FA

Business Context and Reporting Period

Company: First Advantage Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: May 5, 2004
Event: Acquisition of assets from CIC Enterprises, Inc., STEPS, Inc., SFC, Inc., and Horton, Inc. via a newly created wholly-owned subsidiary, CIC Enterprises, LLC.

Key Financial Metrics

Transaction Value: $30,000,000 total purchase price.
Payment Structure:

• Cash: $14,000,000
• Subordinated Promissory Notes: $11,000,000 (Guaranteed by The First American Corporation)
• Convertible Notes: $5,000,000 (Convertible to Class A common stock)

Financing: The $14,000,000 cash portion was funded via a $20,000,000 promissory note from The First American Corporation.
Escrow Arrangement: $14,000,000 of consideration (comprising the $11,000,000 subordinated note and $3,000,000 of the convertible note) is held in escrow.

Material Changes and Contingencies

Escrow Conditions: The release of the $14,000,000 in Escrow Assets is contingent upon the United States government renewing the Work Opportunity Tax Credit program (or a similar program) by December 31, 2005.
Forfeiture Risk: If the program is not renewed by the deadline, the Escrow Assets will be forfeited by the sellers and released to the Company. The final escrow amount may also be adjusted based on the timing and retroactive application of any new program.
Regulatory Filing: The Company agreed to file a Form S-3 registration statement within 45 days of eligibility to register the resale of Class A common stock issuable upon conversion of the notes.

Guidance, Outlook, and Management Commentary

Financial Statements: The filing does not include current financial statements or pro forma financial information. The Company intends to file these by amendment no later than 60 days after the date this 8-K must be filed.
Management Commentary: The transaction terms were determined through arms-length negotiations. The acquired businesses specialize in tax and incentive credit identification, sales and use-tax services, transportation tax services, and tax consulting.

Investor Verification Checklist

• Verify the status of the Work Opportunity Tax Credit program renewal by December 31, 2005, to determine the release of the $14,000,000 escrow.
• Review the upcoming Form S-3 registration statement for details on the convertible notes and potential dilution.
• Monitor the 60-day deadline for the filing of pro forma financial statements to assess the acquisition's impact on consolidated results.
• Confirm the terms of the $20,000,000 promissory note with The First American Corporation used to fund the cash portion.