Prior to the Silver Lake Transaction, all share-based awards were issued to employees under the Predecessor Plan. This plan was dissolved as of the closing date of the Silver Lake Transaction. After the Silver Lake Transaction and prior to the IPO, all share-based awards were issued by Fastball Holdco, L.P., the Company’s previous parent company under the Successor Plan.

Share-based compensation expense is recognized in cost of services, product and technology expense, and selling, general, and administrative expense, in the accompanying consolidated statements of operations and comprehensive income (loss) as follows (in thousands):


	Successor				Predecessor
	Year Ended December 31, 2021		Period from February 1, 2020 through December 31, 2020		Period from January 1, 2020 through January 31, 2020		Year Ended December 31, 2019
Share-based compensation expense
Cost of services	$	163	$	100	$	156	$	171
Product and technology expense		459		179		—		92
Selling, general, and administrative expense		8,908		1,597		3,820		953
Total share-based compensation expense	$	9,530	$	1,876	$	3,976	$	1,216

Class B awards issued under the Predecessor Plan consisted of options and profits interests and generally vested over five years at a rate of 20% per year. The Class B options issued under the Predecessor Plan generally expired ten years after the grant date.

Class C awards issued under the Predecessor Plan consisted of options and profits interests and generally vested based on two criteria (50% each): (1) Time — awards vested over five years at a rate of 20% per year; and (2) Performance — awards vested based on the Company achieving certain revenue growth and EBITDA targets or on achieving certain enterprise value targets upon the sale of the Company. The Class C options issued under the Predecessor Plan generally expired ten years after the grant date.

There were 1,700,051 Class B profits interests and 12,621,955 Class C profits interests under the Predecessor Plan for the period from January 1, 2020 through January 31, 2020 (Predecessor). As of January 31, 2020, all profit interest grants were vested.

As a result of the Silver Lake Transaction, certain awards issued under the Predecessor Plan were granted accelerated vesting upon the closing of the transaction. In accordance with ASC 718, Compensation – Stock Compensation, the Company recorded the additional associated expense of approximately $3.9 million in the period from January 1, 2020 through January 31, 2020 (Predecessor). All remaining unvested awards were forfeited.

A summary of the option unit activity under the Predecessor Plan for the year ended December 31, 2019 (Predecessor) and for the period from January 1, 2020 to January 31, 2020 (Predecessor) is as follows:


		Class B				Class C
		Options		Weighted Average Exercise Price		Options			Weighted Average Exercise Price
December 31, 2018	Grants Outstanding		331,666	$	1.45		3,792,205		$	2.00
	Forfeited		—	$	—		(3,437	)	$	2.00
December 31, 2019	Grants outstanding		331,666	$	1.45		3,788,768		$	2.00
	Forfeited		—	$	—		(72,500	)	$	2.00
January 31, 2020	Grants outstanding		331,666	$	1.45		3,716,268		$	2.00
January 31, 2020	Grants vested		271,666	$	1.45		3,206,998		$	2.00
January 31, 2020	Grants unvested		60,000	$	1.45		509,270		$	2.00

Awards issued under the Successor Plan consist of options and profits interests and vest based on two criteria (50% each): (1) Time — awards vest over five years at a rate of 20% per year; and (2) Performance — awards vest based upon a combination of the five year time vesting, subject to the Company’s investors receiving a targeted money-on-money return. Options issued under the Successor Plan generally expire ten years after the grant date. No awards were issued under the plan during the period from January 1, 2021 through December 31, 2021 (Successor).

Prior to the IPO, the fair value for awards granted during the period from February 1, 2020 through December 31, 2020 (Successor) was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighed average assumptions:


	Period from February 1, 2020 through December 31, 2020
	Class B			Class C
Expected stock price volatility		30.90	%		30.08	%
Risk-free interest rate		1.28	%		1.47	%
Expected term (in years)		6.25			6.25
Estimated fair-value of the underlying unit	$	10.06		$	10.00

A summary of the profits interest unit activity under the Successor Plan for the period from February 1, 2020 through December 31, 2020 (Successor) and the year ended December 31, 2021 (Successor) is as follows:


		Class C Units
February 1, 2020	Grants Outstanding		—
	Issued		4,501,056
	Forfeited		(643,008	)
December 31, 2020	Grants outstanding		3,858,048
	Exchanged for common stock in the Company		(411,720	)
	Exchanged for restricted stock in the Company		(3,446,328	)
December 31, 2021	Grants outstanding		—

A summary of the option unit activity under the Successor Plan for the period from February 1, 2020 through December 31, 2020 (Successor) and the year ended December 31, 2021 (Successor) is as follows:


		Options			Weighted Average Exercise Price
February 1, 2020	Grants Outstanding		—		$	—
	Issued		2,867,694		$	10.06
	Forfeited		(133,960	)	$	10.00
December 31, 2020	Grants outstanding		2,733,734		$	10.06
	Exercised		(24,112	)	$	10.00
	Forfeited		(107,168	)	$	10.00
	Exchanged for options in the Company		(2,602,454	)	$	10.07
December 31, 2021	Grants outstanding		—		$	—

In connection with the Company’s IPO, the Company’s parent was dissolved. Awards issued by the Company’s parent were converted in accordance with non-discretionary anti-dilution provisions of the Successor grants as follows:


		Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
December 31, 2020	Grants outstanding		—		$	—
	Grants issued in exchange for options in the Company’s Parent		3,938,491		$	6.65
	Grants exercised		(58,552	)	$	6.61
	Grants cancelled/forfeited		(360,376	)	$	6.61
December 31, 2021	Grants outstanding		3,519,563		$	6.66	8.2 years	$43.6 million
December 31, 2021	Grants vested		681,227		$	6.66	8.2 years	$8.4 million
December 31, 2021	Grants unvested		2,838,336		$	6.66

In connection with the IPO, the Company adopted the 2021 Equity Plan. The 2021 Equity Plan is intended to provide a means through which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants, and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, thereby strengthening their commitment to our welfare and aligning their interests with those of our stockholders. The 2021 Equity Plan provides for the grant of awards of stock options, stock appreciation rights, restricted shares, and restricted stock units, and other equity-based or cash-based awards as determined by the Company’s Compensation Committee. The 2021 Equity Plan has a total of 17,525,000 shares of common stock reserved as of December 31, 2021. The number of reserved shares automatically increases on the first day of each calendar year commencing on January 1, 2022 and ending on January 1, 2030 in an amount equal to the lesser of (x) 2.5% of the total number of shares of common stock outstanding on the last day of the immediately preceding calendar year and (y) a number of shares as determined by the Board of Directors. As of December 31, 2021, 10,551,501 shares were available for issuance under the 2021 Equity Plan.

Stock options issued immediately prior to the IPO under this 2021 Equity Plan vest based on two criteria (50% each): (1) Time — awards vest over five years at a rate of 20% per year; and (2) Performance — awards vest based upon a combination of the five year time vesting, subject to the Company’s investors receiving a targeted money-on-money return. Stock options issued after the IPO generally vest over five years. Options issued under the 2021 Equity Plan generally expire ten years after the grant date.

A summary of the option activity under the 2021 Equity Plan for the period from June 21, 2021 (the effective date of the 2021 Equity Plan) to December 31, 2021 (Successor) is as follows:


		Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
June 21, 2021	Grants outstanding		—	$	—
	Grants issued		3,714,540	$	15.33
December 31, 2021	Grants outstanding		3,714,540	$	15.33	9.5 Years	$13.8 million
December 31, 2021	Grants vested		644,556	$	15.00	9.5 Years	$2.6 million
December 31, 2021	Grants unvested		3,069,984	$	15.40

Restricted stock units (“RSU”) issued under the 2021 Equity Plan generally vest annually over three to five years. However, certain executive RSUs vest based on two criteria (50% each): (1) Time — awards vest over five years at a rate of 20% per year; and (2) Performance — awards vest based upon a combination of the five year time vesting, subject to the Company’s investors receiving a targeted money-on-money return.

A summary of the RSU activity under the 2021 Equity Plan for the period from June 21, 2021 (the effective date of the 2021 Equity Plan) to December 31, 2021 (Successor) is as follows:


		Shares		Weighted Average Grant Date Fair Value
June 21, 2021	Nonvested RSUs		—	$	—
	Granted		340,875	$	17.19
	Vested		—	$	—
December 31, 2021	Nonvested RSUs		340,875	$	17.19

The following table summarizes the restricted stock issued by the Company. These include grants of unvested Successor profits interests grants that were converted into restricted stock as described above, as well as restricted stock issued to new recipients. The restricted stock granted as a result of the conversion of Successor profits interests retain the vesting attributes (including original service period vesting start date) of the original award. A summary of the restricted stock activity under the 2021 Equity Plan for the period from June 21, 2021 (the effective date of the 2021 Equity Plan) to December 31, 2021 (Successor) is as follows:


		Shares			Weighted Average Grant Date Fair Value
June 21, 2021	Nonvested restricted stock		—		$	—
	Grants issued in exchange for unvested profits interests in the Company’s Parent		2,918,084		$	3.85
	Vested		(304,725	)	$	3.85
December 31, 2021	Nonvested restricted stock		2,613,359		$	3.85

During the IPO and the November Follow-On certain of the Company’s investors realized cash returns. As a result, a portion of the performance based vesting on various awards were considered to have vested during the year ended December 31, 2021 (Successor). This vesting resulted in the recognition of an incremental $3.9 million of share-based compensation expense for the year ended December 31, 2021 (Successor).

As of December 31, 2021 (Successor), the Company had approximately $36.6 million of unrecognized pre-tax non-cash compensation expense, comprised of approximately $8.9 million related to restricted stock, $5.7 million related to RSUs, and $22.0 million related to stock options, which the Company expects to recognize over a weighted average period of 3.7 years.

On June 25, 2021, in connection with the IPO, the Company adopted the First Advantage Corporation 2021 Employee Stock Purchase Plan (“ESPP”) that allows eligible employees to voluntarily make after-tax contributions of up to 15% of such employee’s cash compensation to purchase shares of the Company’s common stock at a 15% discount. During each offering period, there is one six-month purchase period, which will have the same duration and coincide with the length of the offering period. During the holding period, ESPP purchased shares are not eligible for broker transfer. There were no employee stock purchase offerings during the year ended December 31, 2021 (Successor) and accordingly no eligible employees were enrolled in the ESPP during the year ended December 31, 2021 (Successor).

The Company recognized excess tax benefits of approximately $0.2 million associated with equity award exercises and vesting in its income tax expense for the year ended for the year ended December 31, 2021 (Successor). The Company did not recognize any excess tax benefits for the period from February 1, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 through January 31, 2020 (Predecessor), and for the year ended December 31, 2019 (Predecessor).