MEMBERSHIP INTEREST PURCHASE AGREEMENT

Exhibit 2.1

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

Dated as of April 21, 2004

 

Among

 

FIRST ADVANTAGE CORPORATION,

 

ANDREW S. LEVETOWN

 

MARK CARTER

 

JOHN ASHLEY

 

JOHN JENKINS

 

LAURA ZUCKERMAN

 

HENRY HSU

 

THEA BOURNAZIAN

 

ANTHONY SARTORI

 

and

 

JOHN NELLIGAN

 

 

*    The Registrant will furnish a supplementary copy of any omitted exhibits and schedules to the SEC upon request.

TABLE OF CONTENTS¹

 

 

1	This Table of Contents is provided for convenience only and does not form a part of this Purchase Agreement.

 

(i)

 

(ii)

EXHIBITS

 

 

(iii)

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This MEMBERSHIP INTEREST PURCHASE AGREEMENT (as the same may be amended, modified and supplemented from time to time, this “Agreement”) is entered into as of April 21, 2004 by and among FIRST ADVANTAGE CORPORATION, a Delaware corporation (the “Buyer”); Andrew Levetown, an individual residing in the State of Virginia (“Mr. Levetown”); Mark Carter, an individual residing in the State of Virginia (“Mr. Carter”); John Ashley, an individual residing in the State of Virginia (“Mr. Ashley”); John Jenkins, an individual residing in the State of California (“Mr. Jenkins”); Laura Zuckerman, an individual residing in the State of Maryland (“Ms. Zuckerman”); Henry Hsu, an individual residing in the State of Virginia (“Mr. Hsu”); Thea Bournazian, an individual residing in the District of Columbia (“Ms. Bournazian”); Anthony Sartori, an individual residing in the State of Virginia (“Mr. Sartori”); and John Nelligan, an individual residing in the District of Columbia (“Mr. Nelligan”; each of Mr. Levetown, Mr. Carter, Mr. Ashley, Mr. Jenkins, Ms. Zuckerman, Mr. Hsu, Ms. Bournazian, Mr. Sartori and Mr. Nelligan are referred to herein as a “Seller” and collectively as the “Sellers”); the Sellers being the sole members of COREFACTS, LLC, a Virginia limited liability company (the “Company”).

 

W I T N E S S E T H :

 

WHEREAS, the Sellers collectively own all of the issued and outstanding membership interests of the Company (the “Membership Interests”);

 

WHEREAS, the Sellers desire to sell, and the Buyer desires to purchase, the Membership Interests, pursuant to the terms and conditions of this Agreement; and

 

WHEREAS, it is the intention of the Parties that, upon consummation of the purchase and sale of the Membership Interests pursuant to this Agreement, the Buyer or its designee shall own all of the issued and outstanding membership interests of the Company;

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements herein contained, the Parties agree as follows:

 

SECTION 1.

DEFINITIONS AND INTERPRETATIONS

 

1.1 Defined Terms. In this Agreement the following words and expressions shall have the following meanings (such meaning to be equally applicable to both the singular and plural forms of the terms defined):

 

“24/7” has the meaning provided in Section 2.15(l).

 

“Accredited Investor” has the meaning set forth in Regulation D promulgated under the Securities Act of 1933, as amended.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person; provided that, for purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise; provided further that an Affiliate of any Person shall also include (a) any Person that directly or indirectly owns more than five percent (5%) of any class of capital stock or other equity of such Person and (b) any officer, director, trustee, or beneficiary of such Person.

 

“Agreement” has the meaning provided in the introductory paragraph.

 

“Agreed Claims” has the meaning provided in Section 6.3(c).

 

“Balance Sheet” means the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the Balance Sheet Date.

 

“Balance Sheet Date” means December 31, 2003.

 

“Bugs” has the meaning provided in Section 2.15(j).

 

“Buyer” has the meaning provided in the introductory paragraph.

 

“Buyer Reports” has the meaning provided in Section 3.7.

 

“Buyer Indemnified Party” has the meaning provided in Section 6.2(a).

 

“Certificate” has the meaning provided in Section 6.3(a).

 

“Closing” has the meaning provided in Section 4.3.

 

“Closing Date” has the meaning provided in Section 4.3.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.

 

“Company” has the meaning provided in the introductory paragraph.

 

“Company-owned Intellectual Property” shall mean all Intellectual Property owned by the Company or any of its Subsidiaries or used in connection with the business of the Company or any of its Subsidiaries.

 

“Contract” means any contract, agreement, understanding, note, bond, mortgage, indenture, guarantee, license, franchise, commitment, lease or instrument, whether oral or written, including all amendments thereto.

 

“Convertible Note” means any convertible promissory note of the Buyer in favor of a Seller substantially in the form attached hereto as Exhibit B.

 

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“Employee Benefit Plans” has the meaning provided in Section 2.19(a).

 

“Employment Agreement” means each of the employment agreements between the Buyer and Messrs. Ashley, Levetown and Jenkins, respectively, substantially in the form attached hereto as Exhibit C.

 

“Encumbrances” means all liens, security interests, options, rights of first refusal, claims, easements, mortgages, charges, indentures, deeds of trust, rights of way, restrictions on the use of real property, encroachments, leases to third parties, security agreements and any other encumbrances and other restrictions or limitations on use of real or personal property or irregularities in title thereto.

 

“Entity” means any Person that is not a natural person.

 

“Environmental Law” shall mean any law, order or other requirement of law, including any principle of common law, relating to the protection of human health or the environment, or to the manufacture, use, transport, treatment, storage, disposal, release or threatened release of petroleum products, asbestos, urea formaldehyde insulation, polychlorinated biphenyls or any substance listed, classified or regulated as hazardous or toxic, or any similar term, under such Environmental Law.

 

“ERISA” has the meaning provided in Section 2.19(a).

 

“FADV Common Shares” means the Class A common shares, par value $.001 per share, of the Buyer.

 

“Financial Statements” means (i) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the year ended December 31, 2003 and the related unaudited consolidated statements of operations, cash flows and changes in members’ equity, (ii) the audited consolidated balance sheet of the Company and its Subsidiaries as of the year ended December 31, 2002 and the related audited consolidated statements of operations, cash flows and changes in members’ equity, certified by the Company’s accountants and (iii) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the year ended December 31, 2001 and the related unaudited consolidated statements of operations, cash flows and changes in members’ equity, in each case together with any explanatory notes thereto.

 

“GAAP” means United States generally accepted accounting principles applied on a consistent basis.

 

“Governmental Entity” means any instrumentality, subdivision, court, administrative agency, commission, official or other authority of the United States or any other country or any state, province, prefect, municipality, locality or other government or political subdivision thereof.

 

“Indebtedness” of any Person shall mean and include (a) indebtedness for borrowed money or indebtedness issued or incurred in substitution or exchange for indebtedness for borrowed money, (b) amounts owing as deferred purchase price for

 

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property or services, including all seller notes and “earn-out” payments, (c) indebtedness evidenced by any note, bond, debenture, mortgage or other debt instrument or debt security, (d) commitments or obligations by which such Person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit), (e) indebtedness secured by an Encumbrance on assets or properties of such Person, (f) obligations or commitments to repay deposits or other amounts advanced by and owing to third parties, (g) obligations under any interest rate, currency or other hedging agreement or (h) guarantees or other contingent liabilities (including so called take-or-pay or keep-well agreements) with respect to any indebtedness, obligation, claim or liability of any other Person of a type described in clauses (a) through (g) above.

 

“Indemnified Party” has the meaning provided in Section 6.3(a).

 

“Indemnifying Party” has the meaning provided in Section 6.3(a).

 

“Intellectual Property” means all domestic and foreign patents, patent applications, trademarks, service marks and other indicia of origin, trademark and service mark registrations and applications for registrations thereof, copyrights, copyright registrations and applications for registration thereof, Internet domain names, applications and reservations therefor, uniform resource locators (“URLs”) and the Internet sites (collectively, the “Sites”) corresponding thereto, trade secrets, inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, show-how, maskworks, formulae, methods (whether or not patentable), designs, processes, procedures, technology, source codes, object codes, computer software programs, databases, data collectors and other proprietary information or material of any type, whether written or unwritten (and all goodwill associated with, and all derivatives, improvements and refinements of, any of the foregoing).

 

“IRS” means the Internal Revenue Service.

 

“Licenses” has the meaning provided in Section 2.17.

 

“Losses” has the meaning provided in Section 6.2(a).

 

“Material Adverse Effect” means, with respect to any Person and/or its Subsidiaries, a material adverse change in or effect on (a) the validity or enforceability of this Agreement, (b) the ability of such Person to timely perform its obligations under this Agreement or any Related Document to which such Person is a party or (c) the business, assets, conditions (financial or otherwise), results of operations, or operations of such Person and its Subsidiaries taken as a whole.

 

“Membership Interests” has the meaning provided in the first recital.

 

“Nasdaq” means the Nasdaq National Market.

 

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“Noncompetition Agreement” means each Noncompetition Agreement between the Buyer and each of the Primary Sellers, substantially in the form attached hereto as Exhibit D.

 

“Ordinary Course” means, with respect to any Person or its Subsidiaries, the ordinary course of commercial operations customarily engaged in by such Person or its Subsidiaries, consistent with past practices (including with respect to quantity and frequency).

 

“Overlap Period” has the meaning provided in Section 2.13(b).

 

“Party” or “Parties” mean a party or the parties to this Agreement.

 

“Permitted Encumbrances” has the meaning provided in Section 2.7.

 

“Person” means and includes any individual, partnership, joint venture, association, joint stock company, corporation, trust, limited liability company, unincorporated organization, a group and a government or other department, agency or political subdivision thereof.

 

“Pre-Closing Period” has the meaning provided in Section 2.13(b).

 

“Pre-Tax Net Income” means, for any period of determination, the pre-tax net income of the Company (including, for the purpose of this definition, any successor entity, business unit or division) for such period, determined in accordance with GAAP; provided, however, that in determining Pre-Tax Net Income, the allocation of parent company corporate overhead to the Company shall be an amount equal to $75.00 per month for each employee of the Company. For the avoidance of doubt, such parent company corporate overhead allocation does not include direct employee related expenses for employees of the Company, such as 401(k) matching contributions, medical plan expenses and other similar expenses, all of which shall be reflected in calculating pre-tax net income. If the Company has consummated acquisitions during such period, the per annum cost of capital in respect of such acquisitions shall be (a) to the extent the consideration for such acquisition was cash or capital stock, 8.0% and (b) to the extent the consideration for such acquisition is in the form of promissory notes or some other form of indebtedness, the interest rate in respect of such indebtedness.

 

“Primary Sellers” means Mr. Ashley, Mr. Carter, Mr. Jenkins and Mr. Levetown.

 

“Promissory Note” has the meaning provided in Section 4.2.

 

“Purchase Price” has the meaning provided in Section 4.2.

 

“Related Documents” means this Agreement, each Employment Agreement and each Noncompetition Agreement.

 

“SEC” means the Securities and Exchange Commission.

 

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“Seller” and “Sellers” have the meaning provided in the introductory