REPORT
Agreement with Computer Sciences Corporation. We have
an agreement with Computer Sciences Corporation (“CSC”)
and certain of its affi liates, collectively CSC, under which
CSC-owned credit reporting agencies utilize our computer-
ized credit database services. CSC retains ownership of its
credit fi les and the revenues generated by its credit report-
ing activities. We receive a processing fee for maintaining
the database and for each report supplied. The agreement
will expire on July 31, 2008 and is renewable at the option
of CSC for successive ten-year periods. The agreement pro-
vides us with an option to purchase CSC’s credit reporting
business if it does not elect to renew the agreement or if
there is a change in control of CSC while the agreement is
in effect. Under the agreement CSC also has an option,
exercisable at any time, to sell its credit reporting business
to us. The option expires in 2013. The option exercise price
will be determined by a third-party appraisal process and
would be due in cash within 180 days after the exercise of
the option. We estimate that if the option were exercised at
December 31, 2006, the price range would approximate
$650 million to $725 million. This estimate is based solely
on our internal analysis of the value of the businesses, cur-
rent market conditions and other factors, all of which are
subject to constant change. Therefore, the actual option
exercise price could be materially higher or lower than the
estimated amount.
Change in Control Agreements. We have entered into
change in control severance agreements with certain key
executives. The agreements provide for, among other
things, certain payments and benefits in the event of a
qualifying termination of employment (i.e., termination of
employment by the executive for “good reason” or termina-
tion of employment by the Company without “cause,” each
as defi ned in the agreements) within six months prior to or
three years following a change in control of the Company.
In the event of a qualifying termination, the executive will
become entitled to continuation of group health, dental,
vision, life, disability, 401(k) and similar benefi ts for three
years, as well as a lump sum severance payment, all of
which differs by executive.
The change in control agreements have a fi ve-year term
and automatically renew for another fi ve years unless we
elect not to renew the agreements. Change in control events
potentially triggering benefi ts under the agreements would
occur, subject to certain exceptions, if (1) any person acquires
20% or more of our voting stock; (2) upon a merger or other
business combination, our shareholders receive less than
two-thirds of the common stock and combined voting power
of the new company; (3) we sell or otherwise dispose of all or
substantially all of our assets; or (4) we liquidate or dissolve.
If these change in control agreements had been triggered
as of December 31, 2006, payments of approximately
$30.4 million would have been made (excluding tax gross-
up amounts of $9.8 million). Under the Company’s existing
director and employee stock benefi t plans, a change in con-
trol generally would result in the immediate vesting of all
outstanding stock options and satisfaction of the restric-
tions on any outstanding nonvested stock awards.
Guarantees and Indemnifi cations. We account for guaran-
tees in accordance with FIN No. 45, “Guarantor’s Accounting
and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others,” which
required the prospective recognition and measurement of
certain guarantees and indemnifi cations upon adoption.
Accordingly, any contractual guarantees or indemnifi cations
we have issued or modifi ed subsequent to December 31,
2002 are subject to evaluation. If required, a liability for the
fair value of the obligation undertaken will be recognized.
Guarantees. We will from time to time issue standby letters
of credit, performance bonds or other guarantees in the
normal course of business. The aggregate notional amount
of all performance bonds and standby letters of credit is not
material at December 31, 2006, and all have a maturity of
one year or less. Guarantees are issued from time to time to
support the needs of our operating units. In connection with
the sale of our risk management collections business to RMA
Holdings, LLC (“RMA”) in October 2000, we guaranteed the
operating lease payments of a partnership affiliated with
RMA to a lender of the partnership pursuant to a term loan.
The operating lease, which expires December 31, 2011, has a
remaining balance of $6.6 million, based on the undis-
counted value of remaining lease payments, including real
estate taxes, at December 31, 2006.
On September 12, 2005, RMA sold substantially all of
its assets to NCO Group, Inc. (“NCO”). In conjunction with
this sale, NCO agreed to assume the operating lease obliga-
tions discussed above, which we will continue to guarantee.
We believe that the likelihood of demand for payment by us
is minimal and expect no material losses to occur related to
this guarantee. Accordingly, we do not have a liability on
our Consolidated Balance Sheets at December 31, 2006 or
2005 related to this guarantee.