Form S-4
Table of Contents
As filed with the Securities and Exchange Commission on January 17, 2003
Registration No. 333-          

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM S-4
 

 
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
FIRST ADVANTAGE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
 
7375
(Primary Standard Industrial
Classification Code Number)
 
61-1437565
(I.R.S. Employer
Identification Number)
 
805 Executive Center Drive West
Suite 300
St. Petersburg, Florida 33702
(727) 290-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
 
Kenneth D. DeGiorgio, Esq.
Vice President, General Counsel and Assistant Secretary
First Advantage Corporation
1 First American Way
Santa Ana, California 92707-5913
(714) 800-3000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
 
With copies to:
 
Neil W. Rust, Esq.
White & Case LLP
633 West Fifth Street
Los Angeles, California 90071
(213) 620-7700
 
David M. Hernand, Esq.
Latham & Watkins LLP
633 West Fifth Street
Los Angeles, California 90071
(213) 485-1234
 
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement is declared effective
and all conditions to the proposed transaction have been satisfied or waived.
 
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨                      
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨                      
 
 

 


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CALCULATION OF REGISTRATION FEE
 

Title of Each Class of
Securities to be
Registered
  
Amount
to be
Registered(1)(2)
    
Proposed Maximum Offering Price Per Share
  
Proposed Maximum
Aggregate
Offering Price(3)
    
Amount of Registration Fee(4)









Class A common stock, $.001 par value
  
4,238,698 shares
    
n/a
  
$
83,714,275
    
$
7,702

(1)
 
Based upon the estimate of the maximum number of shares of First Advantage Corporation’s Class A common stock expected to be issued in connection with the transactions described herein to holders of common stock of US SEARCH.com Inc. The amount is calculated as the product of (a) 105,967,436, which is the sum of (i) 97,018,715 shares of US SEARCH common stock estimated to be outstanding on January 9, 2003, (ii) 5,167,617 shares of US SEARCH common stock issuable pursuant to stock options expected to be exercised before the mergers and (iii) 3,781,104 shares of US SEARCH common stock to be issued pursuant to outstanding warrants expected to be exercised before the mergers, and (b) an exchange ratio of 0.04.
(2)
 
Pursuant to Rule 416 under the Securities Act, this Registration Statement will include any additional shares of First Advantage’s Class A common stock that may become issuable as a result of any stock split, stock dividend, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of First Advantage’s outstanding Class A common stock.
(3)
 
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities Act, based on the maximum number of shares of US SEARCH common stock to be exchanged in the transaction described herein, multiplied by the average of the high and low sales prices of one share of US SEARCH common stock, as reported on the Nasdaq National Market on January 14, 2003.
(4)
 
Calculated in accordance with Section 6 of the Securities Act and Rule 457 under the Securities Act by multiplying 0.000092 and the proposed maximum aggregate offering price.
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.


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LOGO
US SEARCH.COM INC.
5401 Beethoven Street
Los Angeles, CA 90066
 
                        , 2003
 
To Our Stockholders:
 
You are cordially invited to attend a special meeting of stockholders of US SEARCH.com Inc. to be held at 5401 Beethoven Street, Los Angeles, California 90066 on                         , 2003 at 9:00 a.m. local time.
 
At the special meeting, you will be asked to vote on the approval of an Agreement and Plan of Merger, dated as of December 13, 2002, by and among US SEARCH.com Inc., The First American Corporation and First Advantage Corporation, pursuant to which First Advantage, a newly formed holding company, will acquire US SEARCH and six operating subsidiaries of First American that currently comprise its First American Screening Technologies (FAST) division. The FAST division provides motor vehicle reports, tenant screening, employee background screening and occupational health services.
 
In connection with First Advantage’s acquisition of US SEARCH, each outstanding share of US SEARCH common stock will be converted into the right to receive 0.04 of a share of First Advantage Class A common stock. The series of transactions contemplated by the merger agreement will result in US SEARCH stockholders owning approximately 20% of the shares of capital stock of First Advantage and First American owning the remaining 80%. The shares received by First American in the proposed transaction will be shares of First Advantage Class B common stock, which are substantially the same as shares of Class A common stock but have ten votes per share. Consequently, immediately following the transactions contemplated by the merger agreement, First American will control approximately 98% of the voting power of First Advantage and US SEARCH stockholders will control the remaining 2%.
 
Our board of directors has approved the merger agreement and the mergers of US SEARCH with a subsidiary of First Advantage and believes it is in the best interests of US SEARCH and its stockholders to complete the transactions contemplated by the merger agreement. The board of directors recommends that you vote FOR the proposal to approve the merger agreement and the mergers at the special meeting.
 
The attached notice of special meeting and proxy statement/prospectus explain the proposed mergers and provide specific information concerning the special meeting. Please read these materials carefully. In particular, you should read and consider carefully the discussion in the section entitled “RISK FACTORS” beginning on page 12 of the proxy statement/prospectus. Do not send any certificates representing US SEARCH common stock at this time.
 
US SEARCH is a Delaware corporation. Under Delaware law, the affirmative vote of the holders of a majority of the outstanding shares of US SEARCH common stock is required to approve the merger agreement and the mergers. A US SEARCH stockholder owning approximately 54.1% of US SEARCH common stock as of January 9, 2003, has agreed to vote all of its shares in favor of the proposal to approve the merger agreement and the mergers. Accordingly, so long as the parties perform their obligations under the voting agreement and the voting agreement remains in effect, approval of the proposal to approve the merger agreement and the mergers is assured.


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Whether or not you plan to attend the special meeting, we urge you to complete, sign and promptly return the enclosed proxy card to assure that your shares will be voted at the special meeting. Failure to return a properly executed proxy card and/or to vote at the special meeting will have the same effect as a vote against approval of the merger agreement and the mergers.
 
Sincerely,
 
Brent N. Cohen
Chief Executive Officer
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the mergers described in this proxy statement/prospectus or the securities to be issued in connection with the mergers or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
 
This proxy statement/prospectus is dated                         , 2003 and is expected to be first mailed to US SEARCH stockholders on or about                         , 2003.
 

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US SEARCH.COM INC.
5401 Beethoven Street
Los Angeles, CA 90066
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on                         , 2003
 
To the Stockholders of US SEARCH.com Inc.:
 
A special meeting of stockholders of US SEARCH.com Inc. will be held on                         , 2003 at 9:00 a.m. local time at 5401 Beethoven Street, Los Angeles, California 90066 for the following purposes:
 
 
1.
 
To consider and vote upon a proposal to approve an Agreement and Plan of Merger, dated as of December 13, 2002, by and among US SEARCH.com Inc., The First American Corporation and First Advantage Corporation, pursuant to which First Advantage, a newly-formed holding company, will acquire US SEARCH and six operating subsidiaries of First American that currently comprise its First American Screening Technology (FAST) division. The FAST division provides motor vehicle reports, tenant screening, employee background screening and occupational health services.
 
 
  
 
In connection with First Advantage’s acquisition of US SEARCH, each outstanding share of US SEARCH common stock will be converted into the right to receive 0.04 of a share of First Advantage Class A common stock. The series of transactions contemplated by the merger agreement will result in US SEARCH stockholders owning approximately 20% of the shares of capital stock of First Advantage and First American owning the remaining 80%. The shares received by First American in the proposed transaction will be shares of First Advantage Class B common stock, which are substantially the same as shares of Class A common stock but have ten votes per share. Consequently, immediately following the transactions contemplated by the merger agreement, First American will control approximately 98% of the voting power of First Advantage and US SEARCH stockholders will control the remaining 2%.
 
 
2.
 
To transact any other business as may properly come before the special meeting or any adjournment or postponement of the special meeting.
 
Our board of directors has approved the merger agreement and the mergers and recommends that you vote FOR approval of the merger agreement and the mergers. The proposal is described in more detail in the accompanying proxy statement/prospectus, which you should read in its entirety before voting. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement/prospectus.
 
Only stockholders of record at the close of business on February 1, 2003 are entitled to notice of the special meeting, and to vote at the special meeting and at any adjournments thereof. For ten days before the special meeting, a complete list of stockholders entitled to vote at the special meeting will be available for examination by any stockholder for any purpose germane to the special meeting during ordinary business hours at the principal executive offices of US SEARCH located in Los Angeles, California.


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All US SEARCH stockholders are cordially invited to attend the special meeting in person. However, to ensure your representation at the special meeting, you are urged to complete, sign and return the enclosed proxy card as promptly as possible in the enclosed postage-prepaid envelope. You may revoke your proxy in the manner described in the accompanying proxy statement/prospectus at any time before it is voted at the special meeting. If you fail to return a properly executed proxy card or to vote in person at the special meeting, the effect will be a vote against the proposal to approve the merger agreement and the mergers.
 
By Order of the Board of Directors,
 
Brent N. Cohen
Chief Executive Officer
 
Los Angeles, California
                        , 2003


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WHERE YOU CAN FIND MORE INFORMATION
 
First Advantage has filed a registration statement on Form S-4 to register with the SEC the shares of First Advantage Class A common stock to be issued to US SEARCH stockholders in the mergers. This proxy statement/prospectus is a part of that registration statement and constitutes a proxy statement of US SEARCH and a prospectus of First Advantage. The registration statement, including the attached exhibits and schedules, contains additional relevant information about US SEARCH, the FAST division, First Advantage and First Advantage Class A common stock. As allowed by SEC rules, this proxy statement/prospectus does not contain all the information you can find in the registration statement or the exhibits to the registration statement. First American and US SEARCH file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy the registration statement and any reports, statements or other information that First American and US SEARCH file with the SEC at the SEC’s public reference rooms at Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
 
Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. These SEC filings are also available to the public from commercial document retrieval services and at the world wide web site maintained by the SEC at www.sec.gov.
 
None of US SEARCH, First American and First Advantage has authorized anyone to give any information or make any representation about the mergers or our companies that is different from, or in addition to, that contained in this proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus does not extend to you. The information contained in this proxy statement/prospectus is accurate only as of the date of this document unless the information specifically indicates that another date applies.


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QUESTIONS AND ANSWERS ABOUT THE MERGERS

 
Q:
 
What am I being asked to vote on?
 
A:
 
You are being asked to vote in favor of US SEARCH participating in the proposed mergers of US SEARCH and the subsidiaries comprising the First American Screening Technology (FAST) division of The First American Corporation into wholly-owned subsidiaries of First Advantage Corporation, a newly-formed holding company. After the mergers, you will own shares of First Advantage Class A common stock and will no longer own shares of US SEARCH common stock.
 
Q:
 
What will I receive in the mergers?
 
A:
 
If we complete the mergers, you will receive in exchange for each share of US SEARCH common stock you hold on the date of the mergers the right to receive 0.04 of a share of First Advantage Class A common stock. We will not issue fractional shares in the mergers. In lieu of fractional shares, you will receive cash based on the average closing price of a share of US SEARCH common stock for the ten trading days ending on the trading day that is three trading days before the date of the special meeting. The shares of Class A common stock received by US SEARCH stockholders will represent approximately 20% of the capital stock of First Advantage.
 
  
 
Concurrently with the US SEARCH mergers, First American will receive shares of First Advantage Class B common stock representing approximately 80% of the outstanding capital stock of First Advantage.
 
  
 
For a more complete description of what you will receive in the mergers, see the section entitled “THE MERGERS—Consideration to be Received by US SEARCH Stockholders in the Mergers” on page 35.
 
Q:
 
Does US SEARCH’s board of directors recommend voting in favor of the merger agreement and the mergers?
 
A:
 
Yes. After careful consideration, your board of directors determined the mergers to be fair to you and in your best interests as a stockholder of US SEARCH and has declared the mergers advisable. US SEARCH’s board of directors approved the merger agreement and the mergers and recommends that you vote in favor of the merger agreement and the mergers.
 
  
 
For a more complete description of the recommendation of and factors considered by the US SEARCH board of directors, see the sections entitled “THE MERGERS—US Reasons for the Mergers” on page 27 and  “—Recommendation of the US SEARCH Board of Directors” on page 28.
 
Q:
 
Will I be taxed on the First Advantage Class A common stock I receive in the mergers?
 
A:
 
It is expected that your receipt of First Advantage Class A common stock in the mergers generally will be tax-free for U.S. federal income tax purposes (except for taxes resulting from the receipt of cash instead of any fraction of a share of First Advantage Class A common stock). You are urged to carefully read the discussion in the section entitled “THE MERGERS—Material United States Federal Income Tax Consequences” beginning on page 38, and to consult your tax advisor on the consequences of participation in the mergers.
 
Q:
 
What is the difference between the Class A common stock and the Class B common stock of First Advantage?
 
A:
 
The shares of Class A common stock to be received by the former stockholders of US SEARCH in the mergers will be entitled to one vote per share on all matters presented to the stockholders for vote, while the shares of Class B common stock to be received by First American will be entitled to ten votes per share on such matters. As a result, First American will initially control 98% of the voting power of First Advantage. Each share of Class B common stock received by First American will be convertible into one share of Class A common

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stock at the option of the holder or at such time as the share of Class B common stock is held by someone other than First American (other than in connection with a distribution to First American’s shareholders in a tax-free spinoff of the First Advantage shares). Otherwise the terms of the Class A common stock and the Class B common stock are the same.
 
  
 
For a more complete description of the capital stock of First Advantage, see the section entitled “DESCRIPTION OF FIRST ADVANTAGE CAPITAL STOCK” on page 101.
 
Q:
 
Will I have appraisal rights?
 
A:
 
No. Under Delaware law, US SEARCH stockholders are not entitled to seek an appraisal of the value of their US SEARCH common shares or to receive cash in lieu of whole First Advantage Class A common shares for their US SEARCH common shares.
 
Q:
 
Are there risks I should consider in deciding whether to vote for the mergers?
 
A:
 
Yes. For example, because First Advantage is not yet a publicly traded company, it will be difficult for you to calculate the market value of the shares of Class A common stock of First Advantage that you will receive in exchange for your shares of US SEARCH common stock. In addition, US SEARCH is not permitted to “walk away” from the mergers or resolicit the vote of its stockholders based on changes in the market value of US SEARCH common stock. Thus, even if US SEARCH’s stock price increases, US SEARCH stockholders will only have the right to receive 0.04 of a share of First Advantage Class A common stock for each share of US SEARCH common stock. We urge you to obtain current market quotations of US SEARCH common stock (Nasdaq: SRCH). In evaluating the mergers, you should carefully consider these and other factors discussed in the section entitled “RISK FACTORS—Risks Relating to the Mergers” on page 12.
 
Q:
 
What do I need to do now?
 
A:
 
We urge you to read this proxy statement/prospectus carefully, including its annexes, and to consider how the mergers affect you as a stockholder. After reading this proxy statement/ prospectus in its entirety, we ask that you vote on the mergers.
 
Q:
 
How do I vote?
 
A:
 
Simply indicate on your proxy card how you want to vote, and sign and mail your proxy card in the enclosed return envelope as soon as possible so that your shares may be represented at the special meeting. If you sign and return a proxy card, but do not include instructions on how to vote your proxy, we will vote your shares “FOR” approval and adoption of the merger agreement and the mergers unless your shares are held in a brokerage account. If you fail to return your proxy card or to vote in person, the effect will be a vote against the merger agreement and the mergers. You may also vote via the Internet. For a more complete description of voting at the meeting, see the section entitled “THE SPECIAL MEETING OF STOCKHOLDERS—Voting, Revocation and Solicitation of Proxies” on page 21.
 
Q:
 
If my shares are held in “street name” by my broker, will my broker vote my shares for me?
 
A:
 
Your broker will vote your shares only if you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker. If you do not instruct your broker to vote your shares, it will be equivalent to voting against the merger agreement.
 
  
 
For a more complete description of voting shares held in “street name,” see the section entitled “THE SPECIAL MEETING OF STOCKHOLDERS—Voting, Revocation and Solicitation of Proxies” on page 21.

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Q:
 
What do I do if I want to change my vote?
 
A:
 
If you want to change your vote, send the secretary of US SEARCH a later-dated, signed proxy card before the special meeting with enough time for it to be delivered prior to the special meeting or attend the meeting and vote in person. You may also revoke your proxy by sending written notice to the secretary of US SEARCH before the meeting.
 
  
 
For a more complete description of how to change your vote, see the section entitled “THE SPECIAL MEETING OF STOCKHOLDERS—Voting, Revocation and Solicitation of Proxies” on page 21.
 
Q:
 
Should I send in my stock certificates now?
 
A:
 
No. If the mergers are completed, we will send written instructions for exchanging US SEARCH common stock certificates for First Advantage Class A common stock certificates and the cash portion of the merger consideration paid on account of fractional shares, if any, will be paid by check.
 
Q:
 
When do you expect to complete the mergers?
 
A:
 
We are working toward completing the mergers as quickly as possible. We hope to complete the mergers during the second quarter of 2003.
 
  
 
For a description of the conditions to completing the mergers, see the section entitled “THE MERGER AGREEMENT—Conditions to Completion of the Mergers” on page 50.
 
Q:
 
Whom should I call with questions?
 
A:
 
You should call US SEARCH’s Investor Relations department at (310) 302-6700 with any questions about the mergers.
 
  
 
You may also obtain additional information about US SEARCH and First American from documents filed with the Securities and Exchange Commission, which can be accessed via the internet at www.sec.gov. See “WHERE YOU CAN FIND MORE INFORMATION.”

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SUMMARY
 
This summary highlights selected information from this proxy statement/prospectus and may not contain all the information that is important to you. To better understand the mergers, you should read this entire document carefully, including the Agreement and Plan of Merger attached as Annex A and the other documents to which we refer you.
 
The Companies
 
US SEARCH.com Inc.
5401 Beethoven Street
Los Angeles, California 90066
Telephone: (310) 302-6300
 
US SEARCH is an individual locator and risk management services company, which uses its proprietary software platform and web-based systems to supply consumer and business clients with services such as individual location, identity verification, criminal record checks, employment and education verifications, professional reference checks, credit and motor vehicle record checks, and drug screening. US SEARCH also owns Professional Resource Screening, Inc., an employment screening company.
 
The First American Corporation Screening Technology (FAST) Division
805 Executive Center Drive West
St. Petersburg, Florida 33702
Telephone: (727) 290-1000
 
The FAST division is a leading provider of risk management services to companies, non-profit organizations and governmental agencies throughout the United States. The FAST division provides the following products and services:
 
 
 
Motor Vehicle Reports.    The FAST division provides access to motor vehicle reports in all 50 states and the District of Columbia to clients who are insurance agents, screening companies and transportation carriers.
 
 
 
Tenant Screening.    The FAST division provides landlords and property managers with analysis and information regarding a housing applicant’s credit standing, rental payment history, criminal history, eviction actions and similar background data.
 
 
 
Employee Background Screening.    The FAST division provides comprehensive background screening to employers, including criminal records checks, employment and education verification, reference checks and credit information.
 
 
 
Occupational Health.    The FAST division provides drug testing services and helps clients with the development and implementation of employee support programs.
 
The First American Corporation
1 First American Way
Santa Ana, California 92707
Telephone: (714) 800-3000
 
First American is a diversified provider of business information and related products and services. The First American Family of Companies, many of which command leading market share positions in their respective industries, operate within seven primary business segments including: Title Insurance and Services, Specialty

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Insurance, Trust and Other Services, Mortgage Information, Property Information, Credit Information and Screening Information.
 
First Advantage Corporation
805 Executive Center Drive West
St. Petersburg, Florida 33702
Telephone: (727) 290-1000
 
First Advantage is a new holding company formed by First American on December 12, 2002. Following the transactions contemplated by the merger agreement discussed in this proxy statement/prospectus, First Advantage will own as wholly-owned subsidiaries US SEARCH and each of the companies that comprise the FAST division.
 
The Mergers
 
US SEARCH has agreed to be acquired by First Advantage under the terms of the merger agreement that is described in this proxy statement/prospectus. Pursuant to the merger agreement, First American also has agreed to cause the FAST division, comprised of American Driving Records, Inc., First American Registry, Inc., SafeRent, Inc., HireCheck, Inc., Employee Health Programs, Inc. and Substance Abuse Management, Inc. to be acquired by First Advantage immediately before the acquisition of US SEARCH. We have attached the merger agreement as Annex A to this proxy statement/prospectus. We encourage you to read the merger agreement in its entirety.
 
To accomplish these acquisitions, the following mergers will occur:
 
 
 
first, six newly-formed, wholly-owned subsidiaries of First Advantage will merge with and into American Driving Records, First American Registry, SafeRent, HireCheck, Employee Health Programs and Substance Abuse Management; and
 
 
 
second, a newly-formed, wholly-owned subsidiary of First Advantage will merge with and into US SEARCH.
 
As a result of the mergers, each of American Driving Records, First American Registry, SafeRent, HireCheck, Employee Health Programs, Substance Abuse Management and US SEARCH will become wholly-owned subsidiaries of First Advantage.
 
Upon completion of the US SEARCH merger, each share of US SEARCH common stock outstanding immediately before the effective time of the mergers will be cancelled and extinguished and automatically converted into the right to receive 0.04 of a share of First Advantage Class A common stock.
 
The shares of First Advantage Class A common stock received by US SEARCH stockholders will represent approximately 20% of the capital stock of First Advantage immediately following the closing. As consideration for the mergers of the companies comprising the FAST division, First American will receive shares of First Advantage Class B common stock representing approximately 80% of the shares of capital stock of First Advantage immediately following the closing.
 
US SEARCH Reasons for the Mergers
 
In reaching its decision to approve the mergers, the US SEARCH board of directors considered a number of factors, including the value of the per share merger consideration, the complementary nature of the businesses and other strategic considerations, the long term prospects of US SEARCH, general economic conditions and the condition of the screening industry as a whole. The US SEARCH board of directors also considered a number

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of risks, including risks to the US SEARCH stockholders in owning a minority interest in a company controlled by a single large stockholder, integration risks, the risk that the mergers may not be consummated and other risks. See “THE MERGERS—US SEARCH Reasons for the Mergers” on page 27.
 
First American Reasons for the Mergers
 
First American believes the mergers will:
 
 
 
enhance the FAST division’s competitive position by providing it with additional operating scale, a broader scope of services, expanded geographic reach and increased financial strength;
 
 
 
facilitate the FAST division’s growth efforts by giving it a publicly traded security which it can use to acquire companies; and
 
 
 
give the FAST division what First American believes is a state-of-the art work flow and sourcing technology.
 
Recommendation of US SEARCH’s Board of Directors
 
The US SEARCH board of directors believes that the merger agreement and the transactions contemplated by the merger agreement, including the merger of a wholly-owned subsidiary of First Advantage with and into US SEARCH, are fair to and in the best interests of US SEARCH and its stockholders, and recommends that US SEARCH stockholders vote “FOR” approval of the merger agreement and the mergers.
 
Fairness Opinion of Financial Advisor to US SEARCH’s Board of Directors
 
On December 13, 2002, Lehman Brothers Inc., financial advisor to US SEARCH’s board of directors, delivered to the US SEARCH board of directors its oral opinion, which was subsequently confirmed by delivery of a written opinion dated December 13, 2002, that, as of that date, and based upon and subject to certain matters stated in its written opinion, the exchange ratio to be received by the holders of shares of US SEARCH common stock pursuant to the merger agreement was fair to these holders from a financial point of view. The full text of Lehman Brothers’ written opinion is attached to this proxy statement/prospectus as Annex B. You may read this opinion in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken. Lehman Brothers’ opinion is directed to the US SEARCH board of directors and does not constitute a recommendation to any stockholder as to any matters relating to the mergers. A separate team from Lehman Brothers acted as financial advisor to First American in connection with the mergers with US SEARCH. See “THE MERGERS—Fairness Opinion of Financial Advisor to US SEARCH” on page 29.
 
The Merger Agreement and Other Transaction Agreements
 
The Merger Agreement
 
The parties have entered into an Agreement and Plan of Merger, dated as of December 13, 2002, which sets forth the terms and conditions of the mergers. Among other things, the merger agreement restricts the business conduct of the parties before the closing of the mergers, contains representations and warranties of the parties to the agreement, prohibits US SEARCH from soliciting competing offers, and provides for the payment of a termination fee if the merger agreement is terminated for certain reasons. You are urged to read the section entitled “THE MERGER AGREEMENT” on page 42 and the copy of the merger agreement attached hereto as Annex A.

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The Voting Agreement
 
Pequot Private Equity Fund II, L.P., an affiliate of Pequot Capital Management, Inc., has entered into a voting agreement with First American, pursuant to which Pequot Private Equity Fund II, L.P. has agreed to vote the shares of US SEARCH common stock held by it in favor of the mergers. As of January 9, 2003, Pequot Private Equity Fund II, L.P. beneficially held of record 54.1% of the issued and outstanding shares of common stock of US SEARCH. Accordingly, approval of the mergers by the stockholders of US SEARCH is assured as long as the voting agreement remains in effect and the parties perform their obligations thereunder. You are urged to read the section entitled “OTHER AGREEMENTS—Voting Agreement” on page 54 and the copy of the voting agreement attached hereto as Annex C.
 
The Stockholders Agreement
 
Pequot Private Equity Fund II, L.P. has entered into a stockholders agreement with First American and First Advantage. Under the stockholders agreement, in connection with certain transfers of First Advantage capital stock by First American and its affiliates to third parties after the closing of the mergers, Pequot Private Equity Fund II, L.P. has the right under certain circumstances to sell some or all of its shares of First Advantage capital stock on the same terms that First American or its affiliates proposes to sell shares of First Advantage capital stock. Pequot Private Equity Fund II, L.P. also has the right to designate a person to sit on the board of directors of First Advantage so long as Pequot Private Equity Fund II, L.P. maintains a minimum ownership stake in First Advantage, and has the right under certain circumstances to cause First Advantage to register for resale its shares of Class A common stock. You are urged to read the section entitled “OTHER AGREEMENTS—Stockholders Agreement” on page 55 and the copy of the stockholders agreement attached hereto as Annex D.
 
The Standstill Agreement
 
The merger agreement provides that, at the closing of the mergers, First Advantage will enter into a standstill agreement with First American. Under the terms of the standstill agreement, First American will agree not to acquire additional shares of First Advantage capital stock unless such shares are acquired pursuant to a tender offer to all other holders of First Advantage common stock. Such tender offer must be conditioned upon at least two thirds of such shares being tendered, the same consideration being offered to all holders, and on terms approved by a committee consisting solely of disinterested members of the board of directors of First Advantage, after receiving a written opinion from a nationally recognized investment bank to the effect that the tender offer is fair to First Advantage’s stockholders, other than First American and its affiliates. The tender offer also would have to comply with the SEC’s going private rule 13e-3. However, First American may acquire shares of First Advantage capital stock in connection with a capital contribution if approved by a majority of disinterested directors.
 
The standstill agreement also requires that a committee comprised solely of disinterested directors approve any transaction between First Advantage and First American outside the ordinary course of business. The standstill agreement also restricts First American’s ability to transfer voting securities of First Advantage to certain persons unless such persons agree to assume First American’s obligations under the standstill agreement. You are urged to read the section entitled “OTHER AGREEMENTS—Standstill Agreement” on page 58 and the copy of the standstill agreement attached hereto as Annex E.
 
The Services Agreement
 
The merger agreement provides that, at the closing of the mergers, First Advantage will enter into a services agreement with First American. First American will provide certain business services, such as human resources

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and payroll services, network services and benefits services, and certain overhead services such as legal and tax support, strategic planning, communication and accounting services pursuant to such agreement. The services agreement also provides that First American may loan up to $1.0 million to First Advantage without obtaining the approval of a committee of disinterested directors of First Advantage. You are urged to read the section entitled “OTHER AGREEMENTS—Services Agreement” on page 60 and the copy of the services agreement attached hereto as Annex F.
 
The Subordinated Secured Promissory Note
 
On January 15, 2003, First American loaned US SEARCH $1.4 million pursuant to a subordinated secured promissory note that matures on June 30, 2003. The subordinated secured promissory note bears interest at the lesser of 10.0% and the prime rate plus 4.75% and is secured by all of the real and personal property of US SEARCH. See “OTHER AGREEMENTS—Subordinated Secured Promissory Note” on page 61.

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF US SEARCH  AND HISTORICAL COMBINED FINANCIAL INFORMATION OF THE FAST DIVISION
The table below presents summary financial information of US SEARCH and the FAST division for each of the years in the five-year period ended December 31, 2001 and the nine months ended September 30, 2002 and September 30, 2001. This information has been derived from the selected financial data of US SEARCH and the FAST division included in this proxy statement/prospectus. This information is only a summary, and you should read it in conjunction with the historical financial statements and related notes of US SEARCH and the FAST division attached to this proxy statement/prospectus.
 
US SEARCH
 
    
Nine Months Ended
September 30,

   
Fiscal Year Ended December 31,

 
    
2002

   
2001

   
2001

   
2000

   
1999

   
1998

   
1997

 
Statement of Operations:
                                                        
Total revenue
  
$
22,616,000
 
 
$
14,464,000
 
 
$
18,399,000
 
 
$
22,363,000
 
 
$
19,541,000
 
 
$
9,245,000
 
 
$
2,971,000
 
Net loss
  
 
(21,281,000
)
 
 
(8,293,000
)
 
 
(11,937,000
)
 
 
(29,362,000
)
 
 
(26,377,000
)
 
 
(6,788,000
)
 
 
(399,000
)
Net loss available to common stockholders
  
 
(21,281,000
)
 
 
(21,271,000
)
 
 
(24,915,000
)
 
 
(34,443,000
)
 
 
(26,377,000
)
 
 
(6,788,000
)
 
 
(399,000
)
Basic and Diluted Per Common Share:
                                                        
Net loss per share attributable to common stockholders
  
$
(0.46
)
 
$
(1.18
)
 
$
(1.38
)
 
$
(1.93
)
 
$
(1.94
)
 
$
(0.71
)
 
$
(0.04
)
Balance Sheet:
                                                        
Total assets
  
$
29,439,000
 
 
$
15,591,000
 
 
$
27,735,000
 
 
$
12,015,000
 
 
$
25,650,000
 
 
$
575,000
 
 
$
547,000
 
Long-term debt, net of current portion
  
 
1,464,000
 
 
 
240,000
 
 
 
1,810,000
 
 
 
42,000
 
 
 
37,000
 
 
 
343,000
 
 
 
61,000
 
Long-term debt
  
 
3,427,000
 
 
 
1,965,000
 
 
 
8,263,000
 
 
 
1,094,000
 
 
 
84,000
 
 
 
4,001,000
 
 
 
904,000
 
Stockholders’ equity (deficit)
  
 
19,523,000
 
 
 
6,789,000
 
 
 
10,355,000
 
 
 
(3,141,000
)
 
 
(19,489,000
)
 
 
(7,749,000
)
 
 
(2,151,000
)
 
FAST DIVISION
 
    
Nine Months Ended
September 30,

 
Year ended December 31,

    
2002

 
2001

 
2001

   
2000

 
1999

   
1998

 
1997

                            
(unaudited)
Statement of Operations:
                                              
Total revenues
  
$
74,291,207
 
$
35,729,085
 
$
49,167,057
 
 
$
38,582,074
 
$
30,372,638
 
 
$
23,196,975
 
$
15,395,636
Net (loss) income
  
$
3,066,357
 
$
261,270
 
$
(579,309
)
 
$
50,515
 
$
(336,312
)
 
$
1,952,477
 
$
1,083,023
Balance Sheet:
                                              
Total Assets
  
$
111,105,307
 
$
62,184,189
 
$
62,283,725
 
 
$
26,628,269
 
$
15,591,881
 
 
$
5,431,869
 
$
2,781,570
Long-term debt
  
$
560,114
 
$
1,158,713
 
$
1,158,713
 
 
$
2,260,899
 
$
1,410,425
 
 
$
355,406
 
$
145,504
Stockholders’ equity
  
$
100,014,045
 
$
52,876,222
 
$
53,075,105
 
 
$
18,491,766
 
$
12,390,154
 
 
$
4,372,076
 
$
1,673,300
 

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SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
 
The table below presents selected financial data from the unaudited pro forma combined financial statements of First Advantage included in this proxy statement/prospectus. The pro forma combined financial statements give effect to the proposed merger of US SEARCH and the FAST division as if the mergers had been completed on January 1, 2001 for income statement purposes and on September 30, 2002 for balance sheet purposes. The unaudited pro forma combined financial data is based on the estimates and assumptions set forth in the notes to such statements, which are preliminary and have been made solely for the purposes of developing such pro forma information. US SEARCH and First American do not claim or represent that the following summary unaudited pro forma financial information is indicative of the results that would have been reported had the transactions actually occurred on the dates indicated above, nor is it indicative of future results. The unaudited pro forma financial information should be read in conjunction with the unaudited pro forma combined financial statements and related notes of First Advantage, as well as the audited and unaudited historical financial statements and related notes of US SEARCH and the FAST division attached to this proxy statement/prospectus.
 
    
Nine Months Ended September 30, 2002

    
Year Ended December 31, 2001

 
Statement of Operations:
                 
Total revenue
  
$
118,406,846
 
  
$
142,954,859
 
Net income (loss)
  
$
(19,703,999
)
  
$
(14,867,043
)
Loss per share
  
$
(1.02
)
  
$
(1.44
)
Shares used in calculation of earnings per share(1)
  
 
19,403,743
 
  
 
19,403,743
 
 
    
At September 30, 2002

Balance Sheet:
      
Total assets
  
$
237,365,943
Long-term debt
  
 
1,464,000
Working capital
  
 
14,998,195
Stockholder’s equity
  
 
212,011,586

(1)
 
The estimated number of shares of First Advantage common stock issuable in the mergers does not include options or warrants to purchase shares of First Advantage Class A common stock that will be outstanding immediately following the mergers, including options to purchase Class A common stock to be issued to former executives of the FAST division and First American who will serve as executives of First Advantage.

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COMPARATIVE HISTORICAL AND PRO FORMA COMBINED PER SHARE DATA
 
The following table presents the unaudited basic and diluted earnings per share and book value per share data for US SEARCH on a historical basis and the unaudited basic and diluted earnings per share and book value per share data for First Advantage on a pro forma basis. Historical earnings per share and book value per share data for the FAST division is not presented below because the FAST division is comprised of wholly-owned subsidiaries of First American, which makes per share data not meaningful. The unaudited pro forma combined financial data presented below are not necessarily indicative of the financial position had the transaction occurred on December 31, 2001 or September 30, 2002 or operating results that would have been achieved had the transaction been in effect as of the beginning of the periods presented, and such data should not be construed as representative of future financial position or operating results of First Advantage. Neither US SEARCH nor the FAST division declared any cash dividends for the periods presented below. The pro forma combined net income, pro forma stockholders’ equity and the pro forma number of shares of common stock outstanding used in determining the amounts presented below have been derived from unaudited pro forma financial statements included in this proxy statement/prospectus. This information is only a summary and should be read in conjunction with the selected historical financial data of US SEARCH and the FAST division, the unaudited pro forma combined financial statements of First Advantage included in this proxy statement/prospectus, and the separate historical financial statements of US SEARCH and the FAST division and related notes attached to this proxy statement/prospectus.
 
      
Nine Months Ended September 30, 2002

    
Year Ended December 31, 2001

 
Historical—US SEARCH(1)
                   
Loss per share:
                   
Basic
    
$
(0.46
)
  
$
(1.38
)
Diluted
    
 
(0.46
)
  
 
(1.38
)
Book value per share
    
 
0.43
 
  
 
0.57
 
Pro forma equivalent—US SEARCH(2):
                   
Loss per share:
                   
Basic
    
 
(11.61
)
  
 
(34.50
)
Diluted
    
 
(11.61
)
  
 
(34.50
)
Book value per share
    
 
10.65
 
  
 
14.34
 
Pro forma for First Advantage(3):
                   
Loss per share:
                   
Basic
    
 
(1.44
)
  
 
(1.02
)
Diluted
    
 
(1.44
)
  
 
(1.02
)
Book value per share
    
 
10.93
 
  
 
10.10
 

(1)
 
The historical loss per share for US SEARCH is calculated by dividing, loss attributable to common stockholders of US SEARCH by the weighted-average number of shares of US SEARCH common stock outstanding for the respective period. The book value per share is calculated by dividing stockholders’ equity by the number of shares of US SEARCH common stock outstanding as of December 31, 2001 and September 30, 2002, as applicable.
(2)
 
The pro forma equivalent loss per share for US SEARCH is calculated by dividing historical loss attributable to common stockholders of US SEARCH by the pro forma weighted average number of shares of US SEARCH common stock outstanding for the respective period. The pro forma equivalent book value per share is calculated by dividing historical stockholders’ equity by the pro forma number of shares of US SEARCH common stock outstanding as of December 31, 2001 and September 30, 2002, as applicable.
(3)
 
The pro forma combined loss per share and book value per share of First Advantage is computed by dividing pro forma loss and stockholders’ equity of First Advantage by 19,403,743 shares of First Advantage common stock expected to be outstanding immediately following the mergers.

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RISK FACTORS
 
The mergers, and an investment in First Advantage Class A common stock, involves a number of risks. In addition to the other information we include in this proxy statement/prospectus, you should consider the following risk factors in deciding whether to vote for the mergers.
 
Risks Relating to the Mergers
 
There is no current public market for First Advantage Class A common stock, and there will not be a public market for First Advantage Class A common stock until the closing. As a result, you will not be able to predict the trading price of the shares of First Advantage Class A common stock you will receive in exchange for your US SEARCH common stock when you vote on the merger agreement.
 
As a result of the mergers, US SEARCH stockholders will have the right to receive 0.04 of a share of First Advantage Class A common stock for each share of US SEARCH common stock they own. The board of directors of US SEARCH has determined that the consideration to be received by the US SEARCH stockholders pursuant to the merger agreement is fair and in the best interests of US SEARCH and its stockholders. However, because there is no current public market for shares of First Advantage Class A common stock, you will not be able to predict the market value of the First Advantage Class A common stock you will receive pursuant to the merger agreement. The market price of First Advantage Class A common stock immediately following the closing of the mergers may vary from the value attributed to it by the board of directors of US SEARCH when it determined to enter into the merger agreement. This variation may be caused by a number of factors, including market perception of the value of First Advantage, changes in the businesses, operations or prospects of US SEARCH, the FAST division or First Advantage, the timing of the mergers, regulatory considerations and general market and economic conditions.
 
The integration of US SEARCH and the FAST division following the transactions will be difficult and may result in a failure to realize some of the anticipated potential benefits.
 
The business combination of US SEARCH and the FAST division involves the integration of several businesses that previously operated independently. We cannot assure you that First Advantage will be able to integrate operations of US SEARCH and the FAST division without encountering difficulties. Any difficulty in integrating the operations of the businesses successfully could have a material adverse effect on the business, financial condition, results of operations or liquidity of First Advantage, and could lead to a failure to realize the anticipated synergies of the combination. First Advantage’s management will be required to dedicate substantial time and effort to the integration of US SEARCH and the FAST division. During the integration process, these efforts could divert management’s focus and resources from other strategic opportunities and operational matters.
 
If we do not complete the mergers, it could negatively impact US SEARCH and the price of its common stock.
 
If the mergers are not completed, US SEARCH may be subject to a number of material risks, including the following:
 
 
 
US SEARCH may be required to pay First American a termination fee of $2.8 million if US SEARCH does not complete the mergers for certain reasons;
 
 
 
the current market price of US SEARCH common stock may decline to the extent that it reflects an assumption that the mergers will be completed;
 
 
 
US SEARCH will have to repay up to $1.4 million that it has borrowed from First American during the period before closing the mergers, pursuant to a subordinated secured promissory note due June 30, 2003; and

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substantial costs related to the mergers, such as legal and accounting fees and expenses and financial advisor expenses, must be paid even if the mergers are not completed.
 
There is no assurance that US SEARCH will have sufficient liquidity to make the above listed payments. As a result, US SEARCH may need to seek additional financing to make these payments. There is no assurance that such financing will be available on terms favorable to US SEARCH or at all. Further, if the merger agreement is terminated and US SEARCH’s board of directors seeks another merger or business combination, US SEARCH cannot assure you that it will be able to find a party willing to pay an equivalent or higher price than that which will be paid in the mergers. In addition, while the merger agreement is in effect, subject to limited exceptions, US SEARCH is prohibited from soliciting, initiating, knowingly encouraging or facilitating the submission of proposals or offers relating to a takeover proposal or endorsing or entering into any agreement with respect to any takeover proposal.
 
Officers and Directors of US SEARCH may have interests in the mergers that are different from those of US SEARCH’s stockholders.
 
A number of directors of US SEARCH who recommend that you vote in favor of the merger agreement are executive officers with existing employment or severance agreements or benefit arrangements, or have or are expected to enter into agreements providing additional benefits, that provide them with interests in the mergers that may be different from yours. The receipt of compensation or other benefits in connection with the mergers (including the acceleration of vesting of stock options), or the continuation of indemnification arrangements for current directors following completion of the mergers, may influence these persons in making their recommendation that you vote in favor of adoption of the merger agreement.
 
The completion of the transactions is subject to the review processes of government entities that could delay completion of the transactions, or result in the imposition of conditions that could have an adverse effect on First Advantage or cause US SEARCH and First American to abandon the transactions.
 
Completion of the transactions is conditioned upon the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Under this statute, US SEARCH and First American are required to make pre-merger notification filings and to await the expiration or early termination of the statutory waiting period before completing the mergers. US SEARCH and First American have not yet obtained any of the regulatory approvals required to complete the mergers.
 
Risks Relating to an Investment in First Advantage
 
First Advantage will be controlled by First American and as a result other stockholders will have little or no influence over stockholders’ decisions.
 
As a result of the mergers, First American will own 100% of the First Advantage Class B common stock, which has ten votes per share. Consequently, First American will have approximately 98% of the total voting power of First Advantage and, therefore, First American will have the right to control the outcome of any matter submitted for the vote or consent of First Advantage’s stockholders, unless a separate class vote is required under Delaware law. First American will have the voting power to control the election of the First Advantage board of directors and it will be able to cause the amendment of First Advantage’s certificate of incorporation or bylaws. First American also may be able to cause changes in the business without seeking the approval of any other party. These changes may not be beneficial to First Advantage or in the best interest of First Advantage’s other stockholders. For example, First American will have the power to prevent, delay or cause a change in control and could take other actions that might be favorable to First American, but not necessarily to other stockholders. Similarly, subject to restrictions contained in the standstill agreement, First American has the voting power to

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exercise a controlling influence over First Advantage’s business and affairs and has the ability to make decisions concerning such things as:
 
 
 
mergers or other business combinations;
 
 
 
purchases or sales of assets;
 
 
 
offerings of securities;
 
 
 
indebtedness that First Advantage may incur; and
 
 
 
payments of any dividends.
 
First Advantage cannot assure you that First American’s ownership of First Advantage common stock or its relationship with First Advantage will not have a material adverse effect on the overall business strategy of First Advantage or on the market price of First Advantage Class A common stock.
 
Moreover, under recently proposed Nasdaq corporate governance rules, if a single stockholder holds more than 50% of the voting power of a company, that company is considered a “controlled company.” A controlled company is exempt from the Nasdaq rules requiring that a majority of the company’s board of directors be independent directors, that independent directors must have regularly scheduled executive sessions and that the compensation and nomination committees must be comprised solely of independent directors. After the consummation of the transactions contemplated by the merger agreement, First American will own more than 50% of the voting power of First Advantage and First Advantage expects to take advantage of such exemptions afforded to controlled companies if the proposed Nasdaq rules are enacted.
 
First Advantage has no operating history as an independent company.
 
The FAST division will comprise a substantial portion of First Advantage’s assets. The FAST division has historically relied on First American for financial, administrative and managerial support relevant to operating a company. Except for certain services for which First Advantage will pay First American to provide, First American will have no obligation to support First Advantage after the mergers. In addition, pursuant to the standstill agreement to be entered into between First American and First Advantage, a majority of First Advantage’s “disinterested directors” must approve most future transactions between First American and First Advantage. First Advantage may need additional capital in order to finance operations or pursue acquisitions. Accordingly, First Advantage will have to obtain its own financing for operations and perform its own administrative functions. There can be no assurance that First Advantage will be able to develop successfully the financial, administrative and managerial resources and structure necessary to operate as an independent public company, or that First Advantage’s available financing and anticipated cash flow from operations will be sufficient to meet all of its cash requirements.
 
There is no current public market for First Advantage Class A common stock.
 
Before the closing of the mergers, there will have been no public market for First Advantage Class A common stock. If First Advantage Class A common stock is approved for quotation on the Nasdaq National Market, there can be no assurance that an active trading market for First Advantage Class A common stock will develop or, if a trading market does develop, that it will continue. In the absence of such a market, you may be unable to readily liquidate your investment in First Advantage Class A common stock.

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First Advantage will be dependent on information suppliers. If First Advantage is unable to manage successfully its relationships with a number of these suppliers, the quality and availability of First Advantage’s services may be harmed.
 
First Advantage will obtain some of the data used in its services from third party suppliers and government agencies. If a number of suppliers are no longer able or are unwilling to provide First Advantage with certain data, First Advantage may need to find alternative sources. If First Advantage is unable to identify and contract with suitable alternative data suppliers and integrate these data sources into its service offerings, First Advantage could experience service disruptions, increased costs and reduced quality of its services. Additionally, if one or more of First Advantage’s suppliers terminates First Advantage’s existing agreements, there is no assurance that First Advantage will obtain new agreements with third party suppliers on terms favorable to First Advantage, if at all. Loss of such access or the availability of data in the future due to increased governmental regulation or otherwise could have a material adverse effect on First Advantage’s business, financial condition and results of operations.
 
First Advantage may be subject to increased regulation regarding the use of personal information.
 
Certain data and services provided by First Advantage will be subject to regulation by various federal, state and local regulatory authorities. Compliance with existing federal, state and local laws and regulations has not had a material adverse effect on the results of operations or financial condition of the FAST division or US SEARCH to date. Nonetheless, federal, state and local laws and regulations in the United States designed to protect the public from the misuse of personal information in the marketplace and adverse publicity or potential litigation concerning the commercial use of such information may increasingly affect the operations of First Advantage, which could result in substantial regulatory compliance expense, litigation expense and a loss of revenue.
 
First Advantage will face significant security risks related to its electronic transmission of confidential information.
 
First Advantage will rely on encryption and other technologies to provide system security to effect secure transmission of confidential or personal information. First Advantage may license these technologies from third parties. There is no assurance that First Advantage’s use of applications designed for data security, or that of third-party contractors will effectively counter evolving security risks. A security or privacy breach could:
 
 
 
expose First Advantage to liability;
 
 
 
increase First Advantage’s expenses relating to resolution of these breaches;
 
 
 
deter customers from using First Advantage’s services; and
 
 
 
deter suppliers from doing business with First Advantage.
 
Any inability to protect the security and privacy of First Advantage’s electronic transactions could have a material adverse effect on the business, financial condition or results of operations of First Advantage.
 
First Advantage could face liability based on the nature of its services and the content of the materials provided which may not be covered by insurance.
 
First Advantage may face potential liability from individuals, government agencies or businesses for defamation, invasion of privacy, negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials that appear or are used in its products or services. Insurance may not be available to cover claims of these types or may not be adequate to cover First Advantage for all risks to which it is exposed. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of First Advantage’s insurance coverage, could have a material adverse effect on First Advantage’s reputation, business and results of operations.

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First Advantage may not be able to pursue its acquisition strategy.
 
A significant part of the historical growth strategies of the FAST division has been identifying and executing on acquisitions. First Advantage intends to continue to grow through acquisitions. First Advantage may not be able to identify suitable acquisition candidates, obtain the capital necessary to pursue its acquisition strategy or complete acquisitions on satisfactory terms. When companies are acquired, First Advantage may not be able to integrate or manage these businesses so as to produce returns that justify the investment.
 
A number of First Advantage’s competitors also have adopted the strategy of expanding and diversifying through acquisitions. First Advantage likely will experience competition in its effort to execute on its acquisition strategy, and First Advantage expects the level of competition to increase. As a result, First Advantage may be unable to continue to make acquisitions or may be forced to pay more for the companies it is able to acquire.
 
First Advantage currently does not plan to pay dividends.
 
First Advantage intends to retain future earnings, if any, that may be generated from operations to help finance the growth and development of its business. As a result, First Advantage does not anticipate paying dividends to stockholders for the foreseeable future.
 
First Advantage’s business depends on technology that may become obsolete.
 
First Advantage intends to use US SEARCH’s DARWIN technology and other information technology to better serve its clients and reduce costs. These technologies likely will change and may become obsolete as new technologies develop. The future success of First Advantage will depend upon its ability to remain current with the rapid changes in the technologies used in its business, to learn quickly to use new technologies as they emerge and to develop new technology-based solutions as appropriate. If First Advantage is unable to do this, it could be at a competitive disadvantage. First Advantage’s competitors may gain exclusive access to improved technology, which also could put First Advantage at a competitive disadvantage. If First Advantage cannot adapt to these changes, its business may be materially adversely affected.
 
First American could sell its controlling interest in First Advantage and therefore First Advantage could eventually be controlled by an unknown third party.
 
Subject to certain restrictions, First American could elect to sell all or a substantial or controlling portion of its equity interest in First Advantage to a third party without offering to First Advantage’s other stockholders the opportunity to participate in this transaction. If another party acquires First American’s interest in First Advantage, that third party may be able to control First Advantage in the same manner that First American is able to control First Advantage. A sale to a third party also may adversely affect the market price of First Advantage’s Class A common stock because the change in control may result in a change in management decisions, business policy and First Advantage’s attractiveness to future investors.
 
First Advantage will have minimal liquidity due to its small public float.
 
Although it is expected that there will be 19,403,743 shares of First Advantage common stock outstanding immediately following the mergers, approximately 80% will be owned by First American and approximately 11% will be beneficially owned by Pequot Capital Management, Inc. Only approximately 9% of First Advantage’s issued and outstanding shares will be freely transferable without restriction under the Securities Act immediately following the closing of the mergers. Accordingly, only a minimal number of shares of First Advantage will actually trade immediately following the closing. As a result, there will likely be less trading volume and therefore less liquidity compared to other companies with similar market capitalization. Consequently, you may have difficulty selling your shares of First Advantage.

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Significant stockholders may sell shares of First Advantage common stock which may cause First Advantage’s share price to fall.
 
Subject to certain restrictions, First American may at any time convert each of its shares of First Advantage Class B common stock into a share of Class A common stock. First American or Pequot Private Equity Fund II, L.P. may transfer shares of First Advantage common stock in a privately-negotiated transaction or to affiliates or shareholders and, under certain circumstances, in a registered public offering. Any transfers, sales or distributions by First American or Pequot Private Equity Fund II, L.P. of a substantial amount of First Advantage’s Class A common stock in the marketplace, or to shareholders, or the market perception that these transfers, sales or distributions could occur, could adversely affect the prevailing market prices for First Advantage Class A common stock.
 
There may be risks related to the prior use of Arthur Andersen LLP as the auditor of SafeRent, Inc., one of the FAST division companies.
 
The balance sheets and related statements of operations, owners’ equity and cash flows of SafeRent for the years ended December 31, 2000 and 2001, which have been included in the FAST division financial information in this proxy statement/prospectus, were audited by Arthur Andersen LLP. Despite First Advantage’s reasonable efforts to obtain Andersen’s consent, Andersen has not consented to the inclusion of its report in this proxy statement/prospectus. Under these circumstances, Rule 437a under the Securities Act permits First Advantage to file the registration statement which this proxy statement/prospectus forms a part of without a written consent from Andersen.
 
Section 11(a) of the Securities Act provides that if any part of a registration statement at the time it becomes effective contains an untrue statement of a material fact, or omits a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to the registration statement (unless it is proved that at the time of the acquisition the person knew of the untruth or omission) may sue, among others, every accountant who has consented to be named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in the registration statement, report or valuation which purports to have been prepared or certified by the accountant.
 
As a result of Andersen failing to consent to being named as an expert or to the inclusion of its report in the registration statement of which this proxy statement/prospectus forms a part, you will not be able to recover against Andersen under Section 11(a) of the Securities Act.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
This proxy statement/prospectus contains “forward-looking statements.” These forward-looking statements are based on estimates and assumptions made by management of First American, the FAST division or US SEARCH, as the case may be, and take into account only the information available at the time the forward-looking statements are made. Although we each believe our respective estimates and assumptions are and will be reasonable, forward-looking statements involve risks, uncertainties and other factors that could cause our respective actual results to differ materially from those suggested in the forward-looking statements. Forward-looking statements include the information concerning future financial performance, anticipated benefits of the mergers, business strategy, projected plans and objectives of First Advantage, prospective products, sales and marketing efforts, costs and expenses, liquidity, cost savings and the other forward-looking statements contained in the following sections of this proxy statement/prospectus:
 
 
 
the expected closing date of the mergers;
 
 
 
pro forma financial data for US SEARCH and the FAST division companies;
 
 
 
information concerning the anticipated benefits of the mergers;
 
 
 
the expected benefits of the mergers considered by First American in “SUMMARY—First American Reasons for the Mergers” on page 6;
 
 
 
statements about the expected competitive position and profitability of First Advantage and its future access to capital in “THE MERGERS—Background of the Mergers” on page 23;
 
 
 
the expected benefits and cost savings expected to result from the mergers considered by The US SEARCH board of directors in “THE MERGERS—US SEARCH Reasons for the Mergers on page 27;
 
 
 
the effect of automation on the quality of services and products and efficiency in “INFORMATION ABOUT US SEARCH—Business” on page 63; and
 
 
 
strategies for future growth described in “INFORMATION ABOUT THE FAST DIVISION—Business—Strategies for Future Growth” on page 71.
 
Forward-looking statements are subject to numerous risks and uncertainties. The following are some important factors that could cause First Advantage’s actual results to differ materially from those in forward-looking statements:
 
 
 
general volatility of the capital markets and the market price of First Advantage Class A common stock;
 
 
 
First Advantage’s ability to identify and complete acquisitions and successfully integrate businesses it acquires (including the FAST division and US SEARCH);
 
 
 
changes in applicable government regulations;
 
 
 
the degree and nature of First Advantage’s competition;
 
 
 
an increase in First Advantage’s expenses;
 
 
 
continued consolidation among First Advantage’s competitors and customers;
 
 
 
technological changes may be more difficult or expensive than anticipated; and
 
 
 
other factors described in the section entitled “RISK FACTORS” beginning on page 12.

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First Advantage’s actual results, performance or achievement could differ materially from those expressed in, or implied by, forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations and financial condition of First Advantage. The forward-looking statements speak only as of the date they are made. None of US SEARCH, First American and First Advantage undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
 

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THE SPECIAL MEETING OF STOCKHOLDERS
 
We are furnishing this proxy statement/prospectus to stockholders of US SEARCH as part of the solicitation of proxies by US SEARCH’s board of directors for use at a special meeting of US SEARCH stockholders to vote on the mergers. We are first mailing this proxy statement/prospectus and the accompanying form of proxy to US SEARCH stockholders on or about                         , 2003.
 
Date, Time and Place
 
The special meeting of stockholders of US SEARCH will be held on                         , 2003 at 9:00 a.m. local time at 5401 Beethoven Street, Los Angeles, California 90066.
 
Purpose of the Special Meeting
 
At the special meeting, you will be asked to vote upon a proposal to adopt the merger agreement and the merger of US SEARCH with a wholly-owned subsidiary of First Advantage.
 
Record date; Stock Entitled to Vote
 
The US SEARCH board of directors has fixed the close of business on February 1, 2003 as the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting. Only holders of record of US SEARCH common stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting. As of the record date, US SEARCH had outstanding and entitled to vote 97,018,715 shares of US SEARCH common stock.
 
Each holder of record of common stock on such date will be entitled to one vote for each share held on all matters to be voted upon at the special meeting.
 
Quorum and Vote Required
 
A quorum will be present at the special meeting if a majority of the shares of US SEARCH stock issued and outstanding and entitled to vote at the special meeting are represented in person or by a properly executed proxy. If a quorum is not present at the special meeting, we expect that the special meeting will be adjourned or postponed to solicit additional proxies.
 
The affirmative vote of the holders of a majority of the outstanding shares of US SEARCH common stock at the special meeting is required to approve the merger agreement and the mergers. A US SEARCH stockholder owning approximately 54.1% of US SEARCH common stock as of January 9, 2003 has agreed to vote all of its shares of common stock in favor of the proposal to approve the merger agreement and the mergers. See “OTHER AGREEMENTS—Voting Agreement” on page 54. Accordingly, so long as the parties perform their obligations under the voting agreement and the voting agreement remains in effect, approval of the proposal to approve the merger agreement and the mergers is assured.
 
Recommendation of the US SEARCH Board of Directors
 
The US SEARCH board of directors met to consider the mergers and the merger agreement and, by a unanimous vote of those directors present, approved the merger agreement and the mergers and determined that the merger agreement and the mergers are advisable, fair to and in the best interests of US SEARCH and its stockholders. One director was absent from the meeting at which the US SEARCH board of directors approved the mergers and the merger agreement, but that director subsequently confirmed in writing to US SEARCH that he supports the mergers and the merger agreement. The US SEARCH board of directors recommends that you vote “FOR” the proposal to adopt the merger agreement and approve the mergers at the special meeting. See “THE MERGERS—US SEARCH Reasons for the Mergers” on page 27.

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Voting, Revocation and Solicitation of Proxies
 
You may vote your shares via the Internet by visiting http://www.eproxy.com/srch/ at any time before 12:00 p.m., Pacific Time, on                     , 2003. Abstentions granted via the Internet will be counted towards the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Electronic voting, including voting via the Internet, is permitted pursuant to Section 212 of the Delaware General Corporation Law so long as it can be determined that the electronic transmission of the proxy was authorized by the stockholder. The Internet voting procedures are designed to authenticate your identity, to confirm your authorization, to allow you to give your voting instructions and to confirm that your instructions have been properly recorded. To vote via the Internet, you will need to enter the three digit company code and seven digit control number printed on your proxy card. If you vote via the Internet, you should understand that there may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, that you must bear.
 
A number of brokers and banks are participating in a program provided through ADP Investor Communication Services that also offers Internet voting options. If your shares are held in an account with a broker or bank participating in the ADP Investor Communication Services program, you may vote those shares via the Internet at ADP Investor Communication Services’ voting website (www.proxyvote.com).
 
Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with the Secretary of US SEARCH at our principal executive office, 5401 Beethoven Street, Los Angeles, CA 90066, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy. Revoking a proxy and failing to subsequently vote either in person or by a later proxy will result in a non-vote.
 
US SEARCH will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this proxy statement/prospectus, the proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. US SEARCH may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by directors, officers or other regular employees of US SEARCH. No additional compensation will be paid to directors, officers or other regular employees for such services.
 
Abstentions and Broker Non-Votes
 
Shares of US SEARCH common stock held by persons attending the special meeting but not voting, and shares of US SEARCH common stock for which US SEARCH has received proxies but with respect to which holders of those shares have abstained from voting, will be counted as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of business at the special meeting. A US SEARCH stockholder owning approximately 54.1% of US SEARCH common stock outstanding as of January 1, 2003 has agreed to vote all of its shares in favor of the proposal to approve the merger agreement and the mergers. Accordingly, so long as the parties perform their obligations under the voting agreement and the voting agreement remains in effect, approval of the proposal to approve the merger agreement and the mergers is assured. Because the affirmative vote of a majority of shares of US SEARCH common stock present or represented by proxy at the special meeting is required, abstentions will have the same effect as votes against the proposal.
 
Shares represented by proxies that reflect a broker “non-vote” will be counted for purposes of determining whether a quorum exists. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner has

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not received instructions from the beneficial owner and does not have discretionary authority to vote the shares. Because the affirmative vote of a majority of shares of US SEARCH common stock present or represented by proxy at the special meeting is required, broker non-votes will have the same effect as votes against the proposal.
 
Adjournments or Postponements
 
US SEARCH does not expect that any matter other than the proposals presented in this proxy statement/prospectus will be brought before the special meeting. However, if other matters are properly presented at the special meeting or any adjournment or postponement of the special meeting, the persons named as proxies will vote in accordance with their best judgment with respect to those matters. Under the laws of the State of Delaware, no business may be raised at the special meeting unless proper notice to the US SEARCH stockholders has been given.
 
Adjournments may be made for the purpose of, among other things, soliciting additional proxies. An adjournment may be made from time to time by approval of the holders of shares representing a majority of the votes present in person or by proxy at the special meeting, whether or not a quorum exists, without further notice other than by an announcement made at the special meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting will be given to each stockholder entitled to vote at the meeting. US SEARCH does not currently intend to seek an adjournment of the special meeting.

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THE MERGERS
 
Background of the Mergers
 
On June 7, 2002, Brent N. Cohen, the chief executive officer of US SEARCH, received an unsolicited telephone call from John W. Long, President of the FAST division, regarding whether US SEARCH might be interested in combining its business with the FAST division. Mr. Long stated his belief that combining the FAST division and US SEARCH would create a much stronger competitor in the screening services industry that would be profitable from the outset and have greater access to capital and other resources. Mr. Cohen expressed his interest in discussing further the possibility of combining the businesses. This initial discussion was followed by a meeting on June 13, 2002 at US SEARCH’s headquarters in Los Angeles, California among Parker Kennedy, President of First American, Mr. Long, Mr. Cohen and Jeffrey R. Watts, Chief Financial Officer of US SEARCH. The meeting participants discussed how a combination could be structured and the possibility of using relative valuations of the FAST division and US SEARCH as the basis for determining how ownership of the combined company would be allocated among First American and US SEARCH stockholders. On June 17, 2002, First American and US SEARCH executed a mutual nondisclosure agreement for the purpose of facilitating the exchange of confidential information.
 
On June 20, 2002, Mr. Long and other senior executives of First American and the FAST division visited US SEARCH’s headquarters. Mr. Cohen, Mr. Watts and other senior officers of US SEARCH made presentations describing US SEARCH’s business. This meeting was followed by a telephone call between Mr. Cohen and Mr. Long on July 2, 2002 during which the relative strengths and weaknesses of the two businesses were discussed. On July 12, 2002, Mr. Cohen attended a meeting in St. Petersburg, Florida to hear a presentation from Mr. Long and other representatives of the FAST division describing its businesses, and to begin discussions regarding relative valuations of the FAST division and US SEARCH. US SEARCH initially proposed that First American would receive 60% of the equity of the combined company for contributing the subsidiaries then comprising the FAST division and that the US SEARCH stockholders would receive 40% for US SEARCH; First American initially proposed 85% for the FAST division and 15% for US SEARCH.
 
On July 18, 2002, Mr. Cohen and Mr. Watts met with Mr. Long and Mr. Kennedy in Santa Ana, California. Mr. Kennedy and Mr. Long reiterated their interest in combining the First American subsidiaries then comprising the FAST division (which did not include Employee Health Programs or SafeRent at that time) with US SEARCH.
 
On July 23, 2002, the board of directors of US SEARCH held a special meeting by telephone. During the meeting, Mr. Cohen summarized the discussions and meetings to date with First American regarding a possible business combination. US SEARCH’s board of directors formed a subcommittee comprised of Mr. Cohen, Lawrence D. Lenihan, Jr. and Alan C. Mendelson to gather more information regarding the proposed combination, participate in negotiating the terms of such combination, and, if appropriate, make a recommendation to the entire board concerning the transaction. The subcommittee agreed to report to the board of directors on July 29, 2002.
 
On July 26, 2002, First American delivered to Mr. Cohen a draft letter of intent setting forth the terms previously discussed with Mr. Kennedy and Mr. Long. The draft letter of intent contemplated that: First American would receive 80% of the capital stock of the combined company on a fully diluted and fully converted basis, with the remaining 20% comprising the shares held by US SEARCH stockholders and shares underlying US SEARCH options and warrants; the combined company would assume any indebtedness incurred by First American in acquiring additional screening businesses between the date the letter of intent was executed and the closing of the combination, or, if First American issued any of its stock in such acquisitions, the combined company would issue a promissory note to First American for the value of such stock; First American would ensure that the FAST division held at least $25,000,000 in cash, less the amount of cash expended by First

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American to acquire new screening businesses prior to closing; and Pequot Private Equity Fund II, L.P., US SEARCH’s majority stockholder, would be required to enter into a voting agreement to vote its shares of US SEARCH stock in favor of the combination. The draft letter of intent by its terms would have required US SEARCH to agree to exclusive negotiations with First American and not publicly disclose the existence of the draft letter of intent. Mr. Cohen circulated the draft letter of intent to US SEARCH’s board of directors.
 
On July 29, 2002, the board of directors of US SEARCH held a special meeting by telephone. During the meeting, Mr. Cohen summarized First American’s draft letter of intent regarding a possible business combination. The board of directors discussed the draft letter of intent and the possibility of pursuing a strategic combination with subsidiaries of First American as an alternative to growing US SEARCH’s business independently. The board of directors discussed the benefits and risks of US SEARCH continuing operations as a standalone company in light of its limited revenue base, current liquidity needs and limited ability to access additional capital under current market conditions. The board of directors considered the benefits to US SEARCH of joining with the FAST division to form a larger, profitable screening services business with greater access to capital and other resources. The subcommittee recommended and the board of directors concluded that US SEARCH should not sign First American’s draft letter of intent, but authorized and directed Mr. Cohen to continue negotiations with First American. The board of directors also authorized Mr. Cohen to enter into discussions with Lehman Brothers about the possibility of Lehman Brothers acting as financial advisor to US SEARCH in connection with the possible combination and, in the event a transaction were to be negotiated, delivering an opinion to the board of directors regarding the fairness from a financial point of view of the consideration to be received by US SEARCH stockholders in such transaction.
 
On August 5, 2002, the board of directors of US SEARCH held a regularly scheduled meeting in US SEARCH’s headquarters. At this meeting, the board of directors considered additional background information about First American, possible structure of a transaction, relative valuations and other strategies for growth available to US SEARCH were discussed. The board of directors was informed that negotiations were continuing with Lehman Brothers concerning the possibility of Lehman Brothers advising US SEARCH on the possible combination.
 
From August 5, 2002 through early September, Mr. Cohen and Mr. Long continued discussions concerning the terms of a possible combination and the relative valuations of the FAST division and US SEARCH. Some of these discussions included representatives of Lehman Brothers assisting US SEARCH, and separate representatives of Lehman Brothers that were advising First American in connection with the possible combination. On August 29, 2002, Mr. Cohen, Mr. Kennedy, Mr. Long and Mr. Lenihan met in New York to discuss First American’s vision for the company that would result from combining the FAST division and US SEARCH. This meeting was followed by several telephone discussions between Mr. Cohen and Mr. Long regarding relative valuations for the businesses. On September 14, 2002, Mr. Cohen sent a letter to Mr. Long outlining general terms for a possible combination. The letter contemplated that US SEARCH stockholders would receive 25% of the capital stock of the combined company and be entitled to receive up to an additional 10% as the market capitalization of the combined company increased over time. Mr. Cohen’s letter also contemplated that First American would ensure that the FAST division would be contributed to the combined company without any debt and with $25.0 million of cash on its balance sheet.
 
On September 20, 2002, Mr. Long responded to Mr. Cohen’s September 14, 2002 letter with a written summary of First American’s proposed terms for a possible combination of the FAST division and US SEARCH. This summary contemplated that First American would contribute its screening services subsidiaries (including Employee Health Programs and SafeRent, which were then in the process of being acquired) and $15.0 million in cash to US SEARCH in exchange for 80% of the capital stock of US SEARCH on a fully diluted basis. The shares of US SEARCH common stock currently issued to US SEARCH stockholders and underlying existing US SEARCH stock options and warrants would remain outstanding and together would represent the remaining 20% of US SEARCH’s outstanding capital stock on a fully diluted basis following such a combination. The summary also contemplated that the shares of US SEARCH capital stock received by First American in the business

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combination would be shares of a new class of stock entitled to ten votes per share (compared to one vote per share for US SEARCH’s existing common stock). The summary further contemplated that executives of the FAST division and US SEARCH (including Mr. Cohen, David Wachtel, US SEARCH’s Chief Technology Officer, H. Jake Mendelsohn, US SEARCH’s Chief Information Officer, Robert Schwartz, Executive Vice President, and Richard Heitzmann, US SEARCH’s Senior Vice President Business Development) would continue as executives of the combined company. From September 20, 2002 through September 26, 2002, Mr. Cohen, Mr. Long and their respective financial and legal advisors continued negotiations regarding First American’s proposed terms.
 
On September 27, 2002, the board of directors of US SEARCH held a special meeting by telephone during which Mr. Cohen updated the board of directors regarding his recent discussions with Mr. Long and First American’s latest proposed terms for combining US SEARCH and the FAST division. These terms included those described in First American’s September 20 summary of proposed terms, but also contemplated that US SEARCH stockholders would receive, as additional consideration, warrants to purchase additional shares of US SEARCH common stock at a strike price equal to the anticipated trading price of US SEARCH common stock at closing. In addition, First Advantage would have a 10 member board of directors following the business combination, of whom one would be Mr. Cohen and one would be designated by Pequot Capital Management, Inc. Following discussion of these proposed terms by the board of directors, the subcommittee previously formed by the board to evaluate the transaction recommended to the full board of directors that it authorize the company’s management to proceed with negotiating a definitive agreement with First American on the basis of the proposed terms. The subcommittee’s recommendation was adopted by the full board of directors. The board of directors also approved engaging Lehman Brothers to assist management and the board of directors in evaluating the proposed combination and deliver an opinion to the board of directors with respect to the fairness from a financial point of view of the consideration to be received by US SEARCH stockholders in the possible combination. The board of directors believed Lehman Brothers was best qualified to assist US SEARCH because of Lehman Brothers’ expertise and relationships within the background screening and business services industries, its familiarity with US SEARCH, and its experience with similar transactions. A separate team within Lehman Brothers was also hired to act as financial advisor to First American in connection with the transaction. Lehman Brothers agreed to provide a fairness opinion only to the board of directors of US SEARCH and not to First American.
 
During October 2002, representatives of US SEARCH and First American and their respective financial and legal advisors continued to discuss and negotiate possible terms and transaction structures, exchange comments on drafts of definitive agreements and conduct due diligence. During these discussions, representatives of US SEARCH asked First American to consider providing US SEARCH stockholders “minority protections” in connection with First American receiving 80% of the shares of capital stock of the combined company. These requested minority protections included First American agreeing not to purchase additional shares of voting stock of the combined company beyond the shares it would receive in the business combination; engage in related party transactions; or sell control of the combined company to another party unless such party agrees to abide by the same minority protections.
 
On October 31, 2002, the US SEARCH board of directors met by telephone for a regularly scheduled board meeting at which Mr. Cohen updated the board of directors regarding the status of negotiations between US SEARCH and First American.
 
On November 18, 2002, Mr. Cohen, Mr. Long, other representatives of US SEARCH and First American and their respective financial and legal advisors met in Los Angeles, California. The purpose of the meeting was to attempt to resolve outstanding issues concerning the proposed combination, including possible adjustments to the consideration that would be payable to US SEARCH stockholders and First American to reflect issues that surfaced in each company’s respective diligence investigation. The representatives of First American proposed that First American should receive additional warrants to purchase a significant number of shares of common stock of the combined company to mirror US SEARCH’s currently outstanding stock options and warrants if

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such options and warrants were converted in the mergers into options and warrants of the combined company. In addition, the parties also discussed possible terms by which First American would loan up to $1,400,000 to US SEARCH after signing a definitive agreement for the proposed combination, which loan First American offered to address US SEARCH’s concerns that it would need to ensure access to additional capital in the event that there would be significant delay between signing and closing of a combination.
 
Between November 18, 2002 and December 5, 2002, the parties and their respective financial and legal advisors continued negotiating the possible terms of the proposed combination, including: the possibility of eliminating the additional warrants to be issued as merger consideration to US SEARCH stockholders in favor of eliminating mirror warrants proposed to be issued to First American; how the amount of First American’s cash capital contribution would be calculated; whether First Advantage stock options initially issued to former employees of the FAST division following closing of the mergers should be dilutive to First American only; and the minority protections that would restrict First American following the combination. During this same period, the parties substantially completed the due diligence process.
 
On December 5, 2002, representatives of US SEARCH and First American and their respective financial and legal advisors met by telephone to further discuss calculations for eliminating the merger warrants to be issued to US SEARCH stockholders in exchange for eliminating the mirror warrants to be issued to First American. By December 12, 2002, representatives of the parties had agreed to eliminate both the merger warrants and the mirror warrants from the proposed business combination in favor of a structure in which US SEARCH stockholders would receive approximately 20% of the shares of capital stock of the combined company and all existing US SEARCH options and warrants would be converted into options and warrants of the combined company at the same implied exchange ratio. The parties further agreed that future grants of stock options to employees, directors and officers of First Advantage would dilute all First Advantage stockholders in accordance with their respective ownership interests.
 
On December 12, 2002, the US SEARCH board of directors held a special meeting by telephone to consider the proposed transaction. All US SEARCH directors, members of management, and representatives of Lehman Brothers and Latham & Watkins LLP, legal counsel to US SEARCH, participated in the meeting. Mr. Cohen reported to the board of directors that the negotiations concerning the combination of US SEARCH and the FAST division were substantially complete, subject to resolving the final calculation of the number of shares of capital stock of the combined company to be issued to First American at the closing of the transaction and minor business issues. Representatives of Lehman Brothers summarized the principal financial terms of the proposed transaction and described financial analysis performed by Lehman Brothers. Lehman Brothers did not render its fairness opinion at that time pending resolution of all remaining open issues on the proposed merger agreement and terms. Latham & Watkins LLP then advised the members of the board of their fiduciary duties with respect to deciding whether to approve the merger agreement and mergers of US SEARCH. After discussion among board members regarding the proposed transaction, the full board voted unanimously to authorize Mr. Cohen to negotiate the unresolved issues concerning the proposed business combination.
 
On December 13, 2002, the US SEARCH board of directors again held a special meeting by telephone, at which all of US SEARCH’s directors, other than Harry Chandler, members of US SEARCH’s senior management and financial and legal advisors were present. At the meeting, Latham & Watkins LLP informed the board that the parties had resolved all remaining issues and reaffirmed the terms of the proposed transaction. Lehman Brothers confirmed that its financial analysis, presented the day before, still applied to the terms of the proposed transaction and delivered its oral opinion, subsequently confirmed in writing, that, as of that date and subject to certain matters stated in the opinion, the exchange ratio for the US SEARCH mergers was fair from a financial point of view to US SEARCH stockholders. Following further discussion regarding the proposed combination, all US SEARCH directors present at the meeting approved the merger agreement and the transactions contemplated by it, including the US SEARCH mergers, and resolved to recommend that the

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US SEARCH stockholders vote to approve the merger agreement and the US SEARCH mergers. Harry Chandler subsequently confirmed in writing that he also approved of the merger agreement and the transactions contemplated by it.
 
The merger agreement, the voting agreement and the stockholders agreement were executed by the parties later that day.
 
US SEARCH Reasons for the Mergers
 
The US SEARCH board of directors believes that the mergers are in the best interests of US SEARCH stockholders and has approved the merger agreement and determined it to be advisable, and recommends that the US SEARCH stockholders vote “FOR” adopting the merger agreement and approval of the mergers.
 
In reaching its decision to approve the mergers and the merger agreement, the US SEARCH board of directors consulted with US SEARCH management and its financial and legal advisors, and considered the following factors:
 
 
 
the per share merger consideration, based on valuation models prepared by US SEARCH’s financial advisor and management, in relation to the recent market trading prices for US SEARCH’s common stock;
 
 
 
the complementary nature of the US SEARCH and the FAST division businesses and the strong strategic and synergistic benefits of combining US SEARCH with the FAST division, which benefits will immediately position the combined company as a significant market player in each of the screening segments in which it will participate;
 
 
 
the fact that the combined company will likely be one of the largest screening services companies in the country based on pro forma combined revenues;
 
 
 
US SEARCH’s long term prospects as an independent company, the constraints on US SEARCH’s ability to pursue its strategic objectives due to its limited access to capital and its present size, and the belief that US SEARCH’s long term prospects would be enhanced by the mergers;
 
 
 
the general condition of the screening industry and the likely benefits to US SEARCH stockholders of consolidating its business with others to create a more significant participant in the industry;
 
 
 
the apparent trend of consolidation in the screening industry and the likelihood that competitors of US SEARCH would participate in this consolidation;
 
 
 
the strength and experience of the management group of the combined company;
 
 
 
the benefits to the combined entity of a continuing relationship with First American, including the benefits of the services to be provided to the combined company by First American pursuant to the services agreement;
 
 
 
the significant cost savings available to the combined company as a result of operational synergies;
 
 
 
the anticipated financial resources of the combined company;
 
 
 
the opinion of Lehman Brothers that, as of the date of its opinion, and based on and subject to certain matters stated therein, the exchange ratio was fair from a financial point of view to US SEARCH stockholders. See “THE MERGERS—Fairness Opinion of Financial Advisor to US SEARCH” on page 29;
 
 
 
the anticipated effectiveness of the mergers in implementing US SEARCH’s strategy of providing diversified screening services to its customers and of expanding beyond its retail consumer business into services for business customers;
 
 
 
the increased scale, scope and financial strength of the combined company, the potential greater liquidity of the combined company and the combined company’s potential for increased access to capital;

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the structure of the mergers and the financial and other terms of the merger agreement, including First American’s agreement to cause First Advantage to have $15 million in cash on the closing date (less expenses related to the transaction and amounts owed to First American by US SEARCH);
 
 
 
the restrictions placed upon the conduct of First American in the standstill agreement, including restrictions upon its ability to acquire additional shares of capital stock of the combined company, and a requirement that transactions between First American and the combined company be approved by a committee of the board of directors of the combined company consisting solely of disinterested directors;
 
 
 
the anticipated tax treatment of the mergers to US SEARCH stockholders;
 
 
 
the ability of US SEARCH under certain circumstances to consider unsolicited alternative proposals, its ability to terminate the merger agreement under certain circumstances including to permit it to accept one of such proposals, and the termination fees payable to First American if the merger agreement is terminated under certain circumstances including US SEARCH’s acceptance of one of such proposals; and
 
 
 
the possibility that US SEARCH’s common stock would be delisted from the Nasdaq National Market System if US SEARCH did not pursue a strategic transaction or a reverse stock split.
 
In addition to these factors, the US SEARCH board of directors also identified and considered the following potentially negative factors in its deliberations concerning the mergers:
 
 
 
the risk that the potential benefits of the mergers may not be realized fully as a result of integration difficulties, negative market perception or public confusion about the mergers, general industry-wide or economic conditions or other factors;
 
 
 
corporate governance risks associated with becoming minority stockholders in a company that will be controlled by a single majority stockholder;
 
 
 
the risk that First American or its affiliates may compete directly with the combined entity in the screening industry;
 
 
 
the risk that the conditions to completion of the mergers will not be satisfied;
 
 
 
the risk of possible delays associated with the completion of the mergers; and
 
 
 
the other risks described under “RISK FACTORS” beginning on page 12 of this proxy statement/prospectus.
 
The US SEARCH board of directors ultimately determined that the positive factors outweighed the negative factors in deciding to proceed with the mergers, but the board of directors did not quantify or assign any relative or specific weights to the various factors that it considered. Rather, the US SEARCH board of directors based its recommendation on the totality of the information presented to and considered by it. In addition, individual members of the US SEARCH board of directors may have given different weight to different factors considered in the analysis.
 
Recommendation of the US SEARCH Board of Directors
 
The US SEARCH board of directors has approved the merger agreement and the mergers and determined that the merger agreement and the mergers are advisable, fair to and in the best interests of US SEARCH and its stockholders. The US SEARCH board of directors recommends that you vote “FOR” the proposal to adopt the merger agreement and approve the mergers at the special meeting.

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Fairness Opinion of Financial Advisor to US SEARCH
 
On September 27, 2002, the board of directors of US SEARCH engaged Lehman Brothers to act as its financial advisor in connection with the proposed transaction with the FAST division. On December 13, 2002, Lehman Brothers rendered its oral and written opinion to the board of directors of US SEARCH with respect to the proposed transaction, that as of such date and, based upon and subject to certain matters stated therein, the exchange ratio to be received by the stockholders of US SEARCH pursuant to the merger agreement was fair to such stockholders from a financial point of view.
 
This summary of the Lehman Brothers opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion attached as Annex B to this proxy statement/prospectus. US SEARCH stockholders may read the opinion for a discussion of the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Lehman Brothers in rendering its opinion.
 
Lehman Brothers’ advisory services and opinion were provided for the information and assistance of the US SEARCH board of directors in connection with its consideration of the proposed transaction. The Lehman Brothers opinion is not intended to be and does not constitute a recommendation to any stockholder of US SEARCH as to how such stockholder should vote in connection with the proposed transaction. Lehman Brothers was not requested to opine as to, and the Lehman Brothers opinion does not address, US SEARCH’s underlying business decision to proceed with or effect the proposed transaction.
 
In arriving at its opinion, Lehman Brothers did not ascribe a specific range of value to US SEARCH or the FAST division, but rather compared the relative value of US SEARCH to the relative value of the FAST division using the financial and comparative analysis described below to determine the fairness from a financial point of view to the stockholders of US SEARCH of the exchange ratio to be received by such stockholders in the proposed transaction. The preparation of this fairness opinion involves various determinations as to the most appropriate and relevant methods of financial and comparative analysis and the application of those methods to the particular circumstances, and therefore, such an opinion is not readily susceptible to summary description. Furthermore, in arriving at its opinion, Lehman Brothers did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Lehman Brothers believes that its analyses must be considered as a whole and that considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion. In its analyses, Lehman Brothers made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of US SEARCH and the FAST division. None of US SEARCH, First American, First Advantage, Lehman Brothers, or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses were not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth therein. In addition, analyses relating to the value of businesses do not purport to be appraisals or to reflect the prices at which businesses actually may be sold.
 
In arriving at its opinion, Lehman Brothers reviewed and analyzed:
 
 
 
the merger agreement and the specific terms of the proposed transaction;
 
 
 
publicly available information concerning US SEARCH that Lehman Brothers believed to be relevant to its analysis, including US SEARCH’s annual reports on Form 10-K for the fiscal years ended December 31, 2001 and 2000, and quarterly reports on Form 10-Q for the quarters ended March 31, 2002, June 30, 2002, and September 30, 2002;
 
 
 
financial and operating information with respect to the business, operations and prospects of US SEARCH and the FAST division furnished to Lehman Brothers by US SEARCH and the FAST division, including unaudited historical financial statements for each of the companies then comprising the FAST division for varying periods between January 1, 2000 and September 30, 2002 provided by

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the FAST division, and unaudited pro forma combined financial statements for the fiscal year ending December 31, 2001 and nine months ending September 30, 2002;
 
 
 
the financial projections for US SEARCH and the FAST division prepared by the management of each entity;
 
 
 
a trading history of US SEARCH’s common stock from June 25, 1999 to the present and a comparison of that trading history with those of other companies that Lehman Brothers deemed relevant;
 
 
 
a comparison of the historical financial results and present financial condition of US SEARCH and the FAST division with those of other companies that Lehman Brothers deemed relevant;
 
 
 
a comparison of the financial terms of the proposed transaction with the financial terms of certain other transactions that Lehman Brothers deemed relevant;
 
 
 
the relative contributions of US SEARCH and the FAST division to the historical and future financial performance of First Advantage on a pro forma basis;
 
 
 
US SEARCH’s near term liquidity requirements and the ability of US SEARCH to meet those requirements in the absence of the proposed transaction;
 
 
 
the results of Lehman Brothers’ informal efforts to solicit interest from third parties with respect to an acquisition of US SEARCH; and
 
 
 
the pro forma impact of the proposed transaction on the current and future financial position of First Advantage.
 
In addition, Lehman Brothers had discussions with the management of US SEARCH and the FAST division concerning their respective businesses, operations, assets, financial condition and prospects and undertook such other studies, analyses and investigations as Lehman Brothers deemed appropriate.
 
In arriving at its opinion, Lehman Brothers assumed and relied upon the accuracy and completeness of the financial and other information used by Lehman Brothers without assuming any responsibility for independent verification of such information and further relied upon the assurances of management of US SEARCH and the FAST division that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of US SEARCH and the FAST division, upon advice of US SEARCH, Lehman Brothers assumed that such projections had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of US SEARCH and the FAST division, respectively, as to the future financial performance of US SEARCH and the FAST division. However, for the purpose of its analysis, Lehman Brothers considered certain somewhat more conservative assumptions and estimates which resulted in certain adjustments to the projections of both US SEARCH and the FAST division. Lehman Brothers discussed these adjusted projections with the management of US SEARCH and they agreed with the appropriateness of the use of such adjusted projections in performing the analysis. Upon the advice of US SEARCH and the FAST division, Lehman Brothers assumed that the FAST division unaudited financials materially reflect the financial performance of the FAST division and will be substantially similar to the results reflected in the audited financials for the companies comprising the FAST division. In arriving at its opinion, Lehman Brothers conducted only a limited physical inspection of the properties and facilities of US SEARCH and the FAST division and did not make or obtain any evaluations or appraisals of the assets or liabilities of US SEARCH and the FAST division. In addition, US SEARCH did not authorize Lehman Brothers to formally solicit, and Lehman Brothers did not so solicit, any indications of interest from any third party with respect to the purchase of all or a part of US SEARCH’s business. The Lehman Brothers opinion necessarily was based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of the Lehman Brothers opinion.
 
Lehman Brothers expressed no opinion as to the prices at which shares of First Advantage common stock will trade following consummation of the proposed transaction. This opinion should not be viewed as providing

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any assurance that the market value of the shares of First Advantage common stock after consummation of the proposed transaction will be in excess of the market value of such shares at any time before announcement or consummation of the proposed transaction.
 
The following is a summary of the material financial and comparative analyses used by Lehman Brothers in connection with providing its opinion to the US SEARCH board of directors. Certain of the summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Lehman Brothers, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Accordingly, the analyses listed in the tables and described below must be considered as a whole. Considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the Lehman Brothers opinion.
 
Comparable Transactions Analysis
 
The comparable transactions analysis provided a market benchmark based on the consideration paid in certain precedent transactions selected by Lehman Brothers. Lehman Brothers reviewed certain publicly available information on seven transactions involving target companies that Lehman Brothers deemed comparable to US SEARCH and the FAST division. The following transactions were included in Lehman Brothers’ analysis:
 
Announcement Date

  
Acquiror Name

  
Target Name

12/05/02
  
Welsh, Carson, Anderson & Stowe
  
US Investigations Services, Inc.
9/10/02
  
US Investigations Services, Inc.
  
Total Information Services, Inc., a division of The Official Information Company
6/18/01
  
Automatic Data Processing, Inc.
  
Avert, Inc.
2/14/00
  
ChoicePoint Inc.
  
DBT Online, Inc.
8/20/99
  
DBT Online, Inc.
  
Information America’s online public records business
5/7/99
  
DBT Online, Inc.
  
I.R.S.C., Inc.
1/21/99
  
Kroll, Inc.
  
Background America, Inc.
 
Lehman Brothers compared enterprise values in the selected transactions as multiples of the latest 12 months revenue, and earnings before interest, taxes, depreciation and amortization (EBITDA). All multiples were based on financial information publicly available at the time the relevant transactions were announced. Lehman Brothers applied a range of selected multiples for the selected transactions to the corresponding financial data of US SEARCH and the FAST division. In the case of the FAST division, the financial data utilized in the comparable transactions analysis as well as the comparable company analysis and contribution analysis described below assumed all acquisitions of the FAST division companies were completed at the beginning of the relevant periods and contained certain pro forma adjustments related to estimated cost savings from certain acquisitions. This analysis indicated an implied equity value reference range for US SEARCH of approximately $49 million to $79 million and an implied equity value reference range for the FAST division of approximately $245 million to $330 million. Lehman Brothers compared the equity value reference ranges for US SEARCH and the FAST division and derived an implied US SEARCH ownership percentage in First Advantage of 13% to 24%. The percentage ownership of US SEARCH in First Advantage of 20% implied by the exchange ratio in the proposed transaction fell within this range.
 
However, because the reasons for and the circumstances surrounding each of the transactions analyzed were so diverse and because of the inherent differences between the business, operations and prospects of US SEARCH and the FAST division, on the one hand, and the business, operations and prospects of the companies included in the comparable transactions group, on the other hand, Lehman Brothers believed that it

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was inappropriate to, and therefore did not rely solely on the quantitative results of the comparable transaction analysis. Accordingly, Lehman Brothers also made qualitative judgments concerning differences between the reasons for and the circumstances surrounding the proposed transaction and the transactions included in the comparable transaction analysis that would affect the relative values of US SEARCH and the FAST division, on the one hand, and the parties to the comparable transactions, on the other hand.
 
Comparable Company Analysis
 
The comparable company analysis assessed how the public market values shares of similar publicly traded companies by comparing specific financial and operating data relating to US SEARCH and the FAST division with other publicly traded public records and database companies deemed comparable. The companies that Lehman Brothers deemed comparable to US SEARCH and the FAST division and used in the comparable company analysis were as follows:
 
ChoicePoint Inc.
 
Hoover’s, Inc.
The Dun & Bradstreet Corporation
 
InfoUSA Inc.
Edgar Online, Inc.
 
Kroll Inc.
Equifax Inc.
 
OneSource Information Services, Inc.
Factual Data Corp.
 
TALX Corporation
Harris Interactive Inc.
   
 
Lehman Brothers reviewed enterprise values of the selected public companies with multiples of estimated 2002 and 2003 revenue and EBITDA. All multiples were based on closing stock prices as of December 10, 2002. Estimated financial data for the selected companies was based on publicly available securities analysts’ estimates. Lehman Brothers applied a range of selected multiples for the selected comparable companies to the corresponding financial data of US SEARCH and the FAST division. Estimated financial data for US SEARCH and the FAST division was based on both the management projections and adjusted projections for both companies. This analysis indicated an implied equity value reference range for US SEARCH of approximately $49 million to $64 million and an implied equity value reference range for the FAST division of approximately $215 million to $265 million. Lehman Brothers compared the equity value reference ranges for US SEARCH and the FAST division and derived an implied US SEARCH ownership percentage in First Advantage of 16% to 23%. The percentage ownership of US SEARCH in First Advantage of 20% implied by the exchange ratio in the proposed transaction fell within this range.
 
However, because of the inherent differences between the business, operations and prospects of US SEARCH, the FAST division and the business, operations and prospects of the companies included in the comparable companies, Lehman Brothers believed that it was inappropriate to and therefore did not rely solely on the quantitative results of the comparable company analysis. Accordingly, Lehman Brothers also made qualitative judgments concerning differences between the financial and operating characteristics and prospects of US SEARCH, the FAST division and the companies included in the comparable company analysis that would affect the public trading values of each.
 
Discounted Cash Flow Analysis
 
The discounted cash flow analysis provided a net present valuation of projections of the after-tax cash flows (defined as operating cash flow available after working capital, capital spending, tax and other operating requirements) based on the respective projections prepared by the managements of US SEARCH and the FAST division, as well as the more conservative adjusted projections. Utilizing such valuations, Lehman Brothers then compared the equity value reference ranges for US SEARCH and the FAST division derived from these models, and arrived at an implied relative percentage ownership in First Advantage.

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US Search.    Lehman Brothers estimated the present value of the stand-alone, unlevered, after-tax free cash flows that US SEARCH could produce over the fiscal years 2003 through 2012 based on two operating scenarios. The first scenario was based on projections provided by US SEARCH management for fiscal years 2003 through 2006. The second scenario used the more conservative adjusted projections. Lehman Brothers also estimated a range of terminal values as of 2012 calculated based on assumed annual free cash flow growth rates in perpetuity beyond 2012 in the range of 4% to 6%. The free cash flows for 2003 through 2012, as well as the estimated terminal values, were then discounted to present values using a discount rate range of 23% to 27%, which is based on US SEARCH’s estimated weighted average cost of capital. This analysis indicated an overall equity value reference range of $101 million to $134 million based on the management projections, and $55 million to $71 million based on the adjusted projections.
 
The FAST division.    Lehman Brothers estimated the present value of the stand-alone, unlevered, after-tax free cash flows that the FAST division could produce over the fiscal years 2003 through 2012 based on two operating scenarios. The first scenario was based on projections provided by management of the FAST division for fiscal years 2003 through 2005. The second scenario used the more conservative adjusted projections. Lehman Brothers also estimated a range of terminal values as of 2012 calculated based on assumed annual free cash flow growth rates in perpetuity beyond 2012 in the range of 4% to 6%. The free cash flows for 2003 through 2012, as well as the estimated terminal values, were then discounted to present values using a discount rate range of 13% to 15%, which is based on the weighted average cost of capital of companies that Lehman Brothers deemed comparable to the FAST division. This analysis indicated an overall equity value reference range of $246 million to $351 million based on the management projections, and $198 million to $280 million based on the adjusted projections.
 
Summary.    Lehman Brothers compared the equity value reference ranges for US SEARCH and the FAST division in order to arrive at an implied relative percentage ownership in First Advantage. Based on a comparison of the management projections for both companies, the implied relative percentage ownership range for US SEARCH was 22% to 35%. Based on a comparison of the adjusted projections for both companies, the implied relative percentage ownership range for US SEARCH was 16% to 27%. The percentage ownership of US SEARCH in First Advantage of 20% implied by the exchange ratio in the proposed transaction fell below the range of implied ownership based on the management projections, and within the range of implied ownership based on the adjusted projections.
 
Contribution Analysis
 
The contribution analysis analyzed the relative contributions of US SEARCH and the FAST division to First Advantage based on latest twelve months revenue and EBITDA, and estimated fiscal year 2002 and 2003 revenue and EBITDA. Using the relative contributions derived in the contribution analysis, Lehman Brothers then developed the implied ownership percentages shown below by adjusting for the net debt of US SEARCH and the FAST division. Lehman Brothers used the management and adjusted projections for both US SEARCH and the FAST division in performing the contribution analysis. The results of this analysis are shown below.
 
      
Relative Contribution
Percentage

      
Implied Ownership
Percentage

 
      
US SEARCH

    
FAST
division

      
US SEARCH

    
FAST
divison

 
Last Twelve Months Revenue
    
19
 %
  
81
%
    
18
%
  
82
%
2002E Revenue
    
20
 %
  
80
%
    
19
%
  
81
%
2003E Revenue—management projections
    
24
 %
  
76
%
    
23
%
  
77
%
2003E Revenue—adjusted projections
    
23
 %
  
77
%
    
22
%
  
78
%
Last Twelve Months Pro Forma EBITDA
    
(65
)%
  
165
%
    
 
  
 
2002E Pro Forma EBITDA
    
(22
)%
  
122
%
    
 
  
 
2003E EBITDA—management projections
    
21
 %
  
79
%
    
20
%
  
80
%
2003E EBITDA—adjusted projections
    
18
 %
  
82
%
    
17
%
  
83
%

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Based on the contribution analysis shown above, Lehman Brothers concluded that the implied ownership percentage for US SEARCH in First Advantage was in the range of 17% to 23%. The percentage ownership of US SEARCH in First Advantage of 20% implied by the exchange ratio in the proposed transaction fell within this range.
 
Implied Premium Analysis
 
Assuming a range of potential trading values for First Advantage, Lehman Brothers calculated the implied premium delivered to US SEARCH stockholders based on the agreed upon US SEARCH ownership percentage in First Advantage of approximately 20%. The following table outlines the implied premium to the US SEARCH share price over various time periods ending December 10, 2002 assuming an illustrative First Advantage market value range of $275 to $425 million.
 
    
First Advantage Illustrative
Market Value ($mil)

 
    
$275

    
$325

    
$375

    
$425

 
Implied Premium to closing share price as of 12/10/02
  
5.0
%
  
23.2
%
  
41.4
%
  
59.5
%
Implied Premium to 10 day average closing price
  
8.0
%
  
27.8
%
  
47.6
%
  
67.4
%
Implied Premium to 30 day average closing price
  
35.0
%
  
59.8
%
  
84.5
%
  
109.3
%
 
Lehman Brothers noted that as a result of the volatility and limited liquidity of US SEARCH’s share price, it was more appropriate to analyze the premium based on longer term average closing share prices, such as the 30 day average closing price premiums shown above. Lehman Brothers then compared the implied premiums shown above to the premiums paid over the stock price for 10 precedent transactions in the business services sector and 17 precedent transactions in the software sector since May of 2000 with transaction values below $300 million. These premiums are shown below.
 
    
Low

    
Mean

      
Median

    
High

 
Business Services
                             
Premium to share price 1 week before announcement
  
8.4
 %
  
74.3
%
    
71.3
%
  
147.3
%
Premium to share price 1 month before announcement
  
(6.2
)%
  
49.1
%
    
56.7
%
  
94.3
%
Software
                             
Premium to share price 1 week before announcement
  
(47.5
)%
  
42.2
%
    
40.3
%
  
109.3
%
Premium to share price 1 month before announcement
  
(61.3
)%
  
51.4
%
    
51.3
%
  
117.8
%
 
Lehman Brothers is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. US SEARCH’s board of directors selected Lehman Brothers because of its expertise, reputation, and familiarity with the business services sector and because its investment banking professionals have substantial experience in transactions comparable to the mergers.
 
As compensation for its services in connection with the mergers, US SEARCH has agreed to pay Lehman Brothers a fee of $1.3 million, all of which is contingent on the consummation of the mergers. In addition, US SEARCH has agreed to reimburse Lehman Brothers for reasonable out-of-pocket expenses incurred in connection with the mergers and to indemnify Lehman Brothers for certain liabilities that may arise out of its engagement by US SEARCH and the rendering of the Lehman Brothers opinion. In addition, with the consent of the board of directors of US SEARCH, a separate team within Lehman Brothers is also acting as financial advisor to First American in connection with the mergers. Lehman Brothers will be paid a separate fee of $1.0 million for such services, which also is contingent upon consummation of the mergers.

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In the ordinary course of its business, Lehman Brothers may trade in the equity securities of US SEARCH and First American for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.
 
Structure of the Mergers
 
The merger agreement provides for the merger of Stockholm Seven Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, with and into US SEARCH. As a result of this merger, US SEARCH will become a wholly-owned subsidiary of First Advantage.
 
The merger agreement also provides that the following mergers will occur immediately before the merger of Stockholm Seven Merger Corp. with and into US SEARCH:
 
 
 
Stockholm One Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into SafeRent, Inc., a wholly-owned subsidiary of First American. As a result of this merger, SafeRent will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Two Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into Employee Health Programs, Inc., a wholly-owned subsidiary of First American. As a result of this merger, Employee Health Programs will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Three Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into Substance Abuse Management, Inc., a wholly-owned subsidiary of First American. As a result of this merger, Substance Abuse Management will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Four Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into HireCheck, Inc., a wholly-owned subsidiary of First American. As a result of this merger, HireCheck will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Five Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into American Driving Records, Inc., a wholly-owned subsidiary of First American. As a result of this merger, American Driving Records will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Six Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into First American Registry, Inc., a wholly-owned subsidiary of First American. As a result of this merger, First American Registry will become a wholly-owned subsidiary of First Advantage.
 
First American also has agreed to contribute First American Indian Holdings LLC to First Advantage as part of the transaction.
 
Consideration to be Received by US SEARCH Stockholders in the Mergers
 
At the completion of the mergers, each share of US SEARCH common stock other than treasury stock or shares of common stock held by First American or any of its subsidiaries will be converted into the right to receive 0.04 of a share of First Advantage Class A common stock.

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No fraction of a share of First Advantage Class A common stock will be issued. In lieu of fractional shares, each holder of US SEARCH common stock who would otherwise be entitled to receive a fraction of a share of First Advantage Class A common stock will receive from First Advantage, subject to any withholdings required by applicable law, an amount of cash rounded to the nearest whole cent. The amount of cash received will be equal to the product of:
 
 
 
such fraction of a share; and
 
 
 
the average closing price of a share of US SEARCH common stock, as quoted on the Nasdaq National Market (or, if no longer quoted on the Nasdaq National Market or the then principal exchange or market for US SEARCH’s common stock), for the ten trading days ending on the trading day that is three trading days before the date of US SEARCH’s stockholders meeting.
 
Consideration to be Received by First American in the Mergers
 
At the completion of the mergers, First American will receive shares of First Advantage Class B common stock representing approximately 80% of the outstanding capital stock of First Advantage. However, if US SEARCH’s indebtedness exceeds $4.4 million at the closing of the mergers (less any cash received by US SEARCH from the exercise of US SEARCH warrants or stock options between signing the merger agreement and closing), First American will be entitled to receive additional shares of First Advantage Class B common stock. The number of additional shares of First Advantage Class B common stock that would be issuable to First American in such event will be equal to four times the amount by which US SEARCH’s indebtedness exceeds $4.4 million (less any cash received by US SEARCH from the exercise of US SEARCH warrants or stock options) divided by the average trading price of First Advantage Class A common stock over the first 10 trading days after closing. Also, First American will be entitled to receive additional shares of First Advantage Class B common stock if, after the closing of the mergers, First Advantage is required to issue shares of First Advantage Class A common stock to settle payment obligations of US SEARCH under the agreement pursuant to which US SEARCH previously acquired Professional Screening Resources. The number of additional shares of First Advantage Class B common stock that would be issued to First American in respect of any such settlement will be equal to the lesser of 48,000 or four times the number of First Advantage Class A common shares issued to settle such obligations.
 
Effect on US SEARCH Stock Options and Warrants
 
All outstanding stock options, stock appreciation rights, limited stock appreciation rights and stock purchase rights of US SEARCH will be assumed by First Advantage and converted automatically into options to purchase shares of First Advantage Class A common stock calculated in accordance with the exchange ratio, rounded down to the nearest whole share. The exercise price will be equal to the exercise price per share of US SEARCH common stock divided by the exchange ratio, rounded down to the nearest whole cent. The outstanding stock options, stock appreciation rights, limited stock appreciation rights and stock purchase rights of US SEARCH will otherwise continue to be exercisable and vest subject to the terms and conditions applicable to them before the mergers. However, the vesting provisions applicable to all outstanding stock options issued to US SEARCH employees and directors pursuant to the US SEARCH Amended and Restated 1998 Stock Incentive Plan provide that all such options will accelerate and be fully vested upon the occurrence of the mergers in accordance with the terms of such plan.
 
Each warrant to purchase a share or shares of US SEARCH common stock outstanding before the mergers will become a warrant entitling the holder to purchase the number of shares of First Advantage Class A common stock such holder would have received pursuant to the merger agreement had such holder exercised such warrant immediately before the mergers, rounded up to the nearest whole share of First Advantage Class A common stock. First Advantage will assume all obligations of US SEARCH with respect to these warrants. Otherwise, each US SEARCH warrant will be subject to the same terms and conditions applicable to it before the mergers.

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Interests of Certain Persons in the Mergers
 
In considering the recommendation of the US SEARCH board of directors that US SEARCH stockholders vote to adopt the merger agreement and to consummate the mergers, US SEARCH stockholders should be aware that a number of officers and directors of US SEARCH have interests in the mergers that are different from or in addition to the interests of US SEARCH stockholders generally. The US SEARCH board of directors was aware of and considered these interests when it considered and approved the merger agreement.
 
Employment Agreements
 
Brent Cohen’s current employment agreement with US SEARCH provides severance benefits if Mr. Cohen’s employment is terminated other than for “cause,” if Mr. Cohen resigns for “good reason” or if Mr. Cohen does not enter into a new employment agreement with First Advantage within seven days of the effectiveness of the mergers. Under the employment agreement, upon the occurrence of any such events, Mr. Cohen would be entitled to:
 
 
 
base salary, which currently is $400,000 per year, and benefits for one year;
 
 
 
a bonus equal to 100% of base salary;
 
 
 
medical insurance coverage for a period of one year after the effective date of the termination, or until Mr. Cohen receives medical insurance coverage from another employer, whichever occurs first; and
 
 
 
the accelerated vesting of stock options, and a period of one year to exercise all stock options.
 
In connection with the mergers, it is expected that Mr. Cohen, H. Jake Mendelsohn and David Wachtel, all executive officers of US SEARCH, will enter into new employment agreements with First Advantage, although the terms of such agreements have not yet been determined.
 
Accelerated Vesting of Options
 
Certain outstanding stock options issued to US SEARCH directors and employees that have written agreements will accelerate and be fully vested upon consummating the mergers in accordance with the terms of the US SEARCH Amended and Restated 1998 Stock Incentive Plan. Set forth below is a list of directors and executive officers of US SEARCH and the number of shares underlying options held by each such person that were unvested as of December 13, 2002, but will become vested upon consummating the mergers:
 
Option Holder

    
Number of
Shares Underlying Options Subject to Acceleration

Harry B. Chandler
    
26,667
Brent Cohen
    
4,143,337
Richard Heitzmann
    
1,125,000
Peter Locke
    
25,000
Alan C. Mendelson
    
25,000
H. Jake Mendelsohn
    
837,502
Thomas W. Patterson
    
81,217
Karol Pollock
    
120,535
Robert Schwartz
    
593,753
David Wachtel
    
847,502
Jeffrey R. Watts
    
1,250,000
 

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Persons Designated to be Directors of First Advantage
 
Pursuant to the stockholders agreement among First Advantage, First American and Pequot Private Equity Fund II, L.P., Pequot Private Equity Fund II, L.P. will have the right to designate a director to First Advantage’s board of directors. Pequot Private Equity Fund II, L.P.’s initial designee will be Lawrence D. Lenihan, Jr., who currently serves as a director of US SEARCH. See “OTHER AGREEMENTS—Stockholders Agreement” on page 55 for more information on the stockholders agreement. Mr. Lenihan is also a managing director of Pequot Capital Management, Inc., an affiliate of Pequot Private Equity Fund II, L.P. Brent Cohen, who also serves as a director of US SEARCH, also is expected to be a director of First Advantage.
 
Indemnification and Insurance
 
Subject to any limitation imposed from time to time under applicable law, First Advantage will indemnify and hold harmless the present and former officers, directors, employees and agents of US SEARCH and its subsidiaries in respect of acts or omissions occurring on or before the effective time of the mergers. Indemnification will be provided to the extent provided under US SEARCH’s certificate of incorporation and bylaws or any indemnification agreement with US SEARCH’s and its subsidiaries’ officers and directors to which US SEARCH or its subsidiaries is a party that is in effect on the date of the merger agreement.
 
For six years after the effective time of the mergers, First Advantage will use its reasonable best efforts to procure officers’ and directors’ liability insurance in respect of acts or omissions occurring on or before the effective time of the mergers covering each of the present and former officers, directors, employees and agents of US SEARCH and its subsidiaries currently covered by US SEARCH’s or its subsidiaries’ officers’ and directors’ liability insurance policy on terms substantially similar to those of such policy in effect on the date of the merger agreement. However, First American will not be required to cause First Advantage to maintain insurance with respect to a specific officer or director if the premium for obtaining the insurance exceeds 200% of the amount per annum US SEARCH paid in its current fiscal year. If First Advantage is unable to obtain the required insurance, it will obtain as much comparable insurance as possible for an annual premium equal to 200% of the amount per annum US SEARCH paid in its current fiscal year and will permit any such party entitled to insurance to pay the excess amount that may be necessary to maintain such insurance coverage.
 
Other Arrangements
 
Alan C. Mendelson, one of US SEARCH’s directors, also is a partner at Latham & Watkins LLP, US SEARCH’s outside legal counsel with respect to the mergers and other general corporate matters.
 
Accounting Treatment
 
First Advantage will account for the mergers under the purchase method of accounting for business combinations under United States generally accepted accounting principles.
 
Material United States Federal Income Tax Consequences
 
The following is a general summary of the material U.S. federal income tax considerations of the mergers to United States holders (as defined below) of US SEARCH common stock. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, Treasury Regulations promulgated under the Internal Revenue Code, administrative rulings and judicial decisions in effect on the date of this proxy statement/prospectus. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. This summary does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction.

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For purposes of this discussion, we use the term “United States holder” to mean:
 
 
 
a citizen or resident of the United States;
 
 
 
a corporation, partnership or other entity created or organized under the laws of the United States or any of its political subdivisions;
 
 
 
a trust that (x) is subject to the supervision of a court within the United States and the control of one or more United States persons or (y) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person; or
 
 
 
an estate that is subject to U.S. federal income tax on its income regardless of its source.
 
This discussion assumes that you hold your shares of US SEARCH common stock as a capital asset, and this discussion does not address all of the U.S. federal income tax consequences that may be relevant to you in light of your particular circumstances. In addition, it does not present a description of the U.S. federal income tax laws applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:
 
 
 
a financial institution;
 
 
 
a tax-exempt organization;
 
 
 
an S corporation or other pass-through entity;
 
 
 
an insurance company;
 
 
 
a mutual fund;
 
 
 
a dealer in securities or foreign currencies;
 
 
 
a foreign holder;
 
 
 
a person whose functional currency is not the U.S. dollar;
 
 
 
a trader in securities that elects the mark-to-market method of accounting for your securities;
 
 
 
a holder of US SEARCH common stock who received your US SEARCH common stock through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan; or
 
 
 
a holder of US SEARCH common stock who holds US SEARCH common stock as part of a hedge, straddle, or other risk reduction strategy or as part of a constructive sale or conversion transaction.
 
No ruling has been or will be sought from the Internal Revenue Service as to the U.S. federal income tax consequences of the mergers, and the following summary is not binding on the Internal Revenue Service.
 
Tax Consequences of the Mergers
 
Completion of the mergers is conditioned upon, among other things, the receipt by US SEARCH of a tax opinion from Latham & Watkins LLP dated as of the closing date, that the merger of Stockholm Seven Merger Corp. with and into US SEARCH qualifies as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. The condition regarding the receipt of the opinion described in the preceding sentence will not be waived by US SEARCH after the receipt of US SEARCH stockholder approval unless further stockholder approval is obtained with appropriate disclosure. The opinion will be based on customary factual assumptions and factual representations and on representation letters provided by US SEARCH, First Advantage and certain of its subsidiaries to be delivered at the time of closing, all of which must continue to be true and accurate in all respects as of the closing. In addition, the opinion will assume that the mergers will be completed according to the terms of the merger agreement. An opinion of counsel represents counsel’s best legal judgment and is not binding on the Internal Revenue Service or any court.

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Tax Consequences if Each of the Mergers Qualifies as a Reorganization
 
Assuming that each of the mergers qualifies as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and subject to the qualifications and assumptions described above, the material U.S. federal income tax consequences of the mergers are as follows:
 
 
 
US SEARCH will not recognize gain or loss in the mergers;
 
 
 
you will not recognize gain or loss when you exchange your US SEARCH common stock solely for First Advantage Class A common stock in the mergers, except for gain or loss resulting from cash that you receive instead of a fractional share of First Advantage Class A common stock;
 
 
 
you will recognize capital gain or loss on any cash received instead of a fractional share of First Advantage Class A common stock equal to the difference between the amount of cash received and the portion of the tax basis of US SEARCH common stock allocated to that fractional share interest, and the gain or loss will constitute long-term capital gain or loss if your holding period in the US SEARCH common stock surrendered in the mergers is more than one year as of the date of the mergers;
 
 
 
the aggregate tax basis of the First Advantage Class A common stock you receive will be the same as your aggregate tax basis in the US SEARCH common stock you surrender in exchange, reduced by any tax basis allocable to any fractional share interest exchanged for cash;
 
 
 
the holding period of the First Advantage Class A common stock you receive will include the holding period of the US SEARCH common stock you surrender in exchange; and
 
 
 
you must retain records and file with your U.S. federal income tax returns a statement setting forth facts relating to the mergers.
 
Backup Withholding
 
If you are a noncorporate holder of US SEARCH common stock, you may be subject to backup withholding on any cash payments received instead of a fractional share interest in First Advantage Class A common stock. You will not be subject to backup withholding, however, if you:
 
 
 
furnish a correct taxpayer identification number and certify that you are not subject to backup withholding on the substitute Internal Revenue Service Form W-9 or successor form included in the letter of transmittal to be delivered to you following the completion of the mergers;
 
 
 
provide a certification of foreign status on Internal Revenue Service Form W-8BEN or a successor form; or
 
 
 
are otherwise exempt from backup withholding.
 
Any amounts withheld under the backup withholding rules are not an additional tax and may be allowed as a refund or credit against your U.S. federal income tax liability, provided you furnish the required information to the Internal Revenue Service.
 
Tax matters are very complicated, and the tax consequences of the mergers to you will depend on your particular tax situation. You are urged to consult your tax advisors regarding the specific tax consequences of the mergers, including tax return reporting requirements, the applicability of federal, state, local and foreign tax laws and the effect of any proposed change in the tax laws.
 
Stock Exchange Listings
 
It is a condition to the completion of the mergers that the First Advantage Class A common stock issuable to the US SEARCH stockholders pursuant to the merger agreement be approved for listing on the Nasdaq National Market, subject only to official notice of issuance. If the mergers are completed, the US SEARCH common stock

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will be delisted from the Nasdaq National Market and will be deregistered under the Securities Exchange Act of 1934, as amended.
 
Regulatory Matters
 
Under the Hart-Scott-Rodino Antitrust Improvements Act, we cannot complete the mergers until we have notified the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission of the mergers and filed the necessary report forms and until the required waiting period has ended. First American and US SEARCH submitted the required filings on January 13, 2003. The waiting period will expire on February 12, 2003 unless terminated earlier in accordance with our request.
 
Operations Following the Mergers
 
After the mergers, each of the companies comprising the FAST division and US SEARCH will be a wholly-owned subsidiary of First Advantage. First Advantage will be a holding company that operates through its subsidiaries in the following two segments:
 
 
 
Enterprise, which will offer motor vehicle reports, tenant screening services, employee background services and occupational health services to businesses, non-profit organizations and governmental agencies.
 
 
 
Consumer, which will offer location and verification services to consumers.
 
First Advantage will be headquartered in St. Petersburg, Florida.
 

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THE MERGER AGREEMENT
 
The following summary describes material provisions of the merger agreement, which is attached to this proxy statement/prospectus as Annex A and is incorporated by reference into this proxy statement/prospectus. This summary may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully in its entirety.
 
T erms of the Mergers
 
Structure of the Mergers
 
The merger agreement provides for the merger of Stockholm Seven Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, with and into US SEARCH. As a result of this merger, US SEARCH will become a wholly-owned subsidiary of First Advantage.
 
The merger agreement also provides that the following mergers will occur before the merger of Stockholm Seven Merger Corp. with and into US SEARCH:
 
 
 
Stockholm One Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into SafeRent, Inc., a wholly-owned subsidiary of First American. As a result of this merger, SafeRent will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Two Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into Employee Health Programs, Inc., a wholly-owned subsidiary of First American. As a result of this merger, Employee Health Programs will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Three Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into Substance Abuse Management, Inc., a wholly-owned subsidiary of First American. As a result of this merger, Substance Abuse Management will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Four Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into HireCheck, Inc., a wholly-owned subsidiary of First American. As a result of this merger, HireCheck will become a wholly-owned subsidiary of First Advantage.  
 
 
 
Stockholm Five Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into American Driving Records, Inc., a wholly-owned subsidiary of First American. As a result of this merger, American Driving Records will become a wholly-owned subsidiary of First Advantage.
 
 
 
Stockholm Six Merger Corp., a newly-formed, wholly-owned subsidiary of First Advantage, will merge with and into First American Registry, Inc., a wholly-owned subsidiary of First American. As a result of this merger, First American Registry will become a wholly-owned subsidiary of First Advantage.
 
First American has also agreed to contribute First American Indian Holdings LLC to First Advantage as part of the transaction.
 
Completion and Effectiveness of the Mergers
 
The closing of the mergers will occur as soon as practicable (and in any event within five business days) after the last of the conditions to completion of the mergers contained in the merger agreement are satisfied or waived unless the parties agree otherwise in writing (see the section entitled “THE MERGER AGREEMENT— Conditions to Completion of the Mergers” below). The mergers will become effective upon the filing of articles or certificates of merger for each of the mergers.

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We are working to complete the mergers quickly. We currently expect that the mergers will close in the second quarter of 2003. However, because completion of the mergers is subject to regulatory approvals and other conditions, we cannot predict the actual timing.
 
Merger Consideration
 
At the completion of the mergers, each share of US SEARCH common stock other than treasury stock or shares of common stock held by First American or any of its subsidiaries will be converted into the right to receive 0.04 of a share of First Advantage Class A common stock.
 
No fraction of a share of First Advantage Class A common stock will be issued. In lieu of fractional shares, each holder of US SEARCH common stock who would otherwise be entitled to receive a fraction of a share of First Advantage Class A common stock will receive from First Advantage, subject to any withholdings required by applicable law, an amount of cash rounded to the nearest whole cent. The amount of cash received will be equal to the product of:
 
 
 
such fraction of a share; and
 
 
 
the average closing price of a share of US SEARCH common stock, as quoted on the Nasdaq National Market (or, if no longer quoted on the Nasdaq National Market, the Nasdaq SmallCap Market or the then principal exchange or market for US SEARCH’s common stock), for the ten trading days ending on the trading day that is three trading days before the date of US SEARCH’s stockholders meeting.
 
The merger agreement provides that the exchange ratio used for determining the number of shares of First Advantage Class A common stock issuable to holders of US SEARCH common stock and underlying existing US SEARCH options and warrants will be adjusted proportionately to take into account any stock split, reverse stock split or other recapitalization of US SEARCH common stock.
 
Upon completion of the mergers, First American will receive shares of First Advantage Class B common stock representing approximately 80% of the capital stock of First Advantage. However, if US SEARCH’s indebtedness exceeds $4.4 million (less any cash received by US SEARCH from the exercise of US SEARCH warrants or stock options) at the closing, First American will be entitled to receive additional shares of First Advantage Class B common stock. The number of additional shares of First Advantage Class B common stock will be equal to four times the amount by which US SEARCH’s indebtedness exceeds $4.4 million (less any cash received by US SEARCH from the exercise of US SEARCH warrants or stock options) divided by the average trading price of First Advantage Class A common stock over the first 10 trading days after closing. Also, First American will be entitled to receive additional shares of First Advantage Class B common stock if, after the closing of the mergers, First Advantage is required to issue shares of First Advantage Class A common stock to settle payment obligations of US SEARCH under the agreement pursuant to which US SEARCH previously acquired Professional Screening Resources. The number of additional shares of First Advantage Class B common stock that will be issued to First American in respect of any such settlement will be equal to the lesser of 48,000 or four times the number of First Advantage Class A common shares issued to settle such obligations.
 
Fractional Shares
 
First Advantage will not issue any fractional shares of First Advantage Class A common stock in the merger with Stockholm Seven Merger Corp. Instead, each holder of US SEARCH common stock exchanged in the merger who would otherwise be entitled to receive a fraction of a share of First Advantage Class A common stock will receive cash, without interest, in lieu of a fractional share.

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Procedures for Exchange of US SEARCH Stock Certificates
 
Exchange of Certificates
 
Promptly following completion of the mergers, Wells Fargo Shareowner Services, the exchange agent for the mergers, will mail to each record holder of US SEARCH common stock a letter of transmittal and instructions for surrendering the record holder’s stock certificates in exchange for a certificate representing First Advantage Class A common stock. Only those holders of US SEARCH common stock who properly surrender their US SEARCH stock certificates in accordance with the exchange agent’s instructions will receive (a) a certificate representing First Advantage Class A common stock and (b) cash in lieu of any fractional share of First Advantage Class A common stock. After the effective time of the mergers, each certificate representing shares of US SEARCH common stock that has not been surrendered will represent only the right to receive upon surrender of that certificate each of the items listed in the preceding sentence. The surrendered certificates representing US SEARCH common stock will be cancelled. Following completion of the mergers, US SEARCH will not register any transfers of US SEARCH common stock outstanding on its stock transfer books before the mergers.
 
Holders of US SEARCH common stock should not send in their US SEARCH stock certificates until they receive a letter of transmittal from the exchange agent, with instructions for the surrender of US SEARCH stock certificates.
 
Lost Stock Certificates
 
First Advantage only will issue (a) a First Advantage stock certificate and (b) cash in lieu of a fractional share in a name other than the name in which a surrendered US SEARCH stock certificate is registered if the person requesting such exchange presents to the exchange agent all documents required by the exchange agent to show and effect the unrecorded transfer of ownership and to show that such person paid any applicable stock transfer taxes. If a US SEARCH stock certificate is lost, stolen or destroyed, the holder of such certificate may need to execute an affidavit or post a bond before receiving each of the items listed in the preceding sentence.
 
Treatment of Stock Options and Warrants
 
All outstanding stock options, stock appreciation rights, limited stock appreciation rights and stock purchase rights of US SEARCH will be assumed by First Advantage and converted automatically into options to purchase shares of First Advantage Class A common stock calculated in accordance with the exchange ratio, rounded down to the nearest whole share. The exercise price will be equal to the exercise price per share of US SEARCH common stock divided by the exchange ratio, rounded down to the nearest whole cent. The outstanding stock options, stock appreciation rights, limited stock appreciation rights and stock purchase rights of US SEARCH will otherwise continue to be exercisable and vest subject to the terms and conditions applicable to them before the mergers. However, the vesting provisions applicable to all outstanding stock options issued to US SEARCH employees and directors pursuant to the US SEARCH Amended and Restated 1998 Stock Incentive Plan provide that all such options will accelerate and be fully vested upon the occurrence of the mergers in accordance with the terms of such plan.
 
Each warrant to purchase a share or shares of US SEARCH common stock outstanding before the mergers will become a warrant entitling the holder to purchase the number of shares of First Advantage Class A common stock such holder would have received pursuant to the merger agreement had such holder exercised such warrant immediately before the mergers, rounded up to the nearest whole share of First Advantage Class A common stock and the nearest whole warrant. First Advantage will assume all obligations of US SEARCH with respect to these warrants. Otherwise, each US SEARCH warrant will be subject to the same terms and conditions applicable to it before the mergers.

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Representations and Warranties
 
The merger agreement contains customary representations and warranties of First American and US SEARCH relating to, among other things:
 
 
 
corporate existence and good standing;
 
 
 
corporate authority;
 
 
 
capital structure;
 
 
 
subsidiaries;
 
 
 
financial statements;
 
 
 
charter documents and corporate books and records;
 
 
 
real property, title to properties and encumbrances on those properties;
 
 
 
leases;
 
 
 
validity and absence of breaches of material contracts;
 
 
 
litigation;
 
 
 
taxes;
 
 
 
insurance;
 
 
 
intellectual property;
 
 
 
required permits and compliance with laws;
 
 
 
absence of conflicts and required filings and consents;
 
 
 
labor and other employment matters;
 
 
 
employee benefit plans;
 
 
 
absence of certain interests in clients, suppliers and others;
 
 
 
absence of certain changes or events since September 30, 2002;
 
 
 
compliance with regulatory laws;
 
 
 
stockholder vote (or, in the case of First American, no stockholder vote) required to complete the mergers;
 
 
 
approval of board of directors;
 
 
 
broker’s or finder’s fees; and
 
 
 
ownership of the assets of the business.
 
The merger agreement also contains representations and warranties by US SEARCH regarding the following matters:
 
 
 
tax matters pertaining to consolidated returns filed by the Kushner-Locke Company in which US SEARCH was included;
 
 
 
SEC filings; and
 
 
 
US SEARCH’s receipt of the opinion of Lehman Brothers.
 
The merger agreement also contains additional representations and warranties of First Advantage relating to the ownership and activities of Stockholm One Merger Corp., Stockholm Two Merger Corp., Stockholm Three

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Merger Corp., Stockholm Four Merger Corp., Stockholm Five Merger Corp., Stockholm Six Merger Corp. and Stockholm Seven Merger Corp. and the authorization of First Advantage and the acquisition companies to consummate the mergers.
 
The representations and warranties contained in the merger agreement are subject to materiality qualifications in many respects, and expire at the completion of the mergers.
 
Conduct of Business Before Mergers
 
Introduction
 
US SEARCH and the FAST division have agreed to restrictions on their respective activities until either the completion of the mergers or the termination of the merger agreement. In general, US SEARCH is restricted from taking a number of actions outside the ordinary course of business. The FAST division is also restricted from taking certain actions.
 
Restrictions on US SEARCH’s Interim Operations
 
US SEARCH has agreed that it will:
 
 
 
conduct its operations only according to the ordinary and usual course of business;
 
 
 
accurately maintain its books and records in the manner required by applicable law;
 
 
 
maintain its accounting and other financial records in accordance with applicable accounting requirements, published rules and regulations of the SEC with respect thereto and GAAP;
 
 
 
use reasonable efforts to preserve intact its business organizations, keep available the services of its officers and employees and maintain existing relationships with licensors, suppliers, distributors, customers, landlords, employees, agents and others having business relationships with them;
 
 
 
confer with First American concerning operational matters of a material nature, including the cancellation or waiver of any claim or right in excess of $50,000; and
 
 
 
report periodically to First American concerning its business, operations and finances.
 
In addition, subject to specified exceptions, US SEARCH has agreed that it will:
 
 
 
refrain from amending or modifying its or its subsidiaries’ certificate of incorporation and bylaws;
 
 
 
refrain from paying any bonuses other than bonuses in the ordinary course of business;
 
 
 
refrain from increasing any salaries or other compensation and entering into any employment, severance or similar agreement with any director, officer or employee;
 
 
 
refrain from adopting, amending or increasing any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan outside the ordinary course of business;
 
 
 
refrain from entering into any contract or commitment except contracts and commitments in the ordinary course of business;
 
 
 
refrain from increasing its indebtedness for borrowed money;
 
 
 
refrain from canceling or waiving any claim or right of substantial value which individually or in the aggregate is material;
 
 
 
refrain from declaring or paying any dividends or redeeming, purchasing or otherwise acquiring any of its securities;

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refrain from making any material change in accounting methods or practices, except as required by law, the SEC or GAAP;
 
 
 
refrain from selling capital stock or other securities, or re-pricing any existing options, warrants or rights to purchase capital stock;
 
 
 
refrain from selling, leasing or otherwise disposing of any asset or property other than in the ordinary course of business;
 
 
 
refrain from making any capital expenditure, except in the ordinary course of business;
 
 
 
refrain from writing off as uncollectible any notes or accounts receivable, except write-offs in the ordinary course of business;
 
 
 
refrain from taking any action that could reasonably be expected to result in any of the representations and warranties of US SEARCH set forth in merger agreement becoming untrue or, any of the conditions to the mergers not being satisfied;
 
 
 
use reasonable best efforts to refrain from taking actions outside the ordinary course of business that would reasonably be expected to delay the filing of this proxy statement/prospectus or require an amendment thereof or delay the effectiveness of the registration statement of which this proxy statement/prospectus is a part or require a post-effective amendment to such registration statement; and
 
 
 
refrain from agreeing to do any of the foregoing.
 
Restrictions on the Fast Division’s Interim Operations
 
First American has agreed that it will cause the FAST division to:
 
 
 
maintain its accounting and other financial records in accordance with applicable accounting requirements, published rules of the SEC and GAAP;
 
 
 
collect its receivables and pay its payables in the ordinary course of business; and
 
 
 
use reasonable efforts to preserve intact its business organizations, keep available the services of its officers and employees and maintain existing relationships with licensors, suppliers, distributors, customers, landlords, employees, agents and others having business relationships with them.
 
In addition, subject to certain exceptions, First American has agreed that it will cause the FAST division to:
 
 
 
refrain from amending or modifying its articles or certificates of incorporation and bylaws;
 
 
 
refrain from making any material change in accounting methods or practices, except as required by law, the SEC or GAAP;
 
 
 
refrain from selling any securities;
 
 
 
refrain from taking any action that could reasonably be expected to result in any of the representations and warranties of First American set forth in the merger agreement becoming untrue or any of the conditions to the mergers not being satisfied;
 
 
 
use reasonable best efforts to refrain from taking actions outside the ordinary course of business that would reasonably be expected to delay the filing of this proxy statement/prospectus or require an amendment thereof or delay the effectiveness of the registration statement of which this proxy statement/prospectus is a part or require a post-effective amendment to such registration statement; and
 
 
 
refrain from agreeing to do any of the foregoing.

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Prohibition from Soliciting Other Offers
 
US SEARCH has agreed to furnish a copy of this proxy statement/prospectus to each of its stockholders as promptly as practicable after the registration statement of which it is a part has become effective with the SEC, and thereafter promptly to call, hold and convene a special meeting of its stockholders. US SEARCH has also agreed to use its reasonable best efforts to obtain the required stockholder approval for the mergers.
 
Under the terms of the merger agreement, subject to specific exceptions described below, US SEARCH has agreed that neither it nor any of its subsidiaries will, and that it will not authorize or permit any of its officers, directors or employees, or any financial advisor, attorney, accountant or other advisor or representative retained by it or its subsidiaries, to solicit, initiate, knowingly encourage or facilitate the submission of proposals or offers relating to a takeover proposal or endorse or enter into any agreement with respect to any takeover proposal.
 
A “takeover proposal” means:
 
 
 
any tender or exchange offer, or proposal, other than a proposal by First American or any of its affiliates, for a merger, share exchange or other business combination involving US SEARCH or any of its subsidiaries; or
 
 
 
any proposal or offer to acquire in any manner a substantial equity interest in US SEARCH or any of its subsidiaries or a substantial portion of the assets of US SEARCH or any of its subsidiaries.
 
Under the merger agreement, US SEARCH must promptly advise First American orally and in writing of any takeover proposal or any inquiries or discussions with respect to a takeover proposal and will within two days of receipt, furnish to First American a copy of any written takeover proposal or a written summary of the material terms of any oral takeover proposal.
 
Neither the board of directors of US SEARCH nor any committee of the board will:
 
 
 
withdraw or modify, or propose to withdraw or modify, in a manner adverse to First American, its approval or recommendation of the mergers or the merger agreement; or
 
 
 
approve or recommend, or propose to approve or recommend, any takeover proposal or any other acquisition of outstanding US SEARCH common stock other than pursuant to the mergers or the merger agreement.
 
Notwithstanding the restrictions contained in the merger agreement, US SEARCH may take the following actions, but only to the extent that the board of directors of US SEARCH concludes in good faith after consulting with its outside legal counsel and financial advisor that the failure to take such action would be inconsistent with the discharge of its fiduciary duties:
 
 
 
furnish information pursuant to appropriate terms of confidentiality concerning US SEARCH and its business, properties or assets to a person who has indicated an interest in making a takeover proposal, without any solicitation by US SEARCH or any of its subsidiaries or representatives after the date of the merger agreement;
 
 
 
engage in discussions or negotiations with an unsolicited person;
 
 
 
following receipt of a takeover proposal from an unsolicited person, take and disclose to its stockholders a position contemplated by Rule 14e-2(a) under the Securities Exchange Act of 1934 or otherwise make disclosure to its stockholders;
 
 
 
following receipt of a takeover proposal from an unsolicited person, fail to make or withdraw or modify its recommendation or declaration of advisability of the mergers or adoption of the merger agreement, and to the extent it does so, refrain from calling, providing notice of or hold the meeting of

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its stockholders to approve the mergers and to adopt the merger agreement and from soliciting proxies or consents to secure the vote of its stockholders to adopt the merger agreement; or
 
 
 
waive the provisions of any confidentiality or standstill agreement.
 
In addition, US SEARCH may:
 
 
 
take any action required to be taken by any non-appealable, final order of a court of competent jurisdiction; or
 
 
 
make any disclosure or filing required by applicable law, stock exchange rules or the rules, regulations or order of any governmental entity.
 
Additional Covenants
 
First Advantage Cash Balances
 
First American will contribute to First Advantage immediately before the closing of the mergers $15.0 million, less:
 
 
 
fees and expenses of First American related to the mergers;
 
 
 
the aggregate amount of the consolidated cash balances of the companies comprising the FAST division that will remain following the closing; and
 
 
 
the amount of the total outstanding principal balance, and all accrued interest thereon, due by US SEARCH to First American under the $1.4 million promissory note.
 
FAST Division Acquisition Agreements
 
In the event that First American or any of its affiliates is permitted to reduce or offset against any payment obligation to third parties arising from or relating to any of the agreements by which First American or its affiliates acquired the companies that comprise the FAST division and their subsidiaries from any third parties, First American or its affiliates will contribute an amount of cash equal to such reduction or offset to First Advantage at the time First American or its affiliates recognize such reduction or offset.
 
Indemnification and Insurance
 
Subject to any limitation imposed from time to time under applicable law, First Advantage will indemnify and hold harmless the present and former officers, directors, employees and agents of US SEARCH and its subsidiaries in respect of acts or omissions occurring on or before the effective time of the mergers. Indemnification will be provided to the extent provided under US SEARCH’s certificate of incorporation and bylaws or any indemnification agreement with US SEARCH’s and its subsidiaries’ officers and directors to which US SEARCH or its subsidiaries is a party, in each case in effect on the date of the merger agreement.
 
For six years after the effective time of the mergers, First Advantage will use its reasonable best efforts to procure officers’ and directors’ liability insurance in respect of acts or omissions occurring on or before the effective time of the mergers covering each of the present and former officers, directors, employees and agents of US SEARCH and its subsidiaries currently covered by US SEARCH’s or its subsidiaries’ officers’ and directors’ liability insurance policy on terms substantially similar to those of such policy in effect on the date of the merger agreement. However, First American will not be required to cause First Advantage to maintain insurance with respect to a specific officer or director if the premium for obtaining the insurance exceeds 200% of the amount per annum US SEARCH paid in its current fiscal year. If First Advantage is unable to obtain the required insurance, it will obtain as much comparable insurance as possible for an annual premium equal to 200% of the amount per annum US SEARCH paid in its current fiscal year and will permit any such party entitled to insurance to pay the excess amount that may be necessary to maintain such insurance coverage.

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Conditions to Completion of the Mergers
 
The obligations of US SEARCH and First American to complete the mergers are subject to the satisfaction or waiver, if legally permissible, of the following conditions:
 
 
 
the US SEARCH stockholders have approved the merger agreement and the mergers;
 
 
 
the SEC has declared effective the registration statement of which this proxy statement/prospectus is a part;
 
 
 
no stop order suspending the effectiveness of the registration statement or any part thereof has been issued by the SEC and no proceeding for that purpose, and no similar proceeding in respect of this proxy statement/prospectus, has been initiated or threatened by the SEC;
 
 
 
all requests for additional information on the part of the SEC have been complied with;
 
 
 
the First Advantage Class A common stock has been listed for quotation on the Nasdaq National Market, subject only to official notice of issuance;
 
 
 
no temporary, preliminary or permanent injunction or other order issued by a court or other government body or by any public authority to restrain or prohibit or restraining or prohibiting the mergers shall be in effect;
 
 
 
any waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the mergers has expired or been terminated;
 
 
 
no statute, rule, regulation, executive order, decree or order of any kind has been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits the mergers; and
 
 
 
all governmental and other consents and approvals have been received.
 
In addition, the obligations of First American to complete the mergers are subject to the satisfaction or waiver, if legally permissible, of the following conditions:
 
 
 
the representations and warranties of US SEARCH contained in the merger agreement are true and accurate, or, in certain cases, true and accurate in all material respects, as of the date of the merger agreement and as of the closing date;
 
 
 
all of the agreements of US SEARCH to be performed before the closing have been performed in all material respects;
 
 
 
the Chief Executive Officer of US SEARCH has delivered to First American a compliance certificate with certain attachments certifying to US SEARCH’s good standing, qualification to do business, tax status and similar matters;
 
 
 
no law, regulation, interpretation, opinion, order, judgment or decree of any kind (including any privacy, data protection, publicity, advertising or similar federal, state or local law) has been enacted, entered, promulgated, issued, amended or enforced by any court or governmental entity, and no change has occurred, which would reasonably be expected to materially and adversely affect the business, operations, assets, liabilities, financial condition or results of operations of US SEARCH and its subsidiaries, taken as a whole. The exception is any such law, regulation, interpretation, opinion, order, judgment or decree that would affect the United States economy generally without disproportionately affecting the industries in which US SEARCH and its subsidiaries compete;
 
 
 
US SEARCH has not commenced a voluntary case under the bankruptcy laws, and an involuntary case under the bankruptcy laws has not been commenced against US SEARCH which involuntary case is not dismissed before the closing date;
 
 
 
all of the directors of US SEARCH and its subsidiaries and certain officers of US SEARCH and its subsidiaries have resigned effective as of the closing date;

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First American has received a written opinion from its counsel that each of the mergers, other than the merger of Stockholm Seven Merger Corp. with and into US SEARCH, will constitute a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code;
 
 
 
US SEARCH has delivered to First American copies of certain documents, and all other proceedings in connection with the mergers have occurred; and
 
 
 
If US SEARCH pays its remaining obligations owed to the former shareholders of Professional Resource Screening, such payment must be made through the issuance of US SEARCH common stock.
 
In addition, the obligations of US SEARCH to complete the mergers are subject to the satisfaction or waiver, if legally permissible, of the following conditions:
 
 
 
the representations and warranties of First American contained in the merger agreement are true and accurate in all material respects, as of the date of the merger agreement and as of the closing date;
 
 
 
First American has delivered to US SEARCH copies of certain documents, and all other proceedings in connection with the mergers have occurred;
 
 
 
all of the agreements of First American to be performed before the closing have been performed in all material respects;
 
 
 
the President or Chief Executive Officer of First American, First Advantage, each FAST division company and each merger subsidiary must have delivered to US SEARCH a compliance certificate with certain attachments certifying to such company’s good standing, qualification to do business, tax status and similar matters;
 
 
 
no law, regulation, interpretation, opinion, order, judgment or decree of any kind (including any privacy, data protection, publicity, advertising or similar federal, state or local law) has been enacted, entered, promulgated, issued, amended or enforced by any court or governmental entity, and no change has occurred, which would reasonably be expected to materially and adversely affect the business, operations, assets, liabilities, financial condition or results of operations of the FAST division companies and their subsidiaries, taken as a whole;
 
 
 
no FAST division company has commenced a voluntary case under the bankruptcy laws, and an involuntary case under the bankruptcy laws has not been commenced against any such company which involuntary case is not dismissed before the closing date;
 
 
 
the standstill agreement has been executed and delivered by First American;
 
 
 
the services agreement has been executed and delivered by First American;
 
 
 
US SEARCH has received a written opinion from its counsel that the merger of Stockholm Seven Merger Corp. with and into US SEARCH will constitute a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code; and
 
 
 
First Advantage has received the cash contribution required of First American.
 
Termination
 
Termination of Merger Agreement
 
The merger agreement may be terminated at any time before the closing:
 
 
 
by mutual written agreement of the parties;
 
 
 
on or after June 11, 2003 (or such later date as First American and US SEARCH may have agreed to in writing) by First American if the conditions to closing have not been complied with or performed in

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any material respect and First American has not materially breached any of its representations, warranties, covenants or agreements;
 
 
 
by First American if the board of directors of US SEARCH has withdrawn or adversely modified its approval or recommendation of the mergers;
 
 
 
on or after June 11, 2003 (or such later date as First American and US SEARCH may have agreed to in writing) by US SEARCH, if the conditions to closing have not been complied with or performed in any material respect and US SEARCH has not materially breached any of its representations, warranties, covenants or agreements;
 
 
 
by either First American or US SEARCH by written notice to the other parties if the mergers contemplated in the merger agreement have not become effective within 30 days after the closing date, so long as the party seeking to terminate has not breached in any material respect any of its covenants and agreements which breach is the proximate cause of the delay;
 
 
 
by First American if US SEARCH fails to call the special meeting of its stockholders to approve the mergers on or before the 45th day after the registration statement of which this proxy statement/prospectus is a part is declared effective by the SEC;
 
 
 
by US SEARCH if a takeover proposal has occurred and the board of directors of US SEARCH withdraws or modifies its approval and recommendation of the mergers and the merger agreement to the extent permitted by the merger agreement in connection with such takeover proposal;
 
 
 
by either First American or US SEARCH if a court of competent jurisdiction or other governmental entity has issued a final, non-appealable order, decree or ruling, or taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the mergers;
 
 
 
by either First American or US SEARCH if at the special meeting of stockholders the stockholders of US SEARCH do not approve the mergers or the merger agreement;
 
 
 
by First American or US SEARCH if Lehman Brothers, US SEARCH’s financial advisor, withdraws its opinion or otherwise notifies the board of directors of US SEARCH that it may no longer rely on such opinion;
 
 
 
by First American if US SEARCH has materially breached any of its covenants and agreements contained in the merger agreement and US SEARCH fails to cure such breach within 10 days after receiving notice from First American; or
 
 
 
by US SEARCH if First American has materially breached any of its covenants and agreements contained in the merger agreement and First American fails to cure such breach within 10 days after receiving notice from US SEARCH.
 
Termination Fee
 
US SEARCH will promptly pay First American a termination fee of $2.8 million in the event the merger agreement is terminated:
 
 
 
by First American because the board of directors of US SEARCH has withdrawn or adversely modified its approval or recommendation of the mergers;
 
 
 
by First American because US SEARCH failed to call the special meeting of its stockholders to approve the mergers on or before the 45th day after the registration statement of which this proxy statement/prospectus is a part is declared effective by the SEC;
 
 
 
by US SEARCH because a takeover proposal has occurred and the board of directors of US SEARCH withdraws or modifies its approval and recommendation of the mergers and the merger agreement to the extent permitted by the merger agreement, in connection with such takeover proposal; or
 

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by either First American or US SEARCH if at the special meeting of stockholders, the stockholders of US SEARCH do not approve the mergers or the merger agreement and, at such time, a takeover proposal had been made and not rejected by US SEARCH’s board of directors.
 
 
Expenses
 
The parties have agreed to pay all of their own expenses relating to the mergers, including the fees and expenses of their respective counsel, auditors and financial advisers. However, following the closing, First Advantage will reimburse First American and its affiliates for all out-of-pocket fees and expenses incurred by any of them in connection with the negotiation and preparation of the merger agreement and the mergers, and First American will be entitled to offset any reimbursement that would otherwise be owed by First Advantage against the $15.0 million capital contribution it is required to make to First Advantage pursuant to the merger agreement.
 
Amendment and Waiver
 
The merger agreement may be amended by First American and US SEARCH, by action taken or authorized by their respective board of directors, at any time before or after approval of the matters presented in connection with the mergers by the stockholders of US SEARCH. However, after approval of US SEARCH’s stockholders, no amendment will be made which by law requires further approval by such stockholders without such further approval. Any such amendment may not be made orally, but only by an agreement in writing signed by the parties.
 
At any time before the completion of the mergers, the parties may:
 
 
 
extend the time for performance of any of the obligations or other acts of the other parties contained in the merger agreement;
 
 
 
waive any inaccuracies in the representations and warranties of the other parties contained in the merger agreement or in any document delivered pursuant to the merger agreement; and/or
 
 
 
waive compliance with any of the agreements or conditions of the other parties contained in the merger agreement.
 
Any agreement on the part of a party to any such extension or waiver is valid only if set forth in writing signed by such party.

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OTHER AGREEMENTS
 
Voting Agreement
 
The following summary describes material provisions of the voting agreement, which is attached to this proxy statement/prospectus as Annex C and is incorporated by reference into this proxy statement/prospectus. This summary may not contain all of the information about the voting agreement that is important to you. We encourage you to read the voting agreement carefully in its entirety.
 
Concurrently with the execution and delivery of the merger agreement, First American entered into a voting agreement with Pequot Private Equity Fund II, L.P. As of January 1, 2003, Pequot Capital Management, Inc. beneficially owned 52,529,702 shares of US SEARCH common stock, representing approximately 54.1% of the outstanding shares of US SEARCH common stock entitled to vote.
 
Under the voting agreement, Pequot Private Equity Fund II, L.P. has agreed that at the special meeting of US SEARCH stockholders it will:
 
 
 
take such actions as are necessary to vote or cause to be voted all of its shares of US SEARCH common stock in favor of the merger of Stockholm Seven Merger Corp. with and into US SEARCH, the execution and delivery by US SEARCH of the merger agreement and the approval of the terms thereof and each of the other actions contemplated by the merger agreement and the voting agreement and any actions reasonably required in furtherance of the merger agreement and the voting agreement; and
 
 
 
not vote or cause or permit to be voted any of its shares of US SEARCH common stock in favor of any takeover proposal (as described below) or any other action or agreement that would in any manner impede, frustrate, prevent or nullify any of the transactions contemplated by the merger agreement (including, without limitation, the merger of Stockholm Seven Merger Corp. with and into US SEARCH) or result in a breach of any covenant, representation or warranty or any other obligation or agreement of US SEARCH under the merger agreement or which would result in any of the conditions to US SEARCH’s or First American’s obligations under the merger agreement not being fulfilled.
 
In addition, Pequot Private Equity Fund II, L.P. also has agreed that it will not:
 
 
 
transfer, or consent to any transfer of, any or all of its shares of US SEARCH common stock or any interest therein if such transfer would result in Pequot Private Equity Fund II, L.P. no longer having the power to vote or cause to be voted such shares in favor of the merger agreement;
 
 
 
enter into any contract, option or other agreement or understanding with respect to any such transfer of any or all of its shares of US SEARCH common stock, or any interest therein if the entering into or performance of any such contract, option or other agreement or understanding would result in Pequot Private Equity Fund II, L.P. no longer having the power to vote or cause to be voted such shares in favor of the merger agreement;
 
 
 
grant any proxy, power-of-attorney or other authorization in or with respect to its shares of US SEARCH common stock (other than for the purpose of fulfilling the terms of the voting agreement);
 
 
 
deposit its shares of US SEARCH common stock into a voting trust or enter into another voting agreement or arrangement with respect to such shares, other than pursuant to the voting agreement; or
 
 
 
take any other action that would in any way restrict, limit or interfere in any material respect with the performance of Pequot Private Equity Fund II, L.P.’s obligations under the voting agreement or the transactions contemplated thereby or by the merger agreement.

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Pequot Private Equity Fund II, L.P. has further agreed, in its capacity as a shareholder of US SEARCH, that it will not, directly or indirectly, knowingly encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information to, any person other than First American or any of its affiliates or representatives concerning any takeover proposal.
 
For purposes of the voting agreement, a “takeover proposal” means:
 
 
 
any tender or exchange offer, or proposal, other than a proposal by First American or any of its affiliates, for a merger, share exchange or other business combination involving US SEARCH or any of its subsidiaries; or
 
 
 
any proposal or offer to acquire in any manner a substantial equity interest in US SEARCH or any of its subsidiaries or a substantial portion of the assets of US SEARCH or any of its subsidiaries.
 
The voting agreement will terminate upon the earlier of the termination of the merger agreement or the consummation of the transactions contemplated by the merger agreement.
 
The voting agreement does not limit or affect any actions taken by any member of the US SEARCH board of directors or any officer of US SEARCH in his or her capacity as a director or officer of US SEARCH.
 
Stockholders Agreement
 
The following summary describes material provisions of the stockholders agreement, which is included in this proxy statement/prospectus as Annex D and is incorporated by reference into this proxy statement/prospectus. This summary may not contain all of the information about the stockholders agreement that is important to you. We encourage you to read the stockholders agreement carefully in its entirety.
 
Concurrently with the execution and delivery of the merger agreement, First American entered into a stockholders agreement with Pequot Private Equity Fund II, L.P. and First Advantage.
 
Tag-Along Right.    In the stockholders agreement, First American agreed that it will not, directly or indirectly, transfer any shares of First Advantage capital stock to any party in a transaction or series of related transactions occurring within a three-year period commencing on the effective date of the mergers if, immediately after such transfer, First American and its affiliates would not beneficially own at least 70% of the number of shares of First Advantage capital stock issued to First American and its affiliates at the closing of the mergers unless:
 
 
 
First American delivers a written notice to Pequot Private Equity Fund II, L.P. of such sale, identifying the third party, the number of shares proposed to be transferred, the purchase consideration for the shares, the proposed date of the closing of such sale and the other material terms and conditions of the proposed sale; and
 
 
 
at Pequot Private Equity Fund II, L.P.’s election, First American permits Pequot Private Equity Fund II, L.P. and its affiliates to participate in such sale by selling a number of shares held by Pequot Private Equity Fund II, L.P. equal to the product of (a) a fraction, the numerator of which is the number of shares proposed to be sold by First American and or its affiliates and the denominator of which is the total number of shares then held by First American and its affiliates and (b) the total number of shares then held by Pequot Private Equity Fund II, L.P. and its affiliates.
 
The purchase consideration paid for exercising the tag-along right will be the purchase consideration offered to First American or its affiliates. If First American or any of its affiliates has sold any shares of First Advantage to the other party in the 12 months before delivering the notice to Pequot Private Equity Fund II, L.P. or such sale is part of a series of related transactions, Pequot Private Equity Fund II, L.P. may request to treat all such sales to which Pequot Private Equity Fund II, L.P. has not been granted a tag-along right as a single transaction, and the price per share to be paid will be the weighted average price paid for all such transactions.

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Designation of Director.    First American agreed to vote, and cause each of its affiliates to vote, all of its shares of First Advantage, or otherwise take such action, as is necessary to ensure that the size of the board of directors of First Advantage will be no more than 10 directors. In addition, First American and each of its affiliates will cause the election to the board of directors of First Advantage of one representative designated in writing by Pequot Capital Management, Inc., who initially will be Lawrence D. Lenihan, Jr. However, First American and its affiliates are not required to vote their shares in favor of any such representative if:
 
 
 
such representative is an officer, director or employee of a person, that is, directly or through its subsidiaries, materially engaged in an individual background screening business that competes with the individual background screening business owned by First Advantage and its subsidiaries; or
 
 
 
such representative is or has been the subject of any of the matters described in Rule 262(b) promulgated under the Securities Act.
 
In lieu of designating a member of the board of directors, Pequot Private Equity Fund II, L.P. may, subject to execution of a mutually agreed confidentiality agreement, designate a representative to:
 
 
 
attend all regular and special meetings of First Advantage’s board of directors in a non-voting, observer capacity; and
 
 
 
receive all notices and materials provided to members of the board of directors, other than privileged information or information that the board reasonably determines to conflict with such representative’s rights.
 
Registration Rights.    The securities that may be registered under the stockholders agreement are:
 
 
 
any shares of Class A common stock of First Advantage that Pequot Private Equity Fund II, L.P. or any of its affiliates own at the date of closing of the mergers or received or is receivable upon the exercise of warrants held at such closing;
 
 
 
any securities received or receivable as a dividend, stock split or other distribution with respect to other registrable securities;
 
 
 
any securities received or receivable upon specific reorganization, reclassification, merger, consolidation or other similar events; and
 
 
 
any shares of Class A common stock of First Advantage acquired by Pequot Private Equity Fund II, L.P. or its affiliates after the date of stockholders agreement, the transfer of which is restricted under Rule 144 of the Securities Act.
 
Demand Registration Rights.    Pequot Private Equity Fund II, L.P. will have the right, by written notice delivered to First Advantage, to require First Advantage to register under the Securities Act the resale registrable securities (as described above) having an aggregate offering price (before deducting of underwriting discounts and commissions) to the public in excess of $5,000,000. Upon receipt of a notice by Pequot Private Equity Fund II, L.P. First Advantage will effect, as expeditiously as reasonably possible, the registration under the Securities Act of all registrable securities that Pequot Private Equity Fund II, L.P. requests to be registered.
 
If Pequot Private Equity Fund II, L.P. exercises its demand registration rights and intends to distribute the registrable securities covered by its request by means of an underwriting, First Advantage will enter into an underwriting agreement in customary form with an underwriter or underwriters selected for such underwriting by Pequot Private Equity Fund II, L.P. (which underwriter or underwriters will be reasonably acceptable to First Advantage).

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First Advantage will not be required to effect any registration based on Pequot Private Equity Fund II, L.P.’s demand registration rights:
 
 
 
before December 13, 2003;
 
 
 
after First Advantage has effected two registration statements pursuant to Pequot Private Equity Fund II, L.P.’s demand registration rights and such registration statements have become effective;
 
 
 
if First Advantage furnishes to Pequot Private Equity Fund II, L.P. a certificate signed by the President or Chief Executive Officer of First Advantage stating that in the good faith judgment of First Advantage’s board of directors, it would be seriously detrimental to First Advantage and its stockholders for such registration statement to be effected at such time. If such event occurs, First Advantage has the right to defer such filing for a period of not more than ninety days after receipt of Pequot Private Equity Fund II, L.P.’s request; provided that such right to delay a request is exercised by First Advantage not more than once in any twelve (12) month period; or
 
 
 
if Pequot Private Equity Fund II, L.P. proposes to dispose of shares of registrable securities that may be registered on a Form S-3.
 
Piggyback Registration.    If First Advantage proposes to file any registration statement under the Securities Act for purposes of a public offering of securities of First Advantage, whether or not for sale for its own account, it will afford Pequot Private Equity Fund II, L.P. and its affiliates an opportunity to include in such registration statement all or part of the registrable securities. If such registration statement is for an underwritten offering, Pequot Private Equity Fund II, L.P. will enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by First Advantage but in no event will any indemnity and/or contribution provisions in such underwriting agreement provide that the indemnity and/or contribution of Pequot Private Equity Fund II, L.P. exceed the net proceeds from the offering received by Pequot Private Equity Fund II, L.P.
 
S-3 Registrations.    First Advantage will use its reasonable best efforts to become and remain eligible to register offerings of securities on Form S-3 or its successor form. At all times during which First Advantage is qualified for the use of Form S-3, Pequot Private Equity Fund II, L.P. may request that First Advantage register its registrable securities on Form S-3. However, First Advantage will not be required to effect more than two such registrations during any twelve-month period if such registrations on Form S-3 have been declared or ordered effective and have remained effective until the earlier of 30 days after the date of effectiveness or the date all of the registrable securities registered thereunder have been sold. First Advantage will not be required to effect any S-3 registration:
 
 
 
within 120 days of the effective date of any other registration pursuant to the stockholders agreement; or
 
 
 
unless Pequot Private Equity Fund II, L.P. proposes to dispose registrable securities having an anticipated aggregate price to the public (net of underwriting discounts and expenses of sale, if any) of at least $2,000,000.
 
Once in any 12 month period, First Advantage may defer filing such S-3 registration statement for a period of not more than 90 days following the requested filing date if First Advantage furnishes to Pequot Private Equity Fund II, L.P. a certificate signed by the President or Chief Executive Officer of First Advantage stating that in the good faith judgment of First Advantage’s board of directors it would be seriously detrimental to First Advantage and its stockholders for a registration statement to be filed at the time requested. Subject to the foregoing, First Advantage will use its reasonable best efforts to promptly effect such registration on Form S-3 to the extent requested by Pequot Private Equity Fund II, L.P. under the stockholders agreement.
 
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Pequot Private Equity Fund II, L.P.’s shares of Class A common stock sold under such registration and will pay fees of one special counsel to Pequot Private Equity Fund II, L.P. or its affiliates of up to $25,000. First Advantage and Pequot Private Equity Fund II, L.P. have agreed to indemnify each other for third party claims arising out of securities law violations under customary circumstances.
 
Termination.    No party has any obligations under the stockholders agreement before the effective time. After the effective time, the provisions of the stockholders agreement terminate as follows:
 
 
 
The tag-along rights terminate on the earlier of:
 
 
 
the first date on which Pequot Private Equity Fund II, L.P. and its affiliates beneficially own less than 5% of the total number of shares of First Advantage’s common stock issued and outstanding immediately following the closing of the mergers; and
 
 
 
the third anniversary of the effective time of the mergers.
 
 
 
The registration rights will terminate on the earlier of:
 
 
 
the fourth anniversary of the effective date; and
 
 
 
the first date following the effective date on which:
 
 
 
First Advantage is then providing current public information within the meaning of Rule 144(c)(1) promulgated under the Securities Act;
 
 
 
no representative designated by Pequot Private Equity Fund II, L.P. pursuant to the stockholders agreement is a member of the board of First Advantage; and
 
 
 
Pequot Private Equity Fund II, L.P. and its affiliates are able to sell all of their registrable securities without restriction under Rules 144 and 145 promulgated under the Securities Act during a three-month period.
 
 
 
The director designation right will terminate on the first date on which Pequot Private Equity Fund II, L.P. owns less than 75% of all of the shares of First Advantage Class A common stock issued to Pequot Private Equity Fund II, L.P. and its affiliates at the closing of the mergers.
 
Standstill Agreement
 
The following summary describes material provisions of the standstill agreement, which is attached to this proxy statement/prospectus as Annex E and is incorporated by reference into this proxy statement/prospectus. This summary may not contain all of the information about the standstill agreement that is important to you. We encourage you to read the standstill agreement carefully in its entirety.
 
Pursuant to the merger agreement, at the closing of the mergers First American will enter into a standstill agreement with First Advantage. The standstill agreement will provide that First American will not and will not permit any of its affiliates to, acquire, offer, or propose or agree to acquire, beneficial ownership of any voting securities of First Advantage or securities of any subsidiary of First Advantage other than:
 
 
 
the securities of First Advantage issued to First American at the closing of the mergers or securities issued upon exchange, exercise or conversion thereof;
 
 
 
as a result of the transfer of beneficial ownership of securities of First Advantage from First American or its affiliates to an affiliate of First American or to First American; provided, that the acquiring person agrees in writing to assume all of the obligations of First American under the standstill agreement; and
 
 
 
securities issued to First American or an affiliate of First American as a result of a capital contribution made by First American or such affiliate to First Advantage and approved by a majority of disinterested directors of First Advantage.

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First American may also acquire, offer or propose or agree to acquire the beneficial ownership of securities of First Advantage if pursuant to a tender offer made by First American or an affiliate of First American for outstanding securities of US SEARCH:
 
 
 
to all of First Advantage’s stockholders (other than First American and its affiliates);
 
 
 
conditioned on at least two-thirds of the outstanding common stock of First Advantage (other than common stock of First Advantage beneficially owned by First American and its affiliates) being tendered; and
 
 
 
in which the same consideration is offered to all holders of First Advantage common stock.
 
In addition, the tender offer must be approved by a special committee of First Advantage’s board of directors created to consider the tender offer and consisting only of disinterested directors, after receiving a written opinion from a nationally recognized investment bank that the tender offer is fair to First Advantage’s stockholders (other than First American and its affiliates).
 
In addition, without the prior written approval of a majority of disinterested directors of First Advantage, First American will not and will not cause or permit any of its subsidiaries to enter into any transaction with First Advantage or any subsidiary of First Advantage (other than transactions expressly contemplated by the merger agreement), except transactions engaged in by First Advantage or its subsidiary in the ordinary course of business.
 
First American has also agreed that it will not and will not cause or permit any of its subsidiaries to transfer First Advantage voting securities to any person or group of persons, unless such person or group acquiring such shares agrees in writing to assume all of the obligations of First American under the standstill agreement, if such transfer results in:
 
 
 
such person or group beneficially owning more than 50% of the issued and outstanding voting securities of First Advantage immediately after such transaction; and
 
 
 
either the transfer is made to a person or group in which First American or any of its affiliates has an economic interest in excess of $20.0 million or the voting securities being transferred, together with any voting securities previously transferred by First American or any of its affiliates to such person or group, represent 25% or more of the issued and outstanding voting securities of First Advantage.
 
For purposes of the standstill agreement, “disinterested director” means any member of First Advantage’s board of directors that is not:
 
 
 
an officer or employee of First Advantage;
 
 
 
an officer, director or employee of First American or any affiliate (excluding First Advantage) thereof;
 
 
 
a person who controls or is under common control with First American or any affiliate of First American; or
 
 
 
a person who otherwise would fail to qualify as an “independent director” under the applicable rules of the Nasdaq National Market as then in effect (other than any person designated by Pequot Private Equity Fund II, L.P. in accordance with the stockholders agreement, who will not be disqualified as a disinterested director if such designee otherwise fails to so qualify).
 
For purposes of the standstill agreement, “voting securities” means, collectively, the First Advantage Class A common stock, the First Advantage Class B common stock and any other securities entitled, or that are entitled in the future, to vote generally for the election of members of First Advantage’s board of directors.
 
The standstill agreement will terminate on the earlier to occur of the fourth anniversary of the effective date and the date on which First American no longer controls First Advantage.

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Services Agreement
 
The following summary describes material provisions of the services agreement, which is attached to this proxy statement/prospectus as Annex F and is incorporated by reference into this proxy statement/prospectus. This summary may not contain all of the information about the services agreement that is important to you. We encourage you to read the services agreement carefully in its entirety.
 
At the closing of the mergers First Advantage and First American will enter into a services agreement pursuant to which First American will provide certain business services and overhead services to First Advantage.
 
The following business services will be provided to First Advantage at the rates set forth below:
 
   
 
Human Resources Systems and Payroll Systems
  
$150,000 per year
   
 
Network Services
  
$100,000 per year
   
 
Oracle Financial Systems
  
$50,000 per year
   
 
401(k) Expenses
  
Actual Cost
   
 
Pension Expenses
  
Actual Cost
   
 
Insurance Allocation
  
Actual Cost
   
 
Medical Insurance Allocation
  
Actual Cost
   
 
Company Car Program
  
Actual Cost
   
 
Personal Property Leasing
  
Comparable pricing given to similarly situated affiliates of First American
 
The following overhead services will be provided to First Advantage for a fee of $50,000 per month and reasonable out-of-pocket expenses:
 
 
 
Legal support;
 
 
 
Tax support;
 
 
 
Strategic planning;
 
 
 
Corporate communications support;
 
 
 
Investor relations support;
 
 
 
Accounting/financial management support;
 
 
 
Human resources support; and
 
 
 
General management support.
 
The following additional services with respect to Indian operations will be provided by First Advantage to First American and its affiliates at actual cost:
 
 
 
Leasing of real and personal property;
 
 
 
Management support;
 
 
 
Human resources/payroll support; and
 
 
 
Services incidental to the foregoing.

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First Advantage will, and will cause its affiliates to, provide First American and its affiliates with products and services offered by or through First Advantage or its affiliates from time to time at rates and on terms no less favorable than those generally offered by First Advantage and its affiliates to third parties.
 
Pursuant to the services agreement, First American may make one or more loans to First Advantage on terms mutually agreeable to First American and First Advantage, provided that:
 
 
 
such loan or loans bear interest at a rate per annum no greater than the prime rate in effect from time to time plus 2.75%; and
 
 
 
the aggregate amount of all such loans at any date of determination will not exceed $1,000,000.
 
In addition, First American may offer to provide First Advantage or its affiliates, and First Advantage or its affiliates may purchase, products and services offered by or through First American in the ordinary course of business at rates and on terms then offered by First American to comparable third parties.
 
The services agreement will commence on the effective date of the mergers and terminate on the one year anniversary of such date, unless renewed. The services agreement will continue for successive 180-day periods unless either First American or First Advantage advises the other in writing, no later than thirty days before such date, that the services agreement will not be extended.
 
Subordinated Secured Promissory Note
 
The following summary describes material provisions of the subordinated secured promissory note, which is included as an exhibit to the registration statement of which this proxy statement/prospectus forms part. The terms of the subordinated secured promissory note are incorporated by reference into this proxy statement/prospectus. This summary may not contain all of the information about the subordinated secured promissory note that is important to you. We encourage you to read the subordinated secured promissory note carefully in its entirety. See “WHERE YOU CAN FIND MORE INFORMATION” for instructions on how to obtain the registration statement and exhibits.
 
In connection with the merger agreement, on January 15, 2003, First American loaned US SEARCH $1.4 million pursuant to a subordinated secured promissory note. The note matures on June 30, 2003 and bears interest at a rate equal to the lesser of 10.0% and the prime rate plus 4.75%. If an event of default occurs under the note, all principal and accrued interest will become immediately due and payable and the interest rate will increase to the lesser of 10.0% and the prime rate plus 6.75%. The obligations evidenced by the note are secured by all real and personal property of US SEARCH pursuant to a security agreement between First American and US SEARCH.
 
The following occurrences are events of default under the note:
 
 
 
default in the payment when due of any principal or interest due under the note or any other amounts owing thereunder if such default continues unremedied for three or more business days;
 
 
 
any representation, warranty or statement made by or on behalf of US SEARCH in the note or any security document or in any certificate proves to be untrue in any material respect on the date as of which made or deemed made;
 
 
 
default in the due performance or observance of any other term, covenant or agreement contained in the note or the security agreement and such default continues unremedied for a period of the lesser of ten business days and the grace period provided for in the security agreement with respect to such default, if any;
 
 
 
default in the payment when due, whether by acceleration or otherwise, of any debt for borrowed money of US SEARCH under the Loan and Security Agreement, dated September 12, 2001, as amended, between Comerica Bank, as successor to Imperial Bank, and US SEARCH or default in the

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performance or observance of any obligation or condition with respect to such debt if the effect of such default is to accelerate the maturity of any such debt or such default continues unremedied for any applicable period of time sufficient to permit the holder or holders of such debt, or any trustee or agent for such holders, to cause such debt to become due and payable before its stated maturity;
 
 
 
US SEARCH or any of its subsidiaries institutes or consents to the institution of any proceeding under the federal bankruptcy statutes or any other debtor relief law, or makes an assignment for the benefit of creditors;
 
 
 
US SEARCH or any of its subsidiaries applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property;
 
 
 
any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of US SEARCH or any of its subsidiaries and the appointment continues undischarged or unstayed for 60 calendar days;
 
 
 
any proceeding under the federal bankruptcy statutes or any other debtor relief law relating to any such person or to all or any part of its property is instituted without the consent of US SEARCH or any of its subsidiaries and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding;
 
 
 
if, without the express prior written consent of First American, title to any of the collateral, or any part thereof or interest therein, is (or is attempted to be) sold, conveyed, transferred or further encumbered by US SEARCH in favor of any other person, firm, corporation or other entity, whether by operation of law, agreement or otherwise, except as expressly permitted by the security agreement;
 
 
 
any judgment or order for the payment of money in excess of $2.0 million (taking into account any insurance proceeds payable under a policy where the insurer has accepted coverage without reservation) is rendered against US SEARCH and either:
 
 
 
enforcement proceedings have been commenced by any creditor upon such judgment or order; or
 
 
 
there has been any period of fifteen (15) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect; or
 
 
 
the security documents or any provision thereof ceases to be in full force and effect, or ceases to give First American the liens, rights, powers and privileges purported to be created thereby, or US SEARCH or any other person obligated under any security document (other than First American) defaults in the performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to such security documents or US SEARCH or any person purporting to act by or on behalf of US SEARCH denies or disaffirms US SEARCH’S obligations under any security document.
 

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INFORMATION ABOUT US SEARCH
 
Business
 
Overview
 
US SEARCH is an individual locator and risk management services company, which uses its proprietary software platform and web-based systems to supply consumer and business clients with services such as individual location, identity verification, criminal record checks, employment and education verifications, professional reference checks, credit and motor vehicle record checks, and drug screening. US SEARCH’s services can be accessed through its websites, www.ussearch.com for consumers, www.ussearch.com/business for small and medium businesses, or www.prsinet.com for large businesses. US SEARCH was founded in 1994 and incorporated in Delaware in 1999.
 
US SEARCH has developed US SEARCH DARWIN patent-pending technology, which automates the data management supply chain by accessing, assimilating, and compiling data from disparate sources. The current applications of the technology focus on individual locator and profile services. US SEARCH has developed the technology’s application to employment screening services and expects that it will be in production for US SEARCH’s business customers in 2003. By automating the fulfillment process for employment screening, US SEARCH believes it will be able to deliver a superior quality product more quickly and more efficiently.
 
On December 28, 2001, US SEARCH completed an acquisition of Professional Resource Screening, Inc., an employment screening company with more than 500 clients including AT&T Wireless, The AIG Life Companies, Bell South, Charles Schwab and DHL Worldwide Express.
 
Growth in the Security, Certification and Verification Services Sector
 
US SEARCH believes that background screening and certification services industries will grow due to an increased awareness of security issues. US SEARCH expects that companies will perform more comprehensive background checks on their employees. US SEARCH provides a range of employment screening and background check services, including criminal record checks, employment and education verifications, professional reference checks, credit and motor vehicle record checks, drug screening, and pre-employment verification services.
 
US SEARCH believes that security and risk mitigation have become important issues for businesses, government and other organizations. US SEARCH believes that employers will require better information about the backgrounds of their prospective and current employees to conform, in certain industries, to new regulations and guidelines, to obtain insurance coverage, to reduce the risk of legal liability for negligent hiring and to manage risk. Information technology has provided individual employees with greater potential access to corporate assets.
 
While services and technologies have developed to provide remote access to information sources, US SEARCH believes that existing screening companies either provide only limited information or employ limited amounts of automation. For example, credit reporting services make available only limited types of information for specific purposes, such as verifying individual credit records. More comprehensive search and background checks are available through private investigation firms, but they draw on limited datasets, require significant human intervention, do not generate instantaneous results, and are costly. The employment screening industry has historically been fragmented and regional in nature, with over 100 providers in the United States, most with sales of less than $20.0 million annually. US SEARCH believes that small- and medium-sized businesses have not generally used pre-employment screening services due to prohibitive costs. As these services become more common, US SEARCH believes that there will be a need for a screening company that generates

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fast results and is highly accurate and scalable. According to the U.S. Bureau of National Affairs, the average monthly employee turnover rate for 2001 was approximately 1.1% of the U.S. workforce. Many companies must fill thousands of positions a year, screening multiple candidates for each open position.
 
US SEARCH Services
 
US SEARCH offers a variety of products and services to provide accurate and timely, background information. US SEARCH’s services are highly automated—its clients online can conduct many of US SEARCH’s services instantly. US SEARCH also offers assisted searches and screening services, both online and through toll free telephone numbers. US SEARCH constantly evaluates its data sources and other information sources to ensure the availability of timely, accurate and comprehensive data and background information to its clients.
 
 
 
Large Business Services.    Through US SEARCH’s subsidiary, Professional Resource Screening, US SEARCH provides large businesses, government agencies and other employers with a variety of employment screening, individual and business background check and risk mitigation products and services via an online, web-based system that enables instant ordering and prompt delivery of results. Customers can customize the search and decision parameters online using a “drag-and-drop” browser interface. Employment screening products include Social Security Number Trace, Federal and State Felony and Misdemeanor Record Searches, Employment and Education Verification, and Credit History. US SEARCH also provides character reference checks and drug screening via third party providers. US SEARCH also offers a Management Services program that provides customers with an outsourced solution to background investigations, which includes analysis of developed investigation data, management of Fair Credit Reporting Act communications, legal compliance, and direct applicant contact. Finally, US SEARCH recently developed ApplyDirect, a web-based application tool designed to reduce recruiting costs and improve time-to-hire by allowing job candidates to electronically complete and sign employment application forms. The online application is easily customized to match a client’s paper based form in content and design and incorporates digital signature technology allowing applicants to authorize a background screen.
 
 
 
Small and Medium Business Services.    US SEARCH provides small and medium businesses with a variety of services including individual locator, individual and business background checks and employment screening. Small and medium business clients may use US SEARCH’s services to find missing beneficiaries, debtors, alumni, witnesses, shareholders and pension plan participants, perform due diligence on individuals and businesses before entering into a business or financial relationship, research identity fraud, verify property ownership or screen employees before making a hiring decision. US SEARCH’s customers may access a new small and medium business website at www.ussearch.com/business.
 
 
 
Consumer Services.    US SEARCH provides consumer clients with a single, comprehensive access point to a broad range of information to assist them in locating friends and relatives or learn more information about people in their lives. US SEARCH’s clients can obtain addresses, aliases, listed phone numbers, property ownership, court records, judgments, professional license verification, corporate affiliations and date of death information. Searches are performed by electronically accessing multiple, geographically dispersed public record databases. US SEARCH aggregates this information, then formats and presents the search results to make them easy to read and understand.
 
US SEARCH Strategy
 
US SEARCH’s objective is to become the leading provider of Internet-based employment screening and background information services to businesses, governments and individuals. US SEARCH believes that pre-employment and verification services will become automated through technology in a similar manner to how payroll processing and applicant tracking were automated in the past. US SEARCH makes it possible to not

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merely screen employees before they are hired, but to perform periodic checks on an automated basis. To accomplish these objectives, US SEARCH intends to:
 
 
 
Expand the number of customers using its technology. Following the acquisition of Professional Resource Screening in December of 2001, US SEARCH has over 500 customers for whom it is providing employment screening. During 2003, US SEARCH will continue to focus on converting existing customers from regional or divisional accounts to national accounts. In addition, US SEARCH will focus on expanding the scope of services provided to customers and winning new customers in industry verticals where there is a need for background screening, including transportation, retail, insurance, financial services, healthcare, telecommunications, and technology.
 
 
 
Complete the integration of Professional Resource Screening to US SEARCH’s back-end automated fulfillment platform. Because US SEARCH DARWIN technology makes it possible to introduce automation into portions of the fulfillment of background searches, US SEARCH expects to improve productivity and increase operating efficiency as it completes the integration of Professional Resource Screening’s operations. In addition, US SEARCH believes it will be able to significantly increase the range of services offered to Professional Resource Screening’s existing customer base.
 
 
 
Establish strategic partnerships with leading IT consultants, systems integrators, HR information systems vendors and HR outsourcing companies. US SEARCH intends to develop relationships with leading consulting companies, systems integrators and HR outsourcing companies that will enable it to provide services to their existing client base. US SEARCH also intends to develop partnerships with leading HR Information Systems and Enterprise Resource Planning vendors to integrate its web-enabled software with their systems and make automated screening and background checks available as a value-added feature of their systems.
 
 
 
Grow the consumer business. US SEARCH intends to deepen and strengthen its channel partnerships and continue to introduce new products and services to expand its market position in the consumer business.
 
Marketing and Brand Awareness
 
US SEARCH markets its services through a direct sales force, strategic partnerships and Internet advertising featuring the US SEARCH brand. Given the current attention being paid to security issues, US SEARCH intends to develop channel relationships with leading management consultants, systems integrators, HR information systems providers and HR outsourcing companies to make US SEARCH DARWIN technology and services available as a component of their offerings.
 
US SEARCH intends to continue to strengthen its brand through Internet advertising programs plus limited, television advertising, infomercial advertising, direct mail and e-mail campaigns, and public relations programs. In order to further expand corporate and professional business, US SEARCH plans to target an increasing portion of marketing and advertising programs and related expenditures toward business and professional clients rather than consumers.
 
Marketing to Corporate and Professional Clients.    US SEARCH has established a direct business sales force and a team of research specialists to promote and increase the marketing of its services to prospective professional and corporate clients and to address the specific needs of each corporate and professional client. US SEARCH is targeting certain industries, such as transportation, retail, healthcare, financial services, and insurance markets for its employment screening services.
 
Internet Advertising
 
US SEARCH believes that marketing agreements with Internet search engines and popular websites have increased brand recognition and attracted clients. US SEARCH generates visitors to its website from various forms of Internet advertising, such as banners, buttons, text links and integrated order forms. US SEARCH

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maintains marketing agreements with leading Internet search engines and popular websites, and has placement on major websites such as AOL.com, Yahoo.com, Google.com, MSN.com, InfoSpace.com, Netscape.com, Lycos.com, Whitepages.com, and Overture.com. US SEARCH believes that these sites reach a growing base of Internet users that engage in both business and consumer transactions.
 
US SEARCH plans to continue to use Internet advertising to acquire clients. During 2002, US SEARCH endeavored to negotiate Internet advertising placements that were targeted to achieve customer acquisition and continued to negotiate performance based payment models. In addition, US SEARCH developed lower-cost supplemental client acquisition programs, including its affiliate marketing program that works with a wide variety of smaller websites, commissioning these affiliates on revenue share basis. US SEARCH also intends to develop strategic marketing relationships with other companies based upon traffic patterns, customer profiles and related services, to increase its revenue from the Internet, primarily on a revenue share performance basis.
 
Competition
 
The data and information service industry is highly competitive and currently fragmented, although there has been a recent trend toward consolidation. US SEARCH’s primary competitors for business services include ADP, ChoicePoint, Inc., Kroll, USIS and TALX. Currently, US SEARCH’s primary competitors in the area of individual locator searches include telephone companies and other third parties, who publish free printed or electronic directories, private investigation firms and KnowX.com. US SEARCH does not presently consider major Internet search directories or websites as competitors. In fact, US SEARCH views them as lead generators through their search directories and other services, and US SEARCH presently benefits from strategic advertising arrangements with several of the major Internet search engines and websites.
 
Technology and Infrastructure
 
During 2002, US SEARCH implemented its DARWIN proprietary software platform, which uses advanced technology to access, assimilate, compile, distribute and present data from disparate public and private databases. US SEARCH’s patent application on this technology was published on December 19, 2002.
 
During 2002, US SEARCH completed development of the initial phase of its Corporate Services Platform that provides support for customers of its screening services. In addition, this platform automates many of the activities of the screening business and enhances fulfillment productivity and accuracy.
 
US SEARCH has further enhanced its eCommerce, Customer Relationship Management and proprietary technology developments which utilize the industry standard J2EE technology platform to enhance the interoperability of its software systems, provide improved scaling capability and provide further efficiencies in the software development group by standardizing on a single development platform. US SEARCH’s XML-based messaging framework enables seamless exchange of data with client-partner systems.
 
US SEARCH has scaled its hardware infrastructure to accommodate the increased traffic to its sites and has attempted to provide redundancy at all levels of the architecture in an effort to minimize unanticipated processing interruption.
 
Patents and Trademarks
 
US SEARCH’s patent application on its US SEARCH DARWIN technology was published on December 19, 2002. US SEARCH is the owner of registered trademarks for “1-800-USSEARCH”, “The Public Record Portal,” its logo, “Reuniting America Two People at a Time,” “FraudIdentity,” and “TrustIdentity” and has applied for registered trademark status for “US SEARCH.com”, and “VeroTrust.” US SEARCH has also registered several domain names, including 1800USSEARCH.com, ussearch.com, prsinet.com and verotrust.com.

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Employees
 
As of December 31, 2002, US SEARCH and Professional Resource Screening had 198 full-time and 32 temporary employees. US SEARCH and Professional Resource Screening believe that relations with their employees are good. None of US SEARCH’s nor Professional Resource Screening’s employees are represented by a union or are a party to any collective bargaining agreement.
 
Property
 
US SEARCH’s headquarters are located in approximately 52,500 square feet of office space in Los Angeles, California. The lease terminates on November 30, 2004, and US SEARCH has an option to extend the lease for an additional five years. Professional Resource Screening leases approximately 26,000 square feet of office space in Concord, California. The lease terminates on October 31, 2005.
 
Legal Matters
 
In May 2001, ChoicePoint, Inc., the successor entity to DBT Online, Inc., filed a complaint against US SEARCH in Palm Beach County, Florida alleging breach of contract, fraudulent misrepresentation, unjust enrichment, quantum meruit and breach of the implied covenant of good faith and fair dealing. The complaint sought approximately $1.5 million in damages, as well as interest and attorneys’ fees. US SEARCH removed this action to the United States District Court for the Southern District of Florida. The United States District Court for the Southern District of Florida ordered the matter to arbitration. An arbitration hearing was held in April 2002 and in June 2002 the arbitration awarded US SEARCH a credit of $297,671 to be deducted from invoices of $1.4 million. ChoicePoint has filed a Motion to Confirm the Arbitration Award and US SEARCH has filed a Motion to Modify and correct the Arbitration Award to provide additional credits. US SEARCH is awaiting the District Court’s ruling on these motions. While awaiting a ruling on the motions, US SEARCH has paid $300,000 of the award. US SEARCH has approximately $780,000 accrued for this liability as of December 18, 2002. The costs related to this litigation to date have been less than $100,000.
 
On June 25, 2002, a complaint seeking $434,000 in damages was filed against Professional Resource Screening in Superior Court of California, County of Contra Costa, styled Wood Warren & Co. v. Professional Resource Screening, Inc., No. C02-01816, alleging breach of an oral agreement relating to investment banking services, negligent misrepresentation, promissory estoppel, equitable estoppel and quantum meruit. Although it is too early to predict the outcome of this litigation, US SEARCH believes it has meritorious defenses to plaintiff’s claims. A mediation is scheduled in this matter on January 28, 2003.
 
US SEARCH may from time to time become a party to various legal proceedings arising in the ordinary course of business.

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INFORMATION ABOUT THE FAST DIVISION
 
B usiness
 
Introduction
 
The FAST division of First American is a leading provider of background screening and verification services in the United States. These services include motor vehicle reports, tenant screening, employee background screening and occupational health.
 
Services
 
Motor Vehicle Reports.    The FAST division provides automated access to driving records from all 50 states and the District of Columbia. Insurance companies represent the core of the customer base for this product, which they use for underwriting purposes. Employers also utilize the product to manage risk associated with employees that require the use of a vehicle in the performance of their duties. For most customers, the division receives and fulfills orders through its proprietary Comprise/ZapApp software, which allows the customer to integrate the process of obtaining motor vehicles reports with other processes utilized by the customer. Generally, demand for this product decreases in November and December as a result of seasonal reductions in the insurance and employment markets
 
Tenant Screening.    The FAST division provides tenant screening services to landlords and managers of multifamily residential properties. These services include reports containing information derived from the FAST division’s proprietary database of eviction records, major credit bureaus, provided references and criminal records. Depending on a customer’s needs, reports can draw on any combination of these sources. The division’s RegistryCheck product, for example, provides customers with a comprehensive report of rental history and eviction filings drawn on the division’s proprietary database. Customers also can order scoring products, which assess risk based on a statistical model. Customers generally order and receive the division’s tenant screening products through a secure Internet connection or through proprietary software. In these services the division experiences moderate seasonality, with a slightly disproportionate share of revenue being generated from March through October.
 
Employee Background Screening.    The FAST division provides employee background screening services to thousands of companies in the United States. These services include reports about a prospective employee’s criminal record, motor vehicle violations, credit standing and involvement in civil litigation. The FAST division also makes inquiries of provided references and former employers, verifies educational credentials and licenses and checks industry specific records. A customer can order any of these and other related services individually or as a package. Depending on a customer’s preference, orders may be placed and fulfilled through HireCheck’s proprietary software, through a secure Internet connection, via facsimile, interfaces with third party vendors or a direct interface. Because of the diverse clientele for the employee background screening products, seasonality is minimal. Generally, the division experiences any lull in the demand for its screening products near year end and during the summer, when employers typically slow their hiring pace.
 
Occupational Health.    The FAST division also provides its customers with a comprehensive set of occupational health services, which helps employers manage occupational health issues with respect to both prospective and existing employees. Generally, these products involve first the design and implementation of a testing program, including provision for the collection and testing of specimens. Through its staff of doctors, the division then interprets the results. Ultimately, a report is delivered to customers through a secure Internet connection or through other direct means.
 
The FAST division also develops and manages employee assistance programs, which provide troubled employees with access to confidential counseling services. These programs cover a wide range of personal and workplace issues, including alcohol and drug abuse, marital problems, family matters, bereavement management, depression, stress, retirement and downsizing. The division’s employee assistance programs also provide

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employers with a number of corporate-focused services, including critical incident stress management programs, organizational change consulting and intensive specialty training on issues such as violence in the workplace.
 
Approximately 75% of the division’s occupational health business is derived from employment screening, with the balance attributable to ongoing testing programs and employee assistance programs.
 
As with its employee background screening products, any seasonality in the demand for the division’s occupational health products generally is attributable to decreases in hiring which occur near year end and during the summer.
 
Historical Growth of the FAST Division
 
In the late 1990s, First American initiated a diversification strategy which called for, among other things, the combination of one of its core competencies—data management and analysis—with businesses that are counter-cyclical to its long-standing real estate related products and services. First American also sought businesses that were complementary to its rapidly growing credit reporting business, First American CREDCO. First American management initially focused on the background screening industry—an information-intensive business with a heavy demand for credit reports and a relatively tangential tie to the real estate market.
 
Employee Background Screening.    In September 1998, First American began its entry into the background screening industry by acquiring HireCheck. HireCheck, headquartered in St. Petersburg, Florida, provides a wide range of employee screening services for a diverse group of companies. Depending on the type of product ordered, the reports generated by HireCheck provide information about a prospective employee from a number of sources, including criminal records, motor vehicle reports, credit reports, civil litigation records, prior employers, educational institutions, licensing authorities, employee references and certain other records specific to the industry in which the customer operates.
 
Tenant Screening.    In September 1998, First American also entered the tenant screening industry by acquiring First American Registry, headquartered in Rockville, Maryland. First American Registry, the largest tenant screening company in the United States, gives property managers and landlords in the multifamily housing industry the tools required to evaluate prospective tenants. These tools include access to First American Registry’s proprietary database of landlord-tenant court records, which is the largest of its kind in the United States, and its proprietary database of criminal conviction information, which is one of the largest for use in tenant screening in the country. These tools also include access to credit reports, a credit scoring model developed exclusively for the multifamily housing industry and reference checking.
 
Occupational Health.    Continuing its efforts to provide a comprehensive set of risk management tools to its customers, in August 2001, First American entered the occupational health services business by acquiring Milwaukee, Wisconsin-based Substance Abuse Management. This company manages for employers the collection of drug test specimens, the actual testing of the specimens and the interpretation and delivery of results.
 
Motor Vehicle Reports.    Five months later, in January 2002, First American further added to the menu of services offered by the FAST division by acquiring American Driving Records, a Rancho Cordova, California-based provider of motor vehicle reports. One of the largest competitors in its industry, American Driving Records brought to the FAST division not only a formidable player in a key area of the risk management industry, but also enhanced access to the driving records of almost every state in the United States. With American Driving Records, First American purchased ZapApp India Private Limited, a Bangalore, India-based private limited company that provides web development services to American Driving Records.

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Consolidation
 
In an effort to improve the profitability of the companies then comprising the FAST division, in the second quarter of 2001, First American reorganized the division’s management structure by dedicating a single management group to the oversight of all operations. By emphasizing the group as a whole, this reorganization effort positioned the FAST division to pursue cross-selling opportunities, take advantage of mutual supplier relationships and leverage technological developments and resources across the entire division. It also had the effect of focusing management on efforts to improve the division’s operating margins by increasing the volume of transactions performed using the division’s existing systems, whether through internal sales growth or by acquiring businesses with complementary product offerings. In January 2002, First American formally created the FAST division and began reporting it as a segment in its financial statements.
 
Strategic Acquisitions Following 2001 Reorganization
 
First American supplemented the division’s employee background screening operations by acquiring Factual Business Information, Inc., headquartered in Miami, Florida, in August 2001 and Pretiem Corporation, headquartered in Princeton Junction, New Jersey, in December of 2001. These acquisitions provided the division with a customer base for employee background screening services in three important employment markets: the Miami metropolitan area, New Jersey and New York State.
 
In the last quarter of 2002, the FAST division completed acquisitions of Employee Health Programs in October and SafeRent in November.
 
Employee Health Programs.    A competitor of Substance Abuse Management, the Bethesda, Maryland-based Employee Health Programs brought critical volume to the FAST division’s occupational health business. Through the acquisition of Employee Health Programs, the FAST division also expanded the scope of its existing services to include employee assistance programs, which are designed to help troubled employees resolve behavioral and/or emotional problems and achieve their full productive capability.
 
SafeRent.    SafeRent, headquartered in Denver, Colorado, brought many new customers to the FAST division’s leading tenant screening business and increased the division’s penetration in key markets, in particular markets in the western United States.
 
Customers
 
The FAST division serves a wide variety of clients throughout the United States, including a substantial percentage of those businesses comprising the Fortune 1000, many major real estate investment trusts and property management companies, a number of the top providers of transportation services, governmental agencies, non-profit organizations and health care providers. Dominant categories of customers vary depending on the type of product. Insurance carriers and agents, for example, purchase a substantial proportion of the FAST division’s driving record products. Transportation companies are major consumers of the division’s occupational health products. Multifamily housing property management companies and landlords of all sizes are represented in the tenant screening business’ customer base. Larger employers represent the predominant share of the division’s employee background screening business. The FAST division derives a nominal amount of revenue from customers in Canada and Puerto Rico.
 
The division has in excess of 10,000 customers. No single customer is responsible for 2 percent or more of the revenue of the entire division.
 
Suppliers
 
Data represents a key ingredient of the FAST division’s background screening, tenant screening and driving records products. In obtaining such data, the FAST division draws upon a wide variety of sources, including

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governmental agencies, credit reporting agencies, third parties which compile public record information and on-line search services. Many of the division’s suppliers provide this data in electronic format. The FAST division does not anticipate the termination of any signification relationship with any of its data suppliers. Because the FAST division believes it could acquire necessary data from other sources, the FAST division does not believe that the termination of any supplier relationship would have a material adverse effect on the division’s financial condition or operating results.
 
In connection with its occupational health services, the FAST division depends upon services provided by specimen collection agencies and laboratories. There is significant competition among suppliers of these services and, consequently, the FAST division does not believe the termination of its relationship with any of these suppliers would have a material adverse effect on its financial condition or operating results.
 
Strategies for Future Growth
 
The FAST division believes that as the world becomes increasingly risky for individuals and organizations, demand for the risk management products offered by the FAST division will grow. The FAST division’s primary goal is to be well positioned to capture not only a substantial portion of the existing market, but also a substantial share of the expected growth. The FAST division plans to accomplish this goal in the following manner:
 
Consolidate Operations.    The FAST division intends to continue its aggressive efforts to consolidate its operations. This includes efforts not only to capture synergies by eliminating personnel and systems duplication, but also to exploit cross-sell opportunities by providing a single platform on which the division can offer its entire menu of services to current and prospective customers.
 
Pursue Strategic Acquisitions.    The FAST division also intends to continue pursuing acquisitions of companies that would enable it to enter new markets as well as increasing its share of those markets in which it is already operating. It will pursue companies with assets that will enhance the division’s ability to fulfill orders, including companies with proprietary databases containing information for use in its products or technology that would make order placement or product delivery more efficient. The FAST division also expects to pursue acquisition opportunities which would enable it to enter into related product fields. Its recent acquisitions of Employee Health Programs and SafeRent are examples of the division’s efforts to increase the volume of transactions performed by its existing businesses through strategic acquisitions. The proposed transaction with US SEARCH provides an example of the FAST division’s efforts to enhance its technology (through US SEARCH’s DARWIN platform) and to enter related product fields (location services) through acquisition.
 
Overseas Production.    To cut costs, the FAST division intends to expand its production efforts overseas. Currently, the division’s operations in Bangalore, India provide a portion of its software development needs. The division plans to expand the software development activities of its Bangalore facility and to examine other potential cost saving opportunities it may provide, such as the performance of certain back office functions and the running of a customer service call center.
 
Competition
 
A number of companies compete with the FAST division’s product offerings. The division’s most significant national competitors in employee background screening include ChoicePoint, Kroll, U.S. Investigative Services and ADP. A number of local and regional competitors also exist. The tenant screening industry is highly fragmented, with only approximately 10 other companies providing significant competition on a national level. In its occupational health business, the division has one significant nationwide competitor, however, there are a significant number of relatively local and regional companies in the industry. In motor vehicle reports, there are approximately 10 major competitors to the division, the most predominant of which is ChoicePoint. In each of its markets, the division competes foremost on the basis of customer service and secondarily on price and product differentiation.

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Employees
 
The FAST division employs over 700 people, most of which are located in the United States. The division employs 12 people at its development facility in Bangalore, India.
 
Intellectual Property
 
The FAST division owns a number of items of intellectual property, including trademarks, tradenames, copyrights, patents, domain names and unregistered trade secrets. The FAST division is not dependent upon any single item of intellectual property.
 
Properties
 
The FAST division’s principal executive offices are located in 30,000 square feet of leased office space in St. Petersburg, Florida. The division maintains 16 other offices in the United States and an office in Bangalore, India. These offices, all of which are leased, comprise a total of approximately 110,000 square feet of space.
 
Legal Matters
 
The FAST division is involved in litigation from time to time in the ordinary course of its business. The FAST division does not believe that the outcome of any pending or threatened litigation will have a material adverse effect on its financial position or operating results.
 
Market Price of and Dividends on Common Equity and Related Stockholder Matters
 
There is no established public trading market for the securities of the companies comprising the FAST division. First American beneficially owns all of the outstanding capital stock of the FAST division companies.
 
Qu antitative and Qualitative Disclosures About Market Risk
 
The FAST division considered the provision of Financial Reporting Release No. 48 “Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent In Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments.” The FAST division had no holdings of derivative financial instruments at September 30, 2002 and its total liabilities as of September 30, 2002 consist primarily of notes payable and accounts payable that have fixed interest rates and were not subject to any significant market risk.
 
The FAST division’s fixed rate debt consists primarily of unsecured term notes, and its variable rate debt relates to borrowings with related parties. A 1% increase in interest rates due to increased rates nationwide would not result in a significant amount of additional interest payments by the FAST division.
 

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INFORMATION ABOUT FIRST ADVANTAGE
 
First Advantage, a wholly owned subsidiary of First American, has not conducted any business activities to date other than those incident to its formation, execution of the merger agreement and related agreements and participation in the preparation of this proxy statement/prospectus. Immediately following the mergers, First Advantage will operate US SEARCH and the companies that currently comprise the FAST division and will own, directly and indirectly, all of the outstanding capital stock of such entities. Accordingly, the business of First Advantage, operated through its wholly-owned subsidiaries, will be the businesses currently conducted by US SEARCH and the FAST division. See “INFORMATION ABOUT US SEARCH—Business” on page 63 and “INFORMATION ABOUT THE FAST DIVISION—Business” on page 68.
 

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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
 
US SEARCH
 
US SEARCH’s common stock is quoted on the Nasdaq National Market under the ticker symbol “SRCH.” On January 1, 2003, there were approximately 104 record holders of US SEARCH’s common stock. The equity of the FAST division, comprised of wholly-owned subsidiaries of First American, is not publicly traded.
 
The table below sets forth, for the calendar quarters indicated, the high and low sale prices per share of US SEARCH’s common stock as reported on the Nasdaq National Market.
 
    
US SEARCH’s Common Stock

    
High

  
Low

2000
             
First Quarter
  
$
11.25
  
$
3.69
Second Quarter
  
 
5.19
  
 
1.44
Third Quarter
  
 
3.63
  
 
1.00
Fourth Quarter
  
 
1.31
  
 
0.19
2001
             
First Quarter
  
$
0.969
  
$
0.188
Second Quarter
  
 
2.250
  
 
0.350
Third Quarter
  
 
2.100
  
 
0.630
Fourth Quarter
  
 
1.950
  
 
0.690
2002
             
First Quarter
  
$
1.840
  
$
0.840
Second Quarter
  
 
1.250
  
 
0.590
Third Quarter
  
 
0.800
  
 
0.260
Fourth Quarter
  
 
1.160
  
 
0.190
2003
             
First Quarter (through January 15, 2003)
  
$
0.820
  
$
0.730
 
US SEARCH has never paid any cash dividends and it has no present intention to declare or to pay cash dividends. It is US SEARCH’s present policy to retain earnings, if any, to finance the growth and development of its business.
 
The following table sets forth the closing price of US SEARCH’s common stock as reported on the Nasdaq National Market on November 14, 2002, 30 days before the date of public announcement of the merger agreement, December 13, 2002, the last full trading day before the public announcement of the merger agreement, and [                ], 2003, the last full trading day for which the closing price was available at the time of the printing of this proxy statement/prospectus.
 
Date

    
US SEARCH’s Common Stock

 
November 14, 2002
    
$
0.350
 
December 13, 2002
    
$
0.790
 
[                ], 2003
    
$
[        
]

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First Advantage
 
The First Advantage Class A common stock will not be issued until completion of the transactions, which cannot occur before the time the US SEARCH stockholders vote on approval of the merger agreement and the transactions contemplated by the merger agreement. Consequently, market prices for the First Advantage Class A common stock will not be available at or before the time of the special meeting.
 
First Advantage has never paid any cash dividends, and does not presently intend to pay dividends following completion of the mergers.
 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF US SEARCH
 
US SEARCH is providing the following financial information to aid you in your analysis of the financial aspects of the transactions. The selected financial data of US SEARCH has been derived from the consolidated financial statements and related notes of US SEARCH for each of the years in the five-year period ended December 31, 2001, and the unaudited consolidated financial statements for the nine months ended September 30, 2002 and September 30, 2001. This information is only a summary, and you should read it in conjunction with the historical consolidated financial statements of US SEARCH and the related notes attached to this proxy statement/prospectus.
 
   
Nine Months Ended
September 30,

   
Fiscal Year Ended December 31,

 
   
2002

   
2001

   
2001

   
2000

   
1999

   
1998

   
1997

 
Statement of Operations:
                                                       
Net revenue
 
$
22,616,000
 
 
$
14,464,000
 
 
$
18,399,000
 
 
$
22,363,000
 
 
$
19,541,000
 
 
$
9,245,000
 
 
$
2,971,000
 
Cost of services
 
 
6,713,000
 
 
 
3,516,000
 
 
 
4,494,000
 
 
 
10,392,000
 
 
 
7,293,000
 
 
 
3,149,000
 
 
 
1,291,000
 
   


 


 


 


 


 


 


Gross profit
 
 
15,903,000
 
 
 
10,948,000
 
 
 
13,905,000
 
 
 
11,971,000
 
 
 
12,248,000
 
 
 
6,096,000
 
 
 
1,680,000
 
Operating expenses:
                                                       
Selling and marketing
 
 
8,887,000
 
 
 
7,703,000
 
 
 
10,069,000
 
 
 
25,890,000
 
 
 
22,246,000
 
 
 
7,627,000
 
 
 
865,000
 
Information technology
 
 
2,611,000
 
 
 
3,395,000
 
 
 
4,397,000
 
 
 
3,777,000
 
 
 
1,074,000
 
 
 
—  
 
 
 
—  
 
General and administrative
 
 
9,594,000
 
 
 
7,270,000
 
 
 
10,016,000
 
 
 
12,220,000
 
 
 
7,929,000
 
 
 
3,882,000
 
 
 
1,165,000
 
Charge for warrants issued to majority stockholder
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
1,190,000
 
 
 
—  
 
   


 


 


 


 


 


 


Total operating expenses
 
 
21,092,000
 
 
 
18,368,000
 
 
 
24,482,000
 
 
 
41,887,000
 
 
 
31,249,000
 
 
 
12,699,000
 
 
 
2,030,000
 
   


 


 


 


 


 


 


Loss from operations
 
 
(5,189,000
)
 
 
(7,420,000
)
 
 
(10,577,000
)
 
 
(29,916,000
)
 
 
(19,001,000
)
 
 
(6,603,000
)
 
 
(350,000
)
Interest expense and amortization of debt issue costs
 
 
(15,956,000
)
 
 
(897,000
)
 
 
(1,522,000
)
 
 
(108,000
)
 
 
(8,099,000
)
 
 
(197,000
)
 
 
(110,000
)
Interest income
 
 
—  
 
 
 
—  
 
 
 
167,000
 
 
 
663,000
 
 
 
719,000
 
 
 
—  
 
 
 
—  
 
Other (expense) income, net
 
 
(134,000
)
 
 
26,000
 
 
 
—  
 
 
 
—  
 
 
 
5,000
 
 
 
13,000
 
 
 
63,000
 
   


 


 


 


 


 


 


Loss before income taxes
 
 
(21,279,000
)
 
 
(8,291,000
)
 
 
(11,932,000
)
 
 
(29,361,000
)
 
 
(26,376,000
)
 
 
(6,787,000
)
 
 
(397,000
)
Provision for income taxes
 
 
2,000
 
 
 
2,000
 
 
 
5,000
 
 
 
1,000
 
 
 
1,000
 
 
 
1,000
 
 
 
2,000
 
   


 


 


 


 


 


 


Net loss
 
$
(21,281,000
)
 
$
(8,293,000
)
 
$
(11,937,000
)
 
$
(29,362,000
)
 
$
(26,377,000
)
 
$
(6,788,000
)
 
$
(399,000
)
   


 


 


 


 


 


 


Net income (loss) available to common stockholders
 
$
(21,281,000
)
 
$
(21,271,000
)
 
$
(24,915,000
)
 
$
(34,443,000
)
 
$
(26,377,000
)
 
$
(6,788,000
)
 
$
(399,000
)
Basic and Diluted Per Common Share:
                                                       
Net loss per-share attributable to common stockholders
 
$
(0.46
)
 
$
(1.18
)
 
$
(1.38
)
 
$
(1.93
)
 
$
(1.94
)
 
$
(0.71
)
 
$
(0.04
)
Weighted-average shares outstanding used in per-share calculation
 
 
45,809,470
 
 
 
17,968,189
 
 
 
18,054,000
 
 
 
17,836,000
 
 
 
13,612,000
 
 
 
9,521,000
 
 
 
9,521,000
 
   
September 30,

   
December 31,

 
   
2002

   
2001

   
2001

   
2000

   
1999

   
1998

   
1997

 
Balance Sheet:
                                                       
Cash and cash equivalents
 
$
2,450,000
 
 
$
 2,595,000
 
 
$
3,148,000
 
 
$
2,831,000
 
 
$
17,382,000
 
 
$
99,000
 
 
$
—  
 
Working capital (deficiency)
 
 
(1,625,000
)
 
 
(2,349,000
)
 
 
(9,117,000
)
 
 
(3,540,000
)
 
 
17,013,000
 
 
 
(7,761,000
)
 
 
(2,363,000
)
Total assets
 
 
29,439,000
 
 
 
15,591,000
 
 
 
27,735,000
 
 
 
12,015,000
 
 
 
25,650,000
 
 
 
575,000
 
 
 
547,000
 
Long term debt, net of current portion
 
 
1,464,000
 
 
 
240,000
 
 
 
1,810,000
 
 
 
42,000
 
 
 
37,000
 
 
 
343,000
 
 
 
61,000
 
Total debt
 
 
3,427,000
 
 
 
1,965,000
 
 
 
8,263,000
 
 
 
1,094,000
 
 
 
84,000
 
 
 
4,001,000
 
 
 
904,000
 
Redeemable Series A preferred stock
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
6,209
 
 
 
—  
 
 
 
—  
 
 
 
—  
 
Total stockholders’ equity (deficit)
 
$
19,523,000
 
 
$
6,789,000
 
 
$
10,355,000
 
 
$
(3,141,000
)
 
$
19,489,000
 
 
$
(7,749,000
)
 
$
(2,151,000
)

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US SEARCH MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
The following discussion of results of operations and financial condition should be read in conjunction with US SEARCH’s consolidated financial statements and related notes attached to this proxy statement/prospectus.
 
Overview
 
US SEARCH provides employment screening services to large businesses and a range of location and risk management services to consumers and small and medium sized business clients including identity verification, individual location, criminal record checks, employment and education verifications, professional reference checks, credit and motor vehicle record checks, drug screening, and pre-employment screening services. US SEARCH is able to deliver location verification and screening services through its proprietary web-based applications and patent pending US SEARCH DARWIN technology. US SEARCH’s services can be accessed through its websites, USSEARCH.com, ussearch.com/business or prsinet.com, or by calling toll free telephone numbers, 1-800-USSEARCH for consumers, 1-877-327-2410 for small and medium businesses or 1-800-232-0247 for large businesses.
 
US SEARCH’s consumer and small and medium business products provide direct (Internet and telephone) individual locator, and other public record searches to consumers and these services and pre-employment screening services to small and medium-sized businesses. US SEARCH’s business product provides employment screening and risk mitigation services to large businesses and organizations.
 
Due to the high level of automation, certain of US SEARCH’s services can be conducted instantly online. US SEARCH also offers assisted searches and screening services, both online and through a toll free telephone number.
 
Large Business Services.    US SEARCH provides large businesses, government agencies and other large employers with a variety of employment screening, background check and risk mitigation products and services via an online, web-based system that enables instant ordering and prompt delivery of results. Customers can customize their search and decision parameters online using a “drag-and-drop” browser interface. US SEARCH’s employment screening products include social security number traces, federal and state felony and misdemeanor record searches, employment and education verification, and credit histories. US SEARCH also provides character reference checks and drug screening via third party providers. In addition, US SEARCH offers a Management Services program that provides customers with an outsourced solution to background investigations, which includes analysis of developed investigation data, management of Fair Credit Reporting Act communications, legal compliance, and direct applicant contact.
 
Consumer-Focused Services.    US SEARCH provides consumer clients and small and medium sized businesses with a single, comprehensive access point to a broad range of information to assist them in locating individuals or to learn more information about people in their lives or with whom they do business. US SEARCH’s consumer clients can obtain public information including addresses, aliases, phone numbers, property ownership, court records, professional license verification, corporate affiliations and death record information. US SEARCH also offers nanny and contractor background check services for consumers and employment screening for small businesses.
 
Prices for US SEARCH’s non-instant consumer and small and medium business services have ranged from approximately $20 to $395 per search. Prices for “Instant Searches” range from approximately $10 to $15 per search. Prices for large business services range from $3 to $495. The prices for services vary based on the nature and amount of information and whether or not the search is assisted by a search specialist.

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Revenue for US SEARCH’s services is recognized when the results are delivered to the client. The terms of sale do not provide for refunds after services have been delivered, however, in instances where the clients indicate that the initial search result was unsuccessful, US SEARCH may perform another search or provide a refund at its discretion. In addition, where clients desire additional information they can request to broaden the scope of their “Instant Searches” and US SEARCH applies up to a portion of the cost of the client’s “Instant Searches” towards the cost of the more comprehensive search.
 
US SEARCH’s cost of services consists primarily of payroll and benefits, data acquisition costs, local and long distance telephone charges associated with providing its services, and payment processing costs. US SEARCH’s cost of services is likely to increase with increasing revenue levels. US SEARCH has entered into an agreement with a supplier of online public record data. On September 30, 2002, the non-cancelable payments under this agreement were $207,000 in 2002 and $690,000 in 2003.
 
US SEARCH’s operating expenses consist primarily of selling, marketing, general and administrative expenses and information technology costs. US SEARCH expects operating expenses to increase as it attempts to expand its corporate sales force and product lines.
 
Selling and marketing expenses are a significant portion of US SEARCH’s operating expenses. Internet advertising expenses are the most significant selling and marketing expense. US SEARCH has several cancelable and non-cancelable distribution and marketing agreements with various Internet companies. The terms of these agreements provide for varying levels of exclusivity and minimum and maximum fees payable based on the number of banners, buttons and text links displayed on affiliate websites. On September 30, 2002, the minimum non-cancelable payments due under these agreements were approximately $825,000 for 2002, $3.3 million for 2003, and $550,000 for 2004.
 
US SEARCH expects selling and marketing expenses to increase as it attempts to expand its products and market reach in both the consumer and business services groups.
 
Information technology expenses consist primarily of the compensation and benefits for employees and consultants involved in development, network administration, planning and maintenance of infrastructure. Certain costs associated with the development of software for internal use are capitalized. Information technology costs are expected to increase with the continuing development of proprietary technology.
 
General and administrative expenses consist primarily of compensation and related costs for administrative personnel, our occupancy costs and other overhead costs. US SEARCH expects general and administrative costs to remain flat or decrease as it continues to manage the size and growth of its organization.
 
Interest expense, net of interest income, consists of interest on outstanding short term and long term debt, and convertible notes payable. Interest expense also includes non-cash charges resulting from beneficial conversion features on US SEARCH’s convertible notes payable, and the amortization of discounts and issuance costs on US SEARCH’s convertible notes payable, vendor notes payable, and bank credit facility. As of September 30, 2002, upon the conversion of all remaining convertible notes payable into US SEARCH’s common stock, US SEARCH recognized all remaining beneficial conversion feature charges and wrote off all remaining discounts and issuance cost related to the convertible notes payable. Consequently, US SEARCH expects interest expense to decrease.

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Results of Operations
 
The following table sets forth, for the periods indicated, the relative percentages that certain income and expense items bear to net revenues:
 
    
Nine Months Ended September 30

    
Years Ended
December 31

 
    
2002

    
2001

    
2001

    
2000

    
1999

 
    
(unaudited)
                      
Net revenues
  
100
%
  
100
 %
  
100
 %
  
100
 %
  
100
%
Cost of services
  
30
 
  
24
 
  
24
 
  
46
 
  
37
 
    

  

  

  

  

Gross profit
  
70
 
  
76
 
  
76
 
  
54
 
  
63
 
    

  

  

  

  

Operating expenses:
                                  
Selling and marketing
  
39
 
  
53
 
  
55
 
  
116
 
  
114
 
General and administrative
  
42
 
  
50
 
  
54
 
  
55
 
  
41
 
Information technology
  
12
 
  
24
 
  
24
 
  
17
 
  
5
 
    

  

  

  

  

Total operating expenses
  
93
 
  
127
 
  
133
 
  
188
 
  
160
 
    

  

  

  

  

Loss from operations
  
(23
)
  
(51
)
  
(57
)
  
(134
)
  
(97
)
Interest expense, net
  
(70
)
  
(6
)
  
(7
)
  
3
 
  
(38
)
Other expense, net
  
(1
)
  
 
  
 
  
 
  
 
    

  

  

  

  

Loss before income taxes
  
(94
)
  
(57
)
  
(64
)
  
(131
)
  
(135
)
Provision for income taxes
  
 
  
 
  
 
  
 
  
 
    

  

  

  

  

Net loss
  
(94
)%
  
(57
)%
  
(64
)%
  
(131
)%
  
(135
)%
    

  

  

  

  

 
Comparison of the Nine Months Ended September 30, 2002 to the Nine Months Ended September 30, 2001
 
Net Revenues.    US SEARCH’s net revenues increased from approximately $14.5 million for the nine months ended September 30, 2001 to approximately $22.6 million for the nine months ended September 30, 2002, representing a 56.4% increase. Approximately $6.7 million of the increase is attributable to US SEARCH’s acquisition of Professional Resource Screening in December 2001 and US SEARCH’s entrance into the business services sector. The remaining $1.4 million increase is due to an increase in US SEARCH’s consumer services business. Through a combination of establishing new channel partnerships, strengthening existing channel partnership relationships, and implementing enhanced search technology, US SEARCH was able to increase Internet traffic to its website and improve customer conversion rates for the consumer business.
 
Gross Profit.    Gross profit increased from approximately $10.9 million for the nine months ended September 30, 2001, to approximately $15.9 million for the nine months ended September 30, 2002, representing a 45.3% increase.
 
Gross profit as a percentage of net revenues was approximately 70.3% for the nine month period ended September 30, 2002 compared to 75.7% for the 2001 period. The decrease in gross margin reflects the change in product mix as a result of US SEARCH’s December 2001 acquisition of Professional Resource Screening, which has a lower gross margin than the consumer business, offset by cost reductions in US SEARCH’s consumer business. Increased automation in US SEARCH’s consumer business resulting in a reduction of direct labor expense also contributed to the increase in gross profit.
 
Selling and Marketing Expenses.    Selling and marketing expenses increased by $1.2 million to $8.9 million for the nine month period ended September 30, 2002 as compared to $7.7 million for the 2001 period. The change is the net result of an increase of $1.5 million due to the December 2001 acquisition of Professional Resource Screening, and $1.3 million due to increased advertising costs and the addition of new Internet

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advertising providers, partially offset by a $1.0 million reduction in selling and marketing labor costs. There was also a net reduction of approximately $491,000 in other discretionary selling and marketing costs, consisting of miscellaneous costs such as consulting fees, travel and entertainment costs, and public relations fees. Although costs increased, selling and marketing expenses were 39.3% of sales for the nine months ended September 30, 2002 compared to 53.3% of sales for the nine months ended September 30, 2001. The decrease in the ratio of selling and marketing expenses to sales is a result of US SEARCH’s efforts to reduce customer acquisition costs and to implement more efficient means of marketing by taking steps such as developing better channel partnerships.
 
Information Technology Expenditures.    Information technology expenditures decreased by $784,000 for the nine-month period ended September 30, 2002 as compared to the 2001 period, due primarily to a $893,000 reduction in payroll costs due to reduction in headcount, a $288,000 net reduction in consulting fees due to implementation of certain of US SEARCH’s internally developed software, and a $175,000 increase in software maintenance fees. Additionally, during the three-month period ended September 30, 2002, US SEARCH reversed accruals of approximately $129,000 as it determined that activities related to those accruals were settled for less than the amounts originally estimated. These net cost reductions were partially offset by the $409,000 of increased costs resulting from the December 2001 acquisition of Professional Resource Screening.
 
General and Administrative Expenses.    General and administrative expenses for the nine months ended September 30, 2002 increased by $2.3 million compared to the same period in 2001. The change is primarily the result of a $1.8 million increase due to the December 2001 acquisition of Professional Resource Screening and a $644,000 increase in depreciation expense as a result of initial implementation of certain of US SEARCH’s internally developed software. Additionally, there was a net $346,000 reduction in credit card dispute chargebacks and related chargeback fees. To achieve the reduction in chargebacks, US SEARCH introduced several new credit card authentication procedures to verify credit card transactions. There was also a net increase of approximately $197,000 in other miscellaneous costs.
 
Interest Expense, Net.    Interest expense, net of interest income, was $16.0 million for the nine months ended September 30, 2002 as compared to $897,000 for the same period in 2001. In July 2002, upon the conversion of the 8% Convertible Promissory Notes with an aggregate principal amount of $14.2 million, US SEARCH recorded as additional interest expense a non-cash charge of $11.7 million for a beneficial conversion feature relating to the notes. Included in interest expense for 2002 are non-cash interest charges of $3.4 million related to the amortization of discounts and issuance costs on US SEARCH’s convertible and vendor notes payable. During July 2002, US SEARCH wrote off all remaining discounts on the convertible notes upon conversion of the notes. Interest expense also includes $528,000 related to the amortization of debt issuance costs incurred in conjunction with US SEARCH’s bank credit facility.
 
Other Income (Expense), Net.    Other expense, net of other income, was $134,000 for the nine months ended September 30, 2002 as compared to $26,000 for the same period in 2001. In July 2002, upon the conversion of the 8% Convertible Promissory Notes with an aggregate principal amount of $14,226,000, US SEARCH wrote off approximately $140,000 of financing costs.
 
Comparison of the Year Ended December 31, 2001 to the Year Ended December 31, 2000
 
Net Revenues.    Net revenues decreased from approximately $22.4 million for the year ended December 31, 2000 to approximately $18.4 million for the year ended December 31, 2001, representing a 17.7% decrease. Beginning in the fourth quarter of 2000, certain television and Internet advertising contracts that were not cost-effective were eliminated. Fewer advertisements contributed significantly to the decrease in net revenues.
 
Gross Profit.    Gross profit increased from approximately $12.0 million for the year ended December 31, 2000, to approximately $13.9 million for the year ended December 31, 2001, representing a 15.8% increase.

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Gross profit as a percentage of net revenues was approximately 75.5% for the year ended December 31, 2001 and 53.5% for the year ended December 31, 2000. Data acquisition and fulfillment costs decreased by approximately $2.9 million to 11.3% of sales in 2001 compared to 22.4% of sales in 2000. The reduction is due to the use of lower cost data providers for certain products. Increased automation, which resulted in a reduction in direct labor expenses, also contributed to the improvement in gross margin.
 
Selling and Marketing Expenses.    Selling and marketing expenses, excluding non-cash charges of $1.8 million in the year ended December 31, 2000, decreased from approximately $24.1 million to approximately $10.1 million for the year ended December 31, 2001. As a percentage of net revenues, selling and marketing expenses, decreased to approximately 54.7% for the year ended December 31, 2001, from approximately 107.6%, excluding the non-cash charges, for the year ended December 31, 2000. Advertising costs declined due to efforts to restructure certain online advertising agreements to require lower guaranteed minimum payments and to eliminate certain television and Internet advertising contracts that were not cost-effective.
 
General and Administrative Expenses.    General and administrative expenses decreased 18.0% from approximately $12.2 million for the year ended December 31, 2000 to approximately $10.0 million for the year ended December 31, 2001. This decrease is primarily due to a reduction in payroll and payroll related expenses of $1.1 million of which $492,000 was for severance and a reduction in professional services expenses of approximately $1.0 million. These decreases were partially offset by a $565,000 increase in depreciation expense.
 
Information Technology Expenses.    Information technology expenses increased from approximately $3.8 million for the year ended December 31, 2000 to approximately $4.4 million for the year ended December 31, 2001. The increase is due to increased investment in US SEARCH’s proprietary technology and customer relationship management systems. US SEARCH continued investing in this technology through fiscal year 2002.
 
Interest Expense, Net.    Interest expense, net of interest income, was $1.4 million for the year ended December 31, 2001 compared to net interest income of $555,000 for the year ended December 31, 2000. Included in 2001 interest expense are non-cash charges totaling $445,000 for the beneficial conversion feature associated with US SEARCH’s convertible debt, and $720,000 related to the amortization of debt issuance costs.
 
Amortization of debt issue costs are comprised of non-cash charges and amortization of warrants issued in connection with convertible notes payable, and other origination fees. During 2000, US SEARCH had no such charges. During 2001, US SEARCH incurred non-cash charges comprised of $250,000 associated with warrants issued in connection with its March 2001 convertible notes payable to Pequot Private Equity Fund II, L.P., $367,000 of amortization of warrants issued to US SEARCH’s bank in connection with its line of credit facility, an $89,000 non-cash charge in connection with warrants issued to US SEARCH’s bank under its forbearance agreement and $14,000 of amortization charges relating to warrants issued in connection with US SEARCH’s December 2001 convertible notes payable to Pequot Private Equity Fund II, L.P.
 
Income Taxes.    As of December 31, 2001 US SEARCH had approximately $66.2 million of federal and $35.5 million of state net operating loss carryforwards to offset future taxable income. US SEARCH’s net operating loss carryforwards expire beginning in 2017 for federal and 2002 for state. US SEARCH’s ability to utilize net operating loss carryforwards may be limited in the event that a change in ownership, as defined in the Internal Revenue Code, occurs in the future. US SEARCH has recorded a full valuation allowance against deferred tax assets, as US SEARCH believes that it is more likely than not that the deferred tax assets will not be realized based upon expected future results of operations.

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Comparison of the Year Ended December 31, 2000 to the Year Ended December 31, 1999.
 
Net Revenues.    US SEARCH’s net revenues increased 14% to approximately $22.4 million for the year ended December 31, 2000, from approximately $19.5 million for the year ended December 31, 1999. The increase is primarily attributable to an increase in the number of Internet-based transactions which occurred as a result of increased website visitor traffic and the introduction of lower-priced “Instant Searches” and “Individual Profile Reports”. The growth in website traffic was primarily driven by increased advertising impressions, Internet search engines and popular websites.
 
Gross Profit.    Gross profit decreased 2% to approximately $12.0 million for the year ended December 31, 2000, from approximately $12.2 million for the year ended December 31, 1999. Gross profit as a percentage of net revenues decreased to approximately 54% for the year ended December 31, 2000, from approximately 63% for the year ended December 31, 1999. Cost of services increased 42% to approximately $10.4 million for the year ended December 31, 2000, from approximately $7.3 million for the year ended December 31, 1999. As a percentage of net revenues, cost of services increased to 46% for the year ended December 31, 2000 compared to 37% for the year ended December 31, 1999. Data acquisition and fulfillment costs as a percentage of revenues increased due to the introduction of certain lower-priced products and the use of higher-cost data suppliers in 2000. Telephone costs decreased as a percentage of net revenues primarily due to lower volume of 900-number telephone billings. Labor costs increased as a percentage of net revenues primarily due to efforts to improve customer service levels.
 
Selling and Marketing Expenses.    Selling and marketing expenses increased 16% to approximately $25.9 million for the year ended December 31, 2000, from approximately $22.2 million for the year ended December 31, 1999. As a percentage of net revenues, selling and marketing expenses increased to approximately 116% for the year ended December 31, 2000, from approximately 114% for the year ended December 31, 1999. This increase is primarily attributable to a non-cash charge of $2.2 million recorded in 2000 in connection with the termination of a long-term agreement with an Internet advertising portal.
 
General and Administrative Expenses.    General and administrative expenses increased to approximately $12.2 million for the year ended December 31, 2000, from approximately $7.9 million for the year ended December 31, 1999. As a percentage of net revenues, general and administrative expenses increased to approximately 55% for the year ended December 31, 2000, from approximately 41% for the year ended December 31, 1999. This increase in general and administrative expenses in absolute dollars is primarily attributable to the cost associated with the hiring in 2000 of new management personnel, severance costs, increased rent expense in connection with new facilities, increased legal fees, and depreciation expense.
 
Information Technology Expense.    Information technology expense increased to $3.8 million for the year ended December 31, 2000 from $1.1 million for the year ended December 31, 1999. The increase is attributable to the hiring of technology management and personnel at all levels along with consultant expenses in the efforts to stabilize infrastructure and determine requirements for new technology initiatives.
 
Interest Expense, Net.    Interest expense was $108,000 for the year ended December 31, 2000 compared to interest expense of $8.1 million for the year ended December 31, 1999. Included in interest expense for the year ended December 31, 1999 is approximately $4.6 million relating to the beneficial conversion feature on the convertible subordinated note, and $3.1 million relating to the amortization of debt issuance costs. The interest expense for the year ended December 31, 1999 also includes interest on outstanding short term and long term debt, the convertible subordinated note issued to Kushner-Locke and advances and other inter-company charges from Kushner-Locke. The entire amount outstanding under the convertible subordinated note was automatically converted into common stock on the closing of US SEARCH’s initial public offering in June 1999.
 
In connection with the convertible subordinated note issued to Kushner-Locke in 1999, US SEARCH granted to Kushner-Locke warrants to purchase 906,782 shares of its common stock. Relating to these warrants

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US SEARCH recorded a non-cash charge of $2.5 million in 1999 that was amortized over the six-month period that the convertible subordinated note was outstanding. Also, the convertible subordinated note included an origination fee in the amount of $550,000 paid to Kushner-Locke that was fully amortized in the period.
 
Interest income was $663,000 for the year ended December 31, 2000 compared to interest income of $719,000 for the year ended December 31, 1999. The decrease in interest income resulted from a decline in interest bearing cash balances from the levels following US SEARCH’s initial public offering in June 1999.
 
Liquidity and Capital Resources
 
As of September 30, 2002, cash and cash equivalents have decreased to $3.5 million (including $1.1 million of restricted cash pledged as collateral in connection with US SEARCH’s credit facility) from $3.9 million (including $750,000 of restricted cash) at December 31, 2001.
 
Cash used in operations was $7.0 million for each of the nine-month periods ended September 30, 2002 and 2001. The cash used in operations during the 2002 period is the result of continued operating losses and the growth in accounts receivable due to US SEARCH’s entrance into the business services sector.
 
Cash used in investing activities decreased to $1.9 million for the nine months ended September 30, 2002 compared to $3.6 million for the nine months ended on September 30, 2001. This is attributable to reduced investment in software development because of the completion and implementation of certain projects, reduced computer equipment purchases and license fees.
 
Cash provided by financing activities was approximately $8.2 million for the nine months ended September 30, 2002 compared to $10.4 million for the nine months ended September 30, 2001. The cash provided in the 2002 period is primarily attributable to $10.2 million in net cash proceeds from issuance of January and March 2002 convertible notes payable, partially offset by $697,000 of payments made in conjunction with the December 2001 acquisition of Professional Resource Screening, the repayment of $1.1 million in obligations to financial institutions and other unrelated third parties, and the increase in restricted cash of $305,000 in accordance with US SEARCH’s amended credit facility.
 
On January 15, 2003 First American loaned US SEARCH $1.4 million pursuant to a subordinated secured promissory note that matures on June 30, 2003. The subordinated secured promissory note bears interest at the lesser of 10.0% and the prime rate plus 4.75%, and is secured by all of the real and personal property of US SEARCH. See “OTHER AGREEMENTS—Subordinated Secured Promissory Note” on page 61.
 
On August 7, 2002, US SEARCH entered into an agreement with Comerica Bank to amend its loan and security agreement. The Comerica facility was amended to reduce the revolving credit line to $1.0 million from $3.0 million. Amounts under the borrowing base line may be advanced based on up to 80% of eligible receivables as defined in the agreement. Borrowings under the revolving credit line are due and payable on March 26, 2003. Total borrowings under the revolving credit facility totaled $1.0 million at September 30, 2002. Pursuant to the terms of the amendment to the loan and security agreement with Comerica Bank, all further credit advances under the revolving credit line are subject to credit approval by the bank.
 
Significant financial covenants with which US SEARCH must comply include operating performance requirements, minimum EBITDA requirements and a debt/tangible net worth ratio. In accordance with the terms of the amendment to the loan and security agreement with Comerica Bank, the amount of unrestricted cash US SEARCH must maintain on deposit with the bank was reduced from $1.2 million to $250,000. As of September 30, 2002, US SEARCH must also maintain deposits of $800,000 with the bank as collateral for credit card processing and a standby letter of credit. Effective April 2002, US SEARCH placed a $750,000 deposit with the bank to collateralize an outstanding standby letter of credit. The letter of credit and the required deposit is reduced by $83,333 per month and matures on November 30, 2002. The amount of the letter of credit and the collateral deposit at October 1, 2002 was $166,000.

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In December 2001, US SEARCH issued 8% Convertible Promissory Notes due December 20, 2002 in the aggregate principal amount of $3.5 million. In January 2002, US SEARCH issued 8% Convertible Promissory Notes due January 17, 2003 in the aggregate principal amount of $4.6 million. In March 2002, US SEARCH issued 8% Convertible Promissory Notes due December 20, 2002 in the aggregate principal amount of $6.1 million with net proceeds of $5.7 million. At the 2002 Annual Meeting of Stockholders, held on July 18, 2002, US SEARCH’s stockholders approved the issuance of the shares of common stock underlying the notes and, consequently, these notes and accrued interest automatically converted into common stock on July 18, 2002. These notes, with an aggregate principal amount of $14.2 million and accrued interest, converted into 27,864,051 shares of common stock.
 
As of close of business on July 18, 2002, Pequot Private Equity Fund II, L.P., the holder of all 203,113 shares of Series A-1 Convertible Preferred Stock, elected to convert all of its Series of A-1 Convertible Preferred Stock into common stock. The conversion price of the Series A-1 Convertible Preferred Stock was $0.48237 per share, which resulted in the issuance of an aggregate of 42,107,303 shares of common stock upon conversion.
 
Since inception, US SEARCH has experienced negative cash flows from operations. US SEARCH had a working capital deficit of $1.6 million and an accumulated deficit of $95.8 million as of September 30, 2002. Based on current operating plans, management believes that the $1.4 million loan from First American, existing cash resources and cash forecasted by management to be generated by operations and potentially available from a renegotiated bank financing arrangement will be sufficient to meet working capital and capital requirements through at least the effective time of the mergers. Management’s plans to attain profitability and generate additional cash flows include, increasing revenues from business and consumer services, focusing on cost reductions and operational efficiencies to be derived from further deployment of US SEARCH’s technologies, and the launch of additional products. There is no assurance that management will be successful with these plans. If US SEARCH is unable to meet its current operating plan and is unable to raise additional financing, US SEARCH may be required to reduce certain discretionary spending, which could have a material adverse effect on US SEARCH’s ability to achieve its intended business objectives.
 
Contractual Obligations and Commercial Commitments
 
The following table summarizes all of US SEARCH’s significant contractual payment obligations as of September 30, 2002, by payment due date:
 
    
Payments by Period

Contractual Obligation

  
Total

    
Remainder of 2002

  
2003-2004

    
2005-thereafter

    
($ Thousands)
Bank debt
  
$
1,223
    
$
76
  
$
1,147
    
$
Advertising commitments
  
 
4,675
    
 
825
  
 
3,850
    
 
Capital lease obligations
  
 
209
    
 
55
  
 
151
    
 
3
Operating lease obligations
  
 
3,846
    
 
377
  
 
3,006
    
 
463
Minimum purchase commitments
  
 
897
    
 
207
  
 
690
    
 
Professional Resource Screening payment obligations(a)
  
 
2,220
    
 
150
  
 
2,070
    
 
    

    

  

    

Total
  
$
13,070
    
$
1,690
  
$
10,914
    
$
466
    

    

  

    


(a)
 
Includes payment obligations of $1.5 million, payable in equal monthly installments of $127,000 commencing January 2004. These payments may be accelerated commencing October 2002 based on the profitability and cash flows of Professional Resource Screening.

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Critical Accounting Policies
 
US SEARCH has identified the policies below as critical to its business operations and the understanding of results of operations. The impact and any associated risks related to these policies on US SEARCH’s business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 3 in the Notes to the Consolidated Financial Statements of US SEARCH for the fiscal year ended December 31, 2001 contained in this proxy statement/prospectus. Note that the preparation of US SEARCH’s financial statements in conformity with generally accepted accounting principles requires the making of estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of US SEARCH’s financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.
 
 
 
Capitalized Software and Development Costs.    US SEARCH’s policy on capitalized software costs determines the timing of recognition of certain development costs. Management is required to use professional judgment in determining whether such development costs meet the criteria for immediate expense recognition or capitalization. US SEARCH capitalizes costs of software, consulting services, hardware and payroll related costs incurred to purchase and develop internal-use software. US SEARCH expenses costs incurred during the preliminary project assessment, research and development, reengineering, training and application maintenance phases.
 
 
 
Acquired Intangibles.    US SEARCH’s business acquisition resulted in goodwill and other intangible assets, which affect the amount of future period amortization expense and possible impairment expense that may be incurred. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect the consolidated financial statements. US SEARCH periodically evaluates acquired businesses for potential impairment indicators. Judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operational performance of acquired businesses. Future events could cause US SEARCH to conclude that impairment indicators exist and that goodwill and intangible assets associated with acquired businesses are impaired. Any resulting impairment loss could have a material adverse impact on financial condition and results of operations.
 
 
 
Income Taxes.    US SEARCH utilizes the liability method of accounting for income taxes. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and the tax bases of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
 
 
 
Legal Contingencies.    US SEARCH is currently involved in certain legal proceedings as discussed in Note 6 of its consolidated financial statements for the nine month period ended September 30, 2002. While the outcome of these matters is difficult to predict, US SEARCH currently believes that the loss, if any, from these proceedings will not materially exceed the amount accrued in the consolidated financial statements. However there is no assurance that such amounts accrued will be adequate to cover such losses upon final resolution of these matters.

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Selected Quarterly Financial Data
 
The following table sets forth certain unaudited financial data for the seven quarters in the period ended September 30, 2002. This data has been derived from unaudited financial statements that, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the information when read in conjunction with US SEARCH’s annual audited financial statements and the notes thereto. Certain reclassifications have been made to prior quarters to conform with current quarter presentations. The operating results for any quarter are not necessarily indicative of the results for any future period.
 
    
Quarter Ended

        
    
March 31,
2002

    
June 30,
2002

    
September 30,
2002

        
    
(in thousands except per share data)
        
Net Sales
  
$
6,663
 
  
$
7,526
 
  
$
8,427
 
        
Gross Profit
  
 
4,675
 
  
 
5,312
 
  
 
5,916
 
        
Net Loss
  
 
(2,998
)
  
 
(3,714
)
  
 
(14,572
)
        
Net Loss attributable to common stockholders
  
 
(2,998
)
  
 
(3,714
)
  
 
(14,572
)
        
Loss per share basic and diluted
  
 
(0.11
)
  
 
(0.14
)
  
 
(0.18
)
        
    
Quarter Ended

 
    
March 31,
2001

    
June 30,
2001

    
September 30,
2001

    
December 31,
2001

 
    
(in thousands except per share data)
 
Net Sales
  
$
4,941
 
  
$
5,005
 
  
$
4,517
 
  
$
3,936
 
Gross Profit
  
 
3,517
 
  
 
3,952
 
  
 
3,478
 
  
 
2,958
 
Net Loss
  
 
(2,790
)
  
 
(2,758
)
  
 
(2,747
)
  
 
(3,642
)
Net Loss attributable to common stockholders
  
 
(3,029
)
  
 
(15,497
)
  
 
(2,747
)
  
 
(3,642
)
Loss per share basic and diluted
  
 
(0.17
)
  
 
(0.86
)
  
 
(0.15
)
  
 
(0.20
)
 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF THE FAST DIVISION
 
The FAST division is providing the following financial information to aid you in your analysis of the financial aspects of the transactions. The selected financial data of the FAST division has been derived from the audited combined financial statements and accompanying notes of the FAST division for the three years ended December 31, 2001, unaudited combined financial statements of the FAST division for the two years ended December 31, 1998, and the unaudited combined financial statements for the nine months ended September 30, 2002 and September 30, 2001. This information is only a summary and should be read in conjunction with, and is qualified in its entirety by reference to, the combined financial statements and accompanying notes attached to this proxy statement/prospectus.
 
    
Nine Months Ended
September 30,

    
Year Ended December 31,

 
    
2002

    
2001

    
2001

    
2000

    
1999

    
1998

    
1997

 
Statement of Operations:
                                                              
Total revenue
  
$
74,291,207
 
  
$
35,729,085
 
  
$
49,167,057
 
  
$
38,582,074
 
  
$
30,372,638
 
  
$
23,196,975
 
  
$
15,395,636
 
Cost of revenue
  
 
33,003,231
 
  
 
10,156,868
 
  
 
14,615,322
 
  
 
11,128,306
 
  
 
8,412,157
 
  
 
6,323,396
 
  
 
5,750,107
 
    


  


  


  


  


  


  


Gross margin
  
 
41,287,976
 
  
 
25,572,217
 
  
 
34,551,735
 
  
 
27,453,768
 
  
 
21,960,481
 
  
 
16,873,579
 
  
 
9,645,529
 
Selling, general, and administrative expenses
  
 
35,865,686
 
  
 
25,019,539
 
  
 
35,007,605
 
  
 
26,856,220
 
  
 
22,293,539
 
  
 
14,406,556
 
  
 
8,557,809
 
    


  


  


  


  


  


  


Income (loss) from operations
  
 
5,422,290
 
  
 
552,678
 
  
 
(455,870
)
  
 
597,548
 
  
 
(333,058
)
  
 
2,467,023
 
  
 
1,087,720
 
    


  


  


  


  


  


  


Other (expense) income:
                                                              
Interest expense
  
 
(182,012
)
  
 
(189,646
)
  
 
(241,686
)
  
 
(312,991
)
  
 
(262,154
)
  
 
(37,166
)
  
 
(5,528
)
Interest income
  
 
46,544
 
  
 
51,682
 
  
 
59,349
 
  
 
32,296
 
  
 
21,333
 
  
 
4,222
 
  
 
831
 
    


  


  


  


  


  


  


Total other expense, net
  
 
(135,468
)
  
 
(137,964
)
  
 
(182,337
)
  
 
(280,695
)
  
 
(240,821
)
  
 
(32,944
)
  
 
(4,697
)
    


  


  


  


  


  


  


(Loss) income before provisions for income tax
  
 
5,286,822
 
  
 
414,714
 
  
 
(638,207
)
  
 
316,853
 
  
 
(573,879
)
  
 
2,434,079
 
  
 
1,083,023
 
(Benefit) provision for income tax
  
 
2,220,465
 
  
 
153,444
 
  
 
(58,898
)
  
 
266,338
 
  
 
(237,567
)
  
 
481,602
 
  
 
—  
 
    


  


  


  


  


  


  


Net (loss) income
  
$
3,066,357
 
  
$
261,270
 
  
$
(579,309
)
  
$
50,515
 
  
$
(336,312
)
  
$
1,952,477
 
  
$
1,083,023
 
    


  


  


  


  


  


  


Balance Sheet:
                                                              
Total assets
  
$
111,105,307
 
  
$
62,184,189
 
  
$
62,283,725
 
  
$
26,628,269
 
  
$
15,591,881
 
  
$
5,431,869
 
  
$
2,781,570
 
Long-term debt
  
$
560,114
 
  
$
1,158,713
 
  
$
1,158,713
 
  
$
2,260,899
 
  
$
1,410,425
 
  
$
355,406
 
  
$
145,504
 
Stockholders’ equity (deficit)
  
$
100,014,045
 
  
$
52,876,222
 
  
$
53,075,105
 
  
$
18,491,766
 
  
$
12,390,154
 
  
$
4,372,076
 
  
$
1,673,300
 

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FAST DIVISION MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
The following discussion of results of operations and financial condition should be read in conjunction with the FAST division’s combined financial statements and the related notes attached to this proxy statement/prospectus.
 
Overview
 
The FAST division provides business information and related products and services. The FAST division’s principal businesses include tenant screening, employee background checking, occupational health services and motor vehicle reports.
 
The FAST division earns revenue in the form of fees from the reports generated through its database of information and by searches performed. The FAST division generally enters into agreements with customers under which they pay a fixed fee per report generated. The FAST division recognizes this revenue when reports have been prepared and delivered.
 
The FAST division’s expenses consist primarily of compensation and benefits costs for employees, data acquisition costs, occupancy and related costs, general and administrative expenses associated with operating its business, income taxes and debt service obligations. The FAST division’s expenses are likely to increase with increasing revenue levels.
 
Critical Accounting Policies and Estimates
 
The FAST division’s discussion and analysis of financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with generally accept