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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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February 28, 2006 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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x Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Fair Isaac Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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x No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
FAIR ISAAC CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 1, 2005,
AND PROXY STATEMENT
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
Please take notice that the Annual Meeting of the
Stockholders of Fair Isaac Corporation will be held at the time
and place and for the purposes indicated below.
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TIME |
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9:30 A.M., local time, on Tuesday,
February 1, 2005
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PLACE |
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Offices of Fair Isaac Corporation
901 Marquette Avenue, 33rd Floor
Minneapolis, Minnesota 55402-3232
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ITEMS OF BUSINESS |
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1. To elect nine directors to serve
until the 2006 Annual Meeting of Stockholders and thereafter
until their successors are elected and qualified;
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2. To ratify the appointment of
Deloitte & Touche LLP as our independent auditors for
the fiscal year ending September 30, 2005; and
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3. To transact such other business as
may properly come before the meeting or any adjournment thereof.
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All of the above matters are more fully described
in the accompanying Proxy Statement.
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RECORD DATE |
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You can vote if you were a stockholder of record
at the close of business on Friday, December 3, 2004. A
complete list of stockholders entitled to vote at the Annual
Meeting shall be open to the examination of any stockholder, for
any purpose germane to the Annual Meeting, during ordinary
business hours for at least 10 days prior to the Annual
Meeting at our offices at 901 Marquette Avenue, Suite 3200,
Minneapolis, Minnesota.
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ANNUAL REPORT |
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Our 2004 Annual Report, which includes a copy of
our Annual Report on Form 10-K, accompanies this Proxy
Statement.
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VOTING |
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Your Vote is
Important. We invite all stockholders
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 card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose or follow
the internet or telephone voting instructions on the proxy card.
Any stockholder attending the meeting may vote in person even if
he or she returned a proxy card.
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ADMITTANCE TO MEETING |
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Admittance to the Annual Meeting will be limited
to stockholders. If you are a stockholder of record and plan to
attend, please detach the admission ticket from your proxy card
and bring it with you to the Annual Meeting. Stockholders who
arrive at the Annual Meeting without an admission ticket will be
required to present identification matching the corresponding
stockholder account name at the registration table located
outside the meeting room. If you are a stockholder whose shares
are held by a bank, broker or other nominee, you will be asked
to attest to such ownership at the registration table prior to
the Annual Meeting.
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ANDREA M. FIKE
Vice President, General Counsel and Secretary
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December 28, 2004
FAIR ISAAC CORPORATION
901 Marquette Avenue,
Suite 3200
Minneapolis, Minnesota 55402-3232
INFORMATION ABOUT THIS PROXY SOLICITATION AND
VOTING PROCEDURES
Proxy Statement
This Proxy Statement is furnished in connection
with the solicitation by and on behalf of the Board of Directors
of Fair Isaac Corporation (Fair Isaac, the
Company, we or us), a
Delaware corporation, of proxies to be voted at our 2005 Annual
Meeting of Stockholders (the Annual Meeting) to be
held on Tuesday, February 1, 2005, and at any postponement
or adjournment thereof. A copy of our Annual Report to
Stockholders for the fiscal year ended September 30, 2004,
which includes a copy of our Annual Report on Form 10-K,
accompanies this Proxy Statement. This Proxy Statement and the
accompanying proxy card are being mailed to stockholders on or
about December 28, 2004.
Voting of Shares Represented by Proxies on
Items of Business
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 our Office
of the Secretary 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 attends
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 instructions on the proxy card. If no such
specifications are made, proxies will be voted FOR the election
of the nine nominees for director listed in this Proxy
Statement, and FOR the ratification of the appointment of
Deloitte & Touche LLP as the Companys auditors
for the fiscal year 2005.
Voting of Shares Represented by Proxies on
Other Business
The Board knows of no other matters to be
presented for stockholder action at the Annual Meeting. If other
matters are properly brought before the Annual Meeting, the
persons named as proxies in the accompanying proxy card will
have discretion with respect to how to vote the shares
represented by them.
Proxy Solicitation
We will bear the expense of preparing, printing,
and mailing this Proxy Statement and the proxies solicited
hereby, and we 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, our officers and other
employees may communicate with stockholders either in person or
by telephone for the purpose of soliciting such proxies, and no
additional compensation will be paid for such solicitation. We
have retained Georgeson Shareholder Communications Inc. to
assist in the solicitation of proxies, at a cost of $7,000, plus
normal out-of-pocket expenses.
Outstanding Shares
Only holders of our Common Stock at the close of
business on December 3, 2004 (the Record Date),
are entitled to receive this notice and to vote their shares at
the Annual Meeting. At the close of business on the Record Date,
there were 68,532,905 shares of Common Stock,
$0.01 par value, issued and outstanding, and
20,323,879 shares of Common Stock were held as treasury
stock by the Company. The shares held as treasury stock are not
entitled to vote.
Voting Rights
Each share of Common Stock is entitled to one
vote for each matter to be voted on at the Annual Meeting,
subject to the provisions regarding cumulative voting in the
election of directors. As to the election of the directors, each
stockholder is entitled to one vote per share, multiplied by the
number of directors to be elected. The stockholder may cast all
of such votes for a single candidate or may distribute them
among two or more director candidates, as the stockholder sees
fit. However, no stockholder may cumulate votes unless the name
or names of the candidate or candidates for whom votes are cast
have been placed in nomination prior to the voting and the
stockholder has given notice at the meeting prior to the voting
of the stockholders 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 our director nominees as they may determine, other
than among those candidates for whom authority to vote has been
withheld.
Votes Required
A plurality of the votes cast is required for the
election of each of the nine nominees for director listed in
this Proxy Statement under Proposal 1. The affirmative vote
of a majority of the shares present or represented by proxy and
entitled to vote is necessary to ratify Proposal 2, the
appointment of Deloitte & Touche LLP as our independent
auditors for the fiscal year 2005. Abstentions will be counted
toward a quorum and have the effect of negative votes with
regard to Proposal 2. In the event that a broker indicates
on a proxy that it does not have discretionary authority to vote
certain shares on a particular matter, such broker non-votes
will also be counted towards a quorum and will have the same
effect as negative votes with regard to Proposal 2. All
votes will be tabulated by the inspector of elections appointed
for the Annual Meeting, who will tabulate affirmative votes,
negative votes, abstentions and broker non-votes.
Confidential Nature of Voting
Any proxy, ballot or other voting material that
identifies the particular vote of a stockholder and contains the
stockholders request for confidential treatment will be
kept confidential, except in the event of a contested proxy
solicitation or as may be required by law. We may be informed
whether or not a particular stockholder has voted and will have
access to any comment written on a proxy, ballot or other
material and to the identity of the commenting stockholder. The
inspector of election will be an independent third party not
under our control.
INFORMATION ABOUT THE BOARD OF DIRECTORS,
BOARD COMMITTEES AND CERTAIN CORPORATE GOVERNANCE
MATTERS
Board Meetings, Committees and
Attendance
During fiscal 2004, our Board of Directors met 14
times. During fiscal 2004, the Board had three standing
committees: the Audit Committee; the Compensation Committee; and
the Governance, Nominating and Executive Committee. Each
committees current charter, the criteria used to determine
the independence of our directors and committee members, and our
Corporate Governance Guidelines are available free of charge on
the Companys web site, www.fairisaac.com, or by writing to
the Office of the Secretary at our corporate headquarters. 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 2004.
Lead Independent Director
Our Corporate Governance Guidelines provide that
independent directors will meet in executive session at each
regular Board meeting. The Chair, or if the Chair is also the
Chief Executive Officer, a lead independent director appointed
by the Board, will preside at these meetings. A. George Battle,
the Chair of
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the Board, is independent and presides at
executive sessions held in accordance with our Corporate
Governance Guidelines.
Director Independence Criteria
The Board of Directors has adopted criteria
consistent with the New York Stock Exchange listing requirements
for use in determining whether its directors and director
nominees are independent. The Board has determined that a
majority of the Board as a whole is composed of
independent directors, and each member of its
standing committees is an independent director under
these criteria.
Attendance at Annual Meeting of
Stockholders
It is the policy of the Company, set forth in our
Corporate Governance Guidelines, that directors should attend
the Companys annual meetings of stockholders, absent
special circumstances. All persons nominated for election in
2004 as director attended our 2004 annual meeting.
Policy for Stockholder Communications with
Board
All interested parties, whether stockholders or
otherwise, may send written communications to the Board of
Directors or specified individual directors by addressing their
communication to the Office of the Secretary, Fair Isaac
Corporation, 901 Marquette Avenue, Suite 3200,
Minneapolis, Minnesota 55402-3232. The communications will be
collected by the Secretary and delivered, in the form received,
to the presiding director or, if so addressed, to a specified
director.
Audit Committee
The Audit Committee is a separate committee
established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (the Exchange
Act). The members of the Audit Committee are
A. George Battle, Andrew Cecere (beginning April 5,
2004), Guy R. Henshaw (Chair), and David S. P.
Hopkins. The Audit Committee selects and retains independent
auditors and assists the Board in its oversight of the integrity
of the Companys financial statements, including the
performance of our independent auditors in their audit of our
annual financial statements. The Audit Committee meets with
management and the Companys independent auditors as may be
required. The independent auditors have full and free access to
the Audit Committee without the presence of management. The
Board has determined that Mr. Battle is an audit
committee financial expert within the meaning of
Item 401(h) of Regulation S-K under the Exchange Act.
The Audit Committee held 16 meetings during fiscal 2004.
Compensation Committee
The members of the Compensation Committee are
Tony J. Christianson, Alex W. Hart, Philip G. Heasley
(Chair), and Margaret L. Taylor. The Compensation Committee
determines all aspects of the compensation of our executive
officers and considers and makes recommendations to the Board
concerning action with respect to broadly based compensation and
benefits plans. The Committee also administers the
Companys 1992 Long-term Incentive Plan (LTIP),
2002 Stock Bonus Plan (SBP), and 2003 Employment
Inducement Award Plan (EIAP). The Compensation
Committee held 12 meetings during fiscal 2004.
Governance, Nominating and Executive
Committee
The members of the Governance, Nominating and
Executive Committee are A. George Battle (Chair),
Philip G. Heasley, and Guy R. Henshaw. This Committee
may exercise certain powers of the full Board. It is also
responsible for developing and recommending to the Board a set
of corporate governance principles, identifying and considering
appropriate candidates for election to the Board, and
establishing the agenda for Board meetings. The Governance,
Nominating and Executive Committee held six meetings during
fiscal 2004.
Evaluation of Director
Candidates. In evaluating director
candidates, the Committee will review all nominees for director
regardless of the source of the nomination and will consider, in
accordance with its
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charter, the composition of the Board as a whole,
the requisite characteristics of each candidate, and the
performance and continued tenure of incumbent Board members. The
Committee has not established specific minimum qualifications in
this connection. The Committee will recommend to the Board those
nominees whose attributes it believes would be most beneficial
to the Company. This assessment will include such considerations
as experience, integrity, competence, diversity, skills, and
dedication in the context of the needs of the Board.
Candidates Recommended by
Stockholders. The Committee will
consider director candidates recommended by stockholders in the
same manner that it considers all director candidates.
Stockholders who wish to suggest qualified candidates to the
Committee should write to the Office of the Secretary, Fair
Isaac Corporation, 901 Marquette Avenue, Suite 3200,
Minneapolis, Minnesota 55402-3232, stating in detail the
candidates qualifications for consideration by the
Committee. If a stockholder wishes to nominate a director other
than a person nominated by or on behalf of the Board, he or she
must comply with certain procedures set out in the
Companys By-laws.
Action on Director
Candidates. Following consideration by
the Governance, Nominating and Executive Committee, the full
Board will review and act, or recommend action to the
stockholders, as appropriate, with respect to director nominees.
Invitation to join the Board will be extended by the Board,
acting through its Chair, and by the Chief Executive Officer.
Board, Committee and Director
Performance. The Governance,
Nominating and Executive Committee oversees the processes
developed by each of the Boards committees for the
execution of its duties, and oversees and reports to the Board
on an annual self-assessment of the performance of the Board,
each standing committee of the Board, and each individual
Director.
Director Compensation
We compensate each director who is not an
employee of the Company (an Outside Director) with a
combination of cash and options to purchase Company stock. We
periodically review our program of director compensation in view
of our belief that director compensation should be competitive,
and link rewards to stockholder returns through increased
ownership of our stock. During fiscal 2004, Outside Directors
were compensated as described below.
Cash Compensation.
In fiscal 2004, each Outside Director other than the Chair
received an annual retainer of $20,000, plus $1,000 for each
Board or committee meeting attended. The Chair received an
annual retainer of $40,000 for services as Chair, plus $2,000
for each Board and $1,000 for each committee meeting attended.
Outside Directors who are chairs of standing committees (in
2004, the Audit, Compensation, and Governance, Nominating and
Executive Committees) received an additional $5,000 per
year. Each Outside Director has the right, prior to the annual
meeting, to elect to receive such annual retainer in the form of
options to purchase our Common Stock instead of cash, on the
same terms as the annual grants to Outside Directors, described
below. A director who elects to receive his or her annual
retainer in the form of a stock option receives a stock option
to purchase a number of shares equal to the amount of the
retainer divided by one-half of the per share price of our
Common Stock on the date of grant. In 2004, none of the
directors chose to receive his or her retainer under these
arrangements.
Stock Compensation.
Under our LTIP as amended, each Outside Director receives a
grant of 30,000 non-qualified stock options (the Initial
Grant) upon election as an Outside Director and a grant of
non-qualified options for 11,250 shares on the date of each
annual meeting, provided such member has been an Outside
Director since the prior annual meeting (the Annual
Grant). In addition, each Outside Director who serves as a
standing committee chairperson receives 1,500 nonqualified
options. The exercise price of all such options is equal to the
fair market value of our Common Stock on the date of grant. The
Initial Grants vest in 20% increments on each of the first
through fifth anniversary dates of the directors election,
and they are exercisable in full upon termination of the Outside
Directors services for any reason. Annual Grants are
immediately exercisable upon grant. Both Initial Grants and
Annual Grants expire 10 years after the date of grant.
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PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
Our Board of Directors currently consists of nine
members. Our Board of Directors has nominated the following nine
persons, all of whom currently serve as directors, for election
as directors to serve until the 2006 Annual Meeting of
Stockholders and thereafter until their respective successors
are duly elected and qualified. All nominees except Andrew
Cecere are either standing for re-election as a director or are
executive officers of the Company. Mr. Cecere, who is
standing for election for the first time, was recommended by
other non-management directors, and was elected by the Board to
fill a newly-created vacancy on the Board effective
April 5, 2004. If any nominee is unable or declines to
serve (a contingency which we do not now foresee), either the
proxies named in the accompanying form will vote the shares
represented by them for any nominee who may be nominated by the
present Board of Directors to fill such vacancy, or the size of
the Board will be reduced accordingly.
A. George Battle.
Director since August 1996 and Chair of the Board of Directors
since February 2002; member of the Audit Committee; Chair of the
Governance, Nominating and Executive Committee; age 60.
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From December 2000 until January 1, 2004,
Mr. Battle served as Chief Executive Officer of Ask Jeeves,
Inc. On January 1, 2004, he became Executive Chairman of
Ask Jeeves. From 1968 until his retirement in 1995,
Mr. Battle was an employee and then partner of Arthur
Andersen LLP and Accenture Ltd. Mr. Battles last
position at Accenture was Managing Partner, Market Development,
responsible for Accentures worldwide industry activities,
its Change Management and Strategic Services offerings, and
worldwide marketing and advertising. Mr. Battle is a
director of the following public companies in addition to Fair
Isaac: Ask Jeeves, Inc.; and PeopleSoft, Inc. He is also a
director of the following non-public companies: Alaska Travel
Adventures; Masters Select Equity Mutual Fund; Masters Select
International Mutual Fund; Masters Select Value Fund; and
Masters Select Small Companies Fund. Mr. Battle is a Senior
Fellow of the Aspen Institute and past President of the Board of
Trustees of the Berkeley Repertory Theatre, past Chairman of the
Board of the Head Royce School, and a national trustee of the
Marcus A. Foster Educational Institute. Mr. Battle received
an undergraduate degree from Dartmouth College and an M.B.A.
from the Stanford University Business School.
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Andrew Cecere.
Director since April 2004; member of the Audit Committee;
age 44.
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Mr. Cecere holds the position of Vice
Chairman, Private Client, Trust and Asset Management of
U.S. Bancorp, a position he has held since 2001. From 1985
through 2001, he held various senior financial executive
positions with U.S. Bancorp and its predecessors, including
Chief Financial Officer from 2000 to 2001, Vice Chairman for
corporate trust and leasing business lines, a Member of
U.S. Bancorp Operating Committee from 2000 to 2001, and
manager of treasury management, international banking and
government banking functions from 1999-2000. Mr. Cecere is
not a director of any public company other than Fair Isaac. He
serves on the board of overseers of the Carlson School of
Management at the University of Minnesota, as a director of the
Greater Twin Cities United Way, Capital City Partnership, and
Delta Dental of Minnesota. Mr. Cecere received an
undergraduate degree from the University of St. Thomas and
an M.B.A. from the University of Minnesota.
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Tony J.
Christianson. Director since November
1999; member of the Compensation Committee; age 52.
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Since 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. Mr. Christianson is a director of the following
public company in addition to Fair Isaac: Transport Corp. of
America. He is also a director of the following non-public
companies: AmeriPride Services, Inc.; Capella Education Company;
Dolan Media Company; and Peoples Education Holding, Inc. He also
serves as the Chair of Adam Smith Companies, a closely held
investment company; and a director of Greenspring Companies. He
received an undergraduate degree from Saint Johns
University, Collegeville, Minnesota, and an M.B.A. from the
Harvard Business School.
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Thomas G.
Grudnowski. Director since December
1999; President and Chief Executive Officer; age 54.
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Mr. Grudnowski joined the Company on
December 2, 1999, as the Companys President and Chief
Executive Officer. From 1972 until December 1, 1999, he was
employed by Accenture, Ltd. He was named a partner in 1983, and
his last position at Accenture was Managing Partner in charge of
e-commerce ventures. Mr. Grudnowski received an
undergraduate degree from Saint Johns University,
Collegeville, Minnesota.
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Alex W. Hart.
Director since August 2002; member of the Compensation
Committee; age 64.
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Since November 1997, Mr. Hart has been an
independent consultant to the financial services industry. He
served as Chief Executive Officer of Advanta Corporation, a
consumer lending company, from August 1995 to November 1997, and
as its Executive Vice Chairman from March 1994 to August 1996.
From November 1988 to March 1994, he served as President and
Chief Executive Officer of MasterCard International.
Mr. Hart is a director of the following public companies in
addition to Fair Isaac: Global Payments, Inc., a payment
services company; Shopping.com Ltd, an on-line comparison
shopping service; and Silicon Valley Bancshares Inc., where he
serves as Chairman of the Board. He served as a director of HNC
Software Inc. (HNC) from October 1998 through August
2002. Mr. Hart holds an undergraduate degree from Harvard
University.
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Philip G. Heasley.
Director since November 2000; Chair of the Compensation
Committee; member of the Governance, Nominating and Executive
Committee; age 55.
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Since August 2003, Mr. Heasley has been a
financial consultant and investor. From January 2001 through
August 2003, he served as Chairman and Chief Executive Officer
of Bank Ones First USA credit card unit. He was the
President and Chief Operating Officer of U.S. Bancorp from
July 1999 through November 2000, and Vice Chairman and President
of its consumer products division from September 1993 until July
1999. Mr. Heasley is a director of the following public
companies in addition to Fair Isaac: Fidelity National
Financial, Inc.; Kintra Corporation; and Ohio Casualty
Corporation. He is also a director of Public Radio
International, and during the last five years he served as a
director of: Schwans Enterprises, Inc.; Sun America, Inc.;
Visa USA; and Visa International. His past civic board
affiliations include Advantage Minnesota; the Minnesota Opera;
the Saint Paul Chamber of Commerce; the Science Museum of
Minnesota; and the Walker Art Center. He received an
undergraduate degree from Marist College and an M.B.A. from
Bernard Baruch Graduate School of Business, both in New York.
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Guy R. Henshaw.
Director since February 1994; Chair of the Audit Committee;
member of the Governance, Nominating and Executive Committee;
age 58.
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Since October 1995, Mr. Henshaw has been a
partner in Henshaw/ Vierra Management Counsel, L.L.C. He is also
a Vice President of Eubel, Brady & Suttman Asset
Management, an investment Management firm, located in Dayton,
Ohio. From January 1992 until September 1995, he was Chairman
and Chief Executive Officer of Payday, a payroll outsourcing
services company. From 1984 to 1991, he was President, Chief
Financial Officer and a director of Civic BanCorp.
Mr. Henshaw is not on the board of any public company other
than Fair Isaac. He serves as a director of the following
non-public companies: Sleepy Cat Software, iSystems LLC and
Research & Diagnostic Antibodies Inc. Mr. Henshaw
is Chairman of the John Muir/ Mt. Diablo Health System and a
Trustee of Ripon College. He received an undergraduate degree
from Ripon College and an M.B.A. from the Wharton School of
Business at the University of Pennsylvania.
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David S. P. Hopkins.
Director since August 1994; member of the Audit Committee;
age 61.
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Since January 1996, Dr. Hopkins has been
Director of Quality Measurement and Improvement for 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. From 1993 to 1995, he was Vice President, Client
Services and Corporate Development of International Severity
Information Systems, Inc., a medical severity indexing software
and consulting firm. Mr. Hopkins is not a
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director of any public company other than Fair
Isaac. He serves as a director of the Alan Guttmacher Institute;
and he is a member of advisory boards to the Joint Commission on
Accreditation of Healthcare Organizations and the National
Quality Forum, a not-for-profit organization formed to create a
national strategy for healthcare quality and reporting. Prior to
1993, he held a number of senior management positions with
Stanford University and its medical facilities. He received an
undergraduate degree from Harvard University, and a Ph.D. in
Operations Research and an M.S. in Statistics from Stanford
University.
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Margaret L. Taylor.
Director since December 1999; member of the Compensation
Committee; age 53.
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Since December 1999, Ms. Taylor has been
President of PeopleSoft Investments, Inc., an investment
management subsidiary of PeopleSoft, Inc., a developer of
enterprise client/ server application software products. From
1989 until June 1999, she was a Senior Vice President of
PeopleSoft, Inc. From 1986-88 she was Vice President, Trust and
Investment Management of Hibernia Bank. Ms. Taylor is a
director of the following public company in addition to Fair
Isaac: Rightnow Technologies, where she is a member of the audit
and compensation committees of the board of directors. She holds
a B.A. in Psychology and Communications from Lone Mountain
College in San Francisco, California.
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Officers are elected at the first meeting of the
Board of Directors following the Annual Meeting of Stockholders.
Officers serve until their successors are elected and qualified.
There are no family relationships between any of the directors
and any executive officer.
Vote Required
A plurality of the votes cast is required for the
election of each director.
Recommendation of the Board of
Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
It is the responsibility of the Audit Committee
to select and retain independent auditors for the fiscal year
ending September 30, 2005. The Audit Committee has
appointed the firm of Deloitte & Touche LLP
(Deloitte & Touche) as our independent
auditors for the Companys fiscal year 2005. Although
stockholder ratification of the Audit Committees selection
of independent auditors is not required by our By-laws or
otherwise, we are submitting the selection of
Deloitte & Touche to stockholder ratification so that
our stockholders may participate in this important corporate
decision. If not ratified, the Audit Committee will reconsider
the selection, although the Audit Committee will not be required
to select different independent auditors for the Company.
KPMG LLP (KPMG) served as our
independent auditors from May 1991 through our 2004 fiscal year.
On November 14, 2004, our Audit Committee dismissed KPMG as
the Companys independent accountants and appointed
Deloitte & Touche as the Companys new independent
accountants. KPMG continued as the Companys independent
accountants through the completion of its audit of the
Companys consolidated financial statements as of and for
the year ended September 30, 2004. This action effectively
dismissed KPMG as the Companys independent accountants for
the fiscal year that commenced on October 1, 2004.
The reports of KPMG on the Companys
consolidated financial statements for the fiscal years ended
September 30, 2004, and 2003, did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope, or accounting
principles, except that the reports on the Companys
consolidated financial statements for the fiscal years ended
September 30, 2004, and 2003, made reference to the
Companys change in its method of accounting for goodwill.
7
In connection with its audits of the
Companys consolidated financial statements for the fiscal
years ended September 30, 2004, and 2003, and through the
date of KPMGs dismissal, there were no disagreements with
KPMG on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of
KPMG, would have caused it to make reference thereto in its
reports on the Companys consolidated financial statements
as of and for the fiscal years ended September 30, 2004 and
2003. None of the reportable events described in
Item 304(a)(1)(v) of Regulation S-K occurred during
the fiscal years ended September 30, 2004, and
September 30, 2003, and through the date of KPMGs
dismissal.
During the fiscal years ended September 30,
2004, and September 30, 2003, and through the date of
Deloitte & Touches appointment, the Company did
not consult with Deloitte & Touche regarding any of the
matters or events set forth in Item 304(a)(2)(i) and
(ii) of Regulation S-K.
The Company has provided a copy of the above
disclosures to KPMG and Deloitte & Touche, each of
which has concurred with substance thereof, as it relates to
each of them, and within the scope of the knowledge and belief
of each.
Representatives of KPMG will not be present at
the Annual Meeting, and, as a result, will not have the
opportunity to make statements and respond to appropriate
questions from stockholders present at the meeting.
Representatives of Deloitte & Touche will be present at
the Annual Meeting and will have an opportunity to make a
statement and respond to questions from stockholders present at
the meeting.
Audit and Non-Audit Fees
The following table presents fees for
professional audit services rendered by KPMG LLP for the audit
of the Companys annual financial statements for the years
ended September 30, 2004, and September 30, 2003, and
fees for other services rendered by KPMG LLP during those
periods.
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
2003 |
|
|
|
|
|
Audit Fees
|
|
$ |
2,381,000 |
|
|
$ |
1,790,000 |
|
Audit Related Fees
|
|
|
149,000 |
|
|
|
127,000 |
|
Tax Fees
|
|
|
363,000 |
|
|
|
399,000 |
|
All Other Fees
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
2,893,000 |
|
|
$ |
2,316,000 |
|
|
|
|
|
|
|
|
|
|
Audit Fees. Audit
fees consisted of fees for services rendered in connection with
the annual audit of the Companys consolidated financial
statements, quarterly reviews of financial statements included
in the Companys quarterly reports on Form 10-Q, fees
for Securities and Exchange Commission (SEC)
registration statement services, and fees for comfort letter
procedures.
Audit Related Fees.
Audit related fees consisted principally of fees for audits of
financial statements of employee benefit plans and fees related
to operational system attestation services.
Tax Fees. Tax
services consisted of fees for tax consultation and tax
compliance services.
The Audit Committee considers whether the
provision of services other than for audit fees is compatible
with maintaining our independent auditors independence,
and has determined these services for fiscal 2004 and 2003 were
compatible. All of the services described above were approved by
the Audit Committee pursuant to paragraph (c)(7)(ii)(C) of
Rule 2-01 of Regulation S-X under the Exchange Act, to
the extent that rule was applicable during fiscal 2003 and 2004.
Policy on Audit Committee Pre-Approval of
Audit and Non-Audit Services of Independent Auditors
The Audit Committee is responsible for
appointing, setting compensation, and overseeing the work of the
independent auditors. The Audit Committee has established a
policy regarding pre-approval of all audit and non-audit
services provided by the independent auditors.
8
On an ongoing basis, management communicates
specific projects and categories of service for which the
advance approval of the Audit Committee is requested. The Audit
Committee reviews these requests and advises management if the
Audit Committee approves the engagement of the independent
auditors. On a periodic basis, management reports to the Audit
Committee regarding the actual spending for such projects and
services compared to the approved amounts. The Audit Committee
may also delegate the ability to pre-approve audit and permitted
non-audit services to a subcommittee consisting of one or more
members, provided that any such pre-approvals are reported on at
the next Audit Committee meeting.
Vote Required
The affirmative vote of a majority of the shares
present and entitled to vote is required to ratify this proposal.
Recommendation of the Board of
Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE RATIFICATION OF DELOITTE & TOUCHE
LLP AS THE COMPANYS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 2005.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain
information regarding the beneficial ownership of our Common
Stock as of December 3, 2004 (except as otherwise noted),
by (a) each of our directors and nominees for director,
(b) each of the executive officers named in the Summary
Compensation Table below, (c) all of our executive officers
and directors as a group, and (d) each person known to us
who beneficially owns more than 5% of the outstanding shares of
our Common Stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership1 |
Directors, Nominees, Executive Officers |
|
|
and 5% Stockholders |
|
Number |
|
Percent2 |
|
|
|
|
|
Neuberger Berman, LLC3
|
|
|
4,499,810 |
|
|
|
6.4% |
|
|
605 Third Avenue
|
|
|
|
|
|
|
|
|
|
New York, NY 10158-3698
|
|
|
|
|
|
|
|
|
Kayne Anderson Rudnick Investment Management,
LLC4
|
|
|
3,051,048 |
|
|
|
6.0% |
|
|
1800 Avenue of the Stars, #200
|
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90067
|
|
|
|
|
|
|
|
|
Thomas G. Grudnowski5
|
|
|
1,659,377 |
|
|
|
2.4% |
|
Larry E. Rosenberger6
|
|
|
1,289,143 |
|
|
|
1.9% |
|
Mark P. Pautsch7
|
|
|
157,195 |
|
|
|
* |
|
Tony J. Christianson8
|
|
|
153,386 |
|
|
|
* |
|
A. George Battle9
|
|
|
135,222 |
|
|
|
* |
|
Chad L. Becker10
|
|
|
126,449 |
|
|
|
* |
|
Margaret L. Taylor11
|
|
|
109,875 |
|
|
|
* |
|
Guy R. Henshaw12
|
|
|
100,985 |
|
|
|
* |
|
Steven A. Sjoblad13
|
|
|
97,729 |
|
|
|
* |
|
David S. P. Hopkins14
|
|
|
88,500 |
|
|
|
* |
|
Alex W. Hart15
|
|
|
81,623 |
|
|
|
* |
|
Philip G. Heasley16
|
|
|
77,217 |
|
|
|
* |
|
William F. Nowacki, Jr.17
|
|
|
0 |
|
|
|
* |
|
Andrew Cecere
|
|
|
0 |
|
|
|
* |
|
All executive officers and directors as a group
(24 persons)18
|
|
|
4,510,962 |
|
|
|
6.7% |
|
9
|
|
|
|
* |
Represents holdings of less than 1%.
|
|
|
|
|
1 |
To the Companys 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 |
If the named person holds stock options
exercisable on or prior to February 1, 2005, the shares
underlying those options are included in the number for such
person as if such person had exercised those options. Shares
deemed issued to a holder of stock options pursuant to the
preceding sentence are not deemed issued and outstanding for
purposes of the percentage calculation with respect to any other
stockholder.
|
|
|
3 |
Information as to this person (including
affiliated entities) is based on the report on Form 13F
filed by this person as of September 30, 2004. The Company
has no current information concerning this persons voting
or dispositive power with respect to the shares reported in the
table.
|
|
|
4 |
Information as to this person (including
affiliated entities) is based on the report on Form 13F
filed by this person as of September 30, 2004. The Company
has no current information concerning this persons voting
or dispositive power with respect to the shares reported in the
table.
|
|
|
5 |
Includes options for 1,636,877 shares.
|
|
|
6 |
Includes options for 568,171 shares.
|
|
|
7 |
Includes options for 134,531 shares.
|
|
|
8 |
Includes options for 132,011 shares.
|
|
|
9 |
Includes options for 126,000 shares. Also
includes 4,388 shares held by Mr. Battles son
who resides with him and includes 337 shares held by his
sister, as to which he has dispositive power. Mr. Battle
disclaims beneficial ownership of such shares.
|
|
|
10 |
Includes options for 99,844 shares.
|
|
11 |
Includes options for 105,000 shares.
|
|
12 |
Includes options for 64,630 shares.
|
|
13 |
Includes options for 74,063 shares.
|
|
14 |
Includes options for 81,000 shares.
|
|
15 |
Includes options for 72,623 shares.
|
|
16 |
Includes options for 38,250 shares.
|
|
17 |
Mr. Nowackis employment with the
Company terminated on August 6, 2004. As to
Mr. Nowacki, this information is given as of that date.
|
|
18 |
Includes shares described in notes 5
through 17, above, including a total of
3,487,375 shares subject to options exercisable on or prior
to February 1, 2005, by all the persons in this group.
|
10
EXECUTIVE COMPENSATION
Compensation
The following table sets forth the cash and
non-cash compensation awarded to, earned by, or paid to
(a) the Chief Executive Officer, (b) each of our other
four most highly compensated executive officers at the end of
the Companys 2004 fiscal year, and (c) one other
person who would have been in the group described in
subparagraph (b) immediately preceding but for the fact
that he was not serving as an executive officer of the Company
at the end of fiscal 2004. The information is presented for
services rendered in all capacities to the Company and its
subsidiaries during the fiscal year ended September 30,
2004.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation1 |
|
Long Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
Payouts |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
Annual |
|
Restricted |
|
Securities |
|
|
|
All Other |
|
|
|
|
|
|
Compen- |
|
Stock |
|
Underlying |
|
LTIP |
|
Compen- |
|
|
|
|
Salary |
|
Bonus |
|
sation |
|
Awards2 |
|
Options |
|
Payouts |
|
sation3 |
Name and Principal Position |
|
Year |
|
($) |
|
($) |
|
($) |
|
($) |
|
(#) |
|
($) |
|
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas G. Grudnowski
|
|
|
2004 |
|
|
$ |
596,155 |
|
|
$ |
0 |
|
|
$ |
443 |
4 |
|
|
0 |
|
|
|
562,500 |
|
|
|
0 |
|
|
|
0 |
|
|
President and Chief
|
|
|
2003 |
|
|
|
550,000 |
|
|
|
500,000 |
|
|
|
4,369 |
4 |
|
|
0 |
|
|
|
300,000 |
|
|
|
0 |
|
|
|
0 |
|
|
Executive Officer
|
|
|
2002 |
|
|
|
530,128 |
|
|
|
840,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
225,000 |
|
|
|
0 |
|
|
|
0 |
|
Steven A. Sjoblad
|
|
|
2004 |
|
|
$ |
362,693 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
30,000 |
|
|
|
0 |
|
|
$ |
8,616 |
|
|
Vice President,
|
|
|
2003 |
|
|
|
344,713 |
|
|
$ |
40,636 |
|
|
|
0 |
|
|
|
0 |
|
|
|
97,500 |
|
|
|
0 |
|
|
|
8,334 |
|
|
Consumer Solutions
|
|
|
2002 |
|
|
|
287,372 |
|
|
|
38,750 |
|
|
|
0 |
|
|
$ |
455,940 |
|
|
|
67,500 |
|
|
|
0 |
|
|
|
4,151 |
|
William F. Nowacki, Jr.5
|
|
|
2004 |
|
|
$ |
348,929 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
45,000 |
|
|
|
0 |
|
|
$ |
8,200 |
|
|
Vice President and Chief
|
|
|
2003 |
|
|
|
238,154 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
75,000 |
|
|
|
0 |
|
|
|
8,000 |
|
|
Marketing Officer
|
|
|
2002 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Larry E. Rosenberger
|
|
|
2004 |
|
|
$ |
336,345 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
42,500 |
|
|
|
0 |
|
|
$ |
19,540 |
|
|
Vice President, Research and
|
|
|
2003 |
|
|
|
318,855 |
|
|
$ |
42,392 |
|
|
|
0 |
|
|
|
0 |
|
|
|
60,000 |
|
|
|
0 |
|
|
|
19,340 |
|
|
Development
|
|
|
2002 |
|
|
|
308,992 |
|
|
|
28,340 |
|
|
|
0 |
|
|
$ |
455,940 |
|
|
|
67,500 |
|
|
|
0 |
|
|
|
20,757 |
|
Mark P. Pautsch
|
|
|
2004 |
|
|
$ |
329,884 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
22,500 |
|
|
|
0 |
|
|
$ |
8,200 |
|
|
Vice President and
|
|
|
2003 |
|
|
|
318,855 |
|
|
$ |
38,402 |
|
|
|
0 |
|
|
|
0 |
|
|
|
60,000 |
|
|
|
0 |
|
|
|
8,662 |
|
|
Chief Information Officer
|
|
|
2002 |
|
|
|
309,439 |
|
|
|
80,438 |
|
|
|
0 |
|
|
$ |
455,940 |
|
|
|
67,500 |
|
|
|
0 |
|
|
|
7,423 |
|
Chad L. Becker
|
|
|
2004 |
|
|
$ |
329,884 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
50,000 |
|
|
|
0 |
|
|
$ |
8,200 |
|
|
Vice President,
|
|
|
2003 |
|
|
|
318,855 |
|
|
$ |
54,382 |
|
|
|
0 |
|
|
|
0 |
|
|
|
75,000 |
|
|
|
0 |
|
|
|
8,662 |
|
|
General Manager
|
|
|
2002 |
|
|
|
269,192 |
|
|
|
14,550 |
|
|
|
0 |
|
|
$ |
455,940 |
|
|
|
45,000 |
|
|
|
0 |
|
|
|
7,843 |
|
|
|
1 |
For Mr. Grudnowski, represents salary,
bonus, and other annual compensation earned during the indicated
fiscal year, including portions thereof paid following the end
of the fiscal year. For all other persons in this table,
represents salary and bonus paid during the fiscal year,
regardless of when earned.
|
|
2 |
The shares of restricted stock reflected in the
table were issued under our SBP, which was designed to motivate
and retain key employees in connection with the business
integration challenges presented by our acquisition of HNC.
These restricted shares were issued on August 5, 2002, the
closing date of our acquisition of HNC. The dollar figures in
this column are each computed by multiplying (a) the total
number of shares of restricted stock awarded to each specified
person (14,900 shares, on a pre-split basis), and
(b) the closing sales price per share on August 5,
2002 ($30.60). Unrestricted ownership of these shares vests
without cost to the holder in four equal annual installments
beginning August 5, 2003, subject to the holders
continued employment with the Company on the vesting date.
Dividends will be paid on the shares of restricted stock held by
the persons named. As of September 30, 2004, each person
identified in the table as a holder of restricted stock held,
subject to the restrictions described above, 11,174 shares
of such stock, with an aggregate value of $326,280, except for
Mr. Steven A. Sjoblad, whose employment with the Company
terminated as of December 9, 2004, as a result of which he
forfeited 11,174 shares in his name and subject to
restriction on that date.
|
11
|
|
3 |
Except as otherwise described in this footnote,
represents for fiscal 2004 the value of employer contributions
to accounts of each of the named persons in the Companys
401(k) Plan. The amount shown in this column for
Mr. Rosenberger in both 2003 and 2004 includes a
supplemental payment of $11,340 he received under a special
provision made by the Board in 1999, upon termination of the
Fair, Isaac Pension Plan. In 2002 this supplemental payment was
$9,639. Also in 2002, Mr. Rosenberger received $1,417 and
Mr. Becker $8 as dividends on shares held in a Company
ESOP, which amounts are included in this column.
|
|
4 |
Represents cash payments to Mr. Grudnowski
to cover certain tax obligations related to the value of his use
of a Company-owned aircraft. This value was determined to be
$591 in 2004 and $14,751 in 2003.
|
|
5 |
Mr. Nowacki was employed by the Company in
the capacity indicated from the beginning of fiscal year 2004
through August 6, 2004, as of which date his employment
with the Company terminated.
|
The following table sets forth certain
information concerning options to purchase Company stock granted
during fiscal 2004 to the persons named in the Summary
Compensation Table.
Option Grants in Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants |
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
Potential Realizable Value at |
|
|
Number of |
|
Options |
|
|
|
Assumed Annual Rates of |
|
|
Securities |
|
Granted to |
|
|
|
Stock Price Appreciation for |
|
|
Underlying |
|
Employees |
|
Exercise |
|
|
|
Option Term5 |
|
|
Options |
|
in Fiscal |
|
Price Per |
|
Expiration |
|
|
Name |
|
Granted |
|
Year4 |
|
Share |
|
Date |
|
5% |
|
10% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas G. Grudnowski
|
|
|
562,5001 |
|
|
|
10.6% |
|
|
$ |
39.58 |
|
|
|
04/30/11 |
|
|
$ |
9,442,740 |
|
|
$ |
22,153,690 |
|
Steven A. Sjoblad
|
|
|
30,0002 |
|
|
|
0.6% |
|
|
$ |
35.50 |
|
|
|
11/16/13 |
|
|
$ |
669,541 |
|
|
$ |
1,696,614 |
|
William F. Nowacki, Jr.
|
|
|
45,0002 |
|
|
|
0.8% |
|
|
$ |
35.50 |
|
|
|
11/16/13 |
|
|
$ |
1,004,311 |
|
|
$ |
2,544,922 |
|
Larry E. Rosenberger
|
|
|
20,0003 |
|
|
|
0.4% |
|
|
$ |
28.75 |
|
|
|
08/01/14 |
|
|
$ |
361,489 |
|
|
$ |
916,013 |
|
|
|
|
22,5002 |
|
|
|
0.4% |
|
|
$ |
35.50 |
|
|
|
11/16/13 |
|
|
$ |
502,156 |
|
|
$ |
1,272,461 |
|
Mark P. Pautsch
|
|
|
22,5002 |
|
|
|
0.4% |
|
|
$ |
35.50 |
|
|
|
11/16/13 |
|
|
$ |
502,156 |
|
|
$ |
1,272,461 |
|
Chad L. Becker
|
|
|
20,0003 |
|
|
|
0.4% |
|
|
$ |
28.75 |
|
|
|
08/01/14 |
|
|
$ |
361,489 |
|
|
$ |
916,013 |
|
|
|
|
30,0002 |
|
|
|
0.6% |
|
|
$ |
35.50 |
|
|
|
11/16/13 |
|
|
$ |
669,541 |
|
|
$ |
1,696,614 |
|
|
|
1 |
Granted at fair market value on January 30,
2004, vesting in three equal increments on January 30 of each of
the three years commencing January 30, 2005.
|
|
2 |
Granted at fair market value on November 17,
2003, vesting in 25% increments annually on November 17 of
each of the four years commencing on November 17, 2004.
|
|
3 |
Granted at fair market value on August 2,
2004, vesting in 25% increments annually on August 2 of each of
the four years commencing on August 2, 2005.
|
|
4 |
Based on approximately 5,319,447 options granted
to employees in fiscal 2004.
|
|
5 |
The 5% and 10% rates of appreciation are
specified for illustrative purposes as required by the SEC and
are not intended to forecast future appreciation, if any, of our
stock. If our stock does not increase in value above the
exercise price, then the option grants described in the table
will be valueless.
|
12
The following table sets forth certain
information concerning the exercise, availability and value of
options to purchase Company stock granted during fiscal 2004 to
the persons named in the Summary Compensation Table.
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
Value of Unexercised |
|
|
|
|
|
|
Underlying Unexercised |
|
In-the-Money Options |
|
|
Shares |
|
|
|
Options at FY End |
|
at FY End2 |
|
|
Acquired |
|
Value |
|
|
|
|
Name |
|
on Exercise |
|
Realized1 |
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas G. Grudnowski
|
|
|
150,000 |
|
|
$ |
3,818,550 |
|
|
|
1,318,128 |
|
|
|
984,372 |
|
|
$ |
19,682,461 |
|
|
$ |
1,368,491 |
|
Steven A. Sjoblad
|
|
|
108,750 |
|
|
$ |
1,622,452 |
|
|
|
25,313 |
|
|
|
162,187 |
|
|
$ |
193,429 |
|
|
$ |
490,944 |
|
William F. Nowacki, Jr.
|
|
|
0 |
|
|
$ |
0 |
|
|
|
18,750 |
|
|
|
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Larry E. Rosenberger
|
|
|
0 |
|
|
$ |
0 |
|
|
|
530,671 |
|
|
|
138,125 |
|
|
$ |
8,656,433 |
|
|
$ |
458,646 |
|
Mark P. Pautsch
|
|
|
318,750 |
|
|
$ |
4,666,506 |
|
|
|
97,031 |
|
|
|
126,562 |
|
|
$ |
1,422,766 |
|
|
$ |
543,515 |
|
Chad L. Becker
|
|
|
25,314 |
|
|
$ |
655,334 |
|
|
|
74,999 |
|
|
|
132,967 |
|
|
$ |
700,441 |
|
|
$ |
325,890 |
|
|
|
1 |
Equal to the closing sales price of our Common
Stock as reported by the New York Stock Exchange on the date the
options were exercised, less the exercise price.
|
|
2 |
Based on the closing sales price of our Common
Stock as reported by the New York Stock Exchange on
September 30, 2004 ($29.20), less the exercise price.
|
The following table provides certain information
as of September 30, 2004, with respect to our equity
compensation plans:
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
Number of Securities |
|
|
Securities to be |
|
|
|
Remaining Available |
|
|
Issued upon |
|
Weighted Average |
|
for Future Issuance |
|
|
Exercise of |
|
Exercise Price of |
|
Under Equity |
Plan Category |
|
Outstanding Options |
|
Outstanding Options |
|
Compensation Plans |
|
|
|
|
|
|
|
Equity compensation plans approved by security
holders1
|
|
|
11,853,153 |
|
|
$ |
26.49 |
|
|
|
2,399,6582 |
|
Equity compensation plans not approved by
security holders3
|
|
|
2,687,765 |
|
|
$ |
23.83 |
|
|
|
1,882,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,540,918 |
|
|
$ |
25.99 |
|
|
|
4,282,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
Includes the Companys adopted and not
terminated equity compensation plans approved by stockholders
under which Company securities (a) may be issued upon the
exercise of outstanding options, and/or (b) are available
for future issuance: the LTIP; and 11 plans or arrangements
acquired as part of our acquisition of HNC (these HNC security
holder approved legacy plans are collectively referred to as the
HNC Legacy Approved Plans). A total of
1,931,568 shares of Common Stock are available for future
issuance under the HNC Legacy Approved Plans. The HNC Legacy
Approved Plans and the number of shares of Common Stock
available for future issuance at September 30, 2004, under
each such plan are the following: 1995 Center for Adaptive
Systems Applications, Inc. Stock Plan, 8,651; 1995 Compreview,
Inc. Plan, 7,613 shares; 1995 Equity Incentive Plan,
692,483 shares; 1995 Directors Plan,
152,994 shares; 1996 Aptex Software Equity Incentive Plan,
157,696 shares; 1998 Practical Control Systems Stock Option
Plan, 66,855 shares; 1999 Onyx Technologies Stock Plan,
880 shares; 1999 Systems/ Link Corporation Option Plan,
7,502 shares; the 1999 eHNC Equity Incentive Plan,
100,575 shares; 2000 Advanced Information Management
Solutions, Inc. Plan, 167 shares; 2001 Equity Incentive
Plan, 736,152 shares. Each of the HNC Legacy Approved Plans
permits the issuance of options, the exercise price of which was
equal to the fair market value on the date of grant. Each of HNC
Legacy Approved Plans permits the issuance of options through
the tenth anniversary of the plans adoption. Under NYSE
rules, use of HNC Legacy Approved Plans is limited, among other
ways, to grants to persons who were not employed by the Company
|
13
|
|
|
immediately prior to the HNC acquisition. No
options have been issued under any of the HNC Legacy Approved
Plans since the Companys acquisition of HNC in August
2002, and the Company has no present plans or commitments to
issue additional options under any of these plans. The HNC
Legacy Approved Plans are available as exhibits to the
Companys Annual Report to the SEC on Form 10-K.
|
|
2 |
Under the LTIP, a number of shares equal to 4% of
the number of shares of our Common Stock outstanding on the last
day of the preceding fiscal year is available for grant under
that plan in each fiscal year. The amount shown in the table
does not include the additional shares that became available for
grant on October 1, 2004.
|
|
3 |
Includes the Companys adopted and not
terminated equity compensation plans not approved by
stockholders under which Company securities (a) may be
issued upon the exercise of outstanding options, and/or
(b) are available for future issuance: the EIAP; the SBP;
the 1995 Retek Distribution Corporation stock option
arrangements; the HNC 1998 Stock Option Plan; and individual
option grants to some of our executive officers and our Chairman
of the Board. Under each of the individual option grants, the
exercise price of the options was equal to the fair market value
on the date of grant and, except in one case noted below, the
options vest in equal installments over four years. The
recipients of these options, the grant date and the number of
outstanding shares covered by the options are as follows:
Thomas G. Grudnowski, August 1999, 742,500 shares
(options vest 25% on the first anniversary of the grant date and
in equal monthly installments thereafter during ensuing three
years); Thomas G. Grudnowski; May and November 2001,
225,000 shares; Mark P. Pautsch, August 2000,
97,031 shares; and A. George Battle, February 2002,
16,875 shares. A total of 17,746 shares of Common
Stock are available for future issuance under the 1995 Retek
arrangements, and 333,436 shares of Common Stock are
available for future issuance under the HNC 1998 Stock Option
Plan. All options granted under the 1995 Retek arrangements and
the HNC 1998 Stock Option Plan must be granted through the tenth
anniversary of the plans adoption, must have an exercise
price equal to the fair market value on the date of grant, and
generally vest over four years.
|
Executive Officer Employment
Agreements Thomas G. Grudnowski
Mr. Thomas G. Grudnowski has served as
the Companys Chief Executive Officer and as a director
since December 2, 1999. From that date through its
expiration by its terms on December 2, 2003,
Mr. Grudnowskis employment relationship with the
Company was governed by an employment agreement dated
August 23, 1999, and amended in December 1999, and December
2001 (the 1999 Grudnowski Employment Agreement).
The 1999 Grudnowski Employment Agreement provided
that, beginning in fiscal 2002, Mr. Grudnowskis
annual base salary was $550,000, and his incentive award ranged
from zero to twice his base salary, with a target equal to his
base salary, depending on the achievement of certain strategic,
business and financial objectives mutually determined by
Mr. Grudnowski and our Board of Directors within
90 days following the beginning of the fiscal year.
Pursuant to the 1999 Grudnowski Employment Agreement,
Mr. Grudnowski received options vesting over four years to
purchase up to 1,417,500 shares of our Common Stock, with
an exercise price equal to the fair market value as of
August 23, 1999, and options to
purchase 135,000 shares of our Common Stock, with an
exercise price equal to the fair market value as of
December 3, 1999, which vested January 1, 2000. The
1999 Grudnowski Employment Agreement provided that, in the event
of Mr. Grudnowskis early termination other than for
cause, or upon a change in control of the Company,
or upon termination of employment owing to
Mr. Grudnowskis death or disability, his options to
purchase our Common Stock would vest fully. The 1999 Grudnowski
Employment Agreement further provided that if we terminated
Mr. Grudnowskis employment without cause, then we
would pay Mr. Grudnowski, among other things, twice
Mr. Grudnowskis base salary at the time of
termination and twice the incentive award received by
Mr. Grudnowski for the fiscal year immediately prior to
termination.
On January 30, 2004, we entered into a new
employment agreement (the 2004 Grudnowski Employment
Agreement) with Mr. Grudnowski. The material
provisions of this agreement are summarized below.
14
|
|
|
Term. The 2004
Grudnowski Employment Agreement provides for
Mr. Grudnowskis employment as the Companys
Chief Executive Officer through January 30, 2009. This
agreement will continue from year to year thereafter, unless
either party gives the other party 60 days notice of
termination.
|
|
|
Directorship. The
2004 Grudnowski Employment Agreement provides that the Company
will nominate Mr. Grudnowski to serve as a director for so
long as he is the Companys Chief Executive Officer.
|
|
|
Salary.
Mr. Grudnowskis initial base salary is
$625,000 per year, subject to annual performance-based
review and upward adjustment. Downward adjustments to
Mr. Grudnowskis salary may only be made if such
reductions are a part of a general reduction in the base salary
for all executive officers of the Company.
|
|
|
Bonus.
Mr. Grudnowski is eligible for an annual cash bonus of zero
to two times his annual base salary, depending on the
achievement of certain strategic, business, and financial
objectives determined by the Compensation Committee in
consultation with Mr. Grudnowski. The amount thus
determined will be paid within 60 days following the end of
each Company fiscal year. Mr. Grudnowski does not
participate in any of the Companys other cash bonus plans.
|
|
|
Stock Options.
Mr. Grudnowski was awarded options under the LTIP to
purchase 562,500 shares of Common Stock, at their
closing fair market value on January 30, 2004. For fiscal
years 2004 through 2007, Mr. Grudnowski will be awarded
options under the LTIP to purchase between zero and
300,000 shares, subject to adjustment for stock splits
(beyond the March 10, 2004, stock split which is already
reflected in these figures) and dividends, pursuant to a formula
depending on the Companys performance relative to the
annual total shareholder return (including market
performance and dividend payment) for companies listed on the
S&P 900 Index compounded over the three-year period
ending on the last day of the applicable fiscal year. The
calculations required by the 2004 Grudnowski Employment
Agreement will be performed by an executive compensation firm
retained by the Company, and the options will be awarded within
five days after their completion. All these options vest in
equal increments over three years, on each anniversary of the
award date, subject to the terms of the LTIP and a stock option
agreement. The Company may also, in its sole discretion, grant
Mr. Grudnowski additional options if such grant is deemed
appropriate, and no grant shall be made if the Company believes
in good faith that such grant would violate applicable law or
exchange rules.
|
|
|
Other Benefits.
Mr. Grudnowski participates in the Companys general
employee benefits plans and programs. The Company provides
Mr. Grudnowski with $500,000 in group term life insurance
and four weeks paid vacation.
|
|
|
Other Agreements.
Mr. Grudnowski reaffirmed certain customer confidentiality
and non-disclosure agreements to which he was a party.
Mr. Grudnowski and the Company also entered into a
Management Agreement, the provisions of which are described
below. The Management Agreement provides that, if severance or
benefits payments are made under it, those payments are in lieu
of similar benefits under any other agreement. Therefore,
effectively, if any severance and benefits payments were made to
Mr. Grudnowski under the 2004 Grudnowski Employment
Agreement, the similar provisions of the Management Agreement
would not apply, although the remainder of the Management
Agreement would continue in effect, to the extent applicable.
|
|
|
Payments on
Termination. If
Mr. Grudnowskis employment is terminated while the
2004 Grudnowski Employment Agreement is in effect (a) by
the Company other than for cause, or (b) by
Mr. Grudnowski for good reason, or
(c) because the agreement is otherwise not renewed because
of Mr. Grudnowskis retirement or because either party
has given the other a termination notice, then the Company will
pay Mr. Grudnowski: (a) two times his then-current
base salary, plus (b) two times the cash incentive award
earned by him in the Companys last fiscal year, plus
(c) any earned but unpaid compensation. In the event of
Mr. Grudnowskis resignation, termination for cause,
death or disability, Mr. Grudnowski or his estate will
receive earned but unpaid compensation.
|
15
Executive Officer Employment
Agreements Mark P. Pautsch
We entered into an employment agreement dated
August 8, 2000, with Mark P. Pautsch (the Pautsch
Employment Agreement). Mr. Pautsch has served as the
Companys Vice President and Chief Information Officer
since that date. The Pautsch Employment Agreement provides that
Mr. Pautschs starting salary will be $250,000 and
that Mr. Pautsch will receive annual increases for the next
four years in an amount equal to at least eight percent of his
starting salary. Mr. Pautsch is eligible under the Pautsch
Employment Agreement to receive a target incentive award of 65%
of his base salary, with an actual award of between zero and
twice the target amount. Such incentive award is dependent, in
part, on Company performance and is administered under the
Companys Management Incentive Plan. Pursuant to the
Pautsch Employment Agreement, the Company granted
Mr. Pautsch options vesting over four years to
purchase 258,750 shares of Common Stock, with an
exercise price equal to the fair market value on August 8,
2000. The options to purchase Common Stock vest fully upon a
change in control of the Company, coupled with an adverse change
in employment, or upon termination of employment owing to
Mr. Pautschs death or disability. If the Company
terminates Mr. Pautschs employment without cause,
options to purchase Common Stock vesting within twelve months
following the date of his termination shall vest immediately,
and, if Mr. Pautsch wishes to exercise them, he must do so
within 90 days following his termination. The Pautsch
Employment Agreement further provides that if the Company
terminates Mr. Pautschs employment without cause,
then the Company will pay Mr. Pautsch, among other things,
twice Mr. Pautschs base salary at the time of
termination and an amount equal to the incentive award
Mr. Pautsch would have been eligible to receive in the next
two years, had he not been terminated. The amount calculated
based upon his incentive award eligibility is calculated on the
assumption that targets for which Mr. Pautsch is
responsible would have been achieved. Mr. Pautsch also
received a $40,000 signing bonus, which was paid on
January 1, 2001.
Executive Officer Change-in-Control
Arrangements
Each of Messrs. Grudnowski, Becker, Nowacki,
Rosenberger, and Sjoblad is, or was during the period of their
fiscal 2004 employment by us, a party to a Management Agreement
with the Company. Subject to certain provisions in these
agreements, each officer who is a party to a Management
Agreement is eligible for the following benefits, among others,
if such officers employment is terminated or the
officers responsibilities or compensation are materially
diminished within one year following the occurrence of specified
events generally involving a change in control of the Company:
(a) a payment equal to such officers annual base
compensation then in effect, plus an amount equal to such
officers bonus or cash incentive payment for the fiscal
year preceding the change in control; (b) the immediate
vesting of all stock options and satisfaction of the
restrictions on any restricted stock held; and (c) the
right to continue to participate in any health, disability and
life insurance plan or other program then in effect.
Change-in-control events potentially triggering benefits under
the Management Agreements would occur if any person acquires 30%
or more of our outstanding Common Stock, and the current
directors and those elected directors under normal circumstances
cease to be a majority of the Board, or if a merger or other
business combination occurs and our stockholders receive less
than 70% of the resulting equity. Mr. Grudnowskis
eligibility to receive salary and benefits payments under his
Management Agreement may be affected by his receipt of similar
payments under the 2004 Grudnowski Employment Agreement, as
described above. The Pautsch Employment Agreement, which is also
described above, contains change-in-control provisions
applicable to Mr. Pautsch.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
This Audit Committee is composed of four
directors, each of whom has been determined by the Board to be
an independent director under the Companys
guidelines and the New York Stock Exchange listing requirements.
The members of the Audit Committee are A. George Battle, Andrew
Cecere, Guy R. Henshaw and David S. P. Hopkins. The Board has
determined that Mr. Battle is an audit committee
financial expert within the meaning of Item 401(h) of
Regulation S-K under the Exchange Act. The Audit Committee
selects and retains the Companys independent accountants,
and assists the Board in its oversight of the integrity of the
Companys financial statements, including the performance
of our independent accountants in their audit of our annual
financial statements. The Audit Committee meets with management
and the independent
16
accountants as may be required. The independent
accountants have full and free access to the Audit Committee
without the presence of management. The Board of Directors has
adopted a written charter for the Audit Committee that addresses
the responsibilities of the Audit Committee. This report relates
to the activities undertaken by the Audit Committee in
fulfilling these responsibilities.
On July 30, 2002, the Sarbanes-Oxley Act of
2002 (the Act) was signed into law. Various
requirements of the Act pertaining to the work of the Audit
Committee became effective during fiscal 2003. The Company is
required to implement the requirements of Section 404 of
the Act regarding management assessment of internal controls in
fiscal 2005. The Audit Committee has met with representatives of
management, legal counsel and our independent accountants to
further its understanding of the Acts provisions. It also
reviewed processes that already are in place as well as those
processes that will be required to comply with the requirements
of the Act as they become effective.
The Audit Committee members are not professional
accountants or auditors, and their functions are not intended to
duplicate or to certify the activities of management or the
independent accountants. In performing its functions, the Audit
Committee acts only in an oversight capacity and necessarily
relies on the work and assurances of the Companys
management, which has the primary responsibility for financial
statements and reports, and of the independent accountants, who,
in their report, express an opinion on the conformity of the
Companys annual financial statements to accounting
principles generally accepted in the United States of America.
In fulfilling its oversight responsibilities, the Audit
Committee reviewed with management the audited financial
statements included in the Annual Report on Form 10-K for
the fiscal year ended September 30, 2004. This review
included a discussion of the quality and the effectiveness of
our financial reporting and controls, including the clarity of
disclosures in the financial statements.
In this context, the Audit Committee has met and
held discussions with management and KPMG LLP
(KPMG), the Companys independent accountants
in fiscal 2004. Management represented to the Audit Committee
that the Companys consolidated financial statements were
prepared in accordance with accounting principles generally
accepted in the United States of America, and the Audit
Committee has reviewed and discussed the consolidated financial
statements with management and the independent accountants. The
Audit Committee discussed with KPMG matters required to be
discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
KPMG 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 the
firms independence.
On November 14, 2004, the Audit Committee
approved the dismissal of KPMG and appointed Deloitte &
Touche LLP as the Companys independent accountants for
fiscal 2005. The change in auditing firms was not the result of
any disagreements between the Company and KPMG on any matter of
accounting principles or practices, consolidated financial
statement disclosures or auditing scope or procedure.
Based upon the Audit Committees discussion
with management and the independent accountants, and the Audit
Committees 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
Companys Annual Report on Form 10-K for the year
ended September 30, 2004, filed with the Securities and
Exchange Commission.
Submitted by the Audit Committee of the Board of
Directors.
A. George Battle
Andrew Cecere
Guy R. Henshaw (Chair)
David S. P. Hopkins
17
COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed entirely
of non-employee directors, each of whom has been determined by
the Board to be an independent director under the
Companys guidelines and the New York Stock Exchange
listing requirements. The Compensation Committee determines all
aspects of the compensation of our executive officers and
considers and makes recommendations to the Board concerning
action with respect to broadly based compensation and benefits
plans. The Compensation Committee also administers the
Companys 1992 Long-term Incentive Plan (LTIP),
its 2003 Employment Inducement Award Plan (EIAP),
its 2002 Stock Bonus Plan (SBP), and several
stock-based compensation plans assumed by the Company pursuant
to acquisitions. The Compensation Committee operates under a
charter, which is available on the Companys web site.
Our executive compensation program is designed to
be market competitive while meeting the primary goals of
attracting and retaining well-qualified individuals. Significant
portions of executive compensation are tied to achieving targets
for revenue growth and operating margin, and aligning our
executives interests with those of our stockholders
through the use of stock-based compensation. The Compensation
Committee retains the services of a qualified executive
compensation consulting firm in connection with its work.
In fiscal 2004, our executive compensation
program consisted of three core components: annual base salary,
participation in our cash incentive bonus plan, and the
opportunity to receive equity awards under the Companys
stock-based compensation plans.
Executive officers were eligible to participate
in the same health and welfare benefits plans as our general
employee population. These include group health and life
insurance, participation in the 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.
Executive officers are also eligible to participate in a
Supplemental Retirement and Savings Plan.
Annual Base Salary
The Compensation Committee determines the annual
base salary of each of our executive officers, including the
Chief Executive Officer, subject to the provisions of any
employment agreements. Salaries are determined annually by
considering the officers duties and responsibilities, the
officers demonstrated ability to impact the Companys
operations and profitability, the officers experience and
past individual performance, operational and strategic Company
performance, competitive market practices and internal equity
factors.
Incentive Bonus Plans
Substantially all of the Companys employees
participate in incentive plans based on the Companys
performance against established incentive plan goals for revenue
growth and operating margin set by the Board of Directors at the
commencement of each fiscal year. For fiscal 2004, two such
plans were approved by the Board of Directors: the Broad-Based
Incentive Plan, for non-executive employees; and the Management
Incentive Plan, for vice presidents and certain other senior
leaders. Each of these plans provided for semi-annual payouts,
with a pool of funds available for distribution based upon the
Companys performance against pre-established goals, and
the payout range assigned to individual participants in each
plan determined at the beginning of the fiscal year based upon
the participants scope of responsibility. The midpoint of
a participants payout range represented his/her targeted
payout level, with this value increasing commensurate with level
of responsibility. The Compensation Committee sets the incentive
compensation payout range for each of the executive officers.
During fiscal 2004, the Management Incentive Plan involved two
performance factors: a quarterly evaluation of the
Companys actual performance in relation to revenue growth
and operating margin goals previously established by the Board
of Directors; and the Committees semi-annual assessment of
individual participant performance. Company performance against
established incentive plan goals determined the size of the
overall incentive pool available for payout each semi-annual
cycle, while individual participant performance determined the
point in each participants payout range used for incentive
calculation.
18
Total payments under these two plans during
fiscal 2004 were substantially below targeted levels because
Company performance, primarily in the revenue growth category,
fell below the target goals in the incentive plan. Because
Company performance was below targeted levels, no incentive
bonus plan awards were paid with respect to fiscal 2004 to any
executive officer, including the Chief Executive Officer,
consistent with the Compensation Committees philosophy of
maximizing the alignment between senior management compensation
and growth of stockholder value.
Stock-Based Compensation Plans
The Compensation Committee administers the LTIP,
the EIAP, the SBP, and certain other assumed plans described
below. The primary purpose of these plans is to align the
interests of the Companys workforce, including senior
management, with the interests of its stockholders. Individual
awards under all of these plans are granted based on assigned
level of responsibility and individual performance.
The LTIP is the principle vehicle by which
stock-based compensation is awarded to our employees and
executive officers. Awards under the LTIP are made to
prospective employees, to induce them to accept employment with
the Company, and to existing employees, to recognize individual
contributions and to foster retention. Grants under the LTIP,
including grants to senior executives, are designed to meet
these objectives. The options awarded under the LTIP to
Messrs. Grudnowski, Sjoblad, Nowacki, Rosenberger, Pautsch
and Becker in fiscal 2004 are reflected in this Proxy Statement,
in the table captioned Option Grants in Last Fiscal
Year.
The EIAP was adopted in November 2003 following a
detailed analysis of our anticipated acquisition-driven growth
and a determination that existing equity plans would provide an
insufficient number of options to effectively support this
growth. The EIAP was initially used to grant options to new
hires below the senior executive level, outside the acquisition
context. In May 2004, the Compensation Committee determined to
discontinue such use of this plan and to use it solely on
acquisition-related grant activity. Consistent with this
decision, option awards under the EIAP were made after May 2004
only in connection with our London Bridge and Braun Consulting
acquisitions. Under both the LTIP and the EIAP, the Compensation
Committee may award our executive officers options to purchase
our Common Stock or shares of restricted stock. The exercise
price for all options granted under these plans must be at least
equal to the fair market value of the shares on the date of
grant. Grants under both plans typically vest over an extended
period of time, consistent with the Committees intent to
foster retention.
The SBP was adopted to provide stock-driven
incentives to key employees to motivate and reward the
successful completion of the HNC acquisition and integration of
the HNC business. Under this plan, the Compensation Committee
may award stock to key employees, subject to terms and
conditions, including vesting requirements and price, specified
by the Compensation Committee at the time of the award and
memorialized in a written agreement between the Company and the
recipient. After the initial 2002 awards under the SBP, no
further shares were available for award under this plan, and new
shares would only be available to the extent that the initial
awards were forfeited before the restrictions lapsed. In 2003
and 2004, no awards of restricted stock were made under this
plan. Awards issued in 2002 to named executives under the SBP
are described elsewhere in this Proxy Statement, under the
heading Executive Compensation, in the table
captioned Compensation Table.
In certain cases where we accomplished
acquisitions by purchasing the stock of the acquired entity,
some of our senior executives who were employees of these
companies hold options originally granted under plans of the
predecessor entity.
Limits on Tax-Deductible
Compensation
Section 162(m) of the Internal Revenue Code
of 1986, as amended, places a limit of $1 million on the
amount of compensation that we may deduct in any year with
respect to our Chief Executive Officer and four highest paid
executives employed at the last day of the fiscal year. However,
performance-based compensation that has been approved by
stockholders is excluded from the $1 million limit. The
Company has not adopted any formal policy with respect to
Section 162(m), although the Compensation Committee
generally
19
structures compensation to be deductible and
considers the cost and value to the Company in making
compensation decisions that could result in non-deductibility.
The Compensation Committee has on occasion made decisions that
have resulted or may result in non-deductible compensation. The
Compensation Committee believes that these decisions were
appropriate and in the best interests of the Company.
CEO Compensation
The 1999 Grudnowski Employment Agreement was
negotiated in connection with our hiring of Mr. Grudnowski
as Chief Executive Officer. The 1999 Grudnowski Employment
Agreement terminated according to its terms as of
December 1, 2003. While in effect, it provided for an
annual base salary of $550,000 for fiscal 2003, and a bonus of
between $0 and $1,100,000, 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 January 2004, the Company and
Mr. Grudnowski completed negotiations concerning a new
employment agreement, the 2004 Grudnowski Employment Agreement,
which was signed on January 30, 2004. The underlying
philosophy of this agreement is consistent with the philosophy
generally applicable to all of the Companys executive
officers, as described above in this report. A more detailed
description of the terms of the 2004 Grudnowski Employment
Agreement is contained elsewhere in this Proxy Statement under
the heading Executive Officer Employment
Agreements Thomas G. Grudnowski.
Under the 2004 Grudnowski Employment Agreement,
Mr. Grudnowski received on January 30, 2004, options
under the LTIP to purchase 562,500 shares of the
Companys Common Stock. In October 2004, as part of
Mr. Grudnowskis annual performance review, additional
options to purchase 150,000 shares of Common Stock
were granted under the LTIP to Mr. Grudnowski based on the
formula set out in the 2004 Grudnowski Employment Agreement. All
Mr. Grudnowskis options under the 2004 Grudnowski
Employment Agreement vest in three equal installments on each of
the next three anniversaries of the grant, and expire if
unexercised by April 30, 2011.
The Compensation Committee took action in
November 2004 to determine Mr. Grudnowskis incentive
bonus for fiscal 2004 under the criteria set forth in the 2004
Grudnowski Employment Agreement. This determination was based on
a review of Company performance against the established,
Company-wide goals under the Management Incentive Plan
applicable to other executives. The Company only partially
achieved the targeted objectives. Although a partial payout had
been funded and could have been made under the initial terms of
the plan, consistent with the treatment of other executive
officers under the Management Incentive Plan, no cash incentive
bonus for fiscal 2004 was awarded to Mr. Grudnowski. Also
in November 2004, the Compensation Committee considered
Mr. Grudnowskis base salary and made no base salary
adjustment.
Tony C. Christianson
Alex W. Hart
Philip G. Heasley (Chair)
Margaret L. Taylor
Compensation Committee Interlocks and Insider
Participation
Tony C. Christianson, Alex W. Hart, Philip G.
Heasley and Margaret L. Taylor served as the members of our
Compensation Committee for the fiscal year ended
September 30, 2004. Messrs. Christianson, Hart and
Heasley and Ms. Taylor are non-employee directors. None of
our executive officers served as a director or as a member of a
compensation committee of any business entity employing any of
our directors during the fiscal year ended September 30,
2004.
20
PERFORMANCE GRAPH
The following graph shows the total stockholder
return of an investment of $100 in cash on September 30,
1999, in (a) the Companys Common Stock, (b) the
Research Data Group, Inc. Indices for the Standard &
Poors 500 Stocks (U.S. Companies), and (c) the
Standard & Poors 500 Application Software Index,
in each case with reinvestment of dividends. These indices
relate only to stock prices and do not purport to afford direct
comparison of the business or financial performance of the
companies. The Company does not believe there are any publicly
traded companies that compete with the Company across the full
spectrum of our product and service offerings.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL
RETURN
Among Fair Isaac Corporation,
the S&P 500 Index, and the S&P
Application Software Index
INDEXED RETURNS
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Years Ending September 30 |
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Company/Index |
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1999 |
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2000 |
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2001 |
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2002 |
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2003 |
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2004 |
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FAIR ISAAC
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100 |
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152.37 |
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253.24 |
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263.48 |
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475.81 |
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354.16 |
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S&P 500 INDEX
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100 |
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113.28 |
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83.13 |
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66.10 |
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82.22 |
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93.63 |
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S&P 500 APPLICATION SOFTWARE
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100 |
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148.44 |
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47.79 |
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34.67 |
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49.34 |
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51.10 |
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SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, and the
rules of the SEC thereunder, require our directors, executive
officers, and persons who own more than 10% of our Common Stock
to file reports of their ownership and changes in ownership of
our Common Stock with the SEC. Our employees generally prepare
these reports on the basis of information obtained from each
director and officer. Based on information available to us, we
believe 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, in November 2004 it was discovered
that Mr. Heasley had inadvertently failed to file a report
on SEC Form 4 with respect
21
to his sale of 4,500 shares (on a pre-split
basis) of stock in March 2003. Promptly upon learning of this
omission, on November 29, 2004, an amended Form 4 for
the appropriate period was filed.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
One of Mr. Grudnowskis children is
employed as an attorney in the Companys legal department
and was paid total compensation in excess of $60,000 in fiscal
2004. This compensation is consistent with the Companys
compensation policies and the Company believes that it is also
consistent with prevailing market rates for comparable positions.
SUBMISSION OF PROPOSALS OF
STOCKHOLDERS
Under the rules of the SEC, if a stockholder
wants us to include a proposal in our proxy statement and proxy
card for our 2006 Annual Meeting of Stockholders, the proposal
must be received at our Office of the Secretary, 901 Marquette
Avenue, Suite 3200, Minneapolis, Minnesota 55402-3232, no
later than 5:00 p.m. local time on October 3, 2005, to
be considered for inclusion in the proxy statement and proxy
card for that meeting. Stockholder communications to the Board,
including any such communications relating to director nominees,
may also be addressed to the Office of the Secretary at that
address. The Board believes that no more detailed process for
these communications is appropriate, due to the variety in form,
content and timing of these communications. The Secretary will
forward the substance of meaningful stockholder communications,
including those relating to director candidates, to the Board or
the appropriate committee upon receipt.
In order for business, other than a stockholder
proposal included in our proxy statement and proxy card, to be
properly brought before the 2006 Annual Meeting by a
stockholder, the stockholder must give timely written notice
thereof to the Office of the Secretary and must otherwise comply
with our By-laws. Our By-laws provide that, to be timely, a
stockholders notice must be received by our Corporate
Secretary at our principal executive offices not fewer than
60 days nor more than 90 days prior to the scheduled
date of the annual meeting. If the Company gives fewer than
70 days notice or prior public disclosure of the
scheduled meeting date, then, to be timely, the
stockholders notice must be received no later than the
earlier of (a) 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 (b) two
days prior to the scheduled meeting date.
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By Order of the Board of Directors
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ANDREA M. FIKE
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Vice President, General Counsel and
Secretary |
Dated: December 28, 2004
22
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PROXY |
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PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING FEBRUARY 1, 2005
The undersigned hereby appoints Andrea M. Fike, Nancy E. Fraser or Thomas G. Grudnowski or any
of them, as Proxies, each with the power to appoint his or her substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse, all the shares of Common Stock of Fair
Isaac Corporation that the undersigned is entitled to vote at the Annual Meeting of Stockholders to
be held on February 1, 2005, or any postponement or adjournment thereof.
THIS PROXY WHEN EXECUTED WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO SUCH
DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 (SUBJECT TO
DISCRETIONARY ALLOCATION OF VOTES BY THE PROXIES IN THE EVENT CUMULATIVE VOTING IS APPLICABLE, AS
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT) AND FOR ITEM 2.
(Continued to be signed on the other side)
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Address Change/Comments (Mark the corresponding box on the reverse side) |
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5 FOLD AND DETACH HERE 5
6 IF YOU PLAN TO ATTEND THE MEETING 6
Admission Ticket
FAIR ISAAC CORPORATION
2005 ANNUAL MEETING OF STOCKHOLDERS
ADMISSION TICKET
Please present this ticket for admittance of the
stockholder(s) named above. Admittance will be
based upon availability of seating.
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Please
Mark Here
for Address
Change or
Comments
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SEE REVERSE SIDE |
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FOR ALL
NOMINEES BELOW
(except as indicated)
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WITHHOLD FOR ALL
NOMINEES BELOW
(except as indicated) |
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Nominees: |
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01 A. George Battle, |
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02 Andrew Cecere, |
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03 Tony J. Christianson, |
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04 Thomas G. Grudnowski, |
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05 Alex W. Hart, |
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06 Phillip G. Heasley, |
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07 Guy R. Henshaw, |
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08 David S. P. Hopkins, |
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09 Margaret L. Taylor |
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2. |
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To ratify the appointment of Deloitte & Touche LLP as the Companys independent auditors for the current fiscal year. |
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FOR |
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AGAINST |
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ABSTAIN |
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3. |
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In their discretion upon such other business as may properly come before the meeting. |
(INSTRUCTION: To withold authority to vote for any individual nominee, write that nominees name in the space provided below.)
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I plan to attend the Meeting: |
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o |
(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.)
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Signature(s) |
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Dated |
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, |
2005 |
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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.
5 FOLD AND DETACH HERE 5
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 days a Week
Internet and Telephone voting is available through 11:59PM Eastern Time
the business day prior to annual meeting day.
Your internet or telephone authorizes the named proxies to vote your shares in the same manner as if you
marked, signed and returned your proxy card.
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Internet |
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OR |
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Telephone |
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OR |
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Mail |
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1-800-435-6710 |
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http://www.eproxy.com/fic |
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Use any touch-tone telephone to
vote your proxy. Have your proxy
card in hand when you call. |
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Mark,
sign and date your proxy card and return it in the enclosed postage-paid envelope. |
Use the internet to vote your proxy.
Have your proxy card in hand when
you access the web site. |
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You can view the Annual Report and Proxy Statement on the internet at www.fairisaac.com.
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If you vote your proxy by internet or telephone, you do NOT need to mail back your proxy card. |
6 IF YOU PLAN TO ATTEND THE MEETING 6
Each stockholder may be asked to present valid picture identification, such as drivers license or employee identification badge, in addition to this admission ticket.
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PLEASE ADMIT: |
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NON-TRANSFERABLE |
FAIR ISAAC CORPORATION
2005 ANNUAL MEETING
OF STOCKHOLDERS
ADMISSION TICKET
Please present this ticket for admittance of the
stockholder(s) named above. Admittance will be
based upon availability of seating.