UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrantx
Filed by Party other than Registrant¨
Check the appropriate box:
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x | Definitive proxy statement |
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FIRST ADVANTAGE CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required
x | No fee required |
¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
¨ Fee paid previously with preliminary materials.
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Dear Stockholders:
I am very pleased to invite you to attend the third2009 annual meeting of stockholders of First Advantage Corporation, a Delaware corporation, to be held atin the Renaissance Vinoy Resort,Eagle Auditorium of our offices, located at 501 Fifth Avenue NE, St. Petersburg, Florida 33701,12395 First American Way, Poway, California 92064, on May 11, 2006April 28, 2009 at 9:00 a.m. EasternPacific Time.
DetailsFor the first time in our company’s history, we are pleased to take advantage of the businessSecurities and Exchange Commission rule allowing companies to be conducted atfurnish proxy materials to their stockholders over the meeting are given inInternet. We believe that this e-proxy process expedites stockholders’ receipt of proxy materials, while also lowering the attached noticecosts and reducing the environmental impact of our annual meetingmeeting. On March 18, 2009, we mailed to our stockholders a Notice containing instructions on how to access our 2009 proxy statement and proxy statement.annual report online.
We hope that you are able to attend the annual meeting. It is important that you vote your shares whether or not you are able to attend in person. We urge you to read the accompanying proxy statement and to vote on the matters presentedyour shares by proxy by filling in the appropriate boxes on the enclosed proxy card and returning it promptly.promptly or by voting over the Internet or by telephone by following the instructions found on the proxy card(s). If you attend the meeting and prefer to vote in person, you may do so even if you have returnedalready voted your proxy card.shares by proxy. You may also revoke a proxy at any time before it is exercised.
Directions to the First Advantage Corporation 2009 Annual Meeting are available on the “Investor Relations” page of our website at www.fadv.com.
Thank you for your cooperation and your support and interest in First Advantage Corporation.
John Long
Chief Executive Officer
Anand Nallathambi |
Chief Executive Officer and President |
FIRST ADVANTAGE CORPORATION
100 Carillon Parkway12395 First American Way
St. Petersburg, FL 33716Poway, California 92064
NOTICE OF ANNUAL MEETING
To be Held on May 11, 2006April 28, 2009
The 2009 annual meeting of stockholders of First Advantage Corporation, a Delaware corporation, will be held atin the Renaissance Vinoy Resort,Eagle Auditorium of our offices, located at 501 Fifth Avenue NE, St. Petersburg, Florida 33701,12395 First American Way, Poway, California 92064, on May 11, 2006April 28, 2009 at 9:00 a.m. EasternPacific Time, and at any adjournments thereof, for the following purposes:
1. | To elect our board of directors to serve until our 2010 annual meeting of stockholders, |
2. | To transact such other business as may properly come before the meeting. |
Our board of directors has fixed the close of business on March 31, 200610, 2009 as the record dateRecord Date for determining the holders of our Class A and Class B common stock entitled to notice of the meeting, as well as for determining the holders of our Class A and Class B common stock entitled to vote at the meeting.
All stockholders are invited to attend the annual meeting in person. All stockholders also are respectfully urged to executevote their shares by proxy as promptly as possible by executing and returnreturning the enclosed proxy card as promptly as possible.or by voting over the internet or by telephone by following the instructions found on the proxy card(s). Stockholders who execute avote their shares by proxy card may nevertheless attend the annual meeting, revoke their proxy, and vote their shares in person. Please read the accompanying proxy statement and proxy card for information on the annual meeting and voting.instructions for voting your shares by proxy. Directions to the First Advantage Corporation 2009 Annual Meeting are available on the “Investor Relations” page of our website atwww.fadv.com.
By Order Of The Board Of Directors
Julie A. Waters
By Order Of The Board Of Directors |
Bret T. Jardine |
Vice President, Associate General Counsel and Corporate Secretary |
March 18, 2009 |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held April 28, 2009
The Notice of Internet Availability of Proxy Materials includes a toll-free telephone number, an e-mail address and a website where stockholders can request a paper or e-mail copy of the proxy statement, our annual report on Form 10-K for the year ended December 31, 2008 and a form of proxy relating to the annual meeting as well as information on how to access the form of proxy. If you want to receive a paper copy or an e-mail with links to the electronic materials, you must request one by contacting Bret T. Jardine, Corporate Secretary, at 100 Carillon Parkway, St. Petersburg, Florida
April 11, 2006 33716. There is no charge to you for requesting a copy.
FIRST ADVANTAGE CORPORATION
100 Carillon Parkway12395 First American Way
St. Petersburg, FL 33716Poway, California 92064
PROXY STATEMENT
for
annual meetingAnnual Meeting of stockholdersStockholders
May 11, 2006April 28, 2009
The board of directors of First Advantage Corporation is soliciting proxies for use at the annual meeting of stockholders to be held atin the Renaissance Vinoy Resort,Eagle Auditorium of our offices, located at 501 Fifth Avenue NE, St. Petersburg, Florida 33701,12395 First American Way, Poway, California 92064, on May 11, 2006April 28, 2009 at 9:00 a.m. Eastern, Pacific Time, and at any adjournments thereof. On or about April 14, 2006,
As permitted by Securities and Exchange Commission rules, we began sending the attached notice of annual meeting,are making this proxy statement the enclosed proxy card, and our annual report for 2005 (which ison Form 10-K available to our shareholders electronically via the Internet. On March 18, 2009, we mailed to our stockholders a Notice containing instructions on how to access this proxy statement and our annual report online. If you received a Notice by mail, you will not partreceive a printed copy of the proxy soliciting materials)materials in the mail. If you received a Notice by mail and would like to all holders of recordreceive a printed copy of our Class A and Class B common stock entitled to receiveproxy materials, you should follow the instructions for requesting such materials and vote.
contained in the Notice.
Frequently Asked Questions About The Annual Meeting
Q: | What will be voted on at the annual meeting? |
A: | The purpose of the annual meeting is to elect our directors for a one-year term and to transact any other business that may properly be presented. |
Q: | Does First Advantage Corporation have a recommendation on voting? |
A: | Yes. The board of directors recommends that you vote “FOR” the nominees for director set forth in the attached proxy card. |
Q: | Who is entitled to vote at the meeting? |
A: | Holders of record of our Class A common stock and our Class B common stock at the close of business on March |
Q: | What shares can I vote? |
A: | You may vote all shares owned by you as of |
Q: | How many votes will I have? |
A: | Holders of our Class A common stock will have one vote for each share held of record on |
Q: | What is the difference between record ownership and beneficial ownership? |
A: | Most stockholders own their shares through a stockbroker or other nominee rather than directly in their own names. There are some differences in how to vote, depending on how you hold your shares. |
You are the record owner of shares if those shares are registered directly in your name with our transfer agent. The transfer agent for our Class A common stock is Wells Fargo Shareowner Services. First Advantage actsWe act as itsour own transfer agent for our Class B common stock. As the record holder of shares, you may vote such shares in person at the annual meeting or grant your voting proxy directly by completing the enclosed proxy card.
You are the beneficial owner of shares if you hold those shares in “street name” through a stockbroker, bank, trustee or other nominee, including shares held on your behalf in the First Advantage Corporation 401(k) Savings Plan. If you are a beneficial owner, these proxy materials are being sent to you through your stockbroker or other nominee together with a voting instruction card. In order to vote, you must complete the voting instruction card
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provided by your stockbroker or other nominee to direct the record holder how to vote your shares or obtain a valid proxy from the stockbroker or other nominee who is the record owner of your shares giving you authority to vote your shares in person at the meeting. Directions to the First Advantage Corporation 2009 Annual Meeting are available on the “Investor Relations” page of our website at www.fadv.com.
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Q: | What is a notice of electronic availability of proxy statement and annual report? |
A: | As permitted by Securities and Exchange Commission rules, we are making this proxy statement and our annual report available to our shareholders electronically via the Internet. On March 18, 2009, we mailed to our stockholders a Notice containing instructions on how to access this proxy statement and our annual report online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained in the Notice. |
Q: | How do I vote? |
A: | You can vote on matters that come before the meeting in two ways: |
You can come to the annual meeting and vote in person; or
You can vote your shares by filling out, signing and returning the proxy card or voting instruction card.proxy.
If you wish to vote at the annual meeting, and you are a beneficial owner of your shares, you must have a legal proxy in your favor executed by the stockbroker or other nominee who is the record owner.
Whether or notIf you plan to attendare the annual meeting in person, please fill inrecord owner of your shares, you may vote your shares by proxy using any of the following methods:
completing, signing, dating and signreturning the enclosed proxy card in the postage-paid envelope provided;
calling the toll-free telephone number listed on the proxy card; or
using the Internet site listed on the proxy card.
The telephone and Internet voting procedures set forth on the proxy card are designed to authenticate stockholders’ identities, to allow stockholders to provide their voting instructions, and to confirm that their instructions have been properly recorded. If you vote by telephone or instruction cardover the Internet, you should not return your proxy card.
If you are a beneficial owner, you will receive voting instructions (including, if your broker, bank or other nominee elects to do so, instructions on how to vote your shares by telephone or over the Internet) from the record holder, and you must follow those instructions in order to have your shares voted at the Annual Meeting.
Depending on how you hold your shares, you may receive more than one proxy card.
Your vote is important. Whether you vote by mail, telephone or over the Internet, your shares will be voted in accordance with your instructions. If you sign, date and return it promptly.your proxy card without indicating how you want to vote your shares, the proxy holders will vote your shares in accordance with the recommendations of the Board of Directors.
Q: | Can I revoke my proxy? |
A: | Yes. You may revoke your proxy |
You may send in another proxy card with a later date;
You may notify the secretary ofBret Jardine, our companyCorporate Secretary, in writing before the annual meeting that you have revoked your proxy; or
You may vote in person at the annual meeting.meeting
Q: | What is the quorum requirement? |
A: | A quorum of stockholders is necessary to hold a valid meeting. A majority of the outstanding shares of Class A and Class B common stock on |
Shares represented by proxies that withhold authority to vote for a nominee for election as a director or that reflect abstentions or “broker non-votes” (i.e., shares represented at the meeting held by brokers or nominees and to which (i) instructions have not been received from the beneficial owners or persons entitled to vote and (ii) the broker or nominee does not have the discretionary voting power on a particular matter) will be treated as shares that are present for purposes of determining the presence of a quorum. Abstentions and broker non-votes will not otherwise affect the voting.
Q: | How will my proxy be voted? |
A: | Shares represented by |
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Q: | What is the voting requirement? |
A: | In the election of directors, you may vote “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. In the election of directors, the persons receiving the highest number of “FOR” votes will be elected. |
Q: | Who counts the votes cast at the annual meeting? |
A: | Lisa Steinbach, vice president and controller of our company, acting as the inspector of election, will tabulate votes at the annual meeting. The inspector of election’s duties include determining the number of shares represented at the meeting and entitled to vote, determining the qualification of voters, conducting and accepting the votes, and, when the voting is completed, ascertaining and reporting the number of shares voted, or abstaining from voting, for the election of directors. |
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PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION OF DIRECTORS
Our charter documents require our entire board of eleven directors to be elected annually. Our board has designated the persons listed below as candidates for election. Each is currently serving as a director. Unless otherwise specified in the proxy card, the proxies solicited by the board will be voted “FOR” the election of these candidates. In case any of these candidates becomes unavailable to stand for election to the board, an event that is not anticipated, the proxy holders will have full discretion and authority to vote or refrain from voting for any substitute nominee in accordance with their judgment.
The terms of directors elected at the annual meeting expire at the 2010 annual meeting to be held in 2007 or as soon thereafter as their successors are duly elected and qualified. The board has no reason to believe that any of the nominees will be unable or unwilling to serve as a director if elected.
Directors are elected by a plurality vote of shares present at the meeting, meaning that the nominee with the most affirmative votes for a particular seat is elected for that seat. If you do not vote for a particular nominee, or if you withhold authority to vote for a particular nominee on your proxy card, your vote will not count either “for” or “against” the nominee.
Ten directors will be standing for election at the annual meeting. None of the nominees has a family relationship with the other nominees, any existing director or any executive officer of our company. Pursuant to the stockholders agreement dated as of December 13, 2002 among First American, FirstMark Capital, L.L.C. (formerly known as Pequot Private Equity Fund II, L.P.) and First Advantage,us, First American and each of its affiliates hashave agreed to vote its shares for one nominee designated by Pequot, whoFirstMark. However, FirstMark has chosen Lawrence D. Lenihan, Jr. as its designee.not designated a nominee to the board of directors.
The board recommends a vote “FOR”“FOR” the election of each nominee listed below.
Parker Kennedy,S. Kennedy.Chairman and Director since 2003.2003, Mr. Kennedy, age 58, was president61, has been the Chairman and Chief Executive Officer of our parent company, The First American Corporation, since 2003. He was President of The First American Corporation from 1993 until 2004,2004. Prior to that time, he served as executive vice president from 1986 to 1993 and was appointed to its board of directors in 1987, and was named chairman and chief executive officer in 2003.1987. Mr. Kennedy has been employed by The First American’sAmerican Corporation’s primary subsidiary, First American Title Insurance Company, since 1977. He was appointed vice presidentVice President of that company in 1979, and in 1981 he joined its board of directors. Duringdirectors in 1981, appointed Executive Vice President in 1983, heand became President in 1989. Mr. Kennedy graduated from the University of Southern California with a Bachelor’s degree in economics, and received his law degree from Hastings College of the Law, San Francisco.
Anand Nallathambi.Director since 2007, Mr. Nallathambi, 47, was appointed executive vice president of First American Title Insurance Company, and in 1989 was appointed its president. He now servesto serve as its chairman, a position to which he was appointed in 1999.
John Long, Chief Executive Officer and Director since 2003. Mr. Long, age 50, has served as chief executive officer of First Advantage since June 2003. Beforein March 2007 and President of First Advantage in September 2005 following First Advantage’s acquisition of the Credit Information Group from The First American Corporation. He serves as a member of the First Advantage acquisition committee. Prior to joining First Advantage, Mr. Long was withNallathambi served as President of The First American since 1990, serving firstCorporation’s Credit Information Group and as senior vice president of sales, then as executive vice president and then presidentPresident of First American Real Estate TaxAppraisal Services Inc. From November 1993from 1996 to March 2000, Mr. Long was president and chief executive officer of First American Real Estate Information Services, Inc., overseeing that company’s strategic and acquisition direction, completing over 40 acquisitions. In March 2000, he became president and chief executive officer of HireCheck, Inc. where he oversaw the acquisition of Substance Abuse Management, Inc., Employee Health Programs, Inc., American Driving Records, Inc., First American Registry, Inc., and SafeRent, all of which are now part of First Advantage. Mr. Long1998. He also serves onas a member of the board of directors of First American Title Insurance Company, a wholly-owned subsidiary of First American.the Consumer Data Industry Association, an international trade association. Mr. Long earnedNallathambi holds a Bachelor of Arts degree from the College of New Rochelle and a Masters degree in business administrationEconomics from HofstraLoyola University in New York.Madras, India, and an MBA from California Lutheran University.
J. David Chatham,Chatham.Director since 2003.2003, Mr. Chatham, age 53, has been a director of58, also serves on the First American since 1989,Advantage Corporation’s audit committee and has been a director of The First AdvantageAmerican Corporation since 2003. Mr. Chatham currently serves as chairman of First American’s1989, and chairs its audit committee and asis a member of its compensation and nominating and corporate governance committees.the executive committee. Since 1989, Mr. Chatham has also been a member of the board of directors of First American Title Insurance Company, since 1989. Since 1972, he has been presidentFirst American’s wholly-owned title insurance underwriter. He is President and chief executive officerChief Executive Officer of Chatham Holdings, Inc.,LLC, a real estate development company. Mr. Chatham graduated from the University of Georgia with a Bachelor of Business Administration degree, majoring in real estate and urban development, and completed the management of family-held corporation program at the Wharton School of Business at the University of Pennsylvania.
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Barry Connelly,Connelly.Director since 2003.2003, Mr. Connelly, age 65,68, also serves on the First Advantage Corporation’s audit, nominating and corporate governance committees. Mr. Connelly is a credit information consultant to foreign governments and financial services organizations around the world. He is a director on the board of Collection House LTD, a company quotedlisted on the Australian Exchange. Mr. Connelly also serves as the chairman andExchange; a director on the board of Director Rapid Ratings, LTD,Microbilt Corp., a subsidiaryprivately-held credit services company; and also serves on the joint venture board of Collection House LTD.directors of Huaxia/Dun & Bradstreet China. In December 2002, he retired from the Consumer Data Industry Association (“CDIA”) after 33 years of service, including eight years as president. During his tenurePresident. Mr. Connelly graduated from the University of Missouri with CDIA, he was a contributor in drafting the first Fair Credit Reporting Act in 1970 and its successor in 1997.Bachelor of Journalism degree.
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Lawrence Lenihan, Jr.,Jill Kanin-Lovers.Director since 2003. Mr. Lenihan, age 41, was a director2006, Ms. Kanin-Lovers, 57, serves as the chair of US SEARCH.com, Inc. (“US SEARCH”) from September 2000 until June 2003 whenthe First Advantage acquired that company. Mr. LenihanCorporation’s compensation committee and is a senior managing directorpart of Pequot Capital Management, Inc.its nominating and managing general partner and co-head of the Pequot venture funds and the Pequot private equity funds. Previously, Mr. Lenihan was a principal with Broadview Associates, L.L.C. where he was a senior member of the mergers and acquisitions team. Prior to joining Broadview, Mr. Lenihan held various positions within IBM. Mr. Lenihancorporate governance committee. She is also a member of the board of directors for BearingPoint, a global management and technology consulting firm, where she chairs the compensation committee and serves on the nominating and governing committees; Dot Foods, one of Saba Software,the nation’s largest food redistributors, where she chairs the compensation committee and serves on the nominating committee; and Heidrick & Struggles, a leading global search firm, where she chairs the compensation committee and serves on the audit committee. Currently, Ms. Kanin-Lovers teaches “Corporate Governance and Business Ethics” for the Rutgers University Mini-MBA program and “Executive Compensation” for the Rutgers University Global Executive HR Master’s program. Previously, she was Senior Vice President of Human Resources and Workplace Management at Avon Products, Inc., held a Nasdaq-quoted companyseries of senior corporate human resources executive positions at American Express and servesIBM, and began her career in management consulting with Towers Perrin as Vice President and Manager responsible for global compensation practice. Ms. Kanin-Lovers holds a memberBachelor degree from State University of its auditNew York, a Masters degree from the University of Pennsylvania and compensation committees as well as chairmanan MBA from the Wharton School of its governance committee. In addition, Mr. Lenihan serves as a director on several non-public companies, including Duck Creek Technologies, Haley Systems and OutlookSoft. Mr. Lenihan was recommended as a nominee by Pequot Private Equity Fund II, L.P., a holderBusiness at the University of our Class A common stock who is entitled to designate one director that First American and its affiliates are required to vote for under the terms of a stockholders agreement, as amended, which is described in “Certain Relationships and Related Transactions” beginning on page 24.Pennsylvania.
Frank McMahon,V. McMahon.Director since April 2006. Mr. McMahon, age 46, serves as vice chairman and chief financial officer of First American. Prior to joining First American in April 2006, Mr. McMahon, 49, in addition to serving on the board of directors of First Advantage Corporation, serves as the chair of its acquisition committee and serves on its compensation committee. He also serves as the Vice Chairman of The First American Corporation and is Chief Executive Officer of The First American Corporation’s Information Solutions Group. Previously, he was a managing directorManaging Director of the Investment Banking Division withof Lehman Brothers, Inc. and was responsible for managing their western region financial institutions group, as well as their U.S. asset management sector.sector from 1999 to 2006. Prior, to that, Mr. McMahon managedwas a similar group forManaging Director at Merrill Lynch. Mr. McMahon received a Bachelor degree in Economics from Villanova University and his MBA from Duke University.
Donald Nickelson,Nickelson.Director since 2003.2003, Mr. Nickelson, age 73,76, in addition to serving on the board of directors of First Advantage Corporation, chairs its nominating and corporate governance committee and is a member of its compensation committee and acquisition committee. Currently, he serves as a directorVice Chairman and vice chairmanDirector of the leveraged buy-out firm, Harbour Group Industries Inc., and also sits on its executive and compensation committees. In addition, Mr. Nickelson servesa leveraged buy-out firm; as a director of Adolor Corporation, where he servesis a member of the compensation committee and audit committee; on the auditadvisory board of Celtic Pharmaceutical Holdings, L.P.; as Chairman of the advisory board of Celtic Therapeutics; and nominating-governance committee, and serves as a directorChairman of Mainstay Mutual Funds, where he serves on the nominating and audit committees.Cross Match Industries. Previously, Mr. Nickelson also holds directorship positions for several non-public companies, including AddressFree Corporation and Del Industries. Prior to joining Harbour Group, he served as presidentPresident of PaineWebber Group, an investment banking and brokerage firm, from February 1988 to January 1990.and as Lead Trustee of the Mainstay Mutual Funds Group. He has also served on numerous boards, including: as Chairman of the Pacific Stock Exchange; Omniquip International, Inc.; Greenfield Industries; Vie Financial Group; and Flair Corporation.Inc.; as director of the Chicago Board Options Exchange; W.P. Carey & Co., LLC; Royalty Pharma AG; Allied Healthcare Products; DT Industries; Selectide Corporation; and Sugen, Inc.
Donald Robert,Robert.Director since 2003.2003, Mr. Robert, age 46,49, in addition to serving on the board of directors of First Advantage Corporation, is currently chief executive officera member of its compensation committee. He serves as Chief Executive Officer and director of Experian Group, a globalPlc., an information technology company and a wholly owned subsidiary of GUS Plc, a British retailing and consumer information conglomerate.business listed on the London Stock Exchange. Prior to his current appointment, Mr. Robert served as chief executive officerwas Chief Operating Officer and President of Experian North America, and chief operating officer, and president of itsExperian’s Information Solutions business unit beginning in April 2001. From 1995 to 2001, Mr. Robertbefore becoming Chief Executive Officer of Experian North America. Previously, he was a group executiveGroup Executive of The First American Corporation with responsibility for its Consumer Information and Services Group. From 1992 to 1995, Mr. Robert was presidentGroup; President of Credco, Inc., now First Advantage Credco, the nation’s largest specialized credit reporting company and a wholly-owned subsidiarynow part of First Advantage. He isAdvantage Corporation. Mr. Robert holds a member of the GUS Plc board of directors.Bachelor degree in Business Administration from Oregon State University.
Adelaide Sink,D. Van Skilling.Director since December, 2003. Ms. Sink, age 57, currently serves2005, Mr. Skilling, 75, in addition to serving on the board of Raymond James Financial Inc. and Raymond James Bank, where shedirectors of First Advantage Corporation, serves as a member of Raymond James Inc.’s compensation committee, andits audit committee. Mr. Skilling is the President of Skilling Enterprises. He also currently serves as a member of Raymond James Bank’s audit committee, and is an activethe board member of directors for several non-profit organizations, including the Community Foundation of Tampa Bay, Nature Conservancy of Florida and Wake Forest University. Ms. Sink had a 26-year career with Bank of America—Florida, which culminated in her appointment as president from 1993 until 2000.
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D Van Skilling, Director since November 2005. Mr. Skilling, age 72, currently serves as a director ofcompanies, including: The First American Corporation, where he is lead director and sits on the audit, nominating, corporate governance, and executive committees; Lamson & Sessions, where he chairs the compensation, nomination and governance committees; McData,Onvia, where he is a member ofdirector, chairs the auditcompensation committee, and serves on the nominating and governance committees; Onvia,and American Business Bank, where he is a member of the compensation committee;committee. He retired from his post as Chairman and American Business Bank, where he chairs the compensation committee and is a member of the audit committee. Mr. Skilling formally served as the chairman and chief executive officerChief Executive Officer of Experian Information Solutions, Inc. (formerly TRW Information Systems & Services), following a position he was appointed to26-year career with them. Mr. Skilling earned an MBA in 1996.International Business from Pepperdine University and a Bachelor degree in both Chemistry and Zoology from Colorado College.
David Walker,Walker.Director since 2003.2003, Mr. Walker, age 52,55, in addition to serving on the board of directors of First Advantage Corporation, is the chair of its audit committee and serves on the acquisition committee. Mr. Walker, a Certified Public Account and a Certified Fraud Examiner, is currently serving as the Director of the Programs of Accountancy and Social
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Responsibility and Corporate Reporting in the College of Business at the University of South Florida, St. Petersburg, and is a consultant on corporate governance matters, both roles he has held since 2002. From 1975 through 2002, Mr. Walker was with Arthur Andersen LLP, serving as a partner in the firm from 1986 through 2002.matters. Mr. Walker is also a member of the boards of directors of Chicos FAS, Inc., CommVault Systems, Inc. and Technology Research Corporation, Inc., where he also sits onchairs its compensation committee,committee. Previously, he served as a partner with Arthur Andersen LLP. Mr. Walker earned a Bachelor degree from DePauw University in Economics and Chico’s, FAS.Mathematics, and an MBA from the University Of Chicago Graduate School Of Business.
INFORMATION ABOUT OUR BOARD OF DIRECTORS
Composition of Board and Committees
Our board of directors oversees our business and affairs and monitors the performance of management. Management is responsible for the day-to-day operations of our company. As of the date of this proxy statement, our board has eleventen directors and the following committees: audit, nominating and corporate governance, compensation and special.acquisition. The membership during the last fiscal year and the function of each of the committees are described below. Each of the committees, except the nominating and corporate governance committee, is required to be comprised of three or more members of the board.
We held sevenfive board meetings in 2005.2008. Each director attended at least 75% of all board meetings and applicable committee meetings. We strongly encourage our board of directors to attend our annual meeting of stockholders, and any member who misses three consecutive annual meetings will be removed. The following table lists membership of our board of directors and board committees:
Committees | ||||||||||||
Name of Director | Audit | Nominating and Corporate Governance | Compensation | |||||||||
Parker Kennedy | ||||||||||||
| X | |||||||||||
J. David Chatham | X | |||||||||||
Barry Connelly | X | X | ||||||||||
| X | X | * | |||||||||
Frank McMahon | X | X | * | |||||||||
Donald Nickelson | X | * | X | X | ||||||||
Donald Robert | ||||||||||||
| X | |||||||||||
D. Van Skilling | X | |||||||||||
David Walker | X | * | X |
X=
X = Committee Member; X*= Committee Chair
Independence Matters
Our board has determined that each of our directors is independent within the meaning of applicable NasdaqNASDAQ Stock Market and SECSecurities and Exchange Commission rules, except for ParkerMr. Kennedy, who is chairman and chief executive officer of our parent company, First American; John Long,American, Mr. Nallathambi, who is our chief executive officer;officer and Frankpresident, and Mr. McMahon, who is the vice chairman and chief financialexecutive officer of First American. However,In considering director independence, the board studied the shares of First Advantage common stock beneficially owned by each of the directors as set forth under “Security Ownership of Certain Beneficial Owners and Management,” although the board generally believes that stock ownership tends to further align a director’s interests with those of First Advantage’s other stockholders. In addition, as part of this review, the board considered the fact that Mr. Robert is the chief executive officer of Experian Group, a subsidiary which owns approximately 6.3% of our Class A common stock, and determined that this relationship does not interfere with the exercise of Mr. Robert’s independence from First Advantage and its management.
We are a “controlled company” within the meaning of the NasdaqNASDAQ Marketplace Rules because First American controls more than 50% of theour voting power in First Advantage.power. As such, we are relyingrely on NasdaqNASDAQ Marketplace Rule 4350(c)(5), which allows controlled companies to be exempt from rules requiring (a) the compensation and nominating committees to be composed solely of independent directors; (b) the compensation of the executive officers to be determined by a majority of
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the independent directors or by a compensation committee composed solely of independent directors; and (c) director nominees to be selected or recommended for the board’s selection either by a majority of the independent directors or by a nominating committee composed solely of independent directors.
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Our independent directors meet in executive session immediately following each regularly scheduled meeting of the board of directors. In addition, our independent directors may meet as they determine appropriate from time to time.
Audit Committee. Our board established the audit committee for the primary purposes of overseeing the accounting and financial reporting processes of our company and audits of our financial statements, and preparing an annual report of the committee.statements. Our board of directors has made an affirmative determination that each member of the audit committee (a) is an “independent director” as that term is defined by NasdaqNASDAQ Marketplace Rules and the rules and regulations under the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act”, and (b) satisfies NasdaqNASDAQ Marketplace Rules relating to financial literacy and experience. Our board of directors has further determined that DavidMessrs. Chatham and Walker satisfiessatisfy the criteria for being an “audit committee financial expert” as such term is defined in Item 401(h)407(d)(5) of Regulation S-K promulgated by the SEC.Securities and Exchange Commission.
The audit committee is solely responsible for selecting First Advantage’s our independent registered certified public accounting firm (“independent public accountants;accountants”); approving in advance all audit services and related fees and terms; and approving in advance all non-audit services, if any, provided by our independent public accountants and related fees and terms. The audit committee also oversees and monitors our internal control system, evaluates the independence standards forof our outside auditors, reviews the conduct of and personnel inindependent public accountants, oversees our internal audit function, reviews financial information in our quarterly reports, and reviews and evaluatesoversees the audit performed by our outside auditors.independent public accountants. The committee reports any significant developments with respect to its duties to the full board. The audit committee met 13nine times during 2005.2008. Our board of directors has adopted a written audit committee charter a(a copy of which is attached to this proxy statement as Appendix A. The audit committee charter may also be viewed in the Corporate Governance page of the Investor Relations section of our website located at www.fadv.com. For more information regarding the audit committee, see “Report of the Audit Committee of the Board of Directors” on page 7 of this proxy statement.
Compensation Committee. The compensation committee is responsible for recommending compensation arrangements for officers of our company; evaluating the performance of our company’s chief executive officer; administering our company’s compensation plans, and preparing annual and other reports of the committee. Each member of the committee is a non-employee director. The compensation committee met 9 times in 2005. The compensation committee charter may be viewed on the Corporate Governance page of the Investor Relations section of our website located at www.fadv.com. For additional information regardingwww.fadv.com or a printed copy may be obtained by making a written request to Bret T. Jardine, Corporate Secretary of First Advantage Corporation, at 100 Carillon Parkway, St. Petersburg, Florida 33716).
Compensation Committee. The compensation committee is responsible for recommending compensation arrangements for our executive officers; evaluating the performance of our chief executive officer; and administering our compensation plans. Except for Mr. McMahon, all members of the compensation committee see “Reportare independent under the standards for independence established by the applicable NASDAQ Marketplace Rules. The compensation committee met nine times during 2008. Our board of directors has adopted a written compensation committee charter (a copy of which may be viewed on the Corporate Governance page of the Investor Relations section of our website located at www.fadv.com or a printed copy may be obtained by making a written request to Bret Jardine, Corporate Secretary of First Advantage Corporation, at 100 Carillon Parkway, St. Petersburg, Florida 33716). The compensation committee establishes and reviews our overall compensation philosophy. The committee reviews the performance of our chief executive officer and has the sole authority to determine his compensation and reviews and approves the salary of our other executive officers. The committee reviews and recommends to the board for approval our incentive and equity compensation plans, oversees those who are responsible for administering those plans and approves all equity compensation plans that are not subject to stockholder approval. The compensation committee also has the authority to retain compensation consultants as it deems necessary and the sole authority to approve such consultant’s fees. When setting executive officer compensation, in the first quarter of each year, the Chief Executive Officer presents a report to the compensation committee containing his recommendation of the upcoming year’s salary, bonus and long-term incentive award levels for certain executive officers other than himself. The committee takes the Chief Executive Officer’s report under advisement and meets with its own compensation consultant. To obtain objective compensation information, in 2008 the compensation committee engaged Mercer LLC as its compensation consultant. The committee has the full authority to manage all aspects of Mercer’s engagement, including approving Mercer’s compensation on a monthly basis and the ability, in the compensation committee’s sole discretion, to terminate the engagement. Examples of projects assigned to the consultant included the evaluation of the composition of the peer group of companies used to evaluate appropriate compensation levels, evaluation of levels of executive compensation as compared to general market compensation data and the peer companies’ compensation data, and evaluation of proposed compensation programs or changes to existing programs.
The compensation committee believes that both management and the consultant provide useful information and points of view to assist the compensation committee in determining its own views on compensation. Although the compensation committee receives information and recommendations regarding the design of the compensation program and level of compensation for the executive officers from both the consultant and management, the compensation committee makes the final decisions as to the design and levels of compensation for these executives.
The compensation committee uses the chief executive officer’s report, together with reports that may be prepared by its consultant, to set executive officer salaries and bonuses for the upcoming year. Executive officers are not present during compensation committee or board of directors deliberations concerning their compensation. The chairman of the board is present when setting the chief executive officer’s salary and bonus.
Compensation Committee Interlocks and Insider Participation. The members of the Boardcompensation committee for 2008 were Ms. Kanin-Lovers and Messrs. McMahon, Nickelson and Robert. As noted above, Mr. McMahon is a Vice
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Chairman of DirectorsFirst American, our parent company. None of our executive officers have served on Executive Compensation” on page 17the board of this proxy statement.directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our board of directors or our compensation committee during the 2008 fiscal year.
Nominating and Corporate Governance Committee. Our board of directors has established a nominating and corporate governance committee to (i) assist the board in identifying individuals qualified to become directors and recommending to the board for nomination of candidates for election or reelection to the board or to fill board vacancies.vacancies, (ii) develop and recommend to our board a set of corporate governance principles and (iii) lead the board in complying with those principles. All members of the nominating committee are independent under the standards for independence established by the applicable NASDAQ Marketplace Rules. The nominating and corporate governance committee met two times in 2005.twice during 2008.
The nominating and corporate governance committee acts under a written charter adopted by our board of directors (a copy of which may be viewed inon the Corporate Governance page of the Investor Relations section of our website located at www.fadv.com)www.fadv.com or obtained by making a written request to Bret T. Jardine, Corporate Secretary of First Advantage Corporation, at 100 Carillon Parkway, St. Petersburg, Florida 33716) specifying, among other things, the following minimum qualifications for candidates recommended for election to the board:
impeccable character and integrity;
the ability to communicate effectively with members of the board, management, auditors and outside advisors;
a willingness to act independently;
substantial experience in business, with educational institutions, governmental entities or non-profit organizations;
the ability to read and understand financial statements and financial analysis;
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no criminal history or a background which could reasonably be expected to damage the reputation of our company;
does not currently serve as a director, officer or employee of, or a consultant to, a direct competitor of our company; and
does not cause our company to violate independence requirements under applicable law or the NasdaqNASDAQ Marketplace Rules.
The nominating committee also will consider, among other factors, whether an individual has any direct experience with our company or its subsidiaries (whether as a director, officer, employee, supplier or otherwise); the individual’s experience in the industry in which our company operates; the individual’s other obligations and time commitments; whether the individual is an employee of a company or institution on thehaving a board of directors ofon which a senior executive of our company serves; whether the individual has specific knowledge, skills or experience that may be of value to our company or a committee of the board; whether an individual has been recommended by a stockholder of our company, an independent member of the board, another member of the board, senior management of our company or a customer of our company; and the findings of any third parties that may be engaged to assist the committee in identifying directors.
The nominating and corporate governance committee regularly assesses the appropriate size of the board and whether any vacancies on the board are anticipated. Various potential candidates for director are then identified. Candidates may come to the attention of the committee through current board members, professional search firms, stockholders or industry sources. In evaluating the candidate, the committee considers factors other than the candidate’s qualifications, including the current composition of the board, the balance of management and independent directors, the need for audit committee expertise and the evaluations of other prospective nominees. In connection with this evaluation, the committee determines whether to interview the prospective nominee, and if warranted, one or more members of the committee, and others as appropriate, interview prospective nominees. After completing this evaluation and interview, the committee makes a recommendation to the full board as to the persons who should be nominated by the board, and the board determines the nominees after considering the recommendation and report of the committee.
The nominating and corporate governance committee recommended the slate of directors proposed for election at the annual meeting, which was unanimously approved by the full board of directors, including unanimous approval by the independent directors. Lawrence Lenihan, Jr. was recommended as a nominee by Pequot Private Equity Fund II, L.P., a holder
As part of our Class A common stock who is entitled to designate one director that First Americanits role in developing and its affiliates are required to vote for undercomplying with corporate governance policies, the terms of a stockholders agreement.
Special Committee. In January 2005,nominating and corporate governance committee advises the board of directors formed a special committee comprised of independent directors forand the purpose of evaluatingvarious committees on effective management and leadership, reviews the acquisitiongoverning documents of the Credit Information Group (“CIG”) from First American. The committee is not currently active.company (including our certificate of incorporation, bylaws, corporate governance policies and guidelines and code of conduct), provides ongoing advice with respect to conflicts of interest that may arise, and evaluates the current and future governance needs and obligations of the company, our board and the committees in light of “best practices” developments.
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Procedure for Stockholder Nominations of Directors
Nominations for the election of directors may only be made by the board of directors in consultation with its nominating and corporate governance committee. AAs noted above, FirstMark may designate a nominee to the board of directors under the terms of the stockholders agreement dated as of December 13, 2002 among First American, FirstMark Capital and us. However, FirstMark has not designated a nominee to the board of directors. In addition, a stockholder of record who has the power to vote ten percent or more of the outstanding capital stock of our company may recommend to the nominating committee up to one candidate for consideration as a nominee in any 12-month period. The nominating committee will consider a stockholder nominee only if a stockholder gives written notice to the secretaryBret T. Jardine, Corporate Secretary of our companyFirst Advantage Corporation, at our principal executive offices100 Carillon Parkway, St. Petersburg, Florida 33716 not later than the close of business on November 1 of the year immediately preceding the year of the annual meeting of stockholders at which the stockholder desires to have his or her candidate presented byto the board. Each such notice must include the name, address and telephone number of the potential nominee; a detailed biography of the potential nominee; and evidence of stock ownership by the presenting stockholder, including the number of shares owned. Nominees properly proposed by eligible stockholders will be evaluated by the nominating and corporate governance committee in the same manner as nominees identified by the committee. To date, no stockholder or group of stockholders having the power to vote ten percent or more of our capital stock has put forth any director nominees.
Stockholder Communications
Our stockholders may communicate directly with the members of the board of directors or individual members by writing directly to it or those individuals,them in care of the secretaryBret T. Jardine, Corporate Secretary of our companyFirst Advantage Corporation, at our principal executive offices, together with100 Carillon Parkway, St. Petersburg, Florida 33716. Stockholders are required to provide appropriate evidence of their stock ownership. We strongly encourageownership with any communications. Communications received in writing are distributed to our board ofor to individual directors to attend our annual meeting of stockholders,as appropriate depending on the facts and any member who misses three consecutive annual meetings will be removed.circumstances outlined in the communication received.
Code of EthicsCODE OF CONDUCT
First Advantage hasWe have adopted a code of ethicsconduct that applies to itsour chief executive officer, chief financial officer, controller and all of itsour other officers, employees and directors. Adirectors (a copy of our code of ethicswhich may be viewed inon the Corporate Governance page of the Investor Relations section of our website located at www.fadv.com.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee for fiscal 2005 were Messrs. Lenihan, Nickelson and Robert and Ms. Sink. No member of this committee was at any time during the 2005 fiscal yearwww.fadv.com or at any other time an officer or employeeobtained by making a written request to Bret T. Jardine, Corporate Secretary of First Advantage and no member had any relationshipCorporation, at 100 Carillon Parkway, St. Petersburg, Florida 33716).
BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
Relationships with First American
We effectively commenced operations on June 5, 2003 with our acquisition of First American’s screening technology division and US SEARCH.com, Inc. As consideration for these acquisitions, we issued 100% of our outstanding Class B common stock to First American and 100% of our Class A common stock to former stockholders of US SEARCH.com, Inc. Each share of our Class B common stock entitles the holder to ten votes in any meeting of stockholders. As a result, First American received approximately 80% of the outstanding capital stock of our company and approximately 98% of the voting power in our company. Former stockholders of US SEARCH.com, Inc. received the remaining approximately 20% of our outstanding capital stock. FirstMark, formerly a stockholder of US SEARCH.com, Inc., received approximately 10% of our Class A common stock in the transaction. First American and FirstMark entered into a stockholders agreement concurrently with the acquisitions that granted FirstMark certain registration rights and the right to sell shares of our Class A common stock at the same time First American sells any of our shares under certain circumstances, and generally requires First American to vote for one nominee for director designated by FirstMark. As a controlled subsidiary of First American, we have various relationships with First American, which are described below.
We entered into a reimbursement agreement dated October 11, 2005 with First American whereby we reimburse First American for the actual expenses incurred by us in connection with the participation by certain of our employees in First American’s supplemental benefit plan. In 2008, we reimbursed First American $400,055 for actual and interest costs for Anand Nallathambi’s participation in the supplemental benefit plan.
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On November 7, 2005, we entered into an operating agreement with a subsidiary of First American that sets forth the terms under which we, along with the First American subsidiary, jointly own and operate LeadClick Holding Company, LLC. We have ownership of 70% of LeadClick Holding Company LLC, with the remaining 30% being owned by the First American subsidiary.
First American provides certain legal, financial, technology, administrative and managerial support services to us pursuant to a service agreement that was entered into on January 1, 2004. Under the terms of the service agreement, human resources systems and payroll systems and support, network services and financial systems are provided at an annual cost of approximately $0.3 million. In addition, certain other services including pension and 401(k) expenses, corporate and medical insurance, personal property leasing and company car programs are provided at actual cost. The initial term of the agreement was for one year, with automatic self renewals every six months. First American incurred approximately $8.5 million in service fees for the year ended December 31, 2008.
First American and certain of its affiliates provided sales and marketing, legal, financial, technology, leased facilities, leased equipment and other administrative services to the Credit Information Group. As part of our 2005 acquisition of the Credit Information Group from First American, we entered into an amended and restated services agreement with First American on September 14, 2005. Under the terms of this agreement, First American provides human resources systems and payroll systems and support, network services and financial systems at an annual cost of approximately $4.5 million. In addition, First American provides certain other services (including pension and 401(k) expenses, corporate and medical insurance, personal property leasing and company car programs) at actual cost. The initial term of the agreement was for one year, with automatic self renewals every six months. The amounts allocated to the Credit Information Group are based on management’s assumptions (primarily usage, time incurred and number of employees) as to the proportion of the services used by the Credit Information Group in relation to the actual costs incurred by First American and its affiliates in providing the services. The company incurred approximately $4.5 million in service fees for the year ended December 31, 2008.
We also have an agreement with the First American Corporation dated September 14, 2005 to lease the Credit Information Group’s office space in Poway, California. The lease has an initial term of five years with a one-time option to renew the term for an additional five years. The rent payable under the lease is approximately $169,000 per month, and we are obligated to pay all costs and expenses related to the property, including operating expenses, maintenance and taxes, which were approximately $2.0 million for the year ended December 31, 2008.
Effective January 1, 2003, we entered into an agreement with a subsidiary of First American whereby we act as an agent in selling renters insurance. We receive a commission of 12% of the insurance premiums and 20% of the profits (as defined in the agreement) of the insurance premiums written. Commissions earned in 2008 were approximately $2.5 million.
We also perform employment screening, credit reporting and hiring management services for First American. Total revenue from First American was approximately $4.1 million for the year ended December 31, 2008.
First American Real Estate Solutions, LLC (“FARES”), a joint venture between First American and Experian, owns 50% of a joint venture that provides mortgage credit reports and operations support to a nationwide mortgage lender. In accordance with the terms of the joint venture operating agreement, the mortgage and consumer credit reporting operation of FARES receives a merge fee per credit report issued and is reimbursed for certain operating costs. In connection with the acquisition of the Credit Information Group, FARES entered into an outsourcing agreement where we continue to provide these services to the nationwide mortgage lender. These earnings totaled $5.3 million for the year ended December 31, 2008. Effective January 1, 2008, the Company entered into two agreements (Computer License agreement and a Service Agreement) with Rels Reporting Services, LLC which replaced the original agreements that had provided for charging merge fees on credit reports issued and the reimbursement of the majority of operating costs. These new agreements incorporate a transaction fee and a fixed fee for services, and minimize the reimbursement of operating costs. This management fee is included in service revenue and was $9.8 million for the year ended December 31, 2008. The residual reimbursement for operating costs were $0.4 million for the year ended December 31, 2008.
We, through a subsidiary, perform tax consulting services for First American pursuant to a training grants & incentives services agreement which was entered into in August 2007. We identify grants and tax credits, and match them with First American’s training curriculum and complete the necessary applications as a part of the service offering. Our fees for the training grant services are payable at twenty percent (20%) of the total amount of each approved training grant arranged by us for the benefit of First American. As of this date, there has been no significant revenue recognized under this agreement.
We, through a subsidiary, provide publicly available bankruptcy information to First American pursuant to a data license and information services agreement dated December 27, 2007. The annual fee for these services is $75,000 ($6,250 per month).
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Our Lender Services segment has partnered with First American CoreLogic (“FACL”) through a series of agreements to provide major national lender consumer data from the FACL databases in a Fair Credit Reporting Act compliant method. In 2008, we purchased data from FACL for a total of $1.9 million.
We have a flood zone determination wholesale service provider agreement, dated March 1, 2008, between First American Hazard Certification LLC, a subsidiary of First American and First Advantage requiring disclosureCredco, LLC. Under the terms of this agreement, we are permitted to resell flood products provided by First American to First Advantage Credco’s end-user customers. All product costs and pricing are market-based.
We entered into a hiring management license and service agreement, dated January 11, 2008, between a subsidiary of ours, First Advantage Enterprise Screening Corporation, and First American. Under the terms of the agreement, we will license hiring management solution software to First American and provide certain services and maintenance for the software. The fees for this agreement will be an annual fee of $305,000 (invoiced quarterly). The parties, however, have agreed to suspend performance of this agreement until such time that First American determines to proceed with its previously announced spin-off of a portion of its business.
Relationships with Experian
Experian owns approximately 6.3% of a combination of First Advantage’s Class A and Class B common shares and is considered a related party. The cost of credit reports purchased by us from Experian was $24.9 million for the year ended December 31, 2008. We sell background and lead generation services to Experian. Total revenue from these sales was $0.1 million for the year ended December 31, 2008. We have also entered into a registration rights agreement in September 2005 (and which was amended in November 2005) with Experian pursuant to which we have agreed, under certain terms and conditions, to register shares of our Class A common stock that Experian owns.
Related Party Transaction Approval Policy
It is our policy that the audit committee review and approve in advance all related party transactions that are required to be disclosed pursuant to Item 404 of Regulation S-K. No executiveS-K promulgated by the Securities and Exchange Commission. If advance approval is not feasible, the audit committee must approve or ratify the transaction at the next scheduled meeting of the committee. Transactions required to be disclosed pursuant to Item 404 include any transaction between First Advantage and any officer, director or certain affiliates of First Advantage that has serveda value in excess of $120,000. In reviewing related party transactions, the audit committee evaluates all material facts about the transaction, including the nature of the transaction, the benefit provided to First Advantage, whether the transaction is on commercially reasonable terms that would have been available from an unrelated third-party and any other factors necessary to its determination that the transaction is fair to First Advantage. Our board of directors or compensation committeehas adopted a written Statement of any other entity that has or has had one or more executive officers who served as a memberPolicy With Respect to Related Party Transactions (a copy of which may be viewed on the Corporate Governance page of the boardInvestor Relations section of directorsour website located at www.fadv.com or the compensation committeea printed copy may be obtained by making a written request to Bret T. Jardine, Corporate Secretary of First Advantage during the 2005 fiscal year.Corporation, at 100 Carillon Parkway, St. Petersburg, Florida 33716).
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
In the performance of its oversight function, the audit committee has met and held discussions with management of First Advantage, who represented to the audit committee that our company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. The audit committee has reviewed and discussed the consolidated financial statements with both management and our company’s registered certified public accountants, PricewaterhouseCoopers LLP. The audit committee also discussed with our company’s registered certified public accountants matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as currently in effect.
Our company’s registered certified public accountants also provided to the audit committee the written disclosures required by the current version of Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the audit committee discussed their independence with the independent public accountants. In connection with that, the audit committee has considered whether the provision of non-auditing services (and the aggregate fees billed for these services) in fiscal 2005 by PricewaterhouseCoopers LLP to First Advantage is compatible with maintaining the registered certified public accountants’ independence.
Based upon the reports and discussions described in this report, the audit committee recommended to the board of directors that the audited consolidated financial statements be included in our company’s annual report on Form 10-K for the fiscal year ended December 31, 2005, filed with the SEC.
By the Audit Committee of the Board of
Directors
/s/ DAVID WALKER
David Walker, Chairman
J. David Chatham
Barry Connelly
D. Van Skilling
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EXECUTIVE OFFICERS
(Listed in alphabetical order)
Our executive officers, in addition to Parker Kennedy and John LongAnand Nallathambi are listed below:
Anand NallathambiEvan Barnett, 44, president since September 2005. Following the acquisition of the CIG from First American, Mr. Nallathambi was appointed61, president of First Advantage.our multifamily services segment since 2003. Previously, Mr. Barnett held senior management positions with Omni International Corporation and related entities, including positions as CFO and Executive Vice President. Prior to joining First Advantage,his tenure with Omni International, he was employed as a certified public accountant with Grant Thornton LLP. Mr. NallathambiBarnett served as president of First American’s Credit Information Groupthe National Association of Screening Agencies from 2000 to 2003. Mr. Barnett holds agent licensure for property and as presidentcasualty insurance. He graduated from The American University with a Bachelor of First American Appraisal Services from 1996 to 1998. Mr. Nallathambi receivedScience degree in accounting and a mastersmaster’s degree in business administration from California Lutheran University after obtaining a bachelor of arts degree in economics from Loyola University in Madras, India.financial management.
Akshaya MehtaBret T. Jardine, 46,42, was appointed Vice President, Associate General Counsel and Corporate Secretary in October 2008 and has been with the company since 2004, acting as Corporate Secretary since 2006. Prior to joining the company, Mr. Jardine was a partner in the law firm of Zimmet, Unice, Salzman, Heyman and Jardine PA. and has been practicing law for nearly 20 years. Mr. Jardine received his undergraduate degree from the University of Florida and his law degree from Stetson University College of Law.
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John Lamson, 58, chief operatingfinancial officer and executive vice president since 2003. Prior to joining the company, Mr. Lamson served as chief financial officer of First American Real Estate Information Services Inc., a wholly-owned subsidiary of First American, a position he held from September 1997 to June 2003. Prior to joining First American, Mr. Lamson spent over five years as a self-employed consultant. Prior to that, Mr. Lamson served as chief financial officer of a financial institution and as a certified public accountant with Arthur Andersen Co. Mr. Lamson is a member of the American Institute of Certified Public Accountants and holds a Bachelor of Arts degree in business administration from the University of South Florida.
Andrew Macdonald, 45, was appointed senior vice president of corporate development in September 2007 and continues to serve as president of the First Advantage Investigative and Litigation Services segment, a position he has held since January 2005. Mr. Macdonald joined the company in 2002 through the HireCheck, Inc. acquisition of Employee Health Programs, Inc. where he served as president and chief financial officer. Following the acquisition, Mr. Macdonald served as president of First Advantage Occupational Health Services Corp. and then as vice president and corporate development officer for First Advantage. He is a member of the Oxford College Board of Counselors. Mr. Macdonald received his Bachelor of Arts degree in business administration from Emory University.
Todd Mavis, 47, joined the company as executive vice president-operations on August 1, 2007. Prior to joining the company, Mr. Mavis served as president and chief executive officer of Danka Business Systems from April 2004 to March 2006, having joined Danka Business Systems in 2001. From 1997 to 2001, Mr. Mavis was executive vice president of Mitchell International, a leading information provider and software developer for insurance and related industries. From 1996 to 1997, Mr. Mavis was senior vice president—worldwide sales and marketing of Checkmate Electronics, Inc. Mr. Mavis holds a Bachelor of Arts degree in marketing and administration from the University of Oklahoma and a masters degree in business administration from San Diego State University.
Akshaya Mehta, 49, has been the executive vice president-corporate infrastructure since August 2007. From 2003 to August 2007, Mr. Mehta served the company as chief operating officer and executive vice president. Previously, Mr. Mehta served as executive vice president and chief operating officer of American Driving Records, (“ADR”)Inc., a wholly-owned subsidiary of First Advantage,ours. Mr. Mehta has over 15 years of management experience and over 20 years of technology development expertise. Prior to joining ADRAmerican Driving Records, Inc. in 1999, Mr. Mehta served as division vice president of product development at Automatic Data Processing, Inc., vice president of development at Security Pacific Bank, and Deputy Head of Development at UBS London. Mr. Mehta earned a masters degree in computer science at the Imperial College of the University of London after obtaining a bachelorBachelor of scienceScience degree in physics and medical physics from Queen Elizabeth College of the same university.University of London.
John LamsonThomas Milligan, 55, chief53, was appointed Vice President and Corporate Treasurer in 2003. He previously served as Treasurer of First American Real Estate Information Services, Inc. which he joined in January 1998. Among other duties, Mr. Milligan manages the corporate treasury function, and other financial officermanagement, planning and executive vice president sincerelated analysis for the company. Prior to 1998, Mr. Milligan was Director of Finance for IMC Mortgage Company. Before joining IMC, he provided acquisition financing with Household Commercial Finance and worked in the Chicago office of Deloitte & Touche. Mr. Milligan received his undergraduate business degree from the University of Florida and an MBA from Keller Graduate School of Management. He is also a Certified Public Accountant.
Lisa Steinbach, 45, was appointed Vice President and Corporate Controller in 2003. Prior to joining First Advantage, Mr. Lamson served as chief financial officerthe company, Ms. Steinbach was Controller of First American Real Estate Information Services Inc., a wholly-owned subsidiaryposition she held since joining the company in 1997. Other prior experience includes over 12 years of First American, a position he held from September 1997 to June 2003. Prior to that, Mr. Lamson served as chief financial officerincreasing responsibility with certified public accountants Cherry Bekaert and Holland, Alfa Romeo Distributors of a financial institutionNorth America, and asEckerd Corporation. Ms. Steinbach is a certified public accountant with Arthur Andersen & Co. Mr. Lamson is a member of the American Institute of Certified Public Accountantsin Florida and holds a bachelor of arts degree in business administration from the University of South Florida.
Julie Waters, 39, joined First Advantage in April 2004 as vice president and general counsel. Prior to joining First Advantage, Ms. Waters was general counsel for USA Floral Products, Inc., formally a publicly traded company on NASDAQ. Ms. Waters was previously employed as in-house counsel for Teco Corporation and Spalding & Evenflo Corporation. Ms. Waters received her juris doctorate from George Washington University after receiving a bachelor of arts degree in English and Rhetoric & Communications from the University of Virginia.
Alan Missen, 43, chief information officer since March 2005. Prior to joining First Advantage, Mr. Missen was with PricewaterhouseCoopers LLP, first as director of shared services applications and most recently as director of portfolio management. Before joining PricewaterhouseCoopers LLP, Mr. Missen was a senior information technology manager with Arthur Andersen LLP. Mr. Missen has more than 20 years of experience in information technology. Mr. Missen holds a bachelor of science degree in statistics from the University of Toronto.
Evan Barnett, 58, president of multifamily services segment since 2003. Previously, Mr. Barnett held senior management positions with Omni International Corporation and related entities from 1974 through December 1994. He was employed as a certified public accountant with Grant Thornton LLP (then Alexander Grant & Co) from 1970 to 1974. Mr. Barnett graduated from The American University with a bachelor of science degree in accounting and a master’s degree in business administration in financial management.
Bart Valdez, 43, president of employment services segment since 2003. Mr. Valdez was named president of HireCheck, Inc. in October 2002 after joining the company in October 2000 as chief operating officer. From August 2001 until October 2002, he also served as president of Substance Abuse Management, Inc. (“SAMI”). From June of 1998 until he joined HireCheck, Mr. Valdez served as vice president of business development and operations for Employee Information Services, Inc. (“EIS”). HireCheck, SAMI and EIS are now part of First Advantage’s employment services segment. He received his bachelor of scienceAccounting degree from ColoradoFlorida State University and his master’s degree in business administration from the University of Colorado.University.
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Andrew MacDonald, 42, joined First Advantage in 2002 throughSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information, as of March 10, 2009, concerning (a) each person who is known to us to be the acquisitionbeneficial owner of Employee Health Programs by Hirecheck, now part of First Advantage’s employment services segment, where he was president and chief financial officer. Following the acquisition, Mr. MacDonald served as both presidentmore than 5% of First Advantage Occupational Health ServicesCorporation’s Class A common stock and then as vice presidentClass B common stock; (b) each of our named executive officers; (c) each director; and corporate development officer. In January 2006, Mr. MacDonald was appointed president of First Advantage Litigation Consulting, LLC, part(d) all of the investigativedirectors and litigation support services segment. Mr. MacDonald received his bachelor of arts degreeexecutive officers as a group. Unless otherwise indicated, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares, except to the extent spouses share authority under applicable law. Beneficial ownership is determined in business administration from Emory University.
Howard Tischler, 53, joined First Advantage in September 2005 throughaccordance with the acquisition of CIG from First American and currently serves as the presidentrules of the dealer services segmentSecurities and Exchange Commission. In computing the number and percentage of shares beneficially owned by a person, shares that may be acquired by such person within 60 days of March 10, 2009 are counted as outstanding, while these shares are not counted as outstanding for computing the company. Prior to joining First Advantage, Mr. Tischler served as chief executive officer and presidentpercentage ownership of First American CMSI, a company acquired in connection with the acquisition of the CIG from First American Corporation. Mr. Tischler received his bachelor of science degree in mathematics from the University of Maryland and his masters of science degree in engineering and operations research from the George Washington University.
Isabelle Thiesen, 45, joined First Advantage as chief security officer in October 2005. Prior to joining First Advantage, Ms. Thiesen served as vice president of information security for Warner Bros. Prior to Warner Bros., Ms. Thiesen served in security positions for Universal Studios, American Express and Ernst & Young. Ms. Thiesen has a masters of science degree in business administration from California State Polytechnic University after having received a bachelor of arts degree in mass media communication and film studies from the University of Utah.any other person.
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the total compensation paid or to be paid by First Advantage, as well as certain other compensation paid or accrued, during the periods presented to the chief executive officer and the four most highly compensated executive officers serving at the end of 2005, based on salary and bonus (collectively, the “Named Executive Officers”):
Summary Compensation Table
Class A Common | Class B Common | |||||||||
Name(1) | Number of Shares Beneficially Owned | Percent of Class(2) | Number of Shares Beneficially Owned | Percent of Class(2) | ||||||
Holders of 5% or More | ||||||||||
FADV Holdings LLC(3)(4) The First American Corporation First American Real Estate Information Services, Inc. First American Real Estate Solutions LLC 1 First American Way Santa Ana, California 92797 | 47,726,521 | 79.9 | % | 47,726,521 | 100 | % | ||||
FirstMarkCapital, L.L.C.(5) 1221 Avenue of the Americas New York, New York 10020 | 2,152,421 | 17.9 | % | 0 | * | |||||
Ronald J. Juvonen(6) c/o Downtown Associates 674 Unionville Road Suite 105 Kennett Square Pennsylvania 19348 | 714,880 | 5.9 | % | 0 | * | |||||
Experian Information Solutions, Inc.(4)(7) 475 Anton Boulevard 4th Floor Costa Mesa, California 92626 | 3,784,642 | 6.3 | % | 0 | * | |||||
Maverick Capital, Ltd.(8) 300 Crescent Court 18th Floor Dallas, Texas 75201 | 1,084,915 | 9.0 | % | 0 | * | |||||
Dimensional Fund Advisors LP(9) Palisades West, Building One 6300 Bee Cave Road Austin, Texas 78746 | 876,388 | 7.3 | % | 0 | * | |||||
FMR LLC(10) 82 Devonshire Street, Boston Massachusetts 02109 | 1,090,698 | 9.1 | % | 0 | * | |||||
Directors | ||||||||||
Parker Kennedy(11)(18) | 38,513 | * | 0 | �� | * | |||||
Anand Nallathambi(12) | 416,813 | 3.4 | % | 0 | * | |||||
J. David Chatham(11)(13) | 16,111 | * | 0 | * | ||||||
Barry Connelly(11) | 14,611 | * | 0 | * | ||||||
Frank McMahon(11)(18) | 10,013 | * | 0 | * | ||||||
Donald Nickelson(11) | 14,611 | * | 0 | * | ||||||
Donald Robert(11) | 19,611 | * | 0 | * | ||||||
Jill Kanin-Lovers(11) | 6,279 | * | 0 | * | ||||||
D. Van Skilling(11) | 14,611 | * | 0 | * | ||||||
David Walker(11) | 17,611 | * | 0 | * | ||||||
Named Executive Officers Who Are Not Directors | ||||||||||
John Lamson(14) | 256,716 | 2.1 | % | 0 | * | |||||
Todd Mavis(15) | 26,803 | * | ||||||||
Akshaya Mehta(16) | 246,473 | 2.0 | % | 0 | * | |||||
Evan Barnett(17) | 132,059 | 1.1 | % | 0 | * | |||||
All Directors and Current Executive Officers as a group (14 persons) | 1,230,835 | 10.2 | % | 0 | * |
Name and Principal Position | Year | Annual Compensation | Long-Term Compensation | All Other Compensation | ||||||||||||
Salary | Bonus | Number of Securities Underlying Options/SARs | ||||||||||||||
John Long, | 2005 | $ | 440,000 | $ | 550,000 | (3) | 150,000 | $ | 8,350 | (6) | ||||||
Chief Executive Officer | 2004 | $ | 400,000 | $ | 360,000 | (2) | 0 | $ | 7,669 | (5) | ||||||
2003 | $ | 306,954 | $ | 409,846 | (1) | 420,000 | $ | 12,039 | (4) | |||||||
Anand Nallathambi | 2005 | $ | 400,000 | $ | 1,600,00 | (3)(7) | 200,000 | $ | 5,236 | (6) | ||||||
President | 2004 | $ | — | (8) | $ | — | (8) | — | $ | — | (8) | |||||
2003 | $ | — | (8) | $ | — | (8) | — | $ | — | (8) | ||||||
Akshaya Mehta, | 2005 | $ | 290,000 | $ | 251,333 | (3) | 75,000 | $ | 4,904 | (6) | ||||||
Chief Operating Officer | 2004 | $ | 275,000 | $ | 240,000 | (2) | 0 | $ | 4,792 | (5) | ||||||
2003 | $ | 238,864 | $ | 200,000 | (1) | 135,000 | $ | 8,094 | (4) | |||||||
John Lamson, | 2005 | $ | 240,000 | $ | 288,000 | (3) | 75,000 | $ | 5,439 | (6) | ||||||
Chief Financial Officer | 2004 | $ | 220,000 | $ | 240,000 | (2) | 0 | $ | 5,272 | (5) | ||||||
2003 | $ | 205,570 | $ | 200,000 | (1) | 100,000 | $ | 11,177 | (4) | |||||||
Evan Barnett, | 2005 | $ | 250,000 | $ | 325,000 | (3) | 0 | $ | 4,904 | (6) | ||||||
President of Multifamily | 2004 | $ | 235,000 | $ | 300,000 | (2) | 0 | $ | 5,128 | (5) | ||||||
Services Segment | 2003 | $ | 226,155 | $ | 205,531 | (1) | 75,000 | $ | 12,039 | (4) |
* | Represents holdings of less than one percent. |
(1) |
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(2) | Percentage ownership of each class is calculated based on 12,005,420 shares of Class A common stock and 47,726,521 shares of Class B common stock outstanding, in each case as of March 10, 2009, plus, in the case of percentage ownership of Class A common stock with respect to First American, the number of Class A common shares First American may acquire within 60 days of March 10, 2009 upon full conversion of the Class B common stock owned by it on such date into Class A common stock on a one-for-one basis. |
(5) | As reported in the Schedule 13D dated August 25, 2008 filed with the Securities and Exchange Commission. Consists of 2,152,421 shares of Class A common stock, warrants convertible into 42,849 shares of Class A common stock, and options to purchase |
(6) | As reported in Amendment No. 2 to Schedule 13G dated February 17, 2009 filed with the Securities and Exchange Commission. Ronald J. Juvonen, managing member of Downtown Associates, L.L.C., general partner of Downtown Associates I, L.P., Downtown Associates II, L.P., Downtown Associates III, L.P. and Downtown Associates V, L.P. (collectively referred to as the “Downtown Funds”). These shares are held by Downtown Associates I, L.P., Downtown Associates II, L.P. and Downtown Associates III, L.P. (collectively referred to as the “Downtown Funds”). The general partner of the Downtown Funds is Downtown Associates, L.L.C. (the “General Partner”). Ronald J. Juvonen, as the Managing Member of the General Partner, has sole power to vote and direct the disposition of all shares of the Class A Common Stock held by the Downtown Funds. For purposes of the reporting requirements of the Exchange Act, Mr. Juvonen is deemed to be the beneficial owner of such securities. |
(7) | As reported in Amendment No. 1 to Schedule 13G dated February 14, 2006 filed with the Securities and Exchange Commission. Experian Information Solutions, Inc. filed Amendment No. 1 to Schedule 13G with the Securities and Exchange Commission on February 14, 2006 since it may deemed as part of a group with FADV Holdings LLC, First American, First American Real Estate Information Services, Inc., and First American Real Estate Solutions LLC as a result of Experian Information Solutions, Inc.’s 20% ownership interest in First American Real Estate Solutions LLC. First American Real Estate Solutions LLC owns a 36.2840% membership interest in FADV Holdings LLC (with the other members being First American, which owns a 62.5917% membership interest, and First American Real Estate Information Services, Inc., which owns a 1.1243% membership interest). Experian Affiliate Acquisition, LLC, a Delaware limited liability company, in which Experian Information Solutions, Inc. is the sole member, owns beneficially 321,227 shares of Class A common stock and holds full voting and dispositive power of the shares held of record by it. Experian Information Solutions, Inc. does not have voting power or dispositive power over any of the shares owned by FADV Holdings, except that it may cause FADV Holdings, LLC, under certain circumstances, to distribute 17,317,073 shares of Class B stock to First American Real Estate Solutions LLC which would be required to distribute 20% to Experian Information Solutions, Inc. Such Class B common stock would convert automatically into 3,463,415 shares of Class A common stock. Following the distribution of the Class B common stock, it would convert into Class A common stock, resulting in Experian Information Solutions, Inc. owning approximately 6.5% of our |
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Class A common stock. Experian Information Solutions, Inc. expressly disclaims the existence of a group with any or all of FADV Holdings, First American, First American Real Estate Information Services, Inc. and First American Real Estate Solutions LLC. |
(8) | As reported in Amendment No. 2 to Schedule 13G dated February 17, 2009 filed with the Securities and Exchange Commission. Maverick Capital, Ltd. is an investment adviser registered under Section 203 of the Investment Advisers Act of 1940 and, as such, may be deemed to have beneficial ownership of the Shares which are the subject of this filing through the investment discretion it exercises over its |
(9) | As reported in Schedule 13G dated February 9, 2009, filed with the Securities and Exchange Commission. Dimensional Fund Advisors LP is an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the “Funds.” In its role as investment advisor or manager, Dimensional possesses investment and/or voting power over the shares of Class A common stock |
(10) | As reported in Schedule 13G dated February 9, 2009, filed with the Securities and Exchange Commission. Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 1,090,698 shares or |
(11) | Includes the following options to purchase shares of Class A common stock exercisable within 60 days of March 10, 2009 and Restricted Stock Units vesting within 60 days of March 10, 2009: Mr. Kennedy 11,667 options and 1,999 Restricted Stock Units, Mr. Chatham 11,667 options and 1,999 Restricted Stock Units; Mr. Connelly 11,667 options and 1,999 Restricted Stock Units, Mr. McMahon 6,667 options and 1,999 Restricted Stock Units, Mr. Nickelson 11,667 options and 1,999 Restricted Stock Units, Mr. Robert 11,667 options and 1,999 Restricted Stock Units, Ms. Kanin-Lovers 3,335 options and 1,999 Restricted Stock Units, Mr. Skilling 6,667 options and 1,999 Restricted Stock Units, and Mr. Walker 11,667 options and 1,999 Restricted Stock Units. Each Restricted Stock Unit is equal to one share of Class A Common Stock upon vesting at which |
(12) | Includes options to purchase up to 300,050 shares of Class A common stock |
(13) | Includes 1,500 Class A common stock held by Mr. Chatham’s spouse. |
(14) | Includes options to purchase up to 215,000 shares of Class A common stock exercisable within 60 days of March 10, 2009 and 4,485 shares that are held for the benefit of Mr. Lamson by the trustee of the First Advantage 401(k) Plan. |
(15) | Includes options to purchase up to 16,700 shares of Class A common stock exercisable within 60 days of March 10, 2009. |
(16) | Includes options to purchase up to 210,000 shares of Class A common stock exercisable within 60 days of March 10, 2009 and 692 shares that are held for the benefit of Mr. Mehta by the trustee of the First Advantage 401(k) Plan. |
(17) | Includes options to purchase up to 105,000 shares of Class A common stock exercisable within 60 days of March 10, 2009 and 692 shares that are held for the benefit of Mr. Barnett by the trustee of the First Advantage 401(k) Plan. |
(18) | Messrs. Kennedy and McMahon have entered into agreements with First American requiring them to exercise these option awards and restricted stock awards at the direction of First American and to remit any after-tax benefits they receive as |
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The following table sets forth as of March 10, 2009 the total number of common shares of First American beneficially owned and the percentage of the outstanding shares so owned, based on 93,100,373 shares of First American common stock outstanding on that date, by:
each director;
each named executive officer; and
all of the directors and executive officers as a group.
Unless otherwise indicated in the notes following the table, those listed are the beneficial owners of the listed shares of First American with sole voting and investment power (or, in the case of individual stockholders, shared power with such individual’s spouse) over the shares listed. First American common shares subject to rights exercisable within 60 days of March 10, 2009 are treated as outstanding when determining the amount and percentage beneficially owned by a person or entity.
Name | Number of The First American Corporation Common Shares | Percent of Class | |||
Directors | |||||
Parker Kennedy(1)(2) | 3,316,918 | 3.6 | % | ||
Anand Nallathambi(3) | 112,750 | * | |||
J. David Chatham(4) | 33,692 | * | |||
Barry Connelly | 0 | * | |||
Frank McMahon(5) | 235,396 | * | |||
Donald Nickelson | 0 | * | |||
Donald Robert | 732 | * | |||
Jill Kanin-Lovers | 0 | * | |||
D. Van Skilling(6) | 34,108 | * | |||
David Walker | 0 | * | |||
Named Executive Officers Who Are Not Directors | |||||
John Lamson(7) | 4,800 | * | |||
Todd Mavis | 0 | * | |||
Akshaya Mehta(8) | 8,642 | * | |||
Evan Barnett(9) | 5,780 | * | |||
All Directors and Executive Officers as a group (14 persons) | 3,752,818 | 4.1 | % |
(1) | Of the shares credited to Parker S. Kennedy, chairman of the board and chief executive officer of First American, 11,154 shares are owned directly and 2,896,086 shares are held by Kennedy Enterprises, L.P., a California limited partnership of which Parker S. Kennedy is the sole general partner and D. P. Kennedy, Parker S. Kennedy’s father, is one of the limited partners. The limited partnership agreement pursuant to which the partnership was formed provides that the general partner has all powers of a general partner as provided in the California Uniform Limited Partnership Act, provided that the general partner is not permitted to cause the partnership to sell, exchange or hypothecate any of its shares of stock of First American without the prior written consent of all of the limited partners. Of the shares held by the partnership, 463,799 are allocated to the capital accounts of Parker S. Kennedy. The balance of the shares held by the partnership is allocated to the capital accounts of the other limited partners, who are family members of the Kennedys. Except to the extent of his voting power over the shares allocated to the capital accounts of the limited partners, Parker S. Kennedy disclaims beneficial ownership of all shares held by the partnership other than those allocated to his own capital accounts. |
(2) | Includes options to purchase up to 392,000 shares exercisable within 60 days of March 10, 2009, and 11,515 shares held for the benefit of Mr. Kennedy by the trustee of First American’s 401(k) Savings |
(3) | Includes options to |
(4) | Includes options to purchase up to 5,000 shares exercisable within 60 days of March 10, 2009. |
(5) |
(6) | Includes 2,365 shares held by a nonprofit corporation for which Mr. Skilling serves as a director and officer. In his capacity as an officer, Mr. Skilling has the power, acting alone, to direct the voting and disposition of the shares. Also includes 2,833 shares held in |
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(7) | Includes options to |
(8) | Includes options to purchase up to 8,000 shares exercisable within 60 days of March 10, 2009 and 642 shares are held for the benefit of |
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COMPENSATION DISCUSSION AND ANALYSIS
Overview. This compensation discussion describes and analyzes our compensation practices for the following named executive officers:
Anand Nallathambi, chief executive officer and president
John Lamson, chief financial officer and executive vice president
Todd Mavis, executive vice president of operations
Akshaya Mehta, executive vice president–corporate infrastructure
Evan Barnett, president of Multifamily Services Segment
The principal elements of our executive compensation program are:
base salary
annual cash incentives
long-term equity incentives that can be in the form of stock options, restricted stock and restricted stock units, although restricted stock units are currently only being offered to certain members of management.
other supplemental benefits related to job and work assignments.
We attempt to position the aggregate of these elements at a level commensurate with our size and sustained performance and to base a significant portion of overall compensation on company and individual performance.
Objectives and Philosophy. The overall objectives of our executive compensation program are to:
Enable First Advantage to attract, motivate and retain key executive talent essential to the achievement of our short-term and long-term business objectives;
Provide compensation competitive with others in our industry;
Emphasize performance-based compensation that may only be earned on the achievement of pre-defined business goals and superior individual performance;
Reward senior executives for achieving pre-defined business goals and objectives; and
Align the interests of our executives with stockholders.
In setting base salaries for each named executive officer during 2008, the compensation committee reviewed information about compensation levels for similar positions in companies comparable to First Advantage and his or her individual contribution. At the beginning of 2008 the compensation committee originally based the targets for the 2008 annual incentive award on performance relative to pre-established goals, including earnings per share targets, business unit pre-tax profit targets and certain enhancements to company operations each executive is responsible for, however with the global economic downturn the company did not meet its operating income threshold in 2008 to qualify for cash incentive payments in the 2008 senior executive annual incentive plans. As a result, the compensation committee made discretionary awards based on what it believed to be excellent operating, strategic and financial performance in an unprecedented economic environment. Restricted Stock Units, options and restricted stock were granted to provide the opportunity for long-term compensation based upon the performance of our Class A common stock over time and as a retention tool for key executive talent.
Compensation Process.
Compensation Committee. Executive officer compensation is administered by our compensation committee of our board of directors. Our board of directors appoints the compensation committee members and has delegated to the compensation committee the direct responsibility for, among other matters:
approving, in advance, the compensation and employment arrangements for our executive officers;
reviewing all compensation and benefit plans and programs in which our executive officers participate; and
reviewing and recommending changes to all our equity-based plans as appropriate, subject to stockholder approval as required.
Role of Compensation Experts. The compensation committee is authorized to engage compensation consultants and to obtain, at company expense compensation surveys, reports on the design and implementation of compensation programs for
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directors, officers and employees, and other data and documentation the compensation committee considers appropriate. The compensation committee has the sole authority to retain and terminate any outside counsel or other experts or consultants engaged to assist it in evaluating the compensation of our directors and executive officers, including the sole authority to approve such consultants’ fees and other retention terms. In 2008, the compensation committee engaged Mercer as its compensation consultant. Projects assigned to the consultant include the evaluation of the composition of the peer group of companies, evaluation of levels of our executive compensation as compared to general market compensation and to First Advantage’s peer companies, and evaluation of annual incentive plan performance goals.
In January 2008 the Compensation Committee reviewed information on potential comparator companies provided by Mercer and selected a group of 18 peer companies to be considered in determining compensation for 2008. The following 18 were selected from among U.S.-based publicly held companies that are most comparable to us in size and industry:
Acxiom Corporation | Certegy, Inc (formerly Fidelity National Information Services) | |
Alliance Data Systems Corporation | First Consulting Group, Inc.(1) | |
CBIZ, Inc. | FTI Consulting Inc. | |
Choicepoint Incorporated | Global Payments, Inc. | |
The D&B Corporation | InfoGroup, Inc. (formerly Infousa, Inc.) | |
Experian | Intersections, Inc. | |
Equifax Incorporated | Paychex, Inc. | |
Fair Isaac Corporation | Teletech Holdings Incorporated | |
Viad Corporation | Total System Services, Inc. | |
(1) First Consulting was |
During January and February 2008 Mercer provided the Committee with competitive market data for First Advantage senior executive compensation programs. The data reflects publicly disclosed data regarding the compensation programs of the named executive officers of the 18 peer companies described above, as well as compensation data from published compensation surveys conducted by major consulting firms. Competitive market data is used by management and the Committee to assist in determining compensation programs (including pay levels and vehicles) for senior executives including the named executive officers. The Committee also engaged Mercer to update this review in September 2008.
Based on this analysis, the compensation committee targets total compensation levels (base salary, annual incentive opportunity and the estimated value of long-term incentive awards as of the date they are granted) for our executive officers generally at competitive market levels. The compensation committee considers this to be within the range of competitive market practice.
NamedRole of Our Executive Officer Stock Option GrantsOfficers in the Compensation Process. In the first quarter of each year, the chief executive officer presents a report to the compensation committee recommending the upcoming year’s salary, bonus for the prior year, and Exerciseslong-term incentive award levels for named executive officers as well as other executives, other than himself. The compensation committee uses this report and the reports of its consultant to determine executive officer compensation for the upcoming year. Executive officers are not present during compensation committee or board of directors deliberations concerning their compensation. The report by the chief executive officer includes a discussion of the quantitative and qualitative performance for the prior year as well as an assessment by the chief executive officer of the achievement of quantitative and qualitative goals and objectives. The chairman of the board is present when evaluating performance and setting the chief executive officer’s salary and bonus.
Components of Compensation.
The components of our 2008 compensation program were structured to provide compensation competitive with comparable companies, to reward the achievement of certain financial and business objectives and as a retention tool for key executive talent.
Base Salaries. Base salaries for our executive officers were set within ranges, targeted around the competitive norm for similar executive positions in similar companies. Individual salaries may be above or below the competitive norm based on the individual’s contribution to business results, capabilities and qualifications, potential and the importance of the individual’s position to our success. In this context, similar companies are defined as those that are comparable to us in size and scope, and in the nature of their businesses. In early 2008, salaries of our named executive officers were adjusted based on overall strong company financial results for 2007, and to be more commensurate with the pay levels for executives in similar positions within our specified competitive peer group. Mr. Nallathambi’s salary was increased from $625,000 to $700,000. Mr. Lamson’s salary was increased from $350,000 to $375,000. Mr. Mavis’ salary was increased from $325,000 to $375,000. Mr. Mehta’s salary was increased from $336,000 to $345,000. Mr. Barnett’s salary was increased from $288,750 to $297,400. For 2009, salaries were “frozen” and no increases were provided to executive officers.
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Annual Cash Incentive Awards. Our annual bonus plan awards were intended to: (i) compensate executive officers if strategic and financial performance targets are achieved and (ii) reward executive officers for performance in those activities that are most directly under their control and for which they are accountable. Corporate, business unit and individual performance goals under the annual incentive plan were linked to our annual business plan and budget. The total cash compensation (the sum of salary and bonus) for our executive officers was intended to be competitive with market practice for similar executive positions in similar companies when performance goals under the annual bonus plan are achieved.
In February 2008, the compensation committee adopted the senior executive annual incentive plan for fiscal year 2008, which set the performance measurements to be used to determine whether certain senior executives, with the exception of Mr. Nallathambi, were eligible to receive a bonus for 2008. Bonuses granted under the 2008 senior executive annual incentive program were expressed as a percentage of base salary and were awarded based on achieving certain quantitative and qualitative performance goals. Messrs. Lamson, Mavis, Mehta and Barnett were entitled to a cash bonus based on the achievement of their stated goals as long as First Advantage achieved company operating income in 2008 of at least $108,264,000. No cash bonus would have been paid if the threshold operating income goal was not met.
Mr. Nallathambi’s senior executive annual incentive plan was adopted by the compensation committee in May 2008 and included both cash bonus and equity bonus components. Mr. Nallathambi was entitled to a cash bonus based on achieving certain quantitative and qualitative goals as long as First Advantage achieved 75% ($108,264,000) of its operating income goal for 2008. Mr. Nallathambi’s target cash bonus equaled 100% of his salary. The minimum bonus that he was eligible to receive was 50% of his salary and the maximum bonus was 200% of his salary. Additionally, Mr. Nallathambi was eligible to receive an equity bonus based on achieving certain levels of operating income in 2008. Achieving 75% ($108,264,000) of the company’s operating income goal, would result in Mr. Nallathambi receiving a restricted stock unit award in 2009 with a value of $300,000. At achieving 100% ($144,390,000) or greater of the operating income goal, Mr. Nallathambi would receive a restricted stock unit award in 2009 with a value of $600,000. The award value would be pro-rated for achieved levels of operating income between 75% to 100% of goal. In 2009, after audited financial results are publicly released, the actual restricted stock unit award value would be determined. At that time, the award value would be divided by the company’s closing stock price on the date the award amount was approved by the compensation committee, resulting in a specific number of restricted stock units. This award then vests ratably in one-third increments over the next 3 years (2010, 2011 and 2012).
Incentive awards issued under the 2008 senior executive annual incentive plans for Messrs. Nallathambi, Lamson, Mavis, Mehta and Barnett are subject to adjustment at the compensation committee’s discretion. In making such adjustments, the committee may take into account subjective factors outside the performance measurement goals set for each executive officer at the beginning of the year.
The following table provides information about stock option grantssummarizes the annual cash incentive plan targets and weightings for each executive officer:
Target Cash Incentive Award As A Percentage of Salary | Range of Cash Incentive Award As A Percentage of Salary | Percent of Target Incentive Award Value Attributable to Company Quantitative Goals | Percent of Target Incentive Award Value Attributable to Individual Qualitative Goals | Percent of Target Cash Incentive Awarded for 2008 (1) | ||||||||||
Anand Nallathambi | 100 | % | 50% - 200% | 80 | % | 20 | % | 64 | %(2) | |||||
John Lamson | 100 | % | 50% - 200% | 80 | % | 20 | % | 64 | % | |||||
Todd Mavis | 100 | % | 50% - 200% | 80 | % | 20 | % | 64 | % | |||||
Akshaya Mehta | 100 | % | 50% - 200% | 80 | % | 20 | % | 64 | % | |||||
Evan Barnett | 100 | % | 50% - 200% | 80 | % | 20 | % | 100 | % |
The company did not achieve the threshold level of operating income in 2008 to enable bonus payments to executives. The compensation committee made discretionary awards based on what it believes to eachbe excellent operating, strategic and financial performance in an unprecedented economic environment. The awards for Messrs. Nallathambi, Lamson, Mavis and Mehta approximate the level of operating income achieved against plan. The award for Mr. Barnett
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reflects the at plan performance of the Named Executive Officers during 2005 pursuantMulti-Family business segment that he manages. Additionally, the compensation committee made a discretionary equity bonus award in March 2009 to Mr. Nallathambi. He received a total award value of $162,000, which resulted in 16,200 restricted stock units. The award vests ratably over the next 3 years (2010, 2011 and 2012). The equity bonus program which was in place for the last three years will be discontinued for 2009.
For 2009, the range for cash incentive awards as a percentage of salary has been changed to reflect the current economic conditions. Payouts will not exceed 150% of target and, as with equity incentive awards, will be directly aligned with company performance.
Long-Term Incentive Compensation. We currently administer our long-term incentive compensation through the First Advantage Corporation 2003 Amended and Restated Incentive Compensation Plan. NoA total of 7.0 million shares of Class A common stock are available for issuance under the plan. The plan is administered by the compensation committee. At December 31, 2008, 3,491,557 shares of Class A common stock (in the form of options) and 340,499 shares of restricted stock were outstanding under the plan. Options vest over three years at a rate of 33.4% for the first year and 33.3% for each of the two following years. Each option grant expires ten years after the grant date, and restricted stock vests over three years at a rate of 33.3% for the first two years and 33.4% for the last year. Restricted stock units vest over three years at a rate of 33.3% for the first two years and 33.4% for the last year.
The primary purposes of the long-term incentive program are to align the interests of executive officers and other key employees with those of our stockholders and to attract and retain key executive talent. Employees eligible for the long-term incentive program include those who are determined by the compensation committee to be in key policy-setting and decision-making roles, and to have responsibilities that contribute significantly to achieving our earnings goals. The size of an individual’s long-term incentive award is based primarily on individual performance, the individual’s responsibilities and position. Long-term incentive award values are intended to be competitive with market practice for similar executive positions in similar companies.
In 2005, we provided an opportunity for executive officers to elect to receive restricted stock units representing our stock in lieu of some or all of the executive officers’ annual bonus payments. To provide an incentive to acquire our shares through this program, and thereby align executive officers’ interests more closely with those of our stockholders, we provided a 33% match on these restricted stock unit purchases. These restricted stock units were subject to vesting requirements based on the executive’s continued employment. Eligibility for this program was determined by the compensation committee in its discretion. We may decide to offer this opportunity again in the future. Currently, this program is not being offered.
In 2006, the compensation committee adopted the Flexible Long-Term Incentive Plan. This plan was offered in 2006 and in 2007 and was administered under the 2003 Incentive Compensation Plan. The purpose of this plan was to ensure that First Advantage achieves its long-term goals and objectives. Participants in the program were identified at the beginning of each year. Participants were permitted to make an annual election of the form of awards from among (i) stock options (our current program), (ii) restricted stock (full-value shares of stock), (iii) restricted stock units (phantom units that the participant can convert to full-value shares at some future date of their choosing), or (iv) a combination thereof. All equity incentives granted under the plan have a 3-year graded time-based vesting schedule. Continued employment and satisfactory performance is required to meet the vesting requirements. Participants making an election can choose to receive stock options and norestricted stock/units (one value share/unit for every three stock appreciation rightsoptions the participant elects not to receive). If participants do not make an election at a chosen date in February, the participant receives options as a default election.
In 2008, the compensation committee decided to discontinue the Flexible Long-Term Incentive Plan and to instead offer only restricted stock units to participants who are identified at the beginning of each year. Participation in the new long term incentive plan, which is administered under the 2003 Incentive Compensation Plan, may vary from year to year. The committee determined that awards of restricted stock units as opposed to other forms of equity grants provides for superior alignment of executives’ interests with our shareholders’ interest and simultaneously encourages employee stock ownership. Additionally, the committee believes that the use of restricted stock units is a valuable executive retention tool. All equity incentives granted under the plan have a three year graded time-based vesting schedule. Continued employment and satisfactory performance is required to meet the vesting requirements.
For 2009 long term incentive equity awards were grantedreduced in comparison to the Named Executive Officers during 2005.number of restricted stock units awarded in 2008 in alignment with company performance and to reflect the current economic conditions.
Option Grants In 2005
Name of Executive Officer | Number of Securities Underlying Options Granted(1) | Percent of Total Options Granted to Employees in 2005 | Exercise or Base Price Per Share | Expiration Date | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(2) | |||||||||||
5% | 10% | |||||||||||||||
John Long | 150,000 | 9.6 | % | $ | 19.49 | 2/23/2015 | $ | 1,838,573 | $ | 4,659,306 | ||||||
Akshaya Mehta | 75,000 | 4.8 | % | $ | 19.49 | 2/23/2015 | $ | 919,287 | $ | 2,329,653 | ||||||
John Lamson | 75,000 | 4.8 | % | $ | 19.49 | 2/23/2015 | $ | 919,287 | $ | 2,329,653 | ||||||
Evan Barnett | 30,000 | 2 | % | $ | 19.49 | 2/23/2015 | $ | 367,715 | $ | 931,861 | ||||||
Anand Nallathambi | 200,000 | 12.8 | % | $ | 27.07 | 9/16/2015 | $ | 3,404,820 | $ | 8,628,522 |
The |
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The following table provides information about stock options held by the Named Executive Officers as of December 31, 2005.
Aggregated Option Exercises in 2005
and Option Values as of December 31, 2005
Name of Executive Officer | Number of Shares Acquired on Exercise | Value Realized | Number of Securities Underlying Unexercised Options on December 31, 2005 | Value of Unexercised In-The- Money Options on December 30, 2005(1) | |||||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||
John Long | 2,500 | $ | 11,762 | 180,000 | 87,500 | $ | 914,400 | $ | 444,500 | ||||||
John Long | 0 | 0 | 100,000 | 50,000 | $ | 831,000 | $ | 415,500 | |||||||
John Long | 0 | 0 | 0 | 150,000 | $ | 0 | $ | 1,083,000 | |||||||
Akshaya Mehta | 0 | 0 | 33,333 | 16,667 | $ | 169,331 | $ | 84,668 | |||||||
Akshaya Mehta | 0 | 0 | 56,666 | 28,334 | $ | 470,894 | $ | 235,455 | |||||||
Akshaya Mehta | 0 | 0 | 0 | 75,000 | $ | 0 | $ | 541,500 | |||||||
John Lamson | 0 | 0 | 33,333 | 16,667 | $ | 169,331 | $ | 84,668 | |||||||
John Lamson | 0 | 0 | 33,333 | 16,667 | $ | 276,997 | $ | 138,502 | |||||||
John Lamson | 0 | 0 | 0 | 75,000 | $ | 0 | $ | 541,500 | |||||||
Evan Barnett | 0 | 0 | 33,333 | 16,667 | $ | 169,331 | $ | 84,778 | |||||||
Evan Barnett | 0 | 0 | 16,666 | 8,334 | $ | 138,494 | $ | 69,255 | |||||||
Evan Barnett | 0 | 0 | 0 | 30,000 | $ | 0 | $ | 216,600 | |||||||
Anand Nallathambi | 0 | 0 | 0 | 200,000 | $ | 0 | $ | 720,000 |
First American Corporation’s Benefit Plans
Certain employees of First Advantage are eligible to participate in the following benefit plans maintained byPlans. The First American for theCorporation maintains a pension plan and supplemental benefit of certain officers and employees of First American and its subsidiaries, including First Advantage and its subsidiaries.
Pension Plans.plans. Employees of First Advantage and its subsidiaries who were participants in The First American’sAmerican Corporation’s defined benefit pension plan prior to First Advantage’s June 5, 2003 acquisition of The First American’sAmerican Corporation’s screening technology division, and who have become employees of First Advantage or its
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subsidiaries in connection with such acquisition generally are permitted to continue their participation in the pension plan, to the extent available to employees of First American. As of December 31, 2001, no new participants have been or will bewere permitted to participate in the defined benefit pension plan. Currently, only Messrs. Nallathambi, Lamson and Barnett participate in this plan.
Pension Plan Table
Remuneration (Final Average Pay)(1) | Years of Benefit Service | |||||||||||||||||
5 | 10 | 20 | 30 | 40 | 50 | |||||||||||||
$100,000 | $ | 4,850 | $ | 9,950 | $ | 22,150 | $ | 34,350 | $ | 46,550 | $ | 58,750 | ||||||
125,000 | 6,100 | 12,513 | 27,838 | 43,163 | 58,488 | 73,813 | ||||||||||||
150,000 | 7,350 | 15,075 | 33,525 | 51,975 | 70,425 | 88,875 | ||||||||||||
175,000 | 8,600 | 17,638 | 39,213 | 60,788 | 82,363 | 103,938 | ||||||||||||
200,000 | 9,850 | 20,200 | 44,900 | 69,600 | 94,300 | 119,000 | ||||||||||||
225,000 | 11,100 | 22,763 | 50,588 | 78,413 | 106,238 | 134,063 | ||||||||||||
250,000 | 12,350 | 25,325 | 56,275 | 87,225 | 118,175 | 149,125 | ||||||||||||
275,000 or more | 13,600 | 27,888 | 61,963 | 96,038 | 130,113 | 164,188 |
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The above table sets forth estimated annual benefits upon retirement (assuming such benefits will be paid in the form of a life annuity) at various compensation levels and years of service under First American’s pension plans. Subject to certain conditions of age and tenure, all regular employees of First American and its participating subsidiaries were eligible to join First American’s qualified pension plan until December 31, 2001. No employees are eligible to join the pension plan after that date.
In order to participate, during plan years ending on or prior to December 31, 1994, an employee was required to contribute 1 1/2% of pay (i.e., salary, plus cash bonuses, commissions and other pay) to the plan. As a result of amendments to the pension plan that were adopted in 1994, during plan years commencing after December 31, 1994, an employee was not required to contribute to the plan in order to participate. As a result of further amendments, which were adopted in 2000, the pension plan will not accept new participants after December 31, 2001.
A participant generally vests in his accrued benefit attributable to First American’s contributions upon the completion of three years of service or, if earlier, the attainment of normal retirement age while an employee. Normal retirement age is defined under the plan as the later of the employee’s attainment of age 65 or his third anniversary of participation in the plan.
Upon retirement at normal retirement age, an employee receives full monthly benefits which are equal, when calculated as a life annuity:
An employee with at least three years of participation in the plan may elect to retire after attaining age 55, but prior to age 65, and receive reduced benefits.
First American funds the plan based on actuarial determinations of the amount required to provide the stated benefits. The table is based on retirement at age 65 or later, with contributions having been made by the employee in each year of credited service prior to 1995. The benefits are not subject to deduction for Social Security payments or any other offsets. Currently, John Long, John Lamson and Evan Barnett have16 1/2,8 1/2, and 5 years, respectively, of credited service.
The compensation levels shown in the table are less than those set forth in the summary compensation table because the federal tax law limits the maximum amount of pay that may be considered in determining benefits under the tax-qualified pension plan, and First American’s pension restoration plan, which is described below, does not make up for these limits for pay exceeding $275,000. The limit on pay that could be recognized by tax-qualified retirement plans was $200,000 in 1989. This amount was adjusted for inflation for each year
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through 1993, when the limit was $235,840. In 1993, this limit was decreased to $150,000 for plan years beginning in 1994. The $150,000 limit has been adjusted for inflation and was increased to $160,000 as of January 1, 1997, and to $170,000 as of January 1, 2000. The highest final average pay that could be considered in determining benefits accruing under the pension plan before 1994 is $219,224, and since First American’s pension plan does not consider pay earned after December 31, 2001, the highest final average pay that can be considered in determining benefits accruing after 1993 is $164,000.
During 1996, First American adopted its pension restoration plan. This plan is an unfunded, nonqualified plan designed to make up for the benefit accruals that are restricted by the indexed $150,000 pay limit. However, in order to limit its expense, the pension restoration plan does not make up for benefit accruals on compensation exceeding $275,000. The pension restoration plan also makes up for benefits that cannot be paid from First American’s pension plan because of limitations imposed by the federal tax laws. Vesting of benefits payable to an employee under First American’s pension restoration plan occurs at the same time that vesting occurs for that employee in his or her pension plan benefits. The pension restoration plan is effective as of January 1, 1994, but only covers selected pension plan participants who were employees of First American or its participating subsidiaries on that date. As noted above, January 1, 1994, is the date as of which the pay limit for the pension plan was reduced from $235,840 to $150,000. The pension restoration plan excludes pay earned after December 31, 2001, as does the pension plan.
Supplemental Benefit Plan. First AmericanCorporation maintains both an executive and management supplemental benefit plan that it believes assists in attracting and retaining highly qualified individuals for upper management positions. The plan providesprovide retirement benefits for, and pre-retirement death benefits with respect to, certain key management personnel selected by First American’s board of directors, and may include executives of First Advantage or its subsidiaries at and to the extent selected by First American’s board of directors.personnel. Under the plan,plans, which were amended in 2007, a participant upon retirement at normal retirement date (the later of age 6562 or, unless either waived by The First American’sAmerican Corporation’s board of directors, completion of ten10 years of service),service or five years as a participantplan participant) receives a 50% joint life and 50% survivor annuity benefit equal to 35%30% of “final average compensation.”compensation” under the executive plan or 15% of “final average compensation” under the management plan. “Final average compensation” is the average annual compensation, generally composed of base salary, plus cash bonus and stock bonuses,sales commissions, for those three calendar years outthe five-year period ending on December 31 of the last ten years of employmentcalendar year immediately preceding retirementthe calendar year in which such compensation is the highest.participant retires.
The benefit is reduced by 5%5.952% for each year prior to age 62 in which retirement occurs under the executive plan or 7.143% for each year prior to normal retirement date in which retirement occurs and, until age 70, increased by 5% (compounded in order to approximateunder the annuitized value of the benefit had retirement occurred at age 65) for each year after such date in which retirement occurs. With respect to such postponed retirement, the plan takes into account covered compensation received until age 70, so that the retirement benefit of an executive who retires after normal retirement date is equal to the greater of the annuitized benefit or the benefit calculated using final average compensation until age 70.management plan.
To be eligible to receive benefits under the plan,plans, a participant must be at least age 55, have been an employeeone of The First American Corporation’s employees, or an employee of one of its subsidiaries, (including First Advantage and its subsidiaries), for at least ten10 years under the executive plan or 15 years under the management plan and, unless waived by First American’sits board of directors, covered by the planplans for at least five years. A pre-retirement death benefit is provided consisting of ten10 annual payments, each of which equals 50% of final average compensation. Vesting of rights under the plan is accelerated inIn the event of a change“change in controlcontrol” (as defined in the plan)plans) of First American.
The supplemental benefit plan is unfunded and unsecured. First American purchases insurance, of which First American isCorporation, a participant who retires after the owner and beneficiary, on the lives of the participants in the plan. This insurance is designed to recover, over the life of the plan, First American’s costs incurred with respect to the plan. Currently, only John Long, Anand Nallathambi, and one additional employee has been selected by the First American board to participate in the plan. No amounts are payable by First Advantage in connection with this plan, other than the reimbursable expenses for administration of the plan.
On October 11, 2005, the company and First American entered into a reimbursement agreement, which requires the company to reimburse First American for the actual costs associated with the participation of
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executives of First Advantage or its subsidiaries in the supplemental benefit plan. The reimbursement of such costs will commence in 2006 and are estimated to be approximately $343,000 per year.
Deferred Compensation Plan. First American’s deferred compensation plan offers to a select group of management and highly compensated employees of First American and its subsidiaries, including First Advantage and its subsidiaries, the opportunity to elect to defer portions of salary, commissions and bonuses. A committee appointed by First American’s board is responsible for administering the plan, which became effective January 1, 1998. First American maintains a deferral account for each participating employee on a fully vested basis for all deferrals. Participants can choose to have their cash benefits paid in one lump sum or in quarterly payments upon termination of employment or death. Subject to the terms and conditions of the plan, participants also may elect to schedule in-service withdrawals of deferred compensation and the earnings and losses attributable thereto. For all participants who joined the plan prior to December 31, 2001, the plan provides a pre-retirement life insurance benefit equal to the lesser of 15 times the amount deferred in a participant’s first year of participation or $2.0 million. The life insurance benefit is reduced beginning at age 61 by 20% per year. Participants who join the plan after December 31, 2001, are not eligible for any life insurance benefit. First American pays a portion of the cost of such life insurance benefits. John Long, John Lamson, Akshaya Mehta and Anand Nallathambi participate in this plan. The plan is unfunded and unsecured.
Change of Control Arrangements
First American’s supplemental benefit plan calls for accelerated vesting of all benefits in the event of a change in control shall receive the same benefits as if he or she were retiring upon the attainment of First American. normal retirement date.
Currently, Mr. Nallathambi is the only named executive officer who participates in the executive plan.
Stock Ownership Requirements. We do not currently have any policy or guidelines that require a specified ownership of our common stock by our directors or executive officers or stock retention guidelines applicable to equity-based awards granted to directors and executive officers. We do, however, encourage senior executives to build ownership commensurate with their level within the organization. In addition, the compensation committee, as part of its deliberations during the year, reviews stock ownership by our directors and officers. As of March 10, 2009, our executive officers as a group owned approximately 2% of our outstanding Class A common stock.
Stock Option Practices. We have awarded all stock options to purchase our Class A common stock to executive officers at the fair market value of our common stock at the grant date. Stock options are only issued four times per year on pre-established grant dates. These award dates occur after the release of our quarterly financial results. All awards are approved by the compensation committee. For 2009, it is the intent of compensation committee that only restricted stock units will be awarded to certain levels of management. To the extent restricted stock units are awarded in 2009, the issuance shall be only four times a year based on the identical pre-established grant dates established by the compensation committee for the issuance of options.
Perquisites and Other Personal Benefits. Supplemental benefits are offered to selected executive officers where they are specifically related to job and work assignments. Our philosophy is to de-emphasize executive perquisites so we only provide certain executive officers with a reimbursement for dues of social organizations for the purpose of enhancing business opportunities and with automobile allowances related to job and work assignments.
Post-termination Compensation.
The First Advantage Corporation 2003 Incentive Compensation Plan calls for accelerated vesting of all awards in the event of a change in control of First Advantage or The First American orCorporation. In addition, Mr. Nallathambi participates in the First Advantage.
A “change in control” for purposes of First American’sAmerican Corporation’s supplemental benefit plan, means any one of the following:
Tax Implications of a majorityExecutive Compensation. Our aggregate deductions for each named executive officer compensation are potentially limited by Section 162(m) of the directors in office atInternal Revenue Code of 1986, as amended, to the beginning ofextent the two-year period;aggregate amount paid to an executive officer exceeds $1.0 million, unless it is paid under a predetermined objective performance plan meeting certain requirements, or
A “change in control” for purposes of the First Advantage Corporation 2003 Incentive Compensation Plan means any satisfies one of various other exceptions specified in the following:Internal Revenue Code. The compensation committee considers adoption of plans which can satisfy the requirements of Section 162(m); however, its overall compensation philosophy is not dictated by meeting such requirements.
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Approaches for 2009.The current global economic conditions and the voting securities of the surviving entity, (b) a majority of the board of First Advantage prior to the transaction constitutes at least a majority of the board of the surviving entity, and (c) First Advantage and its affiliates own collectively 50% or more of the voting power of the surviving entity;
Director Compensation
For 2005, the directors received the following compensation: (i) a chair retainer fee of $10,000 per year for the audit committee chair; (ii) a chair retainer fee of $4,000 per year for the compensation committee chair; (iii) a member retainer fee of $10,000 per year for each member ofand management as it relates to executive compensation. We believe that our compensation programs are balanced, reasonable and help us retain the audit committee; (iv) a member retainer fee of $4,000 per year for each member of the compensation committee; (v) a member meeting fee of $1,500 for each meeting of the Board;world’s best talent and (vi) a member meeting fee of $1,000 for each meeting attended by members of the audit committee, compensation committee and nominating committee. The compensation approved by the Board in February was retroactive to January 1, 2005. Non-employee directors receive an option to acquire 5,000 shares of our Class A common stock upon electionare appropriately proportionate to the board. Non-employee directors who have served for six months or more also receive an option to acquire 2,500 shares of our Class A common stock upon reelection. In all cases, the exercise price of options is the fair market value of our Class A common stock on the date of grant. In addition, First Advantage reimburses the directors for travel expenses incurred in connection with their duties as directors of First Advantage. Employees of First Advantage who also are directors receive no additional compensation for their service on the board or on any board committee.
The members of the special committee formed in 2005 were compensated for their service on the special committee, with each individual receiving a committee fee of $10,000 (or, in the case of each of Messrs. Nickelson and Walker, as co-chairmen, $15,000) plus a $1,000 meeting fee for each committee meeting, as well as reimbursement of out-of-pocket expenses.
In addition, the company’s by-laws provide each directorperformance of the Company (including each memberas a whole. While overall prevailing economic conditions are not necessarily within the control of our executives’ ability to dictate Company performance, we believe that it is appropriate for certain components of compensation to decline during periods of economic stress, reduced earnings and lower stock prices. It is in this context that the compensation committee set forth a decision to freeze executive salaries for 2009 and as was done this past year, to align equity incentives with the current status of the special committee)economy and with certain indemnification rights and the Company has entered into an indemnity agreement with each member of the Company’s board of directors, including each member of the special committee.Company.
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REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON
The compensation committee of the board of directors has reviewed and discussed the Compensation Discussion and Analysis with management.
Based on this review and discussion, the compensation committee recommends to the board of directors that the Compensation Discussion and Analysis be included in First Advantage’s Annual Report on Form 10-K for the year ended December 31, 2008 and in this proxy statement each to be filed with the Securities and Exchange Commission.
By the Compensation Committee of the Board of Directors: |
Jill Kanin-Lovers, Chairman |
Frank McMahon, Director |
Donald Nickelson, Director |
Donald Robert, Director |
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows the compensation for each individual who served at any time during 2008 as our principal executive officer and our principal financial officer, and the other three most highly compensated executive officers who were serving as our executive officers at the fiscal year ended December 31, 2008 and whose total compensation exceeded $100,000. We refer to each of the individuals named in the table below as “named executive officers”.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(4) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(7) | Total Compensation ($) | |||||||||||||||||||||
Anand Nallathambi, | 2008 | $ | 700,000 | $ | 444,500 | (2) | $ | 967,254 | $ | 1,016,962 | $ | 0 | (2) | $ | 248,031 | (6) | $ | 37,374 | $ | 3,414,121 | ||||||||||
2007 | 625,000 | — | 562,564 | 1,176,159 | 781,250 | 314,630 | 36,778 | 3,166,875 | ||||||||||||||||||||||
2006 | 525,000 | — | 420,043 | 815,527 | 615,235 | 34,018 | 2,724,453 | |||||||||||||||||||||||
John Lamson, | 2008 | $ | 375,000 | $ | 238,125 | (2) | $ | 477,699 | $ | 138,536 | $ | 0 | (2) | $ | 11,377 | (6) | $ | 20,792 | $ | 1,261,529 | ||||||||||
2007 | 350,000 | — | 348,158 | 300,940 | 437,500 | 28,175 | 21,965 | 1,486,738 | ||||||||||||||||||||||
2006 | 275,000 | — | 179,658 | 472,530 | 326,562 | 33,365 | 23,376 | 1,310,491 | ||||||||||||||||||||||
Todd Mavis, | 2008 | $ | 395,533 | (1) | $ | 238,125 | $ | 166,503 | $ | 104,433 | $ | 0 | (2) | $ | 0 | $ | 156,393 | $ | 1,060,987 | |||||||||||
Akshaya Mehta, | 2008 | $ | 345,000 | $ | 219,075 | (2) | $ | 497,067 | $ | 27,958 | $ | 0 | (2) | $ | 0 | (6) | $ | 17,700 | $ | 1,106,800 | ||||||||||
2007 | 336,000 | — | 423,031 | 190,095 | 328,734 | 86,999 | 17,550 | 1,382,409 | ||||||||||||||||||||||
2006 | 310,000 | — | 242,052 | 476,047 | 346,812 | 53,563 | 17,400 | 1,445,874 | ||||||||||||||||||||||
Evan Barnett, | 2008 | $ | 305,979 | (1) | $ | 297,400 | (2) | $ | 342,057 | $ | 11,182 | $ | 0 | (2) | $ | 11,907 | $ | 16,500 | $ | 985,025 | ||||||||||
2007 | 288,750 | — | 286,212 | 73,530 | 295,969 | 1,887 | 16,350 | 962,698 | ||||||||||||||||||||||
2006 | 275,000 | 74,250 | (3) | 162,648 | 230,683 | 160,704 | 4,160 | 16,200 | 923,645 |
(1) | The company adopted a voluntary buyback program of Accrued Paid Time Off for all employees in 2008. Messrs. Barnett and Mavis participated in this program. Mr. Barnett’s salary comprises an annual salary of $297,400 and a buyback of accrued Paid Time Off totaling $8,579. Mr. Mavis’ salary comprises an annual salary of $375,000 and a buyback of accrued Paid Time Off totaling $20,533. |
(2) | The company did not meet its operating income threshold in 2008 to qualify for cash incentive payments in the 2008 senior executive annual incentive plans. The compensation committee made discretionary awards based on what it believes to be excellent operating, strategic and financial performance in an unprecedented economic environment. The awards for Messrs. Nallathambi, Lamson, Mavis and Mehta approximate the level of operating income achieved against plan. The award for Mr. Barnett reflects at-plan performance of the Multi-Family business segment that he manages. |
(3) | Reflects a portion of Mr. Barnett’s 2006 annual incentive plan award for which a specific performance metric was modified by the compensation committee to reflect business conditions occurring after the plan metrics were originally approved by the compensation committee. The actual payment was based on the performance level achieved and was calculated consistent with the terms of the annual incentive plan. |
(4) | The dollar amounts recorded in the table for the stock awards and the option awards have been computed in accordance with Statement of Financial Accounting Standards No. 123, (as revised in 2004) (“SFAS No.123R”). Under SFAS 123R, our compensation cost relating to a stock or option award is generally computed over the period of time in which the named executive officer is required to provide service to us in exchange for the award. For more information about the assumptions used to determine the cost of these awards reported in the table, see Note 2, “Summary of Significant Accounting Policies” to First Advantage’s consolidated financial statements as set forth in the First Advantage’s Form 10-K for the year ended December 31, 2008. These option awards are for First Advantage Corporation and The First American Corporation. |
(5) | Reflects only positive increases in values in The First American Corporation Pension Plan, The First American Corporation Executive Supplemental Benefit Plan and The First American Corporations Deferred Compensation Plan. |
(6) | Excludes loss of investment earnings during 2008 in The First American Deferred Compensation Plan of $(143,016) for Mr. Nallathambi, $(120,362) for Mr. Lamson, and $(385,015) for Mr. Mehta. |
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(7) | The table below sets forth a detailed breakdown of the items which comprise “All Other Compensation” for 2008: |
Name | Perquisites and other Personal Benefits(8) | Registrant Contributions to Defined Contribution Plans(9) | Insurance Premiums | Tax Reimbursements | Total All Other | ||||||||||
Anand Nallathambi | $ | 29,745 | $ | 6,900 | $ | 729 | — | $ | 37,374 | ||||||
John Lamson | $ | 12,858 | $ | 6,900 | $ | 1,034 | — | $ | 20,792 | ||||||
Todd Mavis | $ | 84,084 | $ | 6,900 | — | 65,409 | (10) | $ | 156,393 | ||||||
Akshaya Mehta | $ | 10,800 | $ | 6,900 | — | — | $ | 17,700 | |||||||
Evan Barnett | $ | 9,600 | $ | 6,900 | — | — | $ | 16,500 |
(8) | Reflects car allowances and club membership dues for all executives. Also, includes $74,484 of relocation expenses paid on behalf of Mr. Mavis by the company. |
(9) | Represents First Advantage’s matching contribution in February 2009 to participants’ 2008 deferrals in the First Advantage 401(k) Savings Plan. |
(10) | Reflects the gross-up by the company of federal, state and local income taxes with respect to the taxable portion of Mr. Mavis’ relocation expense reimbursements |
Grants of Plan-Based Awards
The following table provides information concerning equity-based compensation granted to the named executive officers during 2008 under the First Advantage Corporation 2003 Incentive Compensation Plan.
Name | Grant Date | Estimated Future Payouts Under Equity Incentive Plan Awards (1) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||
Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||
Anand Nallathambi | 2/26/2008 | 45,000 | (2) | $ | 912,600 | ||||||||||||
3/3/2008 | 55,000 | (3) | $ | 1,119,800 | |||||||||||||
5/3/2008 | $ | 300,000 | $ | 600,000 | $ | 600,000 | |||||||||||
John Lamson | 3/3/2008 | 29,470 | (3) | $ | 600,009 | ||||||||||||
Todd Mavis | 3/3/2008 | 29,470 | (3) | $ | 600,009 | ||||||||||||
Akshaya Mehta | 3/3/2008 | 19,646 | (3) | $ | 399,993 | ||||||||||||
Evan Barnett | 3/3/2008 | 12,279 | (3) | $ | 250,000 |
(1) | This award represents a portion of Mr. Nallathambi’s annual incentive plan, as approved by the compensation committee, based on achieving certain levels of operating income for 2008. The threshold award level is a restricted stock unit award with a value of $300,000, and the target and maximum award values are both $600,000. The actual number of restricted stock units to be awarded will be determined by dividing the final award value (based on the level of operating income achieved) by the closing stock price on the award determination date in 2009. This award will vest in one-third increments over the next 3 years (2010, 2011 and 2012). |
(2) | This award represents a portion of Mr. Nallathambi’s 2007 annual incentive compensation plan. The compensation committee determined in February 2008 that Mr. Nallathambi earned 45,000 shares based on attaining certain earnings per share levels. The threshold award under the 2007 plan was for 5,000 restricted stock units, the target award was for 40,000 units and the maximum award was for 55,000 units. The restricted stock unit award vests in one-quarter increments over the next 4 years (2009, 2010, 2011 and 2012). |
(3) | All awards are for restricted stock units, which vest ratably over 3 years (2009, 2010 and 2011). |
Additional Information Relating to Our Summary Compensation and Grants of Plan-Based Awards Tables
The compensation committeeplans under which remuneration was paid and grants in the following table were made to our named executive officers are generally described in under “Compensation Discussion and Analysis” above.
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Outstanding Equity Awards at Fiscal Year-End – First Advantage Corporation
The following table provides information concerning unexercised options, unvested stock and equity incentive plan awards outstanding related to First Advantage’s Class A common stock as of December 31, 2008 for each named executive officer.
Option Awards | Stock Awards | |||||||||||||||||
Number of Securities Underlying Unexercised Options(2) (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | ||||||||||||||
Name | Grant Date | Exercisable | Unexercisable | |||||||||||||||
Anand Nallathambi | 9/15/2005 | 200,000 | $ | 27.070 | 9/15/2015 | |||||||||||||
2/22/2007 | 33,400 | 66,600 | $ | 26.760 | 2/22/2017 | |||||||||||||
3/30/2007 | 16,700 | 33,300 | $ | 23.970 | 3/30/2017 | |||||||||||||
138,0479 | (3) | $ | 1,953,365 | |||||||||||||||
James Lamson | 6/4/2003 | 50,000 | $ | 21.625 | 6/4/2013 | |||||||||||||
12/22/2003 | 50,000 | $ | 18.400 | 12/22/2013 | ||||||||||||||
2/22/2005 | 75,000 | $ | 19.490 | 2/22/2015 | ||||||||||||||
2/21/2006 | 26,680 | 13,320 | $ | 24.930 | 2/21/2016 | |||||||||||||
56,254 | (4) | $ | 795,994 | |||||||||||||||
Todd Mavis | 8/15/2007 | 16,700 | 33,300 | $ | 18.540 | 8/15/2017 | ||||||||||||
29,470 | (5) | $ | 417,001 | |||||||||||||||
Akshaya Mehta | 6/4/2003 | 50,000 | $ | 21.625 | 6/4/2013 | |||||||||||||
12/22/2003 | 85,000 | $ | 18,400 | 12/22/2013 | ||||||||||||||
2/22/2005 | 75,000 | $ | 19.490 | 2/22/2015 | ||||||||||||||
$ | 40,654 | (6) | $ | 575,254 | ||||||||||||||
Evan Barnett | 6/4/2003 | 50,000 | $ | 21.625 | 6/4/2013 | |||||||||||||
12/22/2003 | 25,000 | $ | 18,400 | 12/22/2013 | ||||||||||||||
2/22/2005 | 30,000 | $ | 19.490 | 2/22/2015 | ||||||||||||||
$ | 26,905 | (4) | $ | 380,706 |
(1) | Based on the December 31, 2008 closing stock price of $14.15. |
(2) | Options vest over three years on the anniversary of the grant date at a rate of 33.4% for the first year and 33.3% for each of the two following years. |
(3) | 9,040 shares vested February 22, 2009, 9,040 shares will vest February 22, 2010, 9,040 shares will vest February 22, 2011, 11,250 shares vested February 26, 2009, 11,250 shares will vest February 26, 2010, 11,250 shares will vest February 26, 2011, 11,250 shares will vest February 26, 2012, 18,314 shares vested March 3, 2009, 18,313 shares will vest March 3, 2010, and 18,313 shares will vest February 3, 2011. |
(4) | 6,777 shares will vest February 20, 2010, 6,667 shares will vest February 21, 2010, 6,660 shares vested on February 22, 2009, 6,680 shares will vest February 22, 2010, 9,813 vested on March 3, 2009, 9,823 shares will vest on March 3, 2010 and 9,823 will vest March 3, 2011. |
(5) | 9,813 shares vested March 3, 2009, 9814 shares will vest on March 3, 2010 and 9,843 shares will vest March 3, 2011. |
(6) | 6,660 shares vested on February 22, 2009, 6,680 shares will vest February 22, 2010, 6,488 shares vested on March 3, 2009, 6,488 shares will vest March 3, 2010 and 6,488 shares will vest March 3, 2011. |
(7) | 4,454 shares vested on February 22, 2009, 4,454 shares will vest February 22, 2010, 4,093 shares vested March 3, 2009, 4,093 shares vest on March 3, 2010 and 4,093 shares will vest March 3, 2011. |
Outstanding Equity Awards at Fiscal Year-End – The First American Corporation
The following table provides information concerning unexercised options as of December 31, 2008 for each of Messrs. Nallathambi, Lamson and Mehta under First American’s 1996 Stock Option Plan, 1997 Director’s Stock Plan and 2006 Incentive Compensation Plan.
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Option Awards | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | |||||||||
Name | Grant Date | Exercisable | Unexercisable | |||||||||
Anand Nallathambi | 2/24/2000 | 6,000 | $ | 14.000 | 2/24/2010 | |||||||
12/13/2001 | 15,000 | $ | 19.200 | 12/13/2011 | ||||||||
7/23/2002 | 10,000 | $ | 19.100 | 7/23/2012 | ||||||||
2/27/2003 | 30,000 | $ | 22.850 | 2/27/2013 | ||||||||
2/26/2004 | 10,000 | 10,000 | (1) | $ | 30.560 | 2/26/2014 | ||||||
2/28/2005 | 10,000 | 20,000 | (1) | $ | 36.550 | 2/28/2015 | ||||||
John Lamson | 3/12/2003 4/1/2003 | 2,000 2,000 | $ $ | 26.35 26.35 | 3/12/2013 4/1/2013 | |||||||
Akshaya Mehta | 1/24/2002 | 8,000 | $ | 18.89 | 1/24/2012 |
(1) | Options vest pro rata over five years on the anniversary of the grant date at a rate of 20% per year. |
Options Exercised and Stock Vested
The following table provides information concerning the exercise of stock options, SARs and similar instruments and vesting of stock, including restricted stock, restricted stock units and similar instruments, related to First Advantage’s Class A common stock during 2008 for each of the named executive officers on an aggregate basis.
Stock Awards | |||||
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | |||
Anand Nallathambi | 19,934 | $ | 383,933 | ||
John Lamson | 10,570 | $ | 202,368 | ||
Todd Mavis | — | — | |||
Akshaya Mehta | 18,215 | $ | 351,139 | ||
Evan Barnett | 12,107 | $ | 233,531 |
The First American Corporation Benefit Plans
Certain of our boardemployees are eligible to participate in the following benefit plans maintained by First American for the benefit of directors is chargedcertain officers and employees of First American and its subsidiaries, including ours’ and our subsidiaries’ officers and employees.
Pension Plan and Supplemental Benefit Plan
The following table provides information with developing, overseeingrespect to each plan that provides for payments or other benefits to the named executive officers following, or in connection with, retirement.
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | |||||
Anand Nallathambi | The First American Corporation Pension Plan | 14.00 | $ | 53,417 | |||||
The First American Corporation Executive Supplemental Benefit Plan | $ | 1,491,702 | |||||||
John Lamson | The First American Corporation Pension Plan | 11.25 | $ | 84,318 | |||||
Todd Mavis | — | — | — |
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Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | |||||
Akshaya Mehta | — | — | — | ||||||
Evan Barnett | The First American Corporation Pension Plan | 10.25 | $ | 96,032 |
Additional Information Relating to Our Pension Plan and reviewing the general compensation plans and policiesSupplemental Benefit Plan Table
Pension Plan. Employees of First Advantage and recommendsits subsidiaries who were participants in First American’s defined benefit pension plan prior to First Advantage’s June 5, 2003 acquisition of First American’s screening technology division, and who have become employees of First Advantage or its subsidiaries in connection with such acquisition generally are permitted to continue their participation in the individual compensation arrangementspension plan, to the extent available to employees of First American. As of December 31, 2001, no new participants were permitted to participate in the defined benefit pension plan.
In order to participate, during plan years ending on or prior to December 31, 1994, an employee was required to contribute 1.5% of pay (i.e., salary, plus cash bonuses, commissions and other pay) to the plan. As a result of amendments to the pension plan that were adopted in 1994, during plan years commencing after December 31, 1994, an employee was not required to contribute to the plan in order to participate. As a result of further amendments, which were adopted in 2000, the pension plan will not accept new participants after December 31, 2001.
A participant generally vests in his accrued benefit attributable to First American’s contributions upon the completion of three years of service or, if earlier, the attainment of normal retirement age while an employee. Normal retirement age is defined under the plan as the later of the employee’s attainment of age 65 or his third anniversary of participation in the plan.
Upon retirement at normal retirement age, an employee receives full monthly benefits which are equal, when calculated as a life annuity:
to 1% of the first $1,000 and 1.25% of remaining final average pay (i.e., the average of the monthly “pay,” as defined above, during the five highest paid consecutive calendar years out of the last ten years prior to retirement) times the number of years of credited service with First American and its subsidiaries (including First Advantage and its subsidiaries) as of December 31, 1994; and
• | to 3/4% of the first $1,000 and 1% of the remaining final average pay times the number of years of credited service with First American and its subsidiaries (including First Advantage and its subsidiaries) subsequent to December 31, 1994. |
Effective December 31, 2000, First American’s pension plan was amended to exclude from the calculation of benefits any pay earned after December 31, 2001, and any service earned after December 31, 2005.
Effective December 31, 2002, First American’s pension plan was amended to reduce the rate at which future benefits accrue for our chief executive officer, ourparticipants who had not yet attained age 50 by spreading the accrual of the benefit that would have accrued during 2003 – 2005 over extended periods ranging from 5 to 20 years, depending on the participant’s age as of December 31, 2002. The pension plan was amended in February 2008 to eliminate benefit accruals for service after April 30, 2008.
Effective April 30, 2008, First American’s pension plan was amended to “freeze” all benefit accruals for all participants.
An employee with at least three years of participation in the plan may elect to retire after attaining age 55, but prior to age 65, and receive reduced benefits.
First American funds the plan based on actuarial determinations of the amount required to provide the stated benefits. The benefits are not subject to deduction for Social Security payments or any other executive officersoffsets. Currently, Messrs. Nallathambi, Lamson and the presidentsBarnett have 14.00, 11.25 and 10.25 years, respectively, of our primary operating subsidiaries. The compensation committee also administers the incentive compensation plan, including the equity-based component thereof.
Compensation Policiescredited service.
The compensation committeelevels shown in the table are less than those set forth in the summary compensation table because the federal tax law limits the maximum amount of pay that may be considered in determining benefits under the tax-qualified pension plan, and First American’s pension restoration plan, which is committeddescribed below, does not make up for these limits for pay exceeding $275,000. The limit on pay that could be recognized by tax-qualified retirement plans was $200,000 as of January 1, 1989. This amount was adjusted for inflation for each year through 1993, when the limit was $235,840. In 1993, this limit was decreased to designing$150,000 for plan years beginning in 1994. The $150,000 limit has been adjusted for inflation and implementing a program
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was increased to $160,000 as of January 1, 1997, and to $170,000 as of January 1, 2000. The highest final average pay that could be considered in determining benefits accruing under the pension plan before 1994 is $219,224, and since First American’s pension plan does not consider pay earned after December 31, 2001, the highest final average pay that can be considered in determining benefits accruing after 1993 is $164,000.
During 1996, First American adopted its pension restoration plan. This plan is an unfunded, nonqualified plan designed to make up for the benefit accruals that are restricted by the indexed $150,000 pay limit. However, in order to limit its expense, the pension restoration plan does not make up for benefit accruals on compensation exceeding $275,000. The pension restoration plan also makes up for benefits that cannot be paid from First American’s pension plan because of limitations imposed by the federal tax laws. Vesting of benefits payable to an employee under First American’s pension restoration plan occurs at the same time that vesting occurs for that employee in his or her pension plan benefits. The pension restoration plan is effective as of January 1, 1994, but only covers selected pension plan participants who were employees of First American or its participating subsidiaries on that date. As noted above, January 1, 1994, is the date as of which the pay limit for the pension plan was reduced from $235,840 to $150,000. The pension restoration plan excludes pay earned after December 31, 2001, as does the pension plan. The pension restoration plan was amended in February 2008 to eliminate benefit accruals for service after April 30, 2008.
Supplemental Benefit Plans. The First American Corporation maintains executive compensationand management supplemental benefit plans that will contributeit believes assist in attracting and retaining highly qualified individuals for upper management positions. The plans provide retirement benefits for, and pre-retirement death benefits with respect to, certain key management personnel selected by The First American Corporation’s board of directors, and may include our executives or executives of our subsidiaries at and to the achievementextent selected by The First American Corporation’s board of directors. Under the plans that were amended and restated November 1, 2007, upon retirement at normal retirement date (the later of age 62 or, unless either waived by The First American Corporation’s board of directors, completion of ten years of service or five years as a plan participant), a participant receives a 50% joint and survivor annuity benefit equal to 30% of “final average compensation” under the executive plan or 15% of “final average compensation” under the management plan. “Final average compensation” is the average annual compensation, generally composed of base salary, cash bonus and sales commissions, for the five-year period ending on December 31 of the calendar year immediately preceding the calendar year in which the participant retires. The benefit is reduced by 5.952% for each year prior to normal retirement date in which retirement occurs under the executive plan or 7.143% for each year prior to normal retirement date in which retirement occurs under the management plan.
To be eligible to receive benefits under the plans, a participant must be at least age 55, have been an employee of The First American Corporation, or an employee of one of its subsidiaries (including our business objectivessubsidiaries and enhance stockholder value. We have anus), for at least ten years under the executive compensation program that we believe also:plan or fifteen years under the management plan and, unless waived by The First American Corporation’s board of directors, covered by the plans for at least five years. A pre-retirement death benefit is provided consisting of ten annual payments, each of which equals 50% of final average compensation. Vesting rights under the plans are accelerated in the event of a change in control (as defined in the plans) of The First American Corporation.
On October 11, 2005, the company and objectives; and
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Elements of ExecutiveNonqualified Deferred Compensation
Our executive compensation program has four key components:
These components combine fixed and variable elements to create a total compensation package that links a significant portion of compensation to corporate, business unit and individual performance.
Base Salary. Base salaries are set within ranges, which are targeted around the competitive norm for similar executive positions in similar companies. Individual salaries may be above or below the competitive norm. We consider theThe following factors in approving adjustments to salary levels for our executive officers:
Annual Bonuses. Annual bonuses are granted pursuant to our executive compensation plan and are intended to serve two primary functions. First, annual bonuses permit us to compensate officers directly if we achieve specific performance targets. Second, annual bonuses also serve to reward executives for performance on those activities that are most directly under their control and for which they are held accountable.
We set specific performance goals for our company, each business unit and each individual executive. Performance awards are increased or decreased from the target to reflect performance levels that exceed or fall
17
below expectations. Business unit and individual performance goals are based on each individual executive’s responsibilities and his or her respective contribution to our success. The annual bonus is largely based on objective factors and, excepttable provides information with respect to bonuses requiredeach defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified for each named executive officer.
Name | Executive Contribution in Last Fiscal Year ($) | Registrant Contribution in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals in Last Fiscal Year ($) | Aggregate Balance at Last Fiscal Year-end ($) | |||||||||||
Anand Nallathambi | $ | 66,154 | $ | 0 | $ | (143,016 | ) | $ | 0 | $ | 306,254 | |||||
John Lamson | $ | 37,500 | $ | 0 | $ | (120,362 | ) | $ | 0 | $ | 213,334 | |||||
Todd Mavis | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||
Akshaya Mehta | $ | 312,297 | $ | 0 | $ | (385,015 | ) | $ | 0 | $ | 1,263,389 | |||||
Evan Barnett | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
Additional Information Relating to be paid pursuant to employment agreements, the committee has the authority to approve, reduce or entirely eliminate annual bonuses. Annual bonuses typically are cash-based and are paid at the end of each fiscal year. Generally, annual bonus amounts increase as financial measures increase above the levels originally set by the compensation committee.Our Nonqualified Deferred Compensation Plan Table
Long-Term Incentive AwardsDeferred Compensation Plan. Long-term incentive awardsFirst American’s deferred compensation plan offers to a select group of management and highly compensated employees of First American and its subsidiaries, including our subsidiaries and us, the opportunity to elect to defer portions of salary, commissions and bonuses. A committee appointed by First American’s board is responsible for administering the plan, which became effective January 1, 1998. First American maintains a deferral account for each participating employee on a fully vested basis for all deferrals. Participants can choose to have their cash benefits paid in one lump sum or in quarterly payments upon termination of employment or death. Subject to the terms and conditions of the plan, participants also may elect to schedule in-service withdrawals of deferred compensation and the earnings and losses attributable thereto. For all participants who joined the plan prior to December 31, 2001, the plan provides a pre-retirement life insurance benefit equal to the lesser of 15 times the amount deferred in a participant’s first year of participation or $2.0 million. The life insurance benefit is reduced beginning at age 61 by 20% per year. Participants who join the plan after December 31, 2001, are granted pursuantnot eligible for any life insurance benefit. First American pays a portion of the cost of such life insurance benefits. Messrs. Lamson, Mehta and Nallathambi participate in this plan. The plan is unfunded and unsecured.
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Potential Payments Upon Termination or Change in Control
Name | Benefit | Termination with Cause or for Good Reason | Termination without Cause or Good Reason | Voluntary Termination | Death | Disability | Change in Control | Retirement | |||||||||||||||
Anand Nallathambi, | Stock Options (1): | $ | 0 | $ | 513,790 | $ | 513,790 | $ | 513,790 | $ | 513,790 | $ | 513,790 | n/a | |||||||||
Restricted Stock Restricted Stock Units (1): | $ | 0 | $ | 0 | $ | 0 | $ | 1,953,365 | $ | 472,723 | $ | 1,953,365 | n/a | ||||||||||
Pension Plan (2): | $ | 53,417 | $ | 53,417 | $ | 53,417 | $ | 31,032 | $ | 53,417 | $ | 53,417 | n/a | ||||||||||
Supplemental Benefit Plan (2): | $ | 0 | $ | 0 | $ | 0 | $ | 5,803,230 | $ | 2,137,205 | $ | 6,478,747 | n/a | ||||||||||
Deferred Compensation Plan (2): | $ | 306,254 | $ | 306,254 | $ | 306,254 | $ | 596,894 | $ | 306,254 | $ | 306,254 | n/a | ||||||||||
Paid Time-Off (2): | $ | 70,000 | $ | 70,000 | $ | 70,000 | $ | 70,000 | $ | 70,000 | $ | 70,000 | n/a | ||||||||||
Total Value: | $ | 429,671 | $ | 943,461 | $ | 943,461 | $ | 8,968,311 | $ | 3,553,389 | $ | 9,375,573 | $ | 0 | |||||||||
John Lamson | Stock Options (1): | $ | 0 | $ | 10,160 | $ | 10,160 | $ | 10,160 | $ | 10,160 | $ | 10,160 | $ | 10,160 | ||||||||
Restricted Stock Restricted Stock Units (1): | $ | 0 | $ | 0 | $ | 0 | $ | 795,994 | $ | 95,895 | $ | 795,994 | $ | 0 | |||||||||
Pension Plan (2): | $ | 98,499 | $ | 98,499 | $ | 98,499 | $ | 48,592 | $ | 98,499 | $ | 98,499 | $ | 98,499 | |||||||||
Supplemental Benefit Plan (2): | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||
Deferred Compensation Plan (2): | $ | 213,334 | $ | 213,334 | $ | 213,334 | $ | 333,334 | $ | 213,334 | $ | 213,334 | $ | 213,334 | |||||||||
Paid Time-Off (2): | $ | 38,942 | $ | 38,942 | $ | 38,942 | $ | 38,942 | $ | 38,942 | $ | 38,942 | $ | 38,942 | |||||||||
Total Value: | $ | 350,775 | $ | 360,935 | $ | 360,935 | $ | 1,227,022 | $ | 456,830 | $ | 1,156,929 | $ | 360,935 | |||||||||
Todd Mavis | Stock Options (1): | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | n/a | |||||||||
Restricted Stock Restricted Stock Units (1): | $ | 0 | $ | 0 | $ | 0 | $ | 417,001 | $ | 0 | $ | 417,001 | n/a | ||||||||||
Pension Plan (2): | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||
Supplemental Benefit Plan (2): | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||
Deferred Compensation Plan (2): | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||
Paid Time-Off (2): | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | n/a | ||||||||||
Total Value: | $ | 0 | $ | 0 | $ | 0 | $ | 417,001 | $ | 0 | $ | 417,001 | $ | 0 | |||||||||
Akshaya Mehta | Stock Options (1): | $ | 0 | $ | 80,000 | $ | 80,000 | $ | 80,000 | $ | 80,000 | $ | 80,000 | n/a | |||||||||
Restricted Stock Restricted Stock Units (1): | $ | 0 | $ | 0 | $ | 0 | $ | 575,254 | $ | 13,980 | $ | 575,254 | n/a | ||||||||||
Pension Plan (2): | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||
Supplemental Benefit Plan (2): | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||
Deferred Compensation Plan (2): | $ | 1,263,389 | $ | 1,263,389 | $ | 1,263,389 | $ | 1,263,389 | $ | 1,263,389 | $ | 1,263,389 | n/a | ||||||||||
Paid Time-Off (2): | $ | 34,500 | $ | 34,500 | $ | 34,500 | $ | 34,500 | $ | 34,500 | $ | 34,500 | n/a | ||||||||||
Total Value: | $ | 1,297,889 | $ | 1,377,889 | $ | 1,377,889 | $ | 1,953,143 | $ | 1,391,869 | $ | 1,953,143 | $ | 0 | |||||||||
Evan Barnett | Stock Options (1): | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Restricted Stock Restricted Stock Units (1): | $ | 0 | $ | 0 | $ | 0 | $ | 380,706 | $ | 18,084 | $ | 380,706 | $ | 0 | |||||||||
Pension Plan (2): | $ | 97,508 | $ | 97,508 | $ | 97,508 | $ | 49,400 | $ | 97,508 | $ | 97,508 | $ | 97,508 | |||||||||
Supplemental Benefit Plan (2): | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||
Deferred Compensation Plan (2): | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||
Paid Time-Off (2): | $ | 23,539 | $ | 23,539 | $ | 23,539 | $ | 23,539 | $ | 23,539 | $ | 23,539 | $ | 23,539 | |||||||||
Total Value: | $ | 121,047 | $ | 121,047 | $ | 121,047 | $ | 453,645 | $ | 139,131 | $ | 501,753 | $ | 121,407 |
(1) | Based on the December 31, 2008 closing stock price of $14.15 for First Advantage stock options, restricted stock and restricted stock unit awards, and the December 31, 2008 closing stock price of $28.89 for The First American Corporation’s stock option awards. |
(2) | Based on plan valuations and accrued obligations as of December 31, 2008. |
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Additional Information Relating to Potential Payments Upon Employment Termination or Change in Control
Change in Control Arrangements
In 2008, none of our executive officers had change in control agreements through First Advantage. However, the First Advantage Corporation 2003 Incentive Compensation Plan and are intended to aligncalls for accelerated vesting of all awards in the interestsevent of executive officers anda change in control of First American or us. In addition, Mr. Nallathambi participates in First American’s supplemental benefit plan, which calls for accelerated vesting of all benefits in the event of a change in control of First American.
A “change in control” for purposes of First American’s supplemental benefit plan means any one of the following:
a merger or consolidation in which stockholders of First American end up owning less than 50% of the voting securities of the surviving entity;
the sale, transfer or other key employees with thosedisposition of all or substantially all of First American’s assets or the complete liquidation or dissolution of First American;
a change in the composition of First American’s board over a two-year period without the consent of a majority of the directors in office at the beginning of the two-year period; or
the acquisition or accumulation by certain persons of at least 25% of First American’s voting securities.
A “change in control” for purposes of the First Advantage Corporation 2003 Incentive Compensation Plan means any one of the following:
an acquisition in one transaction or a series of transactions by any person which results in such person owning more than 50% of the voting power in First American (other than directly from First American);
an acquisition in one transaction or a series of transactions by any person which results in such person owning more than 50% of our stockholders. To achieve this purpose,voting power (other than directly from us);
a merger, consolidation or similar transaction involving First American, unless (a) stockholders of First American end up owning more than 50% of the voting securities of the surviving entity, (b) a majority of the board of First American prior to the transaction constitutes at least a majority of the board of the surviving entity, and (c) First American and its affiliates own collectively 50% or more of the voting power of the surviving entity;
a merger, consolidation or similar transaction involving us, unless (a) our stockholders end up owning more than 50% of the voting securities of the surviving entity, (b) a majority of our board of directors prior to the transaction constitutes at least a majority of the board of the surviving entity, and (c) we and our affiliates own collectively 50% or more of the voting power of the surviving entity;
the composition of First American’s board is changed without the consent of a majority of the directors in office;
the composition of our board is changed without the consent of a majority of the directors in office;
any approval of any plan allowsor proposal for the grantingliquidation or dissolution of First American or us;
any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets or business of First American to any person (other than a transfer to a company that we own or that is owned by First American or the distribution to First American’s stockholders of the stock optionsor any other assets of a company that we own or that is owned by First American); or
any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of our assets or business to purchaseany person (other than a transfer to a company that we own or that is owned by First American, the distribution to our Class A commonstockholders of the stock stock appreciation rights, restricted stock awardsor any other assets of a company that we own or is owned by First American, or a transfer or distribution to First American or its affiliates).
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Director Compensation
For 2008, non-employee directors received a yearly fee of $30,000. “Non-employee director” means a member of the board who is not also an employee or consultant of the company, a subsidiary or an affiliate. In addition, non-employee directors received the following additional compensation: (i) a chair retainer fee of $10,000 per year for the audit committee chair; (ii) a chair retainer fee of $4,000 per year for the compensation committee chair and for the nominating and corporate governance committee chair; (iii) a member retainer fee of $10,000 per year for each member of the audit committee; (iv) a member retainer fee of $4,000 per year for each member of the compensation committee; (v) a member meeting fee of $1,500 for each meeting of the board; and (vi) a member meeting fee of $1,000 for each meeting attended by members of the audit committee, compensation committee and nominating and corporate governance committee. Non-employee directors also receive an option to acquire 5,000 shares of our Class A common stock performance unit awards, performance share awards,upon election to the board. Non-employee directors who have served for six months or more also receive restricted shares of our Class A common stock units and cash-based awards to eligible personsvalued at $65,000 upon reelection. In all cases, the discretion of the compensation committee. To date, the committee has granted only stock options, restricted stock units and restricted stock under the plan.
The size of an individual’s stock option award is based primarily on individual performance and the individual’s responsibilities and position with our company. These options are granted with an exercise price equal toof options is the fair market value of our Class A common stock on the date of grant, therefore, the stock options have value only if our Class A common stock price appreciates from the value on the date the options were granted. These options generally vest and become exercisable in three equal, annual, installments beginning on the first anniversary of the date of grant. The incentive compensation plan is a discretionary plan; however, it has been the compensation committee’s practice generally to award options quarterly.
Amendments to Incentive Compensation Plan. As part of its duties and its ongoing review of our company’s compensation plans and policies, the committee reviewed and approved the amendments to theFinally, First Advantage Corporation 2003 Incentive Compensation Plan, includingreimburses the increasedirectors for travel expenses incurred in the numberconnection with their duties as directors of shares available for grant under the plan to a total of 7,000,000. The committee determined that having 7,000,000 shares available under the plan and the expansion of the type of awards available to include “other stock-based awards”, under which shares can be granted to participants in the company’s management stock purchase program in lieu of cash bonuses, are critical to our company’s efforts to adequately compensate our key employees, to provide them with incentives to maintain and increase our profitability, and to recruit and retain employees of the caliber necessary to continue our company’s growth. The committee also determined that having the additional shares available for grant under the plan is necessary to reflect the fact that, after the acquisition of CIG from First American, First Advantage is a much larger company with significantly more employees.Advantage. In addition, the committee determined that somecompany’s by-laws provide each director with certain indemnification rights and we have entered into an indemnity agreement with each member of the other amendments were necessary to comply with Internal Revenue Code Section 409A, which recently became effective and is applicable to deferredboard of directors.
The following table provides information concerning the compensation arrangements.
Benefits. Benefits offered to executives serve a different purpose than do the other elements of executive compensation. In general, they are designed to provide a safety net of protection against the financial catastrophes that can result from illness, disability or death and to provide a reasonable level of retirement income. Benefits offered to executives are largely those that are offered to the general employee population.
Chief Executive Officer Compensation
In December 2003, the committee increased Mr. Long’s base salary from $300,000 to $400,000our directors for the year 2004. In 2005, the committee increased Mr. Long’s base salary from $400,000 to $440,000 effectiveperiod January 1, 2005. In February 2006, Mr. Long’s base salary was increased to $600,000, effective February 2006. The committee’s decision to increase Mr. Long’s salary was based upon the committee’s opinion that Mr. Long’s base salary was below current market conditions as well as the increase of the company’s size following the acquisition of CIG from First American. In increasing Mr. Long’s base salary, the committee considered the median salary range for chief2008 through December 31, 2008. Directors who are also named executive officers in the group of comparable companies.have been omitted from this table.
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In addition to receiving an increase in his base salary, Mr. Long received a 2005 bonus in the amount of $550,000, of which $275,000 was paid in cash and the remainder was paid in restricted stock units in the amount of 9,707, which was matched by the company, for a total amount of 12,942 restricted stock units. The issuance of the restricted stock units was pursuant to the management stock purchase plan, adopted by the committee in 2005, which permitted certain executive officers to receive a portion of their bonus in restricted stock units, with a company match of one restricted stock unit for every three restricted stock units received. The restricted stock units vest ratably over a three year period, and are subject to customary terms and conditions, including continued employment with our company. Factors that the committee considered in awarding the bonus included objective factors based upon the financial performance of First Advantage, such as earnings per share, as well as subjective criteria relating to the execution of the desired strategic direction of First Advantage, including growth through acquisitions, and increased shareholder value. Mr. Long was also awarded options to acquire 150,000 common shares for his performance during 2005.
By the Compensation Committee of the Board of
Directors
/s/ DONALD ROBERT
Donald Robert, Chairman
Lawrence Lenihan, Jr.
Donald Nickelson
Alex Sink
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Total ($) | ||||||||
Parker Kennedy(3) | — | $ | 36,077 | $ | 12,780 | $ | 48,857 | |||||
J. David Chatham | $ | 62,000 | $ | 36,077 | $ | 12,780 | $ | 110,857 | ||||
Barry Connelly | $ | 82,000 | $ | 36,077 | $ | 12,780 | $ | 130,857 | ||||
Jill Kanin-Lovers | $ | 77,000 | $ | 36,077 | $ | 10,284 | $ | 123,361 | ||||
Frank V. McMahon(3) | — | $ | 36,077 | $ | 20,520 | $ | 56,597 | |||||
Donald Nickelson | $ | 82,000 | $ | 36,077 | $ | 12,780 | $ | 130,857 | ||||
Donald Robert | $ | 49,000 | $ | 36,077 | $ | 12,780 | $ | 97,857 | ||||
D. Van Skilling | $ | 62,000 | $ | 36,077 | $ | 23,390 | $ | 121,467 | ||||
David Walker | $ | 94,500 | $ | 36,077 | $ | 12,780 | $ | 143,357 |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information, as of March 31, 2006, concerning (a) each person that is known to First Advantage to be the beneficial owner of more than 5% of First Advantage’s Class A common stock and Class B common stock; (b) each Named Executive Officer; (c) each director of First Advantage; and (d) all of the directors and executive officers of First Advantage as a group. Unless otherwise indicated, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares, except to the extent spouses share authority under applicable law. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number and percentage of shares beneficially owned by a person, shares that may be acquired by such person within 60 days of March 31, 2006 are counted as outstanding, while these shares are not counted as outstanding for computing the percentage ownership of any other person.
Name(1) | Class A Common | Class B Common | ||||||||
Number of Shares Beneficially Owned | Percent of Class(2) | Number of Shares Beneficially Owned | Percent of Class(2) | |||||||
Holders of 5% or More | ||||||||||
FADV Holdings LLC(3)(4) The First American Corporation First American Real Estate Information Services, Inc. First American Real Estate Solutions LLC 1 First American Way Santa Ana, California 92797 | 47,726,521 | 83 | % | 47,726,521 | 100 | % | ||||
Pequot Capital Management, Inc.(5) 500 Nyala Farm Road Westport, Connecticut 06880 | 2,166,360 | 22 | % | 0 | * | |||||
Baron Capital Group, Inc.(6) BAMCO, Inc. Baron Small Cap Fund Ronald Baron 767 Fifth Avenue New York, New York 10153 | 1,200,000 | 12 | % | 0 | * | |||||
Experian Information Solutions, Inc.(4)(7) 475 Anton Boulevard 4th Floor Costa Mesa, California 92626 | 3,784,642 | 6.5 | % | 0 | 6.0 | % | ||||
Directors | ||||||||||
Parker Kennedy(8) | 27,666 | * | 0 | * | ||||||
John Long(11) | 400,719 | * | 0 | * | ||||||
J. David Chatham(9)(10) | 7,500 | * | 0 | * | ||||||
Barry Connelly(9) | 5,000 | * | 0 | * | ||||||
Lawrence Lenihan, Jr.(5) | 2,166,360 | 22 | % | 0 | * | |||||
Frank McMahon | 0 | * | 0 | * | ||||||
Donald Nickelson(9) | 5,000 | * | 0 | * | ||||||
Donald Robert(9) | 10,000 | * | 0 | * | ||||||
Adelaide Sink(9) | 9,000 | * | 0 | * | ||||||
D. Van Skilling | 0 | * | 0 | * | ||||||
David Walker(9) | 8,000 | * | 0 | * | ||||||
Named Executive Officers Who Are Not Directors | ||||||||||
Akshaya Mehta(12) | 119,761 | * | 0 | * | ||||||
John Lamson(13) | 102,286 | * | 0 | * | ||||||
Evan Barnett(14) | 62,191 | * | 0 | * | ||||||
Anand Nallathambi | 9,000 | * | 0 | * | ||||||
All Directors and Executive Officers as a group (13 persons) | 2,932,483 | 30 | % | 0 | * |
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(1) |
As of December 31, 2008, Ms Kanin-Lovers and Messrs. Kennedy, Chatham, Connelly, McMahon, Nickelson, Robert, Van Skilling and Walker each held 5059 shares of unvested restricted stock.
(2) | The values set forth in this column relate to option awards that were granted in 2003, 2004, 2005 and 2006. The dollar amounts recorded in the table for the option awards have been computed in accordance with SFAS No. 123R. Under SFAS 123R, our compensation cost relating to a stock or option award is generally computed over the period of time in which the director is required to provide service to us in exchange for the award. For more information about the assumptions used to determine the cost these awards reported in the table, see Note 2. “Summary of Significant Accounting Policies” to First Advantage’s consolidated financial statements as set forth in the |
Ms Kanin-Lovers and Messrs. Kennedy, Chatham, Connelly, McMahon, Nickelson, Robert, Van Skilling and Walker held vested options to purchase 3,335, 11,667, 11,667, 11,667, 5,002, 11,667, 11,667, 6,667 and 11,667 shares, respectively, as of December 31, 2008. There were no option grants to non-employee directors made in 2008.
(3) |
|
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|
The following table sets forth as of March 31, 2006 the total number of First American common shares beneficially owned and the percentage of the outstanding shares so owned, based on 95,797,949 shares of First American common stock outstanding on that date, by:
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Unless otherwise indicated in the notes following the table, those listed are the beneficial owners of the listed shares of First American with sole voting and investment power (or, in the case of individual shareholders, shared power with such individual’s spouse) over the shares listed. First American common shares subject to rights exercisable within 60 days of March 31, 2006 are treated as outstanding when determining the amount and percentage beneficially owned by a person or entity.
Name | Number of First American Common Shares | Percent of Class | |||
Directors | |||||
Parker Kennedy(1)(2) | 3,440,515 | 3.6 | % | ||
John Long(3) | 985 | * | |||
J. David Chatham(4) | 34,133 | * | |||
Frank McMahon | 48,334 | * | |||
Donald Robert | 0 | * | |||
D. Van Skilling(5) | 27,239 | ||||
Named Executive Officers Who Are Not Directors | |||||
Akshaya Mehta(6) | 8,600 | * | |||
John Lamson(7) | 38,175 | * | |||
Evan Barnett | 12,400 | * | |||
Anand Nallathambi(8) | 74,176 | * | |||
All Directors and Executive Officers as a group (8 persons) | 3,678,552 | 3. | 8% |
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, as well as persons who own ten percent or more of our outstanding Class A and Class B common stock, to file an initial report of beneficial ownership of company stock and reports of changes in beneficial ownership thereafter with the SEC.Securities and Exchange Commission. Section 16(a) requires these insiders to deliver copies of all reports filed under Section 16(a) to our company.us. Based solely on a review of these copies available to us, we believe that insidersdirectors, officers and ten percent stockholders have complied with all applicable Section 16(a) filing requirements for fiscal 2005, with the exception of Messrs. Missen and MacDonald, who reported stock option grants late.2008.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our company effectively commenced operations on June 5, 2003 with our acquisition of First American’s screening technology division and US SEARCH. As consideration for the acquisitions, we issued on or about June 5, 2003 100% of our outstanding Class B common stock to First American and 100% of our Class A common stock to former stockholders of US SEARCH. Each share of our Class B common stock entitles the holder to ten votes in any meeting of stockholders. As a result, First American received approximately 80% of the outstanding capital stock of our company and approximately 97% of the voting power in our company. Former stockholders of US SEARCH received the remaining approximately 20% of our outstanding capital stock. Pequot Capital Management, Inc., formerly a stockholder of US SEARCH, received approximately 10% of our Class A common stock in the transaction. First American and Pequot Capital Management, Inc. entered into a stockholders agreement concurrently with the acquisitions that grants Pequot Capital Management, Inc. certain registration rights and the right to sell shares of our Class A common stock at the same time First American sells any of our shares under certain circumstances, and generally requires First American to vote for one nominee for director designated by Pequot Capital Management, Inc.
In connection with the June 2003 acquisitions discussed above, First Advantage and First American entered into a services agreement pursuant to which First American agreed to provide certain financial, administrative and managerial support services to First Advantage. On January 1, 2004, First Advantage and First American amended and restated the services agreement to eliminate most of the services and fees covered by the original agreement. Under the amended and restated agreement, First American will continue to provide certain business services to First Advantage at actual cost or on pricing at the same rate provided to similarly situated affiliates of First American. First American will also provide certain human resources systems, payroll systems and financial systems to First Advantage at a cost of $300,000 per year under the terms of the amended and restated service agreement.
First Advantage provides certain business services in India to First American at actual cost.
On July 31, 2003, First Advantage entered into a promissory note with First American. The loan evidenced by the promissory note is a $10 million uncollateralized revolving loan, with interest payable monthly. The principal balance of the promissory note is payable on July 31, 2006. The promissory note is subordinated to the $20 million bank debt and bears interest at the rate payable under the $20 million bank debt plus 0.5% per annum.
On April 27, 2004, First Advantage entered into a promissory note with First American. The loan evidenced by the promissory note is a $20 million uncollateralized revolving loan, with interest payable monthly. In connection with the acquisition of CIG, this promissory note was paid off by First Advantage in September 2005.
On September 14, 2005, the company completed the acquisition of CIG from First American under the terms of the master transfer agreement. First Advantage purchased CIG and related businesses with 29,073,170 shares of its Class B common stock.
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On March 23, 2006, our company issued an additional 1,650,455 shares of its Class B common stock to First American under the terms of the master transfer agreement, requiring the issuance of additional shares in the event Dealertrack, a company acquired as part of CIG, conducted an initial public offering resulting in proceeds in excess of $50,000,000.
First American and certain affiliates provided sales and marketing, legal, financial, technology, leased facilities, leased equipment and other administrative services to CIG. As part of the acquisition of CIG, an amended and restated services agreement was entered into on September 14, 2005. Under the terms of the new agreement, human resources systems and payroll systems and support, network services and financial systems are provided at an annual cost of approximately $4,800,000. In addition, certain other services including pension and 401(k) expenses, corporate and medical insurance, personal property leasing and company car programs are provided at actual cost. The initial term of the agreement is for one year, and self renews every six months. The company also entered into an agreement with First American to lease the CIG office space in Poway, California. The lease is for an initial lease term of five years to commence on the closing date with a one-time option to renew the term for an additional five years. The rent payable under the lease is approximately $169,000 a month and the Company is obligated to pay all costs and expenses related to the property, including operating expenses, maintenance and taxes. CIG recognized approximately $13,702,000, $11,664,000 and $11,627,000 in selling, general and administrative expense in 2005, 2004 and 2003, respectively, relating to these services. The amounts allocated to CIG are based on management’s assumptions (primarily usage, time incurred and number of employees) as to the proportion of the services used by CIG in relation to the actual costs incurred by First American and affiliates in providing the services.
Effective January 1, 2003, our company and a subsidiary of First American entered into an agreement whereby the company will act as an agent in selling renters insurance. The company receives a commission of 12% of the insurance premiums and 20% of the profits (as defined in the agreement) of the insurance premiums written. Commissions earned in 2005, 2004, and 2003 were approximately $333,000, $87,000, and $11,000 respectively.
Our company performs employment screening services for First American. Total revenue from First American was approximately $700,000, $422,000 and $353,000 for the years ended December 31, 2005, 2004 and 2003, respectively.
First American Real Estate Solutions, LLC (“FARES”), a joint venture between First American and Experian Information Solutions, Inc. (“Experian”), owns 50% of a joint venture that provides mortgage credit reports and operations support to a nationwide mortgage lender. In accordance with the terms of the joint venture operating agreement, the mortgage and consumer credit reporting operation of FARES receives a merge fee per credit report issued and is reimbursed for certain operating costs. In addition, FARES records the 50% share of the earnings of the joint venture using the equity method of accounting. In connection with the acquisition of CIG, FARES entered into an outsourcing agreement where the company continues to provide these services to the nationwide mortgage lender. These earnings are included in service revenue in the accompanying combined statements of income and totaled $5,724,000, $6,672,000, and $8,062,000, for the years ended December 31, 2005, 2004 and 2003, respectively. Total merge fees were $7,092,000, $7,379,000, and $9,056,000 for the years ended December 31, 2005, 2004 and 2003, respectively and are included in service revenue in the accompanying combined statement of income. Total reimbursement for operating costs were $7,289,000, $7,476,000, and $8,471,000, for the years ended December 31, 2005, 2004 and 2003, respectively.
First Advantage and First American Real Estate Information Services, Inc. (“FAREISI”), entered into an operating agreement on November 7, 2005, which provides for the formation of a limited liability company, Leadclick Holding Company, LLC, that was used to purchase their majority ownership interest in Leadclick Media, Inc (“Leadclick”). Pursuant to the terms of the operating agreement, First Advantage and FAREISI have agreed to an allocation of the profits from Leadclick.
First Advantage and First American entered into a reimbursement agreement whereby First Advantage reimburses First American for the actual expenses incurred by it in connection with certain First Advantage employees’ participation in the First American supplemental benefit plan.
25
Experian Information Solutions, Inc., as part of its joint venture with First American in FARES, owns approximately 65% of a combination of First Advantage’s Class A and Class B common shares and is considered a related party. First Advantage entered into a registration rights agreement with Experian, which requires First Advantage to register any shares of First Advantage Class A common stock that Experian may receive upon a distribution by FARES. First Advantage entered into an amended registration agreement with Experian, which requires First Advantage to register any shares of First Advantage Class A common stock that it may receive in the future.
First Advantage and certain of its subsidiaries purchases credit reports from Experian. The cost of credit reports purchased by First Advantage from Experian was $27,431,000, $20,020,000, and $19,399,000 for the years ended December 31, 2005, 2004 and 2003, respectively. First Advantage sells background and lead generation services to Experian. Total revenue from these sales was $263,000, $62,000 and $53,000 for the years ended December 31, 2005, 2004 and 2003, respectively.
26
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing change in the cumulative total stockholder return on First Advantage’s Class A common stock to the cumulative total stockholder return on the S&P SmallCap 600, and the publicly traded common stock of ChoicePoint Inc. ChoicePoint is a company with business lines substantially similar to First Advantage’s business lines. The period presented begins June 6, 2003, the first day our Class A common stock was quoted on the Nasdaq National Market, and ends December 31, 2005.
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN*
AMONG FIRST ADVANTAGE CORPORATION, CHOICEPOINT INC.
AND THE S & P SMALLCAP 600 INDEX
27
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The firm of PricewaterhouseCoopers LLP has been selected by the audit committee of our board as the independent registered certified public accounting firm to audit the books and accounts of our company and its subsidiaries for the fiscal year ending December 31, 2005.2008. This firm has served as independent public accountants for our company since 2003. A representative of PricewaterhouseCoopers LLP is expected to be present at the annual meeting and will have an opportunity to make any desired statement and to answer any appropriate questions by stockholders.
Audit Firm Fee Summary
Our company retainedThe following table sets forth fees billed to us by PricewaterhouseCoopers LLP as its independent public accountants to providefor professional services in the following categoriesrendered for 2008 and amounts during the relevant periods:2007:
Service | Fees | ||||||||
Audit | $ | 1,431,880 | |||||||
Audit-Related | $ | 516,974 | |||||||
2008 | 20071 | ||||||||
Audit Fees | $ | 1,641,256 | $ | 1,628,548 | |||||
Audit-Related Fees | $ | 168,295 | $ | 119,048 | |||||
Tax Fees | $ | 0 | $ | 70,000 | $ | 98,195 | |||
All Other Fees | $ | 0 | $ | 1,500 | $ | 1,800 | |||
Total | $ | 1,948,854 | $ | 1,881,051 | $ | 1,847,591 | |||
1 In the 2008 proxy statement, the Company reported $1,840,726 in fees billed by PricewaterhouseCoopers LLP for 2007. Subsequent billings after the filing of the proxy statement are reflected in the table above and include all fees for 2007. |
1 In the 2008 proxy statement, the Company reported $1,840,726 in fees billed by PricewaterhouseCoopers LLP for 2007. Subsequent billings after the filing of the proxy statement are reflected in the table above and include all fees for 2007. |
Audit Fees. This category includes the aggregate fees billed for professional services rendered for the audits of our company’s consolidated financial statements for fiscal year 2005,years 2008 and 2007, respectively, for the reviews of the financial statements included in our quarterly reports on Form 10-Q during fiscal 2005, and for services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements for the relevant fiscal year.
Audit-Related Fees. This category includes the aggregate fees billed during the period from January 1, 2005 to December 31, 2005for fiscal years 2008 and 2007, respectively, for assurance and related services by PricewaterhouseCoopers LLP that are reasonably related to the performance of the audits or reviews of the financial statements and are not reported above under “Audit Fees,” and generally consist of fees for due diligence accounting consultation with respect to our registration statements, the audit of our 401(k) plans and agreed-upon procedure reports.
Tax Fees. This category includes the aggregate fees billed during the period from January 1, 2005 to December 31, 2005for fiscal years 2008 and 2007, respectively, for professional services rendered by the independent accountantsPricewaterhouseCoopers LLP for tax advice and tax planning. First Advantage was not billed any fees in this category during such period.planning, including the preparation of certain state tax returns.
All Other Fees. This category includes the aggregate fees billed during the period from January 1, 2005 to December 31, 2005for fiscal years 2008 and 2007, respectively, for products and services provided by the independent accountantsPricewaterhouseCoopers LLP that are not reported above under “Audit Fees,” “Audit-Related Fees,” or “Tax Fees.” First Advantage was not billed anyIn 2008 and 2007, these fees in this category during such period.related to the renewal of a subscription to a library of accounting literature.
The audit committee has considered the compatibility of the non-audit services performed by and fees paid to PricewaterhouseCoopers LLP in fiscal 2005year 2008, and has determined that such services and fees were compatible with the independence of the accountants. During fiscal year 2005,2008, PricewaterhouseCoopers LLP did not utilize any personnel in connection with the audit other than its full-time, permanent employees.
Policy for Approval of Audit and Non-audit Services. The audit committee has adopted an approval policy regarding the approval of audit and non-audit services provided by the independent public accountants, which approval policy describes the procedures and the conditions pursuant to which the audit committee may grant general pre-approval for services proposed to be performed by our independent public accountants. All services provided by our independent public
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independent accountants, both audit and non-audit, must be pre-approved by the audit committee. Our audit committee has delegated to the chairman of the audit committee the authority to grant pre-approvals of non-audit services provided by PricewaterhouseCoopers LLP. The decisions of the chairman of the audit committee to pre-approve such a service are required to be reported to the audit committee at its next regularly scheduled meetings.meeting.
In determining whether to approve a particular audit or permitted non-audit service, the audit committee will consider, among other things, whether such service is consistent with maintaining the independence of the independent accountant.public accountants. The audit committee will also consider whether the independent accountant ispublic accountants are best positioned to provide the most effective and efficient service to our company and whether the service might be expected to enhance our ability to manage or control risk or improve audit quality.
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
In the performance of its oversight function, the audit committee has met and held discussions with management of First Advantage, who represented to the audit committee that our company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. The audit committee has reviewed and discussed the consolidated financial statements with both management and our company’s independent registered certified public accounting firm, PricewaterhouseCoopers LLP. The audit committee also discussed with our company’s independent registered certified public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
Our company’s independent registered certified public accountants also provided to the audit committee the written disclosures and the letter required by the current version of Public Company Accounting Oversight Board (“PCAOB”) Rule 3526 (Communications with Audit Committees concerning Independence), and the audit committee discussed their independence with the independent registered certified public accountants. In this connection, the audit committee has considered whether the provision of non-auditing services (and the aggregate fees billed for these services) in fiscal 2008 by PricewaterhouseCoopers LLP to First Advantage is compatible with maintaining the independent registered certified public accounting firm’s independence.
Based upon the reports and discussions described in this report, the audit committee recommended to the board of directors that the audited consolidated financial statements be included in First Advantage’s annual report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission.
By the Audit Committee of the Board of Directors: |
David Walker, Chairman |
J. David Chatham, Director |
Barry Connelly, Director |
D. Van Skilling, Director |
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GENERAL INFORMATION
Stockholder Proposals
In order for a proposal by a stockholder to be included in the proxy statement and proxy for the 2010 annual meeting, to be held in 2007,we must receive such proposal must be received by First Advantage at itsour principal executive office, to the attention of the secretary,Bret T. Jardine, Corporate Secretary of First Advantage Corporation, at 100 Carillon Parkway, St. Petersburg, Florida 33716 no later than December 31, 20062009 (which is not more than 120 days prior to the anniversary of the mailing date of this proxy statement), assuming that the date of the annual meeting to be held in 20062010 is not changed by more than 30 days from the date of this annual meeting. In such event, we will provide notice of the date by which such proposals must be received in order to be included. TheOur determination by First Advantage of whether itwe will oppose inclusion of any proposal in its proxy statement and proxy will be made on a case-by-case basis in accordance with its judgment and the rules and regulations promulgated by the SEC.Securities and Exchange Commission. Proposals received after December 31, 20062009 will not be considered for inclusion in our proxy materials for the 2010 annual meeting in 2007.meeting.
Pursuant to the rules and regulations promulgated by the SEC,Securities and Exchange Commission, any stockholder who intends to present a proposal at the 2010 annual meeting to be held in 2007 without requesting that we include such proposal in our company’s proxy statement should be aware that he or she must notify our companyus at itsour principal executive office, attention secretary, not later than March 1, 2007February 10, 2010 (which is 45 days prior to the anniversary of the mailing date of this proxy statement) of the intention to present the proposal. Otherwise, we may exercise discretionary voting with respect to such stockholder proposal pursuant to authority conferred by proxies to be solicited by our board and delivered in connection with the meeting.
As of the date of this proxy statement, the board is not aware of any matters to come before the annual meeting other than those set forth on the notice accompanying this proxy statement. If any other matters come before the annual meeting, the proxy card, if executed and returned, gives discretionary voting authority to the persons named as proxy holders, John LongAnand Nallathambi and Julie Waters,Bret T. Jardine, our chief executive officer and vice president, associate general counsel and corporate secretary, respectively, with respect to such matters.
Annual Report
All stockholders of record as A copy of the Record Date have been sent, or are concurrently herewith being sent, a copy of our annual reportcompany’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Such report contains certified consolidated financial statements2008, as filed with the Securities and Exchange Commission, will be sent to any stockholder without charge upon written request addressed to Bret T. Jardine, Corporate Secretary of First Advantage and its subsidiaries forCorporation, at 100 Carillon Parkway, St. Petersburg, Florida 33716. You also may obtain our Annual Report on Form 10-K over the fiscal year ended December 31, 2005.
No Incorporation by Reference
The reportInternet on the “Investor Relations” page of the compensation committee of the board on executive compensation and the audit committee report, and the Stock Performance Graph above are not deemed to be “filed” with the SEC, and shall not be incorporated by reference into any priorour website atwww.fadv.com or future filings made by First Advantage underat the Securities Act or theand Exchange Act, except to the extent that First Advantage specifically incorporates such information by reference.Commission’s Web site,www.sec.gov.
Additional Information
Under the Delaware General Corporation Law, you will not have any appraisal rights in connection with the actions to be taken at the annual meeting.
Beginning on April 11, 200619, 2009 a list of holders of record of our Class A and Class B common stock as of the Record Date will be available at our principal executive office during ordinary business hours for examination by any stockholder holding any class of our common stock on the Record Date for any purpose germane to the annual meeting.
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Our company will pay the cost of preparing, assembling and mailing the attached letter from our chief executive officer,president, notice of annual meeting, this proxy statement, the enclosed proxy card, and the solicitation of proxies. Directors,Our directors, officers and other regular employees of First Advantage may solicit proxies. None of them will receive any additional compensation for such solicitation. People soliciting proxies may contact you in person, by telephone, via e-mail or by facsimile. First AdvantageWe will pay brokers or other persons holding stock in their names or the names of their nominees for thetheir reasonable and customary expenses of forwarding soliciting material to their principals.
Our company will, upon the written request of any person who is a beneficial owner of our Class A or Class B common shares on the Record Date, furnish without charge a copy of our annual report on Form 10-K for the year 2005, together with the accompanying financial statements. We will also furnish a copy of the exhibits to the annual report, if requested. Such requests should contain a representation that the person requesting this material was a beneficial owner of the our Class A common stock or Class B common stock on the Record Date and be sent to the secretary of our company at the address indicated on the first page of this proxy statement.
By Order of the Board of Directors |
Bret T. Jardine |
Vice President, Associate General Counsel and Corporate Secretary |
March 18, 2009 |
By Order of the Board of Directors-35-
/s/ JULIE WATERS
Julie Waters
Vice President,
General Counsel
St. Petersburg, Florida
April 11, 2006
31COMPANY #
APPENDIX A
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purposes of the Audit Committee (the “Committee”) are (1) to assist the Board of Directors in fulfilling its oversight of the accounting and financial reporting processes of the Company and the audits of the Company’s financial statements; and (2) to prepare the “Report of the Committee” to be included in the Company’s annual proxy statement.
While the Committee has the responsibilities and powers set forth in the charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements. Management and the internal auditing department are responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The independent accountants are responsible for planning and carrying out a proper audit of the Company’s annual financial statements, and reviewing the Company’s quarterly financial statements prior to the filing of each quarterly report.
In meeting its responsibilities, other than as set forth herein, the Committee’s policies and procedures shall be flexible so that it may react to any change in circumstances or conditions.
COMPOSITION
The Committee shall be comprised of three or more directors who shall be appointed by the Board of Directors. The Chairperson of the Committee shall be appointed by the Board of Directors.
Each member of the Committee shall qualify as an “independent director” under applicable law and the Nasdaq National Market listing requirements (the “Nasdaq Rules”) and shall be able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement. In addition one member of the Committee shall have past employment experience in finance or accounting, requisite personal certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities, as determined in accordance with the Nasdaq Rules by the Board in its business judgment. When and as required by the Nasdaq Rules, applicable law or the rules of the Securities and Exchange Commission (the “SEC”), one member of the Committee shall be a “financial expert,” as determined by the Board of Directors in accordance with such law or rules in its business judgment.
COMPENSATION
No member of the Committee shall receive any compensation from the Company other than (i) director’s fees for service as a director of the Company, including reasonable compensation for serving on the Committee and regular benefits that other directors receive and (ii) a pension or similar deferred compensation for past performance, provided that such compensation is not conditioned on continued or future service to the Company.
MEETINGS
The Committee shall meet at least once every fiscal quarter or more frequently as circumstances require. Members of the Committee may participate in a meeting of the Committee by means of conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other. The
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Committee may ask members of management or others to attend meetings and provide pertinent information, as necessary. The Committee shall meet separately periodically at such times as it deems appropriate with management, the director of the internal auditing department, the independent accountants and the Company’s general or outside counsel to discuss any matters that the Committee or any of these persons or firms believe should be discussed privately or as is necessary to fulfill the Committee’s duties hereunder.
RESOURCES AND AUTHORITY
The Committee shall be granted unrestricted access to all information and all employees of the Company as requested by members of the Committee. The Committee shall have the power to conduct or authorize investigations into any matters within its scope of responsibilities and shall be empowered to retain, at the Company’s expense, independent counsel, accountants, or others to assist it in the conduct of any investigation, or to otherwise assist it in fulfilling its responsibilities and duties, without seeking approval of the Board of Directors or management.
The Committee shall have the sole authority to:
(i) select, retain and terminate the Company’s independent accountants (subject, if applicable, to shareholder ratification);
(ii) approve in advance all auditing services and related fees and terms; and
(iii) approve in advance all non-audit services permitted to be provided to the Company by the independent accountants under applicable law and SEC rules, and related fees and terms; provided, however
a. that non-audit services that were not recognized at the time of the engagement to be non-audit services and otherwise fall within the pre-approval exception provided in Section 10A of the Securities Exchange Act of 1934 (“de minimus non-audit services”) may be approved by the Committee prior to completion of the audit, and
b. that the Committee may delegate to one or more members of the Committee the authority to pre-approve services to be provided by the independent accountants, provided that any such pre-approval by one or more members of the Committee shall be reported to the full Committee at its next scheduled meeting.
RESPONSIBILITIES AND DUTIES
The Committee, to the extent it deems necessary or appropriate in fulfilling its purposes, shall:
1. Obtain and review a written report by the independent accountants describing (i) the firm’s internal quality-control procedures, and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues.
2. Obtain and review with the independent accountants a written statement as required by Independence Standards Board (ISB) Standard No. 1, as may be modified or supplemented, discuss with the independent accountants any disclosed relationships or services that may impact their objectivity and independence, and recommend any appropriate actions to be taken.
3. Set clear hiring policies for employees or former employees of the independent accountants.
4. Discuss with management the timing and process for implementing the rotation of audit partners as required by applicable law and SEC rules.
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Financial Reporting
1. Prior to the annual audit, review the scope of the independent accountant’s audit plan, including the scope, procedures and timing of the audit, the experience and qualifications of the senior members of the independent accountant’s team and the quality control procedures of the independent accountant.
2. Review with management and the independent accountants the financial information included in the Company’s Quarterly Report on Form 10-Q and management’s discussion and analysis of the financial condition and results of operations prior to its filing.
3. Review with management and the independent accountants at the completion of the annual audit the Company’s consolidated financial statements included in the Annual Report on Form 10-K and management’s discussion and analysis of the financial condition and results of operations prior to its filing.
4. Discuss with management generally the types of information (including financial information and earnings guidance) to be disclosed in earnings press releases and earnings calls, as well as to analysts and rating agencies (paying particular attention to any use of “pro forma,” or “adjusted” non-GAAP information).
5. Review legal and regulatory matters that may have a material impact on the Company’s consolidated financial statements, related compliance policies and programs, and reports received from regulators.
6. Establish procedures for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
7. Discuss with the Company’s general counsel and/or outside counsel any significant legal, compliance or regulatory matters that may have a material effect on the Company’s business, financial statements or compliance policies, including material notices to or inquiries received from governmental agencies.
Internal Auditing Department, Financial Controls and Risk Management
1. Review and concur in the appointment or dismissal of the director of the internal auditing department.
2. Review in consultation with the independent accountants and the director of the internal auditing department the integrity of the Company’s financial reporting processes and system of internal control including controls over quarterly financial reporting, computerized information systems and security.
3. Review with the director of the internal auditing department the qualifications and staffing of the internal audit department, the scope of the proposed audit plan for the following year and the coordination of the plan with the independent accountants.
4. Receive from the director of the internal auditing department summaries of and, as appropriate, the significant reports to management prepared by the internal auditing department and management’s responses thereto.
5. Review with management, the director of the internal auditing department and the independent accountants (i) the Company’s policies with respect to risk assessment and risk management, (ii) the Company’s major financial risks exposures, and (iii) the steps management has taken to monitor and control such exposures.
Reporting and Recommendations
1. Prepare the Report of the Committee for inclusion in the annual stockholders’ meeting proxy statement. The Report of the Committee must state whether the Committee: (i) has reviewed and discussed the audited consolidated financial statements with management, (ii) has discussed with the independent accountants the
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matters required to be discussed by SAS 61, as may be modified, supplemented or replaced, (iii) has received the written disclosures from the independent accountants required by ISB Standard No. 1, as may be modified or supplemented, and has discussed with the accountants their independence, and (iv) has recommended to the Board of Directors, based on the review and discussions referred to in above items (i) through (iii), that the Company’s consolidated financial statements be included in the Annual Report on Form 10-K for the last fiscal year for filing with the SEC.
OTHER DUTIES
The Committee shall review and reassess the adequacy of this Audit Committee Charter on an annual basis and submit any proposed revisions to the Board of Directors for consideration and approval.
The Committee shall report regularly to the Board of Directors concerning significant developments in the course of performing the above responsibilities and duties, including reviewing with the full Board any issues that arise with respect to the quality or integrity of the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent accountants, or the performance of the internal audit function.
The Committee shall perform such functions (whether or not described herein) as necessary or appropriate under applicable law, the Company’s charter or Bylaws, and the resolutions and other directives of the Board of Directors.
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FIRST ADVANTAGE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, April 28, 2009
9:00 a.m.
in the
EAGLE AUDITORIUM
at
FIRST ADVANTAGE CORPORATION
12395 FIRST AMERICAN WAY
POWAY, CALIFORNIA 92064
Directions to the First Advantage Corporation 2009 Annual Meeting are available at our “Investor Relations” page of our website @ www.fadv.com
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on April 28, 2009.
Notice is hereby given that the Annual Meeting of Stockholders of First Advantage Corporation will be held in the Eagle Auditorium at 12395 First American Way, Poway, California 92064 on Tuesday, April 28, 2009 at 9:00 a.m.
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting.
The Proxy Statement and 2008 Annual Report on Form 10-K are available at www.ematerials.com/fadv
If you want to receive a paper copy or an e-mail with links to the electronic materials, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed on the reverse side of this notice on or before April 16, 2009 to facilitate timely delivery.
Matters intended to be acted upon at the meeting are listed below.
The Board of Directors recommends that you vote FOR the following proposal:
1. Election of Directors
You may immediately vote your proxy on the Internet at:
www.eproxy.com/fadv
• Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. (CT) on April 27, 2009.
• Please have this Notice and the last four digits of your Social Security Number or Tax Identification Number available. Follow the instructions to vote your proxy.
Your Internet vote authorizes the Named Proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
To request paper copies of the proxy materials, which include the proxy card, proxy statement and annual report, please contact us via:
Internet – Access the Internet and go to www.ematerials.com/fadv . Follow the instructions to log in, and order copies.
Telephone – Call us free of charge at 866-697-9377 in the U.S. or Canada, using a touch-tone phone, and follow the instructions to log in and order copies.
Email – Send us an email at ep@ematerials.com with “fadv Materials Request” in the subject line.
The email must include:
• The 3-digit company # and the 11-digit control # located in the box in the upper right hand corner on the front of this notice.
• Your preference to receive printed materials via mail -or- to receive an email with links to the electronic materials.
• If you choose email delivery you must include the email address.
• If you would like this election to apply to delivery of material for all future meetings, write the word “Permanent” and include the last 4 digits of your Tax ID number in the email.
To request paper copies of the proxy materials, which include the proxy card, proxy statement and annual report, please contact us via:
Internet – Access the Internet and go to www.ematerials.com/fadv . Follow the instructions to log in, and order copies.
Telephone – Call us free of charge at 866-697-9377 in the U.S. or Canada, using a touch-tone phone, and follow the instructions to log in and order copies.
Email – Send us an email at ep@ematerials.com with “fadv Materials Request” in the subject line.
The email must include:
• The 3-digit company # and the 11-digit control # located in the box in the upper right hand corner on the front of this notice.
• Your preference to receive printed materials via mail -or- to receive an email with links to the electronic materials.
• If you choose email delivery you must include the email address.
• If you would like this election to apply to delivery of material for all future meetings, write the word “Permanent” and include the last 4 digits of your Tax ID number in the email.
FIRST ADVANTAGE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
To Be Held
Thursday, May 11, 2006,Tuesday, April 28, 2009, 9:00 a.m.
atin the
RENAISSANCE VINOY RESORTEAGLE AUDITORIUM
501 FIFTH AVENUE NEat
ST. PETERSBURG, FLORIDA 33701FIRST ADVANTAGE CORPORATION
12395 FIRST AMERICAN WAY
POWAY, CALIFORNIA 92064 First Advantage Corporation 12395 First American Way Poway, CA 92064 proxy | ||
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This proxy is solicited by the Board of Directors of First Advantage Corporation for use at the Annual Meeting on May 11, 2006.April 28, 2009.
The shares of First Advantage Class A or Class B common stock you hold ofon record as of March 31, 200610, 2009 will be voted as you specify on the reverse side.
By signing and dating this proxy, you revoke all prior proxies and appoint John LongAnand Nallathambi and Julie Waters,Bret Jardine, and each of them, with full power of substitution, to vote your shares as directed on the matters shown on the reverse side.
If no choice is specified, the proxy will be voted “FOR” the nominees for director listed herein, and at the discretion of the proxy holders on other matters that may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.
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ADDRESS BLOCK
COMPANY #
Vote by Internet, Telephone or Mail
24 Hours a Day, 7 Days a Week
Your phone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
INTERNET – www.eproxy.com/fadv Use the Internet to vote your proxy until 12:00 p.m. (CT) on April, 27, 2009.
PHONE – 1-800-560-1965
Use a touch-tone telephone to vote your proxy until 12:00 p.m. (CT) on April, 27, 2009.
MAIL – Mark, sign and date your proxy card and return it in the postage-paid envelope provided.
If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Voting Instruction Card.
TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
Please detach here¨
The Board of Directors Recommends a Vote FOR all nominees listed below.
1. Election of directors: | 01 Parker Kennedy 06 Donald Nickelson 02 Anand Nallathambi 07 Donald Robert 03 J. David Chatham 08 Jill Kanin-Lovers 04 Barry Connelly 09 D. Van Skilling 05 Frank McMahon 10 David Walker Vote FOR all nominees (except as marked) Vote WITHHELD from all nominees (Instructions: To withhold authority to vote for any indicated nominee, write the number(s) of the nominee(s) in the box provided to the right.)
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTEDFOR EACH NOMINEE LISTED HEREIN.
Address change?Change? Mark Box ¨Indicate changes below:
Dated: ___________Date
Signature(s) in Box
Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy. Partnerships and limited liability companies should sign in partnership or applicable entity name by an authorized person.
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