NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 6, 2001
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of Fair, Isaac
and Company, Incorporated (the "Company") will be held at 9:30 A.M., P.S.T., on
Tuesday, February 6, 2001, at Four Points Sheraton Hotel, 1010 Northgate Drive,
San Rafael, California, for the following purposes:
1. To elect directors to serve until the 2002 Annual Meeting of Stockholders
and thereafter until their successors are elected and qualified.
2. The approval of an amendment to the Company's Restated Certificate of
Incorporation, as amended, to eliminate cumulative voting in the election
of directors.
3. To ratify the appointment of KPMG LLP as the independent auditors of the
Company.
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement. Only stockholders of record at the close of business on Friday,
December 8, 2000, are entitled to notice of and to vote at the meeting or any
postponement or adjournment thereof. A list of stockholders entitled to vote at
the Annual Meeting will be available for inspection at the Company's offices,
200 Smith Ranch Road, San Rafael, California at least 10 days before the
meeting.
All stockholders are cordially invited to attend the meeting in person. However,
to assure your representation at the meeting, you are urged to mark, sign, date
and return the enclosed proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if he or she returned a proxy.
Sincerely,
/s/ HENK J. EVENHUIS
Henk J. Evenhuis
Executive Vice President, Chief Financial
Officer and Secretary
San Rafael, California
January 5, 2001
--------------------------------------------------------------------------------
Your Vote is Important. In order to assure your representation at the meeting,
you are requested to complete, sign and date the enclosed proxy as promptly as
possible and return it in the enclosed envelope (to which no postage need be
affixed if mailed in the United States).
<PAGE>
Proxy Statement
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of the Company of proxies to be used at
the Annual Meeting of Stockholders of the Company to be held on Tuesday,
February 6, 2001, and any postponement or adjournment thereof. A copy of the
Company's Annual Report to Stockholders for the fiscal year ended September 30,
2000, which includes a copy of the Company's Annual Report on Form 10-K
accompanies this Proxy Statement. This Proxy Statement and the accompanying form
of proxy are being mailed to stockholders on or about January 5, 2001.
Proxy Solicitation
The shares represented by the proxies received pursuant to this
solicitation and not revoked will be voted at the Annual Meeting. A stockholder
who has given a proxy may revoke it by giving written notice of revocation to
the Corporate Secretary of the Company or by giving a duly executed proxy
bearing a later date. Attendance in person at the Annual Meeting does not of
itself revoke a proxy; however, any stockholder who does attend the Annual
Meeting may revoke a proxy previously submitted by voting in person. Subject to
any such revocation, all shares represented by properly executed proxies will be
voted in accordance with specifications on the enclosed proxy. If no such
specifications are made, proxies will be voted FOR the election of the nine
nominees for director listed in this Proxy Statement, FOR the amendment to the
Company's Certificate of Incorporation, as amended, to eliminate cumulative
voting in the election of directors and FOR the ratification of the appointment
of KPMG LLP as the Company's auditors for the current fiscal year.
The Company will bear the expense of preparing, printing and mailing this
Proxy Statement and the proxies solicited hereby and will reimburse banks,
brokerage firms and nominees for their reasonable expenses in forwarding
solicitation materials to beneficial owners of shares held of record by such
banks, brokerage firms and nominees. In addition to the solicitation of proxies
by mail, officers and regular employees of the Company may communicate with
stockholders either in person or by telephone for the purpose of soliciting such
proxies; no additional compensation will be paid for such solicitation. The
Company has retained Skinner & Co. to assist in the solicitation of proxies at a
cost of $3,500 plus normal out-of-pocket expenses.
Outstanding Shares and Voting Rights
Only stockholders of record at the close of business on December 8, 2000 (the
"record date") are entitled to notice of and to vote at the Annual Meeting. At
the close of business on the record date, there were 14,550,510 shares of the
Company's Common Stock, $0.01 par value, issued and outstanding, excluding
258,724 shares of Common Stock held as treasury stock by the Company. The shares
held as treasury stock are not entitled to be voted. Each share of Common Stock
is entitled to one vote with respect to each matter to be voted on at the Annual
Meeting subject to the provisions regarding cumulative voting in the election of
directors as described below. A plurality of the votes cast is required for the
election of the nine nominees for director listed in this Proxy Statement, and
the affirmative vote of a majority of the shares present or represented by proxy
and entitled to vote is required to amend the Company's Certificate of
Incorporation, as amended, to eliminate cumulative voting in the election of
directors and ratify the appointment of KPMG LLP as the Company's auditors for
the current fiscal year. Abstentions with respect to any matter are treated as
shares present or represented by proxy and entitled to vote on that matter and
thus have the same effect as negative votes. Broker non-votes and other
circumstances in which proxy authority has been withheld do not constitute
abstentions.
In the election of the directors, each stockholder is entitled to one vote
per share multiplied by the number of directors to be elected, and the
stockholder may cast all of such votes for a single candidate or may distribute
them among the number of directors to be voted for, or for any two or more of
them as the stockholder may see fit; provided, however, that no stockholder
shall be entitled so to cumulate votes unless such candidate's or candidates'
names have been placed in nomination prior to the voting and the stockholder has
given notice at the meeting prior to the voting of the stockholder's intention
to cumulate votes. If any one stockholder has given such notice, all
stockholders may cumulate their votes for candidates in nomination. The persons
authorized to vote shares represented by executed proxies in the enclosed form
(if authority to vote for the election of directors is not withheld) will have
full discretion and authority to vote cumulatively and to allocate votes among
any or all of the
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<PAGE>
Board of Directors' nominees as they may determine or, if authority to vote for
a specified candidate or candidates has been withheld, among those candidates
for whom authority to vote has not been withheld.
PROPOSAL NUMBER 1
Election of Directors
Nominees
The Board of Directors currently consists of 10 members. The Board of
Directors has nominated the following persons, all of whom currently are serving
as directors, for election as directors to serve until the 2002 Annual Meeting
of Stockholders and thereafter until their respective successors are duly
elected and qualified.
A. George Battle, Director. Mr. Battle was elected a director in August
1996. From 1968 until his retirement in 1995, Mr. Battle was an employee and
then partner of Arthur Andersen and Andersen Consulting. Mr. Battle's last
position at Andersen Consulting was Managing Partner, Market Development. In
that role he was responsible for Andersen Consulting's worldwide industry
activities, its Change Management and Strategic Services offerings, and
worldwide marketing and advertising. He served as a Presidential Exchange
Executive with the United States Department of Health, Education and Welfare
during 1975-1976. Mr. Battle is a Senior Fellow of the Aspen Institute and a
director of Ask Jeeves, Inc.; PeopleSoft, Inc.; Barra, Inc.; Masters Select
Equity Mutual Fund and Masters Select International Mutual Fund. Further, he is
past President of the Board of Trustees of the Berkeley Repertory Theatre,
Chairman of the Board of the Head Royce School and a national trustee of the
Marcus A. Foster Educational Institute. Mr. Battle received a degree in
Economics from Dartmouth College and an M.B.A. from the Stanford University
Business School. Mr. Battle is 56 years old.
Tony J. Christianson, Director. Mr. Christianson was elected a director in
November 1999. Since its founding in 1980, Mr. Christianson has been a Managing
Partner of Cherry Tree Investments, Inc., a private equity investment firm
focused on application service providers, education businesses and information
technology services companies. He is also a director of Peoples Education
Holding, Inc.; Transport Corp. of America; AmeriPride Services, Inc.; Dolan
Media Company and Capella Education Company. Mr. Christianson also serves as the
chair of Adam Smith Company, a closely held investment company. He holds a B.S.
in Economics and Accounting from St. John's University of Collegeville,
Minnesota, and an M.B.A. from the Harvard Business School. Mr. Christianson is
48 years old.
Thomas G. Grudnowski, Director, President and Chief Executive Officer. Mr.
Grudnowski joined the Company on December 2, 1999, as the Company's President
and Chief Executive Officer and was elected a director effective that date. From
1972 until December 1, 1999, he was employed by Andersen Consulting. He was
named a partner in 1983 and in his last position at Andersen Consulting he was
Managing Partner in charge of Andersen's line-of-business e-commerce ventures.
Mr. Grudnowski is a director of Interelate, Inc., a private company. He holds a
B.S. in Mathematics and Accounting from St. John's University in Collegeville,
Minnesota. Mr. Grudnowski is 50 years old.
Philip G. Heasley, Director. Mr. Heasley was elected a director in November
2000. He was recently named Chairman and Chief Executive Officer of Bank One's
First USA credit card unit, a position he assumed on January 1, 2001. He was the
President and Chief Operating Officer of US Bancorp, in Minneapolis, from July
1999 through November 2000. From 1987 until July 1999 he held various executive
positions with US Bancorp. Mr. Heasley serves as a director of Schwans
Enterprises, Inc.; Fidelity National Financial, Inc.; Visa USA and Visa
International. He also served as a director at Cray Research Corporation from
1993 to 1996 and Sun America from 1997 to 1999. Mr. Heasley serves as a director
of the Basilica of Saint Mary Endowment Fund, Catholic Charities of the
Archdiocese of St. Paul and Minneapolis, Minneapolis Club and Walker Art Center.
His past civic board affiliations include Advantage Minnesota, the Minnesota
Opera, the St. Paul Chamber of Commerce and the Science Museum of Minnesota. He
holds a B.A. in History from Marist College and an M.B.A. from Bernard Baruch
Graduate School of Business, both in New York. Mr. Heasley is 51 years old.
Guy R. Henshaw, Director. Mr. Henshaw was elected a director in February
1994. He is currently Managing Director of Henshaw/Vierra Management Counsel,
L.L.C., a strategy and management consulting firm. He also
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<PAGE>
serves as a director of iSystems LLC; R&D Antibodies Inc.; and AdvisorTeam.com,
all private companies. From November 1992 to April 1996 he was Chairman of
Payday, The Payroll Company, and was its Chief Executive Officer from March 1993
to April 1996. He served as a director of Payday from 1989 to 1996. From 1984 to
1992 he was President, Chief Financial Officer and a director of Civic BanCorp
and Treasurer and a director of the CivicBank of Commerce. Prior to that, Mr.
Henshaw held positions with the Bank of America and Security National Bank. He
holds a B.A. in Economics from Ripon College and an M.B.A. from the Wharton
School of Business at the University of Pennsylvania. Mr. Henshaw is 54 years
old.
David S. P. Hopkins, Director. Dr. Hopkins was elected a director in August
1994. He is Director of Health Information Improvement at the Pacific Business
Group on Health, a non-profit coalition of 45 large private and public sector
employers. From January 1995 until January 1996, he was an independent
consultant in health care. Prior to that, he was Vice President, Client Services
and Corporate Development of International Severity Information Systems, Inc., a
medical severity indexing software and consulting firm. From 1971 to 1993 he
held a number of senior management positions at Stanford University and its
University Hospital, Medical Center and Medical School. A graduate of Harvard
University, he earned both his Ph.D. in Operations Research and his M.S. in
Statistics at Stanford University. Dr. Hopkins is 57 years old.
Robert M. Oliver, Chairman of the Board of Directors. Dr. Oliver was
elected a director in December 1986 and was elected Chairman of the Board in
January 1996. He was a Professor of Engineering Science in the College of
Engineering, University of California, Berkeley, from 1960 until his retirement
in January 1993. He is also a Director, Trustee and Chairman of the Board of the
AnSer Corporation of Arlington, Virginia, and a Trustee of the Mathematical
Sciences Research Institute of Berkeley, California. Previously, Dr. Oliver was
a member and President of the Board of Directors of the Berkeley Repertory
Theater. He received his Ph.D. in Physics and Operations Research from the
Massachusetts Institute of Technology in 1957, following a year as a Fulbright
Scholar at the University of London. He has served as the President of the
Operations Research Society of America and was the recipient of the Lanchester
Prize, the senior award in the field of Operations Research. Dr. Oliver is 69
years old.
Robert D. Sanderson, Director. Dr. Sanderson was elected a director in
March 1977. He was employed by the Company from 1969 until his retirement in
December 1998. He was elected a Vice President in May 1974, a Senior Vice
President in June 1983, and an Executive Vice President in January 1985 and
served as Chief Operating Officer from February 1989 through July 1995. He
received a B.S. degree in Mathematics at Cornell University and an M.S. and a
Ph.D. in Industrial Engineering and Operations Research from the University of
California, Berkeley. Dr. Sanderson is 57 years old.
Margaret L. Taylor, Director. Ms. Taylor was elected a director in December
1999. Ms. Taylor is currently the Chief Executive Officer of Venture Builders,
LLC, which provides a variety of services to startup businesses. From 1989 until
January 1999, she was a Senior Vice President of PeopleSoft, Inc., a developer
of enterprise client/server application software products. At PeopleSoft her
responsibilities included customer services, application development and
corporate operations. Prior to 1989, Ms. Taylor held a number of positions at
The Hibernia Bank and Bank of California, N.A. She holds a B.A. in Psychology
and Communications from Lone Mountain College in San Francisco, California. Ms.
Taylor is 49 years old.
If any nominee is unable or declines to serve (a contingency which the
Company does not now foresee), the proxies in the accompanying form will be
voted for any nominee who may be nominated by the present Board of Directors to
fill such vacancy or the size of the Board may be reduced accordingly.
Officers are elected at the first meeting of the Board of Directors
following the Annual Meeting of Stockholders at which the directors are elected
and serve until their successors are elected and qualified. There are no family
relationships between any of the directors, nominees for director and any
executive officer.
The Board of Directors recommends a vote FOR each of the nominees.
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<PAGE>
Board and Committee Meetings
During fiscal 2000, the Company had standing audit, compensation and
nominating committees of the Board of Directors.
The Audit Committee consists of A. George Battle, Guy R. Henshaw and David
S. P. Hopkins. The Audit Committee monitors the effectiveness of the audit
conducted by the Company's independent auditors and of the Company's internal
financial and accounting controls, and reports its findings to the Board of
Directors. The committee meets with management and the independent auditors as
may be required. The independent auditors have full and free access to the audit
committee without the presence of management. The Audit Committee held 14
meetings during fiscal 2000.
The Compensation Committee consists of Guy R. Henshaw, A. George Battle and
Margaret L. Taylor. This committee determines all aspects of the compensation of
the Company's executive officers. This Committee also administers the Company's
1992 Long-term Incentive Plan. The Compensation Committee held 18 meetings in
fiscal 2000.
The Nominating Committee consists of David S. P. Hopkins, Tony J.
Christianson, Robert M. Oliver and Robert D. Sanderson. This committee is
responsible for identifying appropriate candidates for election to the Board.
During the past fiscal year, there were five regular meetings and four
special meetings (one of which was a telephonic meeting) of the Board of
Directors. Each incumbent director attended more than 75% of the aggregate
number of all board meetings and meetings of committees on which the director
served during fiscal 2000.
Audit Committee Report
The Audit Committee of the Board of Directors of the Company is composed of
three independent directors under New York Stock Exchange listing standards. The
Audit Committee operates under a written charter adopted by the Board of
Directors, which is attached as Exhibit A to this Proxy Statement. The members
of the Audit Committee are A. George Battle, Guy R. Henshaw and David S.P.
Hopkins. The Audit Committee recommends to the Board of Directors, subject to
stockholder ratification, the selection of the Company's independent auditors.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Audit Committee's responsibility is to monitor and oversee
these processes.
In this context, the Audit Committee has met and held discussions with
management and KPMG LLP, the Company's independent auditors. Management
represented to the Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the Committee has reviewed and discussed the consolidated
financial statements with management and the independent auditors. The Audit
Committee discussed with KPMG LLP matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees).
KPMG LLP also provided to the Audit Committee the written disclosures
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and the Audit Committee discussed with KPMG
LLP that firm's independence.
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<PAGE>
Based upon the Audit Committee's discussion with management and the
independent auditors and the Audit Committee's review of the representation of
management and the report of the independent auditors to the Audit Committee,
the Audit Committee recommended to the Board of Directors that the audited
consolidated financial statements be included in the Company's Annual Report on
Form 10-K for the year ended September 30, 2000, to be filed with the Securities
and Exchange Commission.
A. George Battle
Guy R. Henshaw
David S. P. Hopkins
Stock Ownership
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 30, 2000, by (i) each of
the Company's directors and nominees for director, (ii) each of the executive
officers named in the Summary Compensation Table below, (iii) all executive
officers and directors of the Company as a group, and (iv) each person known to
the Company who beneficially owns more than 5% of the outstanding shares of its
Common Stock.
-6-
<PAGE>
<TABLE>
Stock Ownership Table
<CAPTION>
Directors, Nominees, Executive Officers Beneficial Ownership(1)
-------------------------------
and 5% Stockholders Number Percent(2)
--------------------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Judith W. Isaac (3,4)
200 Smith Ranch Road
San Rafael, CA 94903 1,434,835 9.9%
Entities affiliated with Neuberger Berman, Inc.(4)
605 Third Avenue
New York, NY 10158-3698 1,470,789 10.1%
Entities affiliated with Blum Capital Partners, L.P.(4)
909 Montgomery Street, Suite 400
San Francisco, CA 94133 1,205,100 8.3%
Brown Capital Management(4)
1201 North Calvert Street
Baltimore, MD 21202 951,300 6.5%
Irene D. Gilbert and Henk J. Evenhuis, Trustees for
Fair, Isaac Employee Stock Ownership Trust
200 Smith Ranch Road
San Rafael, CA 94903 617,539 4.2%
Thomas G. Grudnowski(5) 153,700 1.0%
Larry E. Rosenberger(6)(7) 298,015 2.0%
Henk J. Evenhuis(8) 12,500 *
H. Robert Heller(6)(9) 97,308 *
Kenneth M. Rapp(6)(10) 21,705 *
John D. Woldrich(6)(11) 77,585 *
Robert D. Sanderson(12) 294,025 2.0%
A. George Battle(13) 19,733 *
Tony J. Christianson(14) 7,000 *
Philip G. Heasley 0 *
Guy R. Henshaw(15) 26,500 *
David S. P. Hopkins(16) 26,000 *
Robert M. Oliver(17) 45,700 *
Margaret L. Taylor(14) 7,000 *
All executive officers and directors as a group--(23 persons)(6)(18) 1,103,122 7.3%
<FN>
-------------------------
* Represents holdings of less than 1%.
</FN>
</TABLE>
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<PAGE>
1. To the Company's knowledge the persons named in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this
table.
2. Percentages are calculated with respect to a holder of stock options
exercisable on or prior to January 29, 2001, as if such holder had
exercised such option. Shares deemed issued to a holder of stock
options pursuant to the preceding sentence are not included in the
percentage calculation with respect to any other stockholder.
3. Includes 247,500 shares held as co-trustee (with F. L. Adams) and as
beneficiary under a trust.
4. Confirmed ownership with stockholder.
5. Represents options for 153,700 shares.
6. Includes the shares allocated to such individual's account under the
Company's Employee Stock Ownership Plan (amounts have been rounded to
the nearest share). Shares allocated to the accounts of listed
individuals are also included in the total shown for the Trustees of
the Employee Stock Ownership Trust.
7. Includes options for 58,816 shares.
8. Represents options for 12,500 shares.
9. Includes options for 96,788 shares
10. Includes options for 21,395 shares.
11. Includes options for 6,939 shares.
12. Includes options for 7,000 shares.
13. Includes options for 16,000 shares. Also includes 3,300 shares held by
Mr. Battle's son who resides with him and includes 100 shares held by
his sister for whom he has dispositive power. Mr. Battle disclaims
beneficial ownership of such shares.
14. Represents options for 7,000 shares.
15. Includes options for 26,000 shares.
16. Includes options for 25,000 shares.
17. Includes options for 8,000 shares. Also includes 2,000 shares held in
an Individual Retirement Account ("IRA") for Dr. Oliver, 4,000 shares
held in an IRA by his wife and 31,700 shares held jointly by Dr. Oliver
and his wife.
18. Includes shares included in notes (5), (6), (7), (8), (9), (10), (11),
(12), (13), (14), (15), (16) and (17) above, including a total of
461,946 shares subject to options exercisable on or prior to January
29, 2001.
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<PAGE>
Compensation of Directors and Executive Officers
Directors' Compensation
In fiscal 2000, non-employee directors other than the Chairman were compensated
at the rate of $20,000 per year plus $1,000 for each Board meeting attended. The
Chairman is currently compensated at the rate of $100,000 per year for services
as Chairman and other consulting work, plus $2,000 for each Board meeting
attended. See "Director Consulting Arrangement" below. Non-employee directors
who chair standing committees, currently the Audit, Nominating and Compensation
committees, receive an additional $5,000 per year. In addition, the Board of
Directors awarded each member of the Audit Committee an additional payment of
$15,000, because the Audit Committee held more meetings than expected in fiscal
2000.
Under the Company's 1992 Long-term Incentive Plan as amended and
restated effective November 19, 1999, members of the Board of Directors who are
not employees of the Company ("Outside Directors"), receive a grant of 20,000
nonqualified stock options (the "Initial Grant") upon election as an Outside
Director and a grant of nonqualified options for 5,000 shares on the date of
each annual meeting provided such person has been an Outside Director since the
prior annual meeting (the "Annual Grant"). The exercise price of all such
options is equal to the fair market value of Common Stock on the date of grant.
The Initial Grants vest in 20% increments on each of the first through fifth
anniversary dates of such person's election as a director and expire 10 years
after grant. Annual Grants are immediately exercisable upon grant and, effective
November 2000, expire 10 years after grant. All such options granted to an
Outside Director since November 1999 are also exercisable in full upon
termination of such Outside Director's services for any reason. Options granted
prior to November 1999 are only exercisable in full in the event of the
termination of such Outside Director's service because of death, total and
permanent disability or voluntary retirement at or after age 65, or a change in
control with respect to the Company.
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<PAGE>
Compensation of Executive Officers
<TABLE>
The following table sets forth the cash and non-cash compensation awarded
to, earned by or paid to each person that served as the Chief Executive Officer
and each of the other four most highly compensated executive officers of the
Company for services rendered in all capacities to the Company and its
subsidiaries during the last fiscal year.
<CAPTION>
Summary Compensation Table
Long-term Compensation
-------------------------
Awards Payouts
Annual Compensation Securities Long-term
---------------------------------- Underlying Incentive Plan All Other
Name Year Salary Bonus(1) Options Payouts(4) Compensation(5)
---- ---- ------ -------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Grudnowski 2000 $666,666 $133,333(2) 40,000 ------ -----
President and Chief 1999 ----- ----- 420,000(3) ------ -----
Executive Officer
Larry E. Rosenberger(6) 2000 $252,000 $ 19,960 25,289 $482,292 $224,735
President and Chief 1999 245,250 127,737 22,500 107,736 17,982
Executive Officer 1998 222,500 125,250 22,500 156,493 18,156
John D. Woldrich 2000 $251,167 $14,258 24,648 $388,201 $304,900
Executive Vice 1999 243,500 102,505 20,000 83,380 16,670
President 1998 214,750 101,870 20,000 117,671 17,130
Henk J. Evenhuis 2000 $215,625 $17,079 76,000 ----- $6,400
Executive Vice President,
Chief Financial Officer
and Secretary
Kenneth M. Rapp 2000 $242,500 $14,041 31,148 $168,352 $6,424
Executive Vice 1999 185,750 70,965 17,500 12,864 7,441
President 1998 154,500 199,441 12,500 9,792 5,513
H. Robert Heller 2000 $214,841 $8,443 11,969 $288,686 $34,462
Executive Vice 1999 201,000 82,004 10,000 33,850 12,513
President 1998 191,250 84,335 10,000 19,173 13,024
-------------------------
<FN>
1. For fiscal 2000 this amount represents the bonus paid under the Company's
Officer's Incentive Plan, all of which was paid in cash on November 15,
2000. For previous years, the amount represents the portion of amounts
accrued under the Company's Officers' Incentive Plan which was paid in cash
shortly after the end of the fiscal year in which earned, and amounts paid
shortly after year-end under other incentive plans. See description under
"Compensation Committee Report on Executive Compensation; Incentive
Compensation Plans" below.
2. Represents a one-time first-year bonus which was paid in cash on December
2, 1999, pursuant to Mr. Grudnowski's Employment Agreement.
3. Represents options granted to Mr. Grudnowski in fiscal 1999, pursuant to
his Employment Agreement dated August 23, 1999, and prior to the
commencement of his employment on December 2, 1999.
4. For fiscal 2000, this represents the early payout of accrued phantom stock
units as a result of the elimination of the phantom stock portion of the
Officers' Incentive Plan. For previous years, the amount represents the
full
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<PAGE>
payment for shares of "phantom stock" awarded in prior years under the
Company's terminated Officer's Incentive Plan. See description under
"Compensation Committee Report on Executive Compensation-Officer Incentive
Plan" below.
5. Represents the value of employer contributions to the Company's 401(k)
Plan, allocations to the Company's Employee Stock Ownership Plan and a lump
sum payout as a result of the termination of the Company's Pension Plan.
For fiscal 2000, employer 401(k) contributions were $0, $6,400, $6,400,
$6,400, $6,400 and $6,400 for Messrs. Grudnowski, Rosenberger, Woldrich,
Evenhuis, Rapp and Heller, respectively; the value of ESOP dividends were
$0, $3,628, $2,561, $0, $24 and $21 for Messrs. Grudnowski, Rosenberger,
Woldrich, Evenhuis, Rapp and Heller, respectively. In connection with the
termination of the pension plan, Messrs. Rosenberger and Heller elected to
receive a one-time lump sum payment in the amount of $214,707 and $28,041,
respectively. At the election of Mr. Woldrich, the Company purchased an
annuity for his benefit with his one-time lump sum payment of $295,939.
6. Mr. Rosenberger was President and Chief Executive Officer until December 2,
1999. He has served as an Executive Vice President since December 2, 1999.
</FN>
</TABLE>
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Individual Grants
------------------------------------------------------ Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Exercise Option Term(6)
Options Employees in Price per Expiration --------------------------
Name Granted Fiscal Year (5) share Dae 5% 10%
------------------------- ---------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Grudnowski 40,000 (1) 2.70% $42.5000 12/03/09 $1,069,121 $2,709,362
Larry E. Rosenberger 3,289 (2) 0.22% $48.8750 12/21/09 $ 101,095 $ 256,194
22,000 (3) 1.50% $36.7500 04/04/10 $ 508,461 $1,288,541
2,648 (2) 0.18% $48.8750 12/21/09 $ 81,392 $ 206,264
John D. Woldrich 22,000 (3) 1.50% $36.7500 04/04/10 $ 508,461 $1,288,541
50,000 (4) 3.40% $32.6875 10/19/09 $1,027,850 $2,604,773
Henk J. Evenhuis 26,000 (3) 1.80% $36.7500 04/04/10 $ 600,909 $1,522,821
1,148 (2) 0.08% $48.8750 12/21/09 $ 35,286 $ 89,422
Kenneth M. Rapp 30,000 (3) 2.00% $36.7500 04/04/10 $ 693,356 $1,757,101
1,969 (2) 0.13% $48.8750 12/21/09 $ 60,522 $ 153,374
H. Robert Heller 10,000 (3) 0.68% $36.7500 04/04/10 $ 231,119 $ 585,700
<FN>
-------------------------
1. Granted at fair market value and exercisable in full on January 1, 2000.
2. Granted at fair market value and exercisable over four years commencing
September 30, 2000.
3. Granted at fair market value and exercisable over four years commencing
April 4, 2001.
4. Granted at fair market value and exercisable over four years commencing
October 19, 2000.
5. Includes approximately 1,472,666 options granted to approximately 193
employees under the Company's 1992 Long-term Incentive Plan, and certain
grants made outside the Plan to senior management.
-11-
<PAGE>
6. The 5% and 10% rates of appreciation were set by the Securities and
Exchange Commission and are not intended to forecast future appreciation,
if any, of the Company's stock. If the Company's stock does not increase in
value, then the option grants described in the table will be valueless.
</FN>
</TABLE>
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-the-
Acquired Options at FY End Money Options at FY End(2)
on Value ---------------------------- ----------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
----------------------- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Grudnowski 0 $ 0 40,000 420,000 $ 7,600 $ 4,279,800
Larry E. Rosenberger 0 $ 0 58,816 68,973 $ 464,987 $ 357,199
John D. Woldrich 46,621 $532,149 6,939 63,588 $ 50,998 $ 332,030
Henk J. Evenhuis 0 $ 0 0 76,000 $ 0 $ 654,565
Kenneth M. Rapp 19,915 $302,521 21,395 0 $ 149,151 $ 0
H. Robert Heller 0 $ 0 86,788 61,181 $ 765,465 $ 325,775
<FN>
-------------------------
1. Equal to the market value of the Company's Common Stock on the date the
options were exercised, less the exercise price.
2. Based on the closing price of the Company's Common Stock as reported by the
New York Stock Exchange for September 29, 2000 ($42.69), less the exercise
price.
</FN>
</TABLE>
Pension Plan
Until September 30, 1999, the Company maintained the Fair, Isaac Pension
Plan (the "Pension Plan") for the benefit of employees of the Company (not
including employees of its former subsidiaries, DynaMark, Inc., Prevision, Inc.,
Credit and Risk Management Associates, Inc., and its current subsidiary, Risk
Management Technologies), including officers and directors who are employees.
Effective October 1, 1999, the Pension Plan was frozen as employees of these
subsidiaries and others became employees of the Company. Since September 30,
1999, no new participants have been admitted to the Pension Plan and no further
benefits have been accrued under the Pension Plan. All Pension Plan liabilities
to participants were calculated based on compensation and years of service as of
October 1, 1999. These calculated amounts were distributed to participants
through lump sum payments representing the actuarial equivalent of the
participant's accrued benefits, determined according to the Pension Plan's
provisions and in compliance with federal law. The distribution of the Pension
Plan assets was completed in October 2000 and there are no remaining Pension
Plan assets or liabilities.
Director Consulting Arrangements
The Company has an agreement with Dr. Oliver under which he has agreed to
make himself available to the Company for approximately 1,000 hours per year at
the rate of $100,000 per year for so long as he remains Chairman of the
Company's Board of Directors. The term of the agreement began January 1, 1996,
and continues indefinitely until terminated.
-12-
<PAGE>
Employment Agreements
The Company entered into an employment agreement dated August 23, 1999, and
amended December 3, 1999 ("Employment Agreement") with Thomas G. Grudnowski, who
has served as the Company's Chief Executive Officer and as a director since
December 2, 1999. The Employment Agreement has a term of four years, subject to
earlier termination under certain circumstances. The Employment Agreement
provides that during fiscal 2000, Mr. Grudnowski will be paid at an annualized
rate of $800,000 ($666,666 base salary and fixed bonus of $133,333). Beginning
in fiscal 2001, the Employment Agreement provides that Mr. Grudnowski will
receive an annual salary of $400,000, with an incentive target of $400,000 upon
the attainment of certain strategic, business and financial objectives to be
mutually determined by Mr. Grudnowski and the Board of Directors. The actual
incentive bonus can range from zero to twice the target amount. In connection
with the Employment Agreement, the Company has granted Mr. Grudnowski options
vesting over four years to purchase up to 420,000 shares of Common Stock at fair
market value as of August 23, 1999. The options to purchase Common Stock vest
fully upon termination of Mr. Grudnowski without cause, upon a change in control
of the Company or upon termination of employment owing to Mr. Grudnowski's death
or disability. The Company entered into an amendment to the Employment
Agreement, whereby Mr. Grudnowski was granted options to purchase an additional
40,000 shares of Common Stock at fair market value as of December 3, 1999, that
fully vested on January 1, 2000, in lieu of the grant of 10,000 shares of
restricted stock as originally provided in his Employment Agreement. The
Employment Agreement further provides that if the Company should terminate Mr.
Grudnowski's employment without cause, then the Company will pay Mr. Grudnowski,
among other things, twice Mr. Grudnowski's then base salary and twice the
incentive award granted by the Company to Mr. Grudnowski for the period
immediately prior to termination.
Compensation Committee Interlocks and Insider Participation
A. George Battle, Guy R. Henshaw and Margaret L. Taylor served as the
members of the Company's Compensation Committee for the fiscal year ended
September 30, 2000. Messrs. Battle and Henshaw and Ms. Taylor are non-employee
directors of the Company and had no other relationship with the Company for the
fiscal year ended September 30, 2000. None of the executive officers of the
Company had any "interlock" relationships to report during the fiscal year ended
September 30, 2000.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is composed entirely
of directors who are not employees of the Company. The Committee determines all
aspects of the compensation of the Company's executive officers and also
administers the Company's 1992 Long-term Incentive Plan under which grants of
stock options or restricted stock may be awarded to any employee.
The primary objectives of the Company's executive compensation program are
to provide a level of compensation that will attract and retain well qualified
executives, to structure their compensation packages so that a significant
portion is tied to achieving targets for revenue growth and operating margin,
and to align their interests with those of the Company's stockholders through
the use of stock-based compensation.
In fiscal 2000, the Company's executive compensation program consisted of
three main components: annual base salary, participation in the Company's
Officers' Incentive Plan, and the opportunity to receive awards of stock options
or restricted stock.
The executive officers were eligible for the same benefits available
generally to the Company's employees, including group health and life insurance
and participation in the Company's employee stock purchase and 401(k) plans, and
a profit sharing contribution to the 401(k) accounts made at the discretion of
the Board of Directors. The Company also maintains a Supplemental Retirement and
Savings Plan for the benefit of certain highly compensated employees, including
most executive officers, however the Company terminated the matching feature of
this plan effective September 30, 1999.
-13-
<PAGE>
Annual Base Salary
The Compensation Committee determines the annual base salary of each of the
Company's executive officers, including the Chief Executive Officer. The same
principles are applied in setting the salaries of all officers to ensure that
salaries are equitably established. Salaries are determined annually by
considering the officer's duties and responsibilities within the Company and
business unit, the officer's ability to impact the operations and profitability
of the Company, and the officer's experience and past performance.
Officer Incentive Plan
Substantially all of the Company's employees participate in incentive plans
based on the Company's performance with respect to goals for revenue growth and
operating margin set by the Board of Directors for each fiscal year. An
incentive compensation target amount is determined for each participant at the
beginning of the fiscal year. The ratio of incentive plan target to base salary
increases with the level of the employee's responsibilities. The Compensation
Committee sets the incentive compensation targets for each of the executive
officers. Compensation increases for executive officers in recent years have
primarily resulted from increases in incentive plan targets, reflecting the
Committee's emphasis on performance-based pay. After the conclusion of the
fiscal year, the target amount for each participant is multiplied by a factor
based on the Company's actual performance with respect to the revenue growth and
operating margin goals previously established by the Board of Directors to
establish his or her incentive award for the year. During fiscal 2000, operating
margin received .13 the weight given to revenue growth, and awards could range
from zero to two times the target amount.
As disclosed last year, the Company has elected not to continue the
"phantom stock" feature of the Officers' Incentive Plan in fiscal 2000 and
succeeding years. The participants in the Company's Officers' Incentive Plan
could elect to receive a payout of phantom stock units accrued under said plan.
Those that elected the payouts, provided their election was made prior to the
close of business on December 30, 1999, were paid in cash on January 15, 2000,
using a value based on the closing price of the stock on December 21, 1999. In
addition, the Board of Directors approved the grant of one option on the
Company's common stock for every three phantom stock units that were paid off
early. The options granted in connection with this payment vest at approximately
the same rate as the phantom stock units (i.e., 40% on September 30, 2000, 30%
on September 30, 2001, 20% on September 30, 2002, and 10% on September 30,
2003). The exercise price was the closing price on December 21, 1999, and the
option has a ten year term.
Options and Restricted Stock
The Committee may award options to purchase the Company's Common Stock or
shares of restricted stock to any employee, including the executive officers,
under the Company's 1992 Long-term Incentive Plan. The exercise price for all
options granted under this plan must be at least equal to the fair market value
of the shares on the date of grant. In addition to the level of responsibility
and performance of the recipient, the Committee takes previous grants of options
and restricted stock into consideration in making such awards. Awards of options
were made to Messrs. Grudnowski, Rosenberger, Woldrich, Evenhuis, Rapp and
Heller in fiscal 2000 and are reflected in the Option/SAR Grants in Last Fiscal
Year Table and Aggregated Option/SAR Exercises in Last Fiscal Year Table and
Fiscal Year-End Option/SAR Values Table above.
Limits on Tax-Deductible Compensation
The Committee believes that for fiscal 2000 it is highly unlikely that the
combination of base salary and Officer Incentive Plan cash awards for any
executive officer would exceed $1 million. The Company has no plans to amend the
incentive plan covering the officers to ensure deductibility for federal tax
purposes of any "excess" amounts. The Committee believes that the 1992 Long-term
Incentive Plan meets the rules currently in effect so that compensation arising
from the exercise of options granted under that plan will be deductible by the
Company. The Committee believes it is highly unlikely that any combination of
grants of options and restricted stock that will be awarded under that plan and
other compensation will exceed $1 million for a single individual in any given
year. The 420,000 options granted to Mr. Grudnowski and the 50,000 options
granted Mr. Evenhuis as part of
-14-
<PAGE>
inducements to accept employment with the Company were not granted under that
plan and do not qualify for the exemption from Section 162(m) of the Internal
Revenue Code and may thus result in compensation to Messrs. Grudnowski and
Evenhuis which is not deductible by the Company.
CEO Compensation
As Chief Executive Officer of the Company since December 2, 1999, Mr.
Grudnowski is compensated pursuant to an employment agreement entered into in
August 1999, as amended in December 1999 (the "Employment Agreement"). The
Employment Agreement was negotiated in connection with the Company's hiring of
Mr. Grudnowski as Chief Executive Officer. The Employment Agreement, which
extends to December 1, 2003, subject to earlier termination under certain
circumstances, provides for an annual base salary of $666,666 for the first year
of his employment and $400,000 for each year thereafter, unless increased,
whereby the increased amount will become the new base salary. In fiscal 2000,
Mr. Grudnowski received, in addition to his base salary, a first year bonus in
the amount of $133,333. Commencing with fiscal 2001, Mr. Grudnowski may receive
a bonus of between $0 and $800,000, based upon the Company achieving certain
business and financial objectives mutually agreed upon between Mr. Grudnowski
and the Board of Directors of the Company.
In connection with his Employment Agreement, Mr. Grudnowski received an
option to purchase 420,000 shares of the Company's common stock. The grant vests
over a period of four years commencing on the first day of his employment. In
December 1999, the Company entered into an amendment to the Employment
Agreement, whereby Mr. Grudnowski was granted an option to purchase an
additional 40,000 shares of common stock that fully vested on January 1, 2000,
in lieu of the grant of 10,000 shares of restricted stock, as originally
provided in his Employment Agreement.
Mr. Rosenberger acted as the Company's Chief Executive Officer until
December 2, 1999. The amount of Mr. Rosenberger's compensation was determined by
the Compensation Committee using the criteria discussed above. Mr. Rosenberger's
base salary was $252,000, compared to a base salary of $245,250 for fiscal 1999.
A. George Battle
Guy R. Henshaw
Margaret L. Taylor
Performance Graph
In accordance with SEC rules, the following table shows a line-graph
presentation comparing cumulative five-year stockholder returns on an indexed
basis with a broad equity market index and either a nationally recognized
industry standard or an index of peer companies selected by the Company. The
Company has selected the Center for Research in Security Prices ("CRSP") Total
Return Index for the S&P 500 Stocks for the broad equity index, and a
self-determined group of peer companies.
The peer group consists of Acxiom Corporation; American Management Systems,
Inc.; Barra, Inc.; HNC Software Inc.; and Harte-Hanks, Inc. Inference
Corporation is no longer included in the peer group as they were purchased
during the last fiscal year. Harte-Hanks, Inc., has been added to the peer group
because they are a direct competitor to the Company's direct marketing and
credit risk management products. The Company does not believe there are any
publicly traded companies that compete with the Company across the full spectrum
of its product and service offerings. The companies in the peer group represent
a variety of information and decision service providers and software developers
that are in similar order of magnitude as the Company in revenue and market
capitalization. Barra, Inc. is headquartered near the Company's headquarters and
competes with the Company for available technical staff.
-15-
<PAGE>
<TABLE>
Comparison of Five-Year Cumulative Return
<CAPTION>
Measurement Period Fair, Isaac and Company, CRSP Index for Self-determined
(fiscal year covered) Incorporated S&P 500 Peer Group Peer Group Index
--------------------- ------------------------ ------------------ ----------------
<S> <C> <C> <C>
9/95 100.0 100.0 100.0
9/96 133.9 120.3 163.3
9/97 153.3 169.2 156.2
9/98 115.9 185.1 195.9
9/99 97.6 236.2 185.9
9/00 148.8 268.9 266.2
</TABLE>
The returns shown assume $100 invested on September 30, 1995, in the
Company's stock, the CRSP Indices for the S&P 500 Stocks (U.S. Companies) and
the peer group indices, with reinvestment of dividends. The reported dates are
the last trading dates of the Company's fiscal year which ends on September 30.
PROPOSAL NUMBER 2
Elimination of Cumulative Voting
On November 21, 2000, the Board of Directors approved an amendment to
Article Seventh of the Company's Restated Certificate of Incorporation, as
amended, to eliminate cumulative voting in the election of directors.
The Company's Restated Certificate of Incorporation, as amended, currently
provides that stockholders have the right to cumulate their votes in each
election of directors upon notice given at the meeting. Cumulative voting
entitles each stockholder to a number of votes equal to the number of shares
held by the stockholder as of the applicable record date multiplied by the total
number of directors to be elected. The stockholder may allocate those votes to
one or more of the nominees for director. Therefore, even stockholders with a
minority percentage of the outstanding shares, by aggregating (i.e.,
"cumulating") the votes they are entitled to cast, may be able to elect one or
more directors. In contrast, without cumulative voting, each stockholder has
only one vote per share for each director to be elected.
Reasons for Eliminating Cumulative Voting
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to amend the Restated Certificate of Incorporation,
as amended, to eliminate cumulative voting as a measure to protect the Company
from unsolicited takeover attempts or other attempts by minority stockholders to
disrupt the operation of the Board of Directors for personal advantage. The
elimination of cumulative voting may prevent or render it more difficult for a
hostile acquirer with a minority ownership interest in the Company to obtain
representation on the Company's Board of Directors and further interests that
may be contrary to those of the majority of the stockholders.
Possible Effects of Eliminating Cumulative Voting
The elimination of cumulative voting will mean that each stockholder will
have one vote per share for each director to be elected. This will enable the
holders of a majority of the shares entitled to vote in an election of directors
to elect all of the directors being elected at that time, and consequently, will
make it more difficult for minority stockholders of the Company to obtain
representation on the Board of Directors. In addition, elimination of cumulative
voting might, under certain circumstances, render more difficult, or discourage,
a merger or tender offer that is not approved by the Board of Directors, a proxy
contest or the removal of incumbent management.
Recommendation of the Board of Directors
The Board of Directors believes that Article Seventh of the Company's
Restated Certificate of Incorporation, as amended, should be eliminated. It
currently reads as follows:
-16-
<PAGE>
Seventh: At all elections of the directors of the corporation,
each stockholder shall be entitled to one vote per share entitled to
vote multiplied by the number of directors to be elected, and the
stockholder may cast all of such votes for a single candidate or may
distribute them among the number of directors to be voted for, or for
any two or more of them as the stockholder may see fit; provided,
however, that no stockholder shall be entitled so to cumulate votes
unless such candidate or candidates' names have been placed in
nomination prior to the voting and the stockholder has given notice at
the meeting prior to the voting of the stockholder's intention to
cumulate votes. If any one stockholder has given such notice, all
stockholders may cumulate their votes for candidates in nomination.
The Board of Directors recommends a vote FOR the amendment of the Company's
Restated Certificate of Incorporation, as amended, to eliminate Article Seventh
and provide for straight voting in all future elections of directors.
PROPOSAL NUMBER 3
Ratification of Independent Auditors
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of KPMG LLP as the Company's independent auditors for the
Company's current fiscal year ending September 30, 2001. KPMG LLP has served as
the Company's independent auditors since May 1991. Representatives of KPMG LLP
are expected to be present at the Company's Annual Meeting with the opportunity
to make statements and/or respond to appropriate questions from stockholders
present at the meeting.
The Board of Directors recommends a vote FOR the ratification of KPMG LLP
as the Company's independent auditors.
Other Business
The Board of Directors does not know of any business to be presented at the
Annual Meeting other than the matters set forth above, but if other matters
properly come before the meeting it is the intention of the persons named in the
proxies to vote in accordance with their best judgment on such matters.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
and the rules of the Securities and Exchange Commission (the "Commission"),
thereunder require the Company's directors, executive officers and persons who
own more than 10% of the Company's Common Stock to file reports of their
ownership and changes in ownership of Common Stock with the Commission.
Personnel of the Company generally prepare these reports on the basis of
information obtained from each director, officer and certain greater than 10%
owners. Based on such information, the Company believes that all reports
required by Section 16(a) of the Exchange Act to be filed by its directors,
executive officers and greater than 10% owners during the last fiscal year were
filed on time, except that Christian Fair, a former 10% owner and co-trustee and
beneficiary of The William Rodden Fair and Inger Johanne Fair Revocable Trusts,
inadvertently failed to report the sale of 5,200 shares of the Company's stock
in December 1999. Upon Mr. Fair's receiving notification from his broker that
the shares were sold, Mr. Fair promptly filed the report to correct the omission
on February 7, 2000.
Submission of Proposals of Stockholders
Proposals of stockholders intended to be presented at the Company's 2002
Annual Meeting of Stockholders must be received at the Corporate Secretary's
Office, 200 Smith Ranch Road, San Rafael, California 94903, no later than 5:00
p.m. on September 7, 2001, to be considered for inclusion in the proxy statement
and form of proxy for that meeting.
In order for business, other than a stockholder proposal included in the
Company's proxy statement and form of
-17-
<PAGE>
proxy, to be properly brought before the 2002 Annual Meeting by a stockholder,
the stockholder must give timely written notice thereof to the Corporate
Secretary of the Company and must otherwise comply with the Company's Bylaws.
The Company's Bylaws provide that, to be timely, a stockholder's notice must be
received by the Corporate Secretary at the Company's principal executive offices
no less than 60 days nor more than 90 days prior to the scheduled date of the
annual meeting. If the Company gives less than 70 days notice or prior public
disclosure of the scheduled meeting date, then, to be timely, the stockholder's
notice must be received no later than the earlier of (i) the close of business
on the tenth day following the day on which such notice was mailed or such
disclosure was made, whichever occurs first, and (ii) two days prior to the
scheduled meeting date.
By Order of the Board of Directors
/s/ HENK J. EVENHUIS
Henk J. Evenhuis
Executive Vice President, Chief Financial
Officer and Secretary
Dated: January 5, 2001
-18-
<PAGE>
Exhibit A
Fair, Isaac and Company Incorporated
Audit Committee Charter
Page 1 of 3
<PAGE>
I. The principal objectives of the Audit Committee are the following:
1. To oversee the financial control and reporting process by
understanding and assessing the risk of each of the factors
composing the financial process as identified and reported by
senior management.
2. To oversee the establishment and maintenance of the internal
control structure.
3. To monitor compliance with the Company's policy regarding
Conflicts of Interest and Standards of Business Ethics.
4. To review and/or approve major policies and transactions that are
within the scope of the duties and responsibilities of the
Committee under this charter.
5. To report to the Board of Directors on the findings and actions
of the Committee.
II. The Audit Committee shall be structured as follows:
1. The Audit Committee shall be composed of three or more members of
the Board of Directors. Members of the Audit Committee shall be
made up of outside directors who are independent of management of
the institution and who satisfy such other specific requirements
established by the New York Stock Exchange. The Audit Committee
may request that management appoint an employee of the
Corporation to serve as Secretary of the Audit Committee.
2. Members of the Audit Committee shall be appointed from time to
time by the Board of Directors. Members shall serve at the
pleasure of the Board.
3. The Audit Committee shall meet not less than four times each
calendar year, or at such other frequency as is set by a duly
adopted resolution of the Audit Committee.
4. Management shall prepare, and the Chairman of the Audit Committee
shall approve, an agenda for each of the meetings of the Audit
Committee. Such agenda shall take into account all of the
responsibilities of the Audit Committee, as set forth in this
charter.
III. The duties and responsibilities of the Audit Committee shall be as
follows:
1. The Audit Committee shall review with management the selection,
retention, or termination of the external auditors, and recommend
to the Board of Directors such action as may be necessary or
appropriate.
2. The Audit Committee shall periodically review the independence of
the external auditor, including but not limited to a review of
all arrangements between the external auditors and Fair, Isaac
and Company.
3. The Audit Committee shall meet with such members of management,
as it deems necessary or appropriate to further expand the
members' knowledge of Fair, Isaac and Company and its operation.
IV. The Audit Committee shall meet with the external auditor to review:
1. The audited financial statements and the results of the annual
audit.
2. The internal control structure of Fair, Isaac and Company and its
subsidiaries.
3. The "management" letter given to Fair, Isaac and Company.
4. The impact of new or proposed accounting, regulatory, and
auditing pronouncements.
5. External auditors' audit plan.
Page 2 of 3
<PAGE>
V. The Audit Committee shall meet with the Chief Financial Officer or
his/her designee to review:
1. Accounting policies and internal controls.
2. External audit recommendations including reports of examination
filed by regulatory authorities.
3. The financial statements of Fair, Isaac and Company and its
subsidiaries.
4. Significant fraud or financial irregularities.
5. Such other matters as are identified by the Chief Financial
Officer or his/her designee as appropriate for consideration by
the Audit Committee.
6. The impact of new or proposed accounting, regulatory, and
auditing pronouncements.
7. Management's seeking a review of significant accounting issues
with an accounting firm other than the external auditors which is
governed by SAS 50.
VI. The Audit Committee shall review the annual report of the General
Counsel regarding compliance with the Company's policies regarding
Conflicts of Interest and Standards of Business Ethics and the Purchase
and Sale of Fair, Isaac stock.
VII. The Audit Committee shall meet as necessary with the principal
Management Information Systems Officer or his/her designee to review
and/or approve the adequacy of internal controls and security relating
to the financial data processing function.
VIII. The Audit Committee shall review with management such other matters as
are within the general scope of its duties and responsibilities.
IX. The Audit Committee shall review such major policies and transactions
(including amendments thereto) as are within the scope of the duties
and responsibilities of the Committee under this charter, and it shall
report to the Board of Directors on the findings and action of the
Committee.
Page 3 of 3
<PAGE>
--------------------------------------------------------------------------------
PROXY PROXY
Fair, Isaac and Company
Incorporated
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING FEBRUARY 6, 2001
The undersigned hereby appoints Robert M. Oliver and Thomas G.
Grudnowski, or either of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse, all the shares of Common Stock of Fair, Isaac and Company,
Incorporated that the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held on February 6, 2001, or any postponement or adjournment
thereof.
(Continued, and to be signed on the other side)
--------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------------------------------------------------------------------------------------------------
[X] Please mark
your votes
as in this
example
FOR WITHHOLD FOR AGAINST ABSTAIN
ALL FOR ALL
NOMINEES NOMINEES 2. To approve an amendment to the Company's [ ] [ ] [ ]
BELOW BELOW Restated Certificate of Incorporation, as
(except as (except as amended, to eliminate cumulative voting
indicated) indicated) in the election of directors.
1. Election of Directors
If you wish to withhold 3. To ratify the appointment of KPMG LLP as [ ] [ ] [ ]
authority to vote for any [ ] [ ] the Company's independent auditors for
individual nominee, strike a the current fiscal year.
line through that nominee's
name in the list below:
A. George Battle, Philip G. Heasley, 4. In their discretion upon such other
Guy R. Henshaw, David S.P. Hopkins, business as may properly come before the
Robert M. Oliver, Robert D. Sanderson, meeting.
Tony J. Christianson, Margaret L. Taylor, and
Thomas G. Grudnowski THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED AS DIRECTED BY THE UNDERSIGNED
STOCKHOLDER. IF NO SUCH DIRECTIONS ARE MADE,
I PLAN TO ATTEND THE MEETING [ ] THIS PROXY WILL BE VOTED "FOR" THE ELECTION
OF DIRECTORS AND "FOR" ITEMS 2 AND 3.
(Note: Sign exactly as your name appears on
this proxy card. If shares are held jointly
each holder should sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such. If
corporation or partnership, please sign in
firm name by authorized person.)
Signature(s) Dated , 2001
------------------------------------------------------------------ ---------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE
PROVIDED SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
PROXY PROXY
Fair, Isaac and Company
Incorporated
EMPLOYEE STOCK OWNERSHIP PLAN
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING FEBRUARY 6, 2001
The undersigned hereby appoints Robert M. Oliver and Thomas G.
Grudnowski, or either of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse, all the shares of Common Stock of Fair, Isaac and Company,
Incorporated that the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held on February 6, 2001, or any postponement or adjournment
thereof.
(Continued, and to be signed on the other side)
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[X] Please mark
your votes
as in this
example
FOR WITHHOLD FOR AGAINST ABSTAIN
ALL FOR ALL
NOMINEES NOMINEES 2. To approve an amendment to the Company's [ ] [ ] [ ]
BELOW BELOW Restated Certificate of Incorporation, as
(except as (except as amended, to eliminate cumulative voting
indicated) indicated) in the election of directors.
1. Election of Directors
If you wish to withhold 3. To ratify the appointment of KPMG LLP as [ ] [ ] [ ]
authority to vote for any [ ] [ ] the Company's independent auditors for
individual nominee, strike a the current fiscal year.
line through that nominee's
name in the list below:
A. George Battle, Philip G. Heasley, 4. In their discretion upon such other
Guy R. Henshaw, David S.P. Hopkins, business as may properly come before the
Robert M. Oliver, Robert D. Sanderson, meeting.
Tony J. Christianson, Margaret L. Taylor, and
Thomas G. Grudnowski THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED AS DIRECTED BY THE UNDERSIGNED
STOCKHOLDER. IF NO SUCH DIRECTIONS ARE MADE,
I PLAN TO ATTEND THE MEETING [ ] THIS PROXY WILL BE VOTED "FOR" THE ELECTION
OF DIRECTORS AND "FOR" ITEMS 2 AND 3.
(Note: Sign exactly as your name appears on
this proxy card. If shares are held jointly
each holder should sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such. If
corporation or partnership, please sign in
firm name by authorized person.)
Signature(s) Dated , 2001
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE
PROVIDED SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
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