EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into
effective January 30, 2004 (the "Effective Date") by and between Fair Isaac
Corporation (the "Company"), a Delaware Corporation having its principal office
at 200 Smith Ranch Road, San Rafael, California 94903, and Thomas G. Grudnowski,
a resident of Minnesota ("Executive").
A. The Company provides customer and operational data
management and modeling, information analysis, strategy design and software to a
variety of industries worldwide.
B. Executive is the Chief Executive Officer of the
Company and a member of the Company's Board of Directors (the "Board").
C. Executive is currently employed by the Company
pursuant to the terms and conditions of an Employment Agreement dated August 23,
1999, as amended by a First Amendment to Employment Agreement dated December 3,
1999 and a Second Amendment to Employment Agreement dated December 2001
(hereinafter the "Prior Employment Agreement"), which Prior Employment Agreement
expired December 1, 2003.
D. Pursuant to the Prior Employment Agreement, Executive
and the Company are parties to stock option agreements (the "Prior Stock Option
Agreements") that grant to Executive certain options to purchase shares of the
Company's common stock, including but not limited to an option to purchase
420,000 shares of the Company's common stock (the "Initial Option") under
conditions specified in the Prior Employment Agreement and in a Notice of Grant
of Stock Options and Option Agreement dated effective August 23, 1999 (the
"Initial Option Agreement").
E. The Company and Executive desire to consolidate the
terms and conditions of the Initial Option, as set forth in the Initial Option
Agreement and the Prior Employment Agreement, in a single Restated Nonstatutory
Stock Option Agreement, which is attached to this Agreement as Exhibit A.
F. The Company desires to continue to employ Executive
and Executive desires to continue his employment, and both desire to extend the
anticipated term of Executive's employment with the Company, on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the respective agreements of the Company and Executive set forth below, the
Company and Executive, intending to be legally bound, agree as follows:
1. Employment. The Company shall continue to employ
Executive as its Chief Executive Officer, and Executive shall accept such
employment and perform services for the Company, upon the terms and conditions
set forth in this Agreement.
2. Term. The Company agrees to employ Executive and
Executive agrees to be employed by the Company on a full-time basis for the
period commencing on the Effective Date and ending on January 30, 2009, provided
that such period shall be automatically extended for one year and from
year-to-year thereafter until notice of termination is given by the Company or
Executive to the other party at least 60 days prior to January 30, 2009 or the
one-year extension period then in effect, as the case may be, unless Executive's
employment is sooner terminated pursuant to Section 7 hereof.
3. Position and Duties.
(a) Employment as Chief Executive Officer. During
Executive's employment with the Company, Executive shall be an executive officer
of the Company and Executive's title shall be Chief Executive Officer. Executive
shall report to the Board and shall perform such duties and responsibilities as
the Board shall assign to him from time to time consistent with his position.
(b) Board of Directors. Executive shall continue as a
director of the Company and shall diligently perform the duties arising from
such position. After expiration of Executive's current term as director, the
Board shall thereafter, so long as Executive is the Chief Executive Officer of
the Company, nominate Executive for re-election to a position on the Board.
(c) Performance of Duties and Responsibilities. Executive
shall serve the Company faithfully and to the best of his ability and shall
devote his full working time, attention and efforts to the business of the
Company during his employment with the Company. Executive hereby represents and
confirms that he is under no contractual or legal commitments that would prevent
him from fulfilling his duties and responsibilities as set forth in this
Agreement. During his employment with the Company, Executive may participate in
charitable activities and personal investment activities to a reasonable extent,
and he may serve as a director of business and civic organizations as approved
by the Board, so long as such activities and directorships do not interfere with
the performance of his duties and responsibilities hereunder.
4. Compensation.
(a) Base Salary. While Executive is employed by the
Company hereunder, the Company shall pay to Executive an annualized Base Salary
of $625,000, less all legally required and authorized deductions and
withholdings, which Base Salary shall be paid in accordance with the Company's
normal payroll policies and procedures. During each year of Executive's
employment hereunder, the Company shall conduct an annual performance
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review of Executive and thereafter establish Executive's Base Salary in an
amount not less than the Base Salary in effect for the prior year. Executive's
Base Salary shall not be reduced unless such reduction is made as part of a
general reduction in the base salaries for all executive officers of the
Company.
(b) Incentive Awards. For each full fiscal year that
Executive is employed by the Company hereunder, Executive shall be eligible for
an annual bonus ("Incentive Award") with a target amount equal to one times
Executive's Base Salary if Executive's achievements are "at plan," as determined
by the Board. The actual amount of such Incentive Award for any fiscal year may
range from $0 to two times Executive's Base Salary, based on the achievement of
certain strategic, business, and financial objectives determined by the Board in
consultation with Executive. Such Incentive Awards shall be due and payable to
Executive in full as soon as administratively practicable following the Board's
assessment of Company and Executive performance but in no case later than 60
calendar days after the end of each fiscal year. Executive's eligibility for an
Incentive Award hereunder shall be in lieu of Executive's participation in the
Company's Management Incentive Plan or any similar or successor bonus plan of
the Company. The parties acknowledge that Executive is eligible for an incentive
award for the fiscal year ended September 30, 2003, in accordance with the terms
of the Prior Employment Agreement and any applicable incentive plan.
(c) Stock Options.
(i) One-Time Stock Option Grant. Within five
business days after execution of this Agreement, the Company shall grant
Executive a nonstatutory option to purchase 375,000 shares of the common stock
of the Company, vesting over three years, 33% on each anniversary date following
the date of grant, subject to the terms of the Company's 1992 Long-Term
Incentive Plan (the "Plan") and a stock option agreement to be entered into by
the Company and Executive. The exercise price of the option shall be the Fair
Market Value (as defined in the Plan) of the shares as of the date of the grant.
(ii) Annual Option Grants. During his employment
with the Company hereunder, Executive shall be eligible for additional option
grants after completion of each of the fiscal years ending in 2004, 2005, 2006,
and 2007. Each grant will be based on the Company's performance relative to the
average annual Total Shareholder Return 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 ("Compounded TSR"), and will be subject to the terms and
conditions of the Plan as then in effect and an option agreement substantially
in the form attached as Exhibit B. For purposes of this Agreement, "Total
Shareholder Return" or "TSR" shall be determined by the Company for each fiscal
year as follows:
((Average Market Price for 30 calendar days ending on the last day of the
fiscal year period + Dividends Per Share + Special Dividend-Quarter 1 +
Special Dividend-Quarter 2 + Special Dividend-Quarter 3 + Special
Dividend-Quarter 4) / Average Market Price for 30 calendar days ending on
the last day of the previous fiscal year) - 1.
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"Compounded TSR" for any three-year period shall be determined by the Company as
follows:
(((1 + Year one TSR) * (1 + Year two TSR) * (1 + Year three TSR)) to the
power of 1/3) - 1
The annual option grants to be made pursuant to this Section 4(c)(ii) shall be
for the following amounts (in each case, appropriately adjusted to reflect any
stock splits, stock dividends, or the like): If the Company's Compounded TSR is
at least equal to the 25th percentile of Compounded TSR for all S&P 900 Index
companies, but less than the median, the option grant to Executive for such
fiscal year shall be for 100,000 shares. If the Company's Compounded TSR is at
least equal to the median but less than the 75th percentile, the option grant to
Executive for such fiscal year shall be for 125,000 shares. If the Company's
Compounded TSR is equal to or greater than the 75th percentile, the option grant
to Executive for such fiscal year shall be for 200,000 shares. If the Company's
Compounded TSR is below the 25th percentile, no option grant will be made to
Executive for such fiscal year.
The calculations and comparisons required by this Section 4(c)(ii) shall be
determined by an executive compensation consultant retained by the Company. The
Board shall grant any options earned hereunder as soon as practicable after
completion of the fiscal year, but no later than five business days after
receipt of the calculations and comparisons from the executive compensation
consultant. The options provided for in this Section 4(c)(ii) shall be the
minimum granted to Executive during his employment hereunder and nothing in this
Agreement shall prohibit the Board from granting to Executive options for
additional shares in its sole discretion. Notwithstanding the foregoing, the
Company shall have no obligation to make grants hereunder if the Company in good
faith believes that such grants are not permitted by applicable laws or stock
exchange rules, as determined in the reasonable discretion of the Company.
(d) Employee Benefits. While Executive is employed by the
Company hereunder and except as specifically provided in this Agreement,
Executive shall be entitled to participate in all employee benefit plans and
programs of the Company, including without limitation health and disability
insurance coverage, to the extent that Executive meets the eligibility
requirements for each individual plan or program. Executive acknowledges that
his participation in any such plan or program shall be subject to the
provisions, rules and regulations applicable thereto, and that such plans and
programs may be modified by the Company from time to time.
(e) Expenses. While Executive is employed by the Company
hereunder, the Company shall reimburse Executive for all reasonable and
necessary out-of-pocket business, travel and entertainment expenses incurred by
him in the performance of his duties
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and responsibilities hereunder, subject to the Company's normal policies and
procedures for expense verification and documentation.
(f) Term Life Insurance. While Executive is employed by
the Company hereunder, the Company shall purchase group term life insurance for
Executive with coverage of $500,000.
(g) Vacation. While Executive is employed by the Company
hereunder, Executive shall receive four weeks paid vacation time off each year.
Vacation time shall be taken at such times so as not to unduly disrupt the
operations of the Company.
5. Confidentiality Agreements. Executive acknowledges
entering into the Company's Customer Information Confidentiality Agreement and
its Non-Disclosure Agreement (collectively "Confidentiality Agreements") and
hereby reaffirms his commitments and obligations under the Confidentiality
Agreements. Nothing in this Agreement is intended to modify, amend, cancel, or
supersede the Confidentiality Agreements in any manner.
6. Management Agreement. At the same time as Executive
and the Company enter into this Agreement, the parties shall also enter into the
Management Agreement attached hereto as Exhibit C (the "Management Agreement").
7. Termination of Employment.
(a) The Executive's employment with the Company is at
will and shall terminate immediately upon:
(i) Executive's receipt of written notice from
the Company of the termination of his
employment, other than notice that the
Company elects not to extend the term of
this Agreement;
(ii) Executive's abandonment of his employment or
his resignation, other than notice to the
Company that he elects not to extend the
term of this Agreement;
(iii) Executive's Disability (as defined below);
(iv) Executive's death; or
(v) the expiration of the term of Executive's
employment with the Company, after notice as
specified in Section 2 hereof.
(b) The date upon which Executive's termination of
employment with the Company occurs shall be the "Termination Date."
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8. Payments upon Termination of Employment.
(a) If Executive's employment with the Company is
terminated: (A) by the Company prior to the expiration of the term or any
extension thereof for any reason other than for Cause (as defined below), (B) by
Executive prior to expiration of the term or any extension thereof for Good
Reason (as defined below), or (C) upon expiration of the term or extended term
of Executive's employment with the Company upon Executive's retirement or other
notice by either party not to renew the term or extended term, as specified in
Section 2 hereof; then, subject to Section 8(g) below, the Company shall pay to
Executive:
(i) a lump sum equal to two (2) times
Executive's then-current Base Salary;
(ii) a lump sum equal to two (2) times the amount
of the Incentive Award earned by Executive
for the last full fiscal year of Executive's
employment with the Company; and
(iii) any earned but unpaid Base Salary, incentive
compensation, benefits, and vacation or
other paid time off through the Termination
Date, paid in accordance with the Company's
normal payroll practices and procedures.
Any amount payable to Executive hereunder shall be subject to regular payroll
deductions and withholdings. All payments required under Sections 8(a)(i) and
8(a)(ii) shall be paid to Executive within 60 days after expiration of all
consideration and rescission periods applicable to the release described in
Section 8(g).
(b) If Executive's employment with the Company is
terminated by reason of:
(i) Executive's abandonment of his employment or
Executive's resignation (other than for Good
Reason or upon expiration of the term of
employment or any extension thereof after
notice pursuant to Section 2 hereof);
(ii) termination of Executive's employment by the
Company for Cause (as defined below); or
(iii) Executive's Disability or death,
the Company shall pay to Executive or his beneficiary or his estate, as the case
may be, any earned but unpaid Base Salary, incentive compensation, benefits, and
vacation or other paid
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time off through the Termination Date, paid in accordance with the Company's
normal payroll practices and procedures.
(c) "Cause" hereunder shall mean:
(i) an act or acts of personal dishonesty taken
by Executive and intended to result in
substantial personal enrichment of Executive
at the expense of the Company;
(ii) material breach by Executive of any of his
obligations under this Agreement or the
Confidentiality Agreements, or Executive's
repeated failure or refusal to perform or
observe Executive's material duties,
responsibilities and obligations as an
employee or officer of the Company for
reasons other than Disability, if such
breach, failure, or refusal continues ten
days following written notice thereof by the
Company to Executive identifying the same
and specifying that Executive's employment
may be terminated if the same continues;
(iii) the existence of any court order prohibiting
Executive's continued employment with the
Company;
(iv) if Executive has signed or entered into a
written or oral non-competition agreement,
confidentiality agreement, proprietary
information agreement, trade secret
agreement or any other agreement which would
prevent Executive from working for the
Company or from performing Executive's
duties at the Company; or
(v) the willful engaging by Executive in illegal
conduct that is materially and demonstrably
injurious to the Company.
For the purposes of this Section 8(c), no act or failure to act on Executive's
part shall be considered "dishonest," "willful" or "deliberate" unless done or
omitted to be done by Executive in bad faith and without reasonable belief that
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board of Directors of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.
(d) "Disability" hereunder shall mean the inability of
Executive to perform on a full-time basis the duties and responsibilities of his
employment with the Company by reason of his illness or other physical or mental
impairment or condition, if such inability continues for an uninterrupted period
of 180 days or more during any 360-day period. A
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period of inability shall be "uninterrupted" unless and until Executive returns
to full-time work for a continuous period of at least 30 days.
(e) "Good Reason" shall mean a material adverse change in
Executive's title or reporting relationship, without Executive's consent,
excluding any inadvertent change that is remedied by the Company promptly after
receipt of a written notice thereof from Executive.
(f) In the event of termination of Executive's
employment, the sole obligation of the Company shall be its obligation to make
the payments called for by Section 8(a) or Section 8(b) hereof, as the case may
be, and the Company shall have no other obligation to Executive or to his
beneficiary or his estate, except as otherwise provided by law, under the terms
of any other applicable agreement between Executive and the Company or under the
terms of any employee benefit plans or programs then maintained by the Company
in which Executive participates.
(g) Notwithstanding the foregoing provisions of this
Section 8, the Company shall not be obligated to make any payments to Executive
under Section 8(a)(i) or 8(a)(ii) hereof unless and until:
(i) Executive shall have signed and not
rescinded a release of claims in favor of
the Company in a reasonable form to be
prescribed by the Board (other than claims
Executive may have to receive benefits under
this Agreement, under other then-applicable
agreements between Executive and the Company
or under any employee benefit plans of the
Company in which Executive is then a
participant, or for indemnification under
applicable law, the charter documents of the
Company, any related insurance policy
maintained by the Company, or any written
agreement between Executive and the Company
related to indemnification), all applicable
consideration periods and rescission periods
provided by law shall have expired and
Executive is in strict compliance with the
terms of this Agreement and the
Confidentiality Agreements as of the dates
of the payments;
(ii) Executive shall have signed an agreement, in
a reasonable form to be prescribed by the
Board, prohibiting Executive for a period of
one (1) year following the Termination Date
from soliciting, recruiting or inducing, or
attempting to solicit, recruit or induce,
any employee of the Company to terminate
such employee's employment; and
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(iii) in the case of payments under Section 8(a)
by reason of expiration of the term or
extended term of Executive's employment with
the Company upon Executive's retirement or
other notice by either party not to renew
the term or extended term, as specified in
Section 2 hereof, Executive shall have
signed an agreement, in a reasonable form to
be prescribed by the Board, prohibiting
Executive for a period of three (3) years
following the Termination Date from, (A) in
North America and any other location where
the Company is doing business, directly or
indirectly engaging in any activity or
business that competes with the Company and
(B) directly or indirectly soliciting,
recruiting or inducing, or attempting to
solicit, recruit or induce, any employee of
the Company to terminate such employee's
employment.
(h) Notwithstanding the foregoing provisions of this
Section 8, if Executive is eligible for payments or other benefits pursuant to
the terms and conditions of the Management Agreement, Executive shall not be
entitled to receive any compensation or benefits under Section 8(a) above.
9. Return of Records and Property. Upon termination of
his employment with the Company, Executive shall promptly deliver to the Company
any and all Company records and any and all Company property in his possession
or under his control, including without limitation manuals, books, blank forms,
documents, letters, memoranda, notes, notebooks, reports, printouts, computer
disks, computer tapes, source codes, data, tables or calculations and all copies
thereof, documents that in whole or in part contain any trade secrets or
confidential, proprietary or other secret information of the Company and all
copies thereof, and keys, access cards, access codes, passwords, credit cards,
personal computers, telephones and other electronic equipment belonging to the
Company.
10. Disputes. In the event of any dispute, controversy,
or claim for damages arising under or in connection with this Agreement,
including, but not limited to, claims for wages or compensation due; claims for
breach of any contract or covenant (expressed or implied); tort claims; claims
for discrimination; claims for benefits (except where an employee benefit or
profit sharing plan specifies that its claims procedures shall culminate in an
arbitration procedure) and claims for violation of any Federal, State or other
governmental law, statute, regulation, or ordinance, except claims for workers'
compensation or unemployment compensation benefits, Executive and the Company
mutually agree to in good faith consider the use of forms of alternative dispute
resolution, including, but not limited to, arbitration and/or mediation.
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11. Miscellaneous.
(a) Governing Law. All matters relating to the
interpretation, construction, application, validity and enforcement of this
Agreement shall be governed by the laws of the State of Minnesota without giving
effect to any choice or conflict of law provision or rule, whether of the State
of Minnesota or any other jurisdiction, that would cause the application of laws
of any jurisdiction other than the State of Minnesota.
(b) Jurisdiction. Executive and the Company consent to
jurisdiction of the courts of the State of Minnesota and/or the federal district
courts, District of Minnesota, for the purpose of resolving all issues of law,
equity, or fact arising out of or in connection with this Agreement. Unless
otherwise agreed in accordance with Section 10 of this Agreement, any action
involving claims of a breach of this Agreement shall be brought in such courts.
Each party consents to personal jurisdiction over such party in the state and/or
federal courts of Minnesota and hereby waives any defense of lack of personal
jurisdiction.
(c) Entire Agreement. Except for any stock option
agreements between the parties, this Agreement contains the entire agreement of
the parties relating to the subject matter of this Agreement and supersedes all
prior agreements and understandings with respect to such subject matter,
including but not limited to the Prior Employment Agreement and the Initial
Option Agreement. The parties hereto have made no agreements, representations or
warranties relating to the subject matter of this Agreement that are not set
forth herein. This Agreement does not supersede, modify, or cancel the Prior
Stock Option Agreements (other than the Initial Option Agreement), the Restated
Nonstatutory Stock Option Agreement, the Management Agreement, the
Confidentiality Agreements, or any indemnification agreement between Executive
and the Company.
(d) Amendments. No amendment or modification of this
Agreement shall be deemed effective unless made in writing and signed by the
parties hereto.
(e) No Waiver. No term or condition of this Agreement
shall be deemed to have been waived, except by a statement in writing signed by
the party against whom enforcement of the waiver is sought. Any written waiver
shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
(f) Assignment. This Agreement shall not be assignable,
in whole or in part, by either party without the written consent of the other
party, except that the Company may, without the consent of Executive, assign its
rights and obligations under this Agreement to any corporation or other business
entity (i) with which the Company may merge or consolidate, or (ii) to which the
Company may sell or transfer all or substantially all of its assets or capital
stock; provided, however, that no such assignment shall relieve the Company of
its obligations hereunder in the event that the assignee shall fail to perform
the same.
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(g) Counterparts. This Agreement may be executed in any
number of counterparts, and such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
(h) Captions and Headings. The captions and paragraph
headings used in this Agreement are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement or any of the
provisions hereof.
IN WITNESS WHEREOF, Executive and the Company have executed
this Agreement as of the date set forth in the first paragraph.
/s/ THOMAS G. GRUDNOWSKI
---------------------------------
Thomas G. Grudnowski
Fair Isaac Corporation
By /s/ PHILIP G. HEASLEY
------------------------------
Its /s/ CHAIRMAN OF THE
COMPENSATION COMMITTEE
----------------------------
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RESTATED
NONSTATUTORY STOCK OPTION AGREEMENT
Fair Isaac Corporation
Id: 94:1499887
200 Smith Ranch Road
San Rafael, CA 94903
NOTICE OF GRANT OF STOCK OPTION
Thomas G. Grudnowski OPTION NUMBER: 001798
PLAN: CEO
ID:
This Restated Nonstatutory Stock Option Agreement consolidates and restates the
terms and conditions of the option granted to you by Fair Isaac Corporation (the
"Company") on August 24, 1999, and which terms and conditions have previously
been contained in a Notice of Grant of Stock Option and Option Agreement and an
Employment Agreement between you and the Company dated effective August 23,
1999. Because the parties are entering into a new employment agreement which
supercedes the prior employment agreement, it is desirable to enter into this
Restated Nonstatutory Stock Option Agreement containing all of the terms and
conditions of the Option.
You have been granted a Non-Qualified Stock Option to buy 420,000 shares of
common stock of the Company at a price of $32.5000 per share (the "Option").1
The Option will expire on August 24, 2009 (the "Expiration Date").
The total option price of the shares granted (pre-split) is $13,650,000.00.
Subject to the Terms and Conditions of Nonstatutory Stock Option Agreement
attached to this Notice of Grant, the Option shall become exercisable as to the
number of shares of common stock on the dates specified below.
SHARES (PRE-SPLIT) VESTING DATE
- ------------------ ----------------
105,000 December 2, 2000
8,750 December 31, 2000
8,750 January 31, 2001
8,750 February 28, 2001
8,750 March 31, 2001
8,750 April 30, 2001
8,750 May 31, 2001
- --------
(1) The 420,000 shares and $32.500 price per share reflect the option grant
as of its date of grant. Since the date of grant, the Company's common stock has
split and the share price for the Option has been adjusted accordingly. As of
October 1, 2003, this Option is for 945,000 shares of the Company's common stock
with an exercise price of $14.4445 per share.
EXHIBIT A
8,750 June 30, 2001
8,750 July 31, 2001
8,750 August 31, 2001
8,750 September, 30, 2001
8,750 October 31, 2001
8,750 November 30, 2001
8,750 December, 31, 2001
8,750 January 31, 2002
8,750 February 28, 2002
8,750 March 31, 2002
8,750 April 30, 2002
8,750 May 31, 2002
8,750 June 30, 2002
8,750 July 31, 2002
8,750 August 31, 2002
8,750 September, 30, 2002
8,750 October 31, 2002
8,750 November 30, 2002
8,750 December, 31, 2002
8,750 January 31, 2003
8,750 February 28, 2003
8,750 March 31, 2003
8,750 April 30, 2003
8,750 May 31, 2003
8,750 June 30, 2003
8,750 July 31, 2003
8,750 August 31, 2003
8,750 September 30, 2003
8,750 October 31, 2003
8,750 November 30, 2003
By your signature and the Company's signature below, you and the Company agree
that this Restated Notice of Grant of Stock Option and the Terms and Conditions
of Nonstatutory Stock Option Agreement, which is attached hereto, constitute the
Nonstatutory Stock Option Agreement governing this Option.
- ------------------------------------ ------------------------------
Andrea M. Fike, Vice President Date:
Fair Isaac Corporation
- ------------------------------------ ------------------------------
Thomas G. Grudnowski Date:
-2-
FAIR ISAAC CORPORATION
TERMS AND CONDITIONS OF NONSTATUTORY STOCK OPTION AGREEMENT
FOR THOMAS G. GRUDNOWSKI
These are the terms and conditions applicable to the
NONSTATUTORY STOCK OPTION granted by Fair Isaac Corporation, a Delaware
corporation ("Fair Isaac"), to you, the optionee listed on the Notice of Grant
of Stock Option attached hereto as the cover page (the "Notice"), effective as
of the date of grant. The Notice together with these Terms and Conditions of
Nonstatutory Stock Option Agreement constitute the Nonstatutory Stock Option
Agreement (the "Option Agreement").
NONSTATUTORY This Option is not intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue
Code.
VESTING Your Option vests and will be exercisable on the
Vesting Dates, as shown on the Notice. In addition,
your entire Option vests and will be exercisable in
full in the event that:
- your service as an employee or director of Fair
Isaac (or any subsidiary) terminates because of
your Retirement, Disability or death; or
- upon the occurrence of an Event while you are
still an employee, director, consultant or
advisor of Fair Isaac (or any subsidiary); or
- any written employment agreement (other than an
option agreement) between you and Fair Isaac
provides for acceleration of this Option upon a
change in control of Fair Isaac or upon any other
specified event or combination of events.
In the event Fair Isaac terminates your employment
without Cause (other than as a result of death or
Disability), any unvested options scheduled to vest
within 12 months from and after the date of such
termination without Cause shall vest and become
immediately exercisable.
No additional shares become exercisable after your
employment or service with Fair Isaac has terminated
for any reason.
EXERCISE PERIOD The right to purchase shares under this Option
Agreement terminates at 3:00 p.m. Pacific Time on the
earliest of
- the Expiration Date shown on the Notice; or
- the 90th day after the termination date of your
service as an employee, director, consultant or
advisor of Fair Isaac (or any subsidiary), except
if termination results from your Disability or
death or if termination occurs following an
Event; or
- the anniversary date of the termination of your
service as an employee, director, consultant or
advisor of Fair Isaac (or any subsidiary) because
of Disability; or
- the anniversary date of your death, if you die
while an employee, director, consultant or
advisor of Fair Isaac (or any subsidiary).
LEAVES OF For purposes of this Option, your service does not
ABSENCE terminate when you go on a military leave, a sick
leave or another bona fide leave of absence, if the
leave was approved by Fair Isaac in writing. Unless
you return to active work upon termination of your
approved leave, your service will be treated as
terminating on the later of 90 days after you went on
leave or the date that your right to return to active
work is guaranteed by law or by a contract. Fair Isaac
will determine which leaves count for this purpose.
RESTRICTIONS You may not exercise this Option if the issuance of
ON EXERCISE shares at that time would violate any law or
regulation, as determined by Fair Isaac. Moreover, you
cannot exercise this Option unless you have returned a
signed copy of the Option Agreement to Fair Isaac.
NOTICE OF When you wish to exercise this Option, you must notify
EXERCISE Fair Isaac by filing the proper Notice of Exercise
form and delivering it to the address provided on the
Notice of Exercise before your right to purchase
shares under this Option Agreement terminates. If you
send your Notice of Exercise by facsimile
transmission, it will be effective only if it is
promptly confirmed by filing a form with an original
signature.
The Notice of Exercise must specify how many shares
you wish to purchase and must specify how your shares
should be registered (in your name only or in your and
your spouse's names as community property or as joint
tenants with right of survivorship).
If someone else wants to exercise this Option after
your death, that person must prove to Fair Isaac's
satisfaction that he or she is entitled to do so.
FORM OF When you submit your Notice of Exercise, you must
PAYMENT include payment of the exercise price shown on the
Notice for the shares you are purchasing. Payment may
be made in one (or a combination of two or more) of
the following forms as approved by Fair Isaac in its
sole discretion:
- your personal check, a cashier's check or a money
order;
-2-
- irrevocable directions to a securities broker
approved by Fair Isaac to sell shares underlying
this Option and to deliver all or a portion of
the sale proceeds to Fair Isaac in payment of the
exercise price and the balance of the sale
proceeds to you, all pursuant to a special
"Notice of Exercise" form provided by Fair Isaac;
or
- certificates for shares of Fair Isaac common
stock that you have owned for at least 12 months,
along with any forms needed to effect a transfer
of those shares to Fair Isaac with the value of
the shares, determined as of the effective date
of the exercise of this Option, applied to the
exercise price.
WITHHOLDING You will not be allowed to exercise this Option unless
TAXES you make acceptable arrangements to pay any
withholding taxes that may be due as a result of the
exercise of this Option. These arrangements must be
satisfactory to Fair Isaac. You may direct Fair Isaac
to withhold shares with a market value equal to the
withholding taxes due from the shares to be issued as
a result of your exercise of this Option.
RESTRICTIONS By signing the Option Agreement, you agree not to sell
ON RESALE any shares at a time when applicable laws or Fair
Isaac policies prohibit a sale.
TRANSFER OF Prior to your death, only you or a permitted assignee
OPTION as defined herein may exercise this Option (unless
this Option or a portion thereof has been transferred
to your former spouse by a domestic relations order by
a court of competent jurisdiction). You may transfer
this Option or a portion of this Option by gift to
members of your immediate family, a partnership
consisting solely of you and/or members of your
immediate family, or to a trust established for the
benefit of you and/or members of your immediate family
(including a charitable remainder trust whose income
beneficiaries consist solely of such persons). For
purposes of the foregoing, "immediate family" means
your spouse, children or grandchildren, including
step-children or step-grandchildren. Any of these
persons is a "permitted assignee." However, such
transfer shall not be effective until you have
delivered to Fair Isaac notice of such transfer. You
cannot transfer, pledge, hypothecate, assign or
otherwise dispose of this Option, including using this
Option as security for a loan. Any attempts to do any
of these things contrary to the provisions of this
Option, and the levy of any attachment or similar
process upon this Option, shall be null and void and
this Option shall immediately become invalid. You may,
however, dispose of this Option in your will or by a
written beneficiary designation. Such a designation
must be filed with Fair Isaac on the proper form.
RETENTION Neither this Option nor the terms of this Option
RIGHTS Agreement give you the right to continue as an
employee or director of Fair Isaac (or any
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subsidiaries) in any capacity. Fair Isaac (and any
subsidiaries) reserve the right to terminate your
service at any time, with or without cause, subject to
the terms of any written employment agreement signed
by you and Fair Isaac.
STOCKHOLDER You, or your assignees, estate, beneficiaries or
RIGHTS heirs, have no rights as a stockholder of Fair Isaac
until a certificate for any portion of the shares
underlying this Option has been issued. No adjustments
are made for dividends or other rights if the
applicable record date occurs before your stock
certificate is issued.
ADJUSTMENTS In the event of a stock split, a stock dividend or a
similar change in Fair Isaac stock, the number of
shares covered by this Option and the exercise price
per share may be adjusted as Fair Isaac may determine.
In the event of a subdivision of the common stock of
Fair Isaac ("Common Stock") outstanding, a declaration
of a dividend payable in Common Stock, a declaration
of a dividend payable in a form other than Common
Stock in an amount that has a material effect on the
price of the Common Stock, a combination or
consolidation of the outstanding Common Stock (by
reclassification or otherwise) into a lesser number of
shares, a recapitalization, a spinoff or a similar
occurrence, Fair Isaac shall make appropriate
adjustments in one or more of (a) the number of shares
underlying this Option, or (b) the exercise price of
this Option.
APPLICABLE LAW This Agreement will be interpreted and enforced under
the laws of the State of Delaware (without regard to
its rules on choice of law).
OTHER This Option Agreement constitutes the entire
AGREEMENTS understanding between you and Fair Isaac regarding
this Option. Any other prior agreements, commitments
or negotiations concerning this Option are superseded.
This Agreement may be amended only in writing.
DEFINITIONS "RETIREMENT" means that you have terminated your
employment with Fair Isaac at or after (a) reaching
age 65, or (b) reaching age 55 with at least 10 years
of service with Fair Isaac.
"DISABILITY" means that you are unable to engage in
any substantial gainful activity by reason of a
medically determinable, physical or mental impairment
which can be expected to result in death or which has
lasted (or can be expected to last) for a continuous
period of not less than 12 months.
"CAUSE" shall mean: (i) an act or acts of personal
dishonesty taken by you and intended to result in
substantial personal enrichment of you at the expense
of Fair Isaac; (ii) your repeated failure or refusal
to
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perform or observe your duties, responsibilities and
obligations as an employee of Fair Isaac for reasons
other than disability or incapacity; (iii) the
existence of any court order or settlement agreement
prohibiting your continued employment with Fair Isaac;
(iv) if you have signed and/or entered into a written
or oral non-competition agreement, confidentiality
agreement, proprietary information agreement, trade
secret agreement or any other agreement which would
prevent you from working for Fair Isaac and/or from
performing your duties at Fair Isaac, or (v) the
willful engaging by you in illegal conduct that is
materially and demonstrably injurious to Fair Isaac.
No act or failure to act on your part shall be
considered "dishonest," "willful" or "deliberate"
unless done or omitted to be done by you in bad faith
and without reasonable belief that your action or
omission was in, or not opposed, to the best interests
of Fair Isaac. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted
by the Board of Directors of Fair Isaac or based upon
the advice of counsel for Fair Isaac shall be
conclusively presumed to be done, or omitted to be
done, by you in good faith and in the best interests
of Fair Isaac.
"EVENT" shall be deemed to occur upon the occurrence
of BOTH (A): (i) the sale, lease, conveyance or other
disposition of all or substantially all of Fair
Isaac's assets as an entirety or substantially as an
entirety to any person, entity or group of persons
acting in concert; (ii) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Act")) becoming
the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of
Fair Isaac representing 50% or more of the total
voting power represented by Fair Isaac's then
outstanding voting securities; or (iii) a merger or
consolidation of Fair Isaac with any other
corporation, other than a merger or consolidation
which would result in the voting securities of Fair
Isaac outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by
being converted into voting securities of the
surviving entity) at least 50% of the total voting
power represented by the voting securities of Fair
Isaac or such surviving entity outstanding immediately
after such merger or consolidation; AND (B): (i) a
material adverse change in your position with Fair
Isaac which materially reduces your responsibility,
without Cause and without your written consent; (ii) a
material reduction in your compensation without your
written consent; or (iii) a relocation of your place
of employment outside of the seven (7) San Francisco
Bay Area counties, without your written consent.
BY SIGNING THE NOTICE, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED
ABOVE.
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NOTICE OF GRANT OF STOCK OPTION
Fair Isaac Corporation
Id: 94:1499887
200 Smith Ranch Road
San Rafael, CA 94903
Optionee
Thomas G. Grudnowski OPTION NUMBER: _________________
PLAN: 1992 LTIP
ID: _________________
Effective ______, 20__ (the "Grant Date"), you have been granted a Non-Qualified
Stock Option to buy ______ shares of common stock of Fair Isaac Corporation
("Fair Isaac") at $______ per share (the "Option"). The Option will expire on
April 30, 2011 (the "Expiration Date"). This Option is granted pursuant to the
terms of an employment agreement between Optionee and Fair Isaac Corporation
dated effective January 30, 2004 (the "Employment Agreement") and the Fair Isaac
Corporation 1992 Long-Term Incentive Plan, as amended.
Subject to the Terms and Conditions of Nonstatutory Stock Option Agreement
attached to this Notice, the Option shall become exercisable as to one third of
the total number of shares subject to the Option on each of the first three
anniversary dates of the Grant Date (such anniversary dates referred to as the
"Vesting Dates").
By your signature and Fair Isaac's signature below, you and Fair Isaac agree
that this Notice of Grant of Stock Option and the Terms and Conditions of
Nonstatutory Stock Option Agreement, which is attached hereto constitute the
Nonstatutory Stock Option Agreement governing this Option.
_____________________________________ _______________________________
Andrea M. Fike, Vice President Date:
Fair Isaac Corporation
_____________________________________ _______________________________
Thomas G. Grudnowski Date:
EXHIBIT B
FAIR ISAAC CORPORATION
TERMS AND CONDITIONS OF NONSTATUTORY STOCK OPTION AGREEMENT
These are the terms and conditions applicable to the
NONSTATUTORY STOCK OPTION granted by Fair Isaac Corporation, a Delaware
corporation ("Fair Isaac"), to you, the optionee listed on the Notice of Grant
of Stock Option attached hereto as the cover page (the "Cover Page"), effective
as of the date of grant. The Cover Page together with these Terms and Conditions
of Nonstatutory Stock Option Agreement constitute the Nonstatutory Stock Option
Agreement (the "Option Agreement"). This Option is granted pursuant to the terms
of Fair Isaac's 1992 Long-Term Incentive Plan (the "Plan").
NONSTATUTORY This Option is not intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue
Code.
VESTING Your Option vests and will be exercisable on the
Vesting Dates, as described on the Cover Page. In
addition, your entire Option vests and will be
exercisable in full in the event that:
- your service as an employee or director of Fair
Isaac (or any subsidiary) terminates because of
your Disability or death,
- any written employment agreement (other than a
stock option agreement) between you and Fair
Isaac provides for acceleration of this Option
upon a change in control of Fair Isaac or upon
any other specified event or combination of
events,
- Fair Isaac terminates your employment prior to
January 30, 2009 for any reason other than Cause,
or
- you retire or resign your employment with Fair
Isaac prior to January 30, 2009 for Good Reason.
Additional shares will continue to vest and become
exercisable after your employment with Fair Isaac has
terminated, if and only if:
- your employment with Fair Isaac terminates as a
result of the expiration of the term of your
Employment Agreement, as described in Section 2
of your Employment Agreement,
- you retire or resign your employment with Fair
Isaac after January 30, 2009,
- your employment with Fair Isaac terminates by
mutual written agreement between you and Fair
Isaac for reasons other than for Cause, or
- Fair Isaac terminates your employment after
January 30, 2009 for any reason other than for
Cause.
Except as specifically provided above, additional
shares will not continue to vest and become
exercisable after your employment with Fair Isaac has
terminated.
-2-
EXERCISE PERIOD The right to purchase shares under the Option
Agreement terminates at 3:00 p.m. Pacific Time on the
date that is two years and 90 days after the
termination date of your service as an employee of
Fair Isaac, except as follows:
- If your employment with Fair Isaac is terminated
by Fair Isaac for Cause, then the right to
purchase shares under this Option Agreement shall
terminate on the date of termination of your
employment.
- If you retire or resign your employment with Fair
Isaac prior to January 30, 2009 for any reason
other than Good Reason, then the right to
purchase shares under this Option Agreement shall
terminate on the 90th day after the date of
termination of your employment with Fair Isaac.
In no event will the right to purchase shares continue
after the Expiration Date shown on the Cover Page.
LEAVES OF For purposes of this Option, your service does not
ABSENCE terminate when you go on a military leave, a sick
leave or another bona fide leave of absence, if the
leave was approved by Fair Isaac in writing. Unless
you return to active work upon termination of your
approved leave, your service will be treated as
terminating on the later of 90 days after you went on
leave or the date that your right to return to active
work is guaranteed by law or by a contract. Fair Isaac
will determine which leaves count for this purpose.
RESTRICTIONS You may not exercise this Option if the issuance of
ON EXERCISE shares at that time would violate any law or
regulation, as determined by Fair Isaac. Moreover, you
cannot exercise this Option unless you have returned a
signed copy of the Option Agreement to Fair Isaac.
NOTICE OF If you do not exercise this Option through an
EXERCISE automated electronic exercise system approved by Fair
Isaac, then you must notify Fair Isaac in writing of
your intent to exercise this Option. The notice must
specify how many shares you wish to purchase and must
specify how your shares should be registered (i.e., in
your name only, in your and your spouse's names as
community property, or as joint tenants with right of
survivorship). If someone else wants to exercise this
Option after your death, that person must prove to
Fair Isaac's satisfaction that he or she is entitled
to do so.
FORM OF When you submit your notice, you must include payment
PAYMENT of the exercise price shown on the Cover Page for the
shares you are purchasing. Provided payment does not
violate state and federal laws, including without
limitation, the Sarbanes-Oxley Act of 2002, payment
may be made in one (or a combination of two or more)
of the following forms, as approved by Fair Isaac in
its sole discretion:
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- Your personal check, a cashier's check or a money
order;
- Irrevocable directions to a securities broker
approved by Fair Isaac to sell shares underlying
this Option and to deliver all or a portion of
the sale proceeds to Fair Isaac in payment of the
exercise price and the balance of the sale
proceeds to you; or
- Certificates for shares of Fair Isaac common
stock that you have owned for at least 12 months,
along with any forms needed to effect a transfer
of those shares to Fair Isaac with the value of
the shares, determined as of the effective date
of the exercise of this Option, applied to the
exercise price.
WITHHOLDING You will not be allowed to exercise this Option unless
TAXES you make acceptable arrangements to pay any
withholding taxes that may be due as a result of the
exercise of this Option. These arrangements must be
satisfactory to Fair Isaac. You may direct Fair Isaac
to withhold shares with a market value equal to the
withholding taxes due from the shares to be issued as
a result of your exercise of this Option.
RESTRICTIONS By signing the Option Agreement, you agree not to sell
ON RESALE any shares at a time when applicable laws or Fair
TRANSFER OF Isaac policies prohibit a sale. Prior to your death,
OPTION only you or a permitted assignee as defined herein may
exercise this Option (unless this Option or a portion
thereof has been transferred to your former spouse by
a domestic relations order by a court of competent
jurisdiction). You may transfer this Option or a
portion of this Option by gift to members of your
immediate family, a partnership consisting solely of
you and/or members of your immediate family, a limited
liability company consisting solely of you and/or your
immediate family, or to a trust established for the
benefit of you and/or members of your immediate family
(including a charitable remainder trust whose income
beneficiaries consist solely of such persons). For
purposes of the foregoing, "immediate family" means
your spouse, children or grandchildren, including
step-children.
You may also transfer this Option or a portion of this
Option to any other person or entity to which a
transfer of compensatory securities is permitted under
the applicable rules for a Securities and Exchange
Commission Form S-8 registration statement.
Any of these persons and entities to whom a transfer
of this Option may be made is a "permitted assignee."
However, such transfer shall not be effective until
you have delivered to Fair Isaac notice of such
transfer. You cannot transfer, pledge, hypothecate,
assign or otherwise dispose of this Option, including
using this Option as security for a loan. Any attempts
to do any of these things contrary to the provisions
of this Option, and the levy of any attachment or
-4-
similar process upon this Option, shall be null and
void. You may, however, dispose of this Option in your
will or by a written beneficiary designation. Such a
designation must be filed with Fair Isaac on the
proper form.
RETENTION Neither your Option nor the terms of this Option
RIGHTS Agreement give you the right to continue as an
employee or director of Fair Isaac (or any
subsidiaries) in any capacity. Fair Isaac (and any
subsidiaries) reserve the right to terminate your
service at any time, with or without cause, subject to
the terms of any written employment agreement signed
by you and Fair Isaac.
STOCKHOLDER You, or your assignees, estate, beneficiaries or
RIGHTS heirs, have no rights as a stockholder of Fair Isaac
until a certificate for any portion of shares
underlying this Option has been issued. No adjustments
are made for dividends or other rights if the
applicable record date occurs before your stock
certificate is issued, except as described in the
Plan.
ADJUSTMENTS In the event of any adjustments to the capital stock
of Fair Isaac as described in Article 10 of the Plan,
the number of shares covered by this Option and the
exercise price per share may be adjusted as Fair Isaac
may determine pursuant to the Plan.
APPLICABLE LAW This Agreement will be interpreted and enforced under
the laws of the State of Delaware (without regard to
its rules on choice of law).
OTHER This Option Agreement, the Plan and any written
AGREEMENTS agreement between you and Fair Isaac (or any
subsidiaries) providing for acceleration of options
granted to you by Fair Isaac upon a change in control
of Fair Isaac constitute the entire understanding
between you and Fair Isaac regarding this Option. Any
other prior agreements, commitments or negotiations
concerning this Option are superseded. If there is any
inconsistency between the provisions of this Agreement
and the Plan, the provisions of the Plan shall govern.
This Agreement may be amended only in writing.
DEFINITIONS "Cause" shall have the meaning ascribed to it in the
Employment Agreement. "Disability" means that you are
unable to engage in any substantial gainful activity
by reason of a medically determinable, physical or
mental impairment which can be expected to result in
death or which has lasted (or can be expected to last)
for a continuous period of not less than 12 months.
"Good Reason" shall have the meaning ascribed to it in
the Employment Agreement.
BY SIGNING THE COVER PAGE, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
-5-
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is entered into
as of January 30, 2004, by and between Fair Isaac Corporation, a Delaware
corporation (the "Company"), and Thomas G. Grudnowski ("Executive").
WHEREAS, Executive is a key member of the management of the
Company and has heretofore devoted substantial skill and effort to the affairs
of the Company; and
WHEREAS, it is desirable and in the best interests of the
Company and its shareholders to continue to obtain the benefits of Executive's
services and attention to the affairs of the Company; and
WHEREAS, it is desirable and in the best interests of the
Company and its shareholders to provide inducement for Executive (A) to remain
in the service of the Company in the event of any proposed or anticipated change
in control of the Company and (B) to remain in the service of the Company in
order to facilitate an orderly transition in the event of a change in control of
the Company, without regard to the effect such change in control may have on
Executive's employment with the Company; and
WHEREAS, it is desirable and in the best interests of the
Company and its shareholders that Executive be in a position to make judgments
and advise the Company with respect to proposed changes in control of the
Company; and
WHEREAS, the Executive desires to be protected in the event of
certain changes in control of the Company; and
WHEREAS, for the reasons set forth above, the Company and
Executive desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, the Company and Executive
agree as follows:
1. EVENTS. No amounts or benefits shall be payable or provided
for pursuant to this Agreement unless an Event shall occur during the Term of
this Agreement.
(a) For purposes of this Agreement, an "Event" shall be
deemed to have occurred if any of the following occur:
(i) Any "person" (as defined in Sections 13(d)
and 14(d) of the Securities Exchange Act of
1934, as amended, or any successor statute
thereto (the "Exchange Act")) acquires or
becomes a "beneficial owner" (as defined in
Rule 13d-3 or any successor rule under the
Exchange Act), directly or indirectly, of
securities of the Company representing 30%
or more of the combined voting power
EXHIBIT C
of the Company's securities entitled to vote
generally in the election of directors
("Voting Securities") then outstanding or
30% or more of the shares of common stock of
the Company ("Common Stock") outstanding,
provided, however, that the following shall
not constitute an Event pursuant to this
Section 1(a)(i):
(A) any acquisition or beneficial
ownership by the Company or a
subsidiary of the Company;
(B) any acquisition or beneficial
ownership by any employee benefit
plan (or related trust) sponsored
or maintained by the Company or one
or more of its subsidiaries;
(C) any acquisition or beneficial
ownership by any corporation
(including without limitation an
acquisition in a transaction of the
nature described in Section
1(a)(ii)) with respect to which,
immediately following such
acquisition, more than 70%,
respectively, of (x) the combined
voting power of the Company's then
outstanding Voting Securities and
(y) the Common Stock is then
beneficially owned, directly or
indirectly, by all or substantially
all of the persons who beneficially
owned Voting Securities and Common
Stock, respectively, of the Company
immediately prior to such
acquisition in substantially the
same proportions as their ownership
of such Voting Securities and
Common Stock, as the case may be,
immediately prior to such
acquisition; or
(D) any acquisition of Voting
Securities or Common Stock directly
from the Company; and
Continuing Directors shall not constitute a
majority of the members of the Board of
Directors of the Company. For purposes of
this Section 1(a)(i), "Continuing Directors"
shall mean: (A) individuals who, on the date
hereof, are directors of the Company, (B)
individuals elected as directors of the
Company subsequent to the date hereof for
whose election proxies shall have been
solicited by the Board of Directors of the
Company or (C) any individual elected or
appointed by the Board of Directors of the
Company to fill vacancies on the Board of
Directors of the Company caused by death or
resignation (but not by removal) or to fill
newly-created directorships, provided that a
"Continuing Director" shall not include an
individual whose initial assumption of
office occurs as a result of an actual or
threatened election
-2-
contest with respect to the threatened
election or removal of directors (or other
actual or threatened solicitation of proxies
or consents) by or on behalf of any person
other than the Board of Directors of the
Company; or
(ii) Consummation of a reorganization, merger or
consolidation of the Company or a statutory
exchange of outstanding Voting Securities of
the Company (other than a merger or
consolidation with a subsidiary of the
Company), unless immediately following such
reorganization, merger, consolidation or
exchange, all or substantially all of the
persons who were the beneficial owners,
respectively, of Voting Securities and
Common Stock immediately prior to such
reorganization, merger, consolidation or
exchange beneficially own, directly or
indirectly, more than 70% of, respectively,
(x) the combined voting power of the then
outstanding voting securities entitled to
vote generally in the election of directors
of the corporation resulting from such
reorganization, merger, consolidation or
exchange and (y) the then outstanding shares
of common stock of the corporation resulting
from such reorganization, merger,
consolidation or exchange in substantially
the same proportions as their ownership,
immediately prior to such reorganization,
merger, consolidation or exchange, of the
Voting Securities and Common Stock, as the
case may be; or
(iii) (x) Approval by the shareholders of the
Company of a complete liquidation or
dissolution of the Company or (y) the sale
or other disposition of all or substantially
all of the assets of the Company (in one or
a series of transactions), other than to a
corporation with respect to which,
immediately following such sale or other
disposition, more than 70% of, respectively,
(1) the combined voting power of the then
outstanding voting securities of such
corporation entitled to vote generally in
the election of directors and (2) the then
outstanding shares of common stock of such
corporation is then beneficially owned,
directly or indirectly, by all or
substantially all of the persons who were
the beneficial owners, respectively, of the
Voting Securities and Common Stock
immediately prior to such sale or other
disposition in substantially the same
proportions as their ownership, immediately
prior to such sale or other disposition, of
the Voting Securities and Common Stock, as
the case may be; or
(iv) A majority of the members of the Board of
Directors of the Company shall have declared
that an Event has occurred or that an Event
will occur upon satisfaction of specified
conditions, in which
-3-
case the Event shall be deemed to occur upon
satisfaction of such specified conditions;
or
(v) The Company enters into a letter of intent,
an agreement in principle or a definitive
agreement relating to an Event described in
Section 1(a)(i), 1(a)(ii) or 1(a)(iii)
hereof that ultimately results in such an
Event, or a tender or exchange offer or
proxy contest is commenced which ultimately
results in an Event described in Section
1(a)(i) hereof; or
(vi) There shall be an involuntary termination of
employment of the Executive or Termination
for Good Reason (as defined in Section
4(c)), and the Executive reasonably
demonstrates that such event (x) was
requested by a party other than the Board of
Directors of the Company and such party had
previously taken other steps reasonably
calculated to result in an Event described
in Section 1(a)(i), 1(a)(ii), 1(a)(iii) or
1(a)(iv) hereof and which ultimately results
in an Event described in Section 1(a)(i),
1(a)(ii), 1(a)(iii) or 1(a)(iv) hereof, or
(y) otherwise arose in connection with or in
anticipation of an Event described in
Section 1(a)(i), 1(a)(ii), 1(a)(iii) or
1(a)(iv) hereof that ultimately occurs.
Notwithstanding anything stated in this Section 1(a), an Event shall
not be deemed to occur with respect to Executive if (x) the acquisition
or beneficial ownership of the 30% or greater interest referred to in
Section 1(a)(i) is by Executive or by a group, acting in concert, that
includes Executive or (y) a majority of the then combined voting power
of the then outstanding voting securities (or voting equity interests)
of the surviving corporation or of any corporation (or other entity)
acquiring all or substantially all of the assets of the Company shall,
immediately after a reorganization, merger, exchange, consolidation or
disposition of assets referred to in Section 1(a)(ii) or 1(a)(iii), be
beneficially owned, directly or indirectly, by Executive or by a group,
acting in concert, that includes Executive.
(b) For purposes of this Agreement, a "subsidiary" of the
Company shall mean any entity of which securities or other ownership
interests having general voting power to elect a majority of the board
of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Company.
2. PAYMENTS AND BENEFITS. If any Event shall occur during the
Term of this Agreement, then the Executive shall be entitled to receive from the
Company or its successor (which term as used herein shall include any person
acquiring all or substantially all of the assets of the Company) a cash payment
and other benefits on the following basis (unless the Executive's employment by
the Company is terminated voluntarily or involuntarily prior to the occurrence
of the earliest Event to occur (the "First Event"), in which case Executive
shall be entitled to no payment or benefits under this Section 2):
-4-
(a) If at the time of, or at any time after, the
occurrence of the First Event and prior to the end of the Transition
Period, the employment of Executive with the Company is voluntarily or
involuntarily terminated for any reason (unless such termination is a
voluntary termination by Executive other than for Good Reason, is on
account of the death or Disability of the Executive or is a termination
by the Company for Cause), subject to the limitations set forth in
Sections 2(d) and 2(e), Executive shall be entitled to the following:
(i) The Company shall pay Executive's full base
salary at the rate then in effect, benefits,
and vacation or other paid time off earned
through the Termination Date.
(ii) The Company or its successor, within 90 days
after the Termination Date, shall make a
cash payment to Executive in an amount equal
to two (2) times the sum of (A) the annual
base salary of Executive in effect
immediately prior to the First Event plus
(B) the cash bonus or cash incentive
compensation received by the Executive from
the Company for the last full fiscal year
preceding the First Event.
(iii) For a 24-month period after the Termination
Date, the Company shall allow Executive to
participate in any health, disability and
life insurance plan or program in which the
Executive was entitled to participate
immediately prior to the First Event as if
Executive were an employee of the Company
during such 24-month period; provided,
however, that in the event that Executive's
participation in any such health, disability
or life insurance plan or program of the
Company is barred, the Company, at its sole
cost and expense, shall arrange to provide
Executive with benefits substantially
similar to those which Executive would be
entitled to receive under such plan or
program if Executive were not barred from
participation. Benefits otherwise receivable
by Executive pursuant to this section
2(a)(iii) shall be reduced to the extent
comparable benefits are received by
Executive from another employer or other
third party during such 24-month period, and
Executive shall promptly report receipt of
any such benefits to the Company.
(iv) Any outstanding and unvested stock options
granted to Executive shall be accelerated
and become immediately exercisable by
Executive (and shall remain exercisable for
the terms specified in the applicable stock
option agreements) and any restricted stock
awarded to Executive and subject to
forfeiture shall be fully vested and shall
no longer be subject to forfeiture.
(b) The Company shall also pay to Executive all legal
fees and expenses incurred by the Executive as a result of such
termination, including, but not limited to, all
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such fees and expenses, if any, incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement.
(c) In addition to all other amounts payable to Executive
under this Section 2, Executive shall be entitled to receive all
benefits payable to Executive under any other plan or agreement
relating to retirement benefits.
(d) Executive shall not be required to mitigate the
amount of any payment or other benefit provided for in Section 2 by
seeking other employment or otherwise, nor shall the amount of any
payment or other benefit provided for in Section 2 be reduced by any
compensation earned by Executive as the result of employment by another
employer after the Termination Date or otherwise, except as
specifically provided in this Agreement.
(e) Notwithstanding any other provision of this
Agreement, the Company will not pay to Executive, and Executive will
not be entitled to receive, any payment pursuant to Section 2(a)(ii)
unless and until:
(i) Executive executes, and there shall be
effective following any statutory period for
revocation or rescission, a release that
irrevocably and unconditionally releases the
Company, any company acquiring the Company
or its assets, and their past and current
shareholders, directors, officers, employees
and agents from and against any and all
claims, liabilities, obligations, covenants,
rights and damages of any nature whatsoever,
whether known or unknown, anticipated or
unanticipated; provided, however, that the
release shall not adversely affect
Executive's rights to receive benefits to
which he is entitled under this Agreement,
any other then-applicable agreement between
Executive and the Company, or any employee
benefit plans of the Company in which
Executive is then a participant, or
Executive's rights to indemnification under
applicable law, the charter documents of the
Company, any insurance policy maintained by
the Company or any written agreement between
the Company and Executive; and
ii) Executive executes an agreement prohibiting
Executive for a period of one (1) year
following the Termination Date from
soliciting, recruiting or inducing, or
attempting to solicit, recruit or induce,
any employee of the Company or of any
company acquiring the Company or its assets
to terminate the employee's employment.
(f) The obligations of the Company under this Section 2
shall survive the termination of this Agreement.
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3. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything contained herein to the
contrary, prior to the payment of any amounts pursuant to Section 2(a)
hereof, an independent national accounting firm designated by the
Company (the "Accounting Firm") shall compute whether there would be
any "excess parachute payments" payable to Executive, within the
meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), taking into account the total "parachute
payments," within the meaning of Section 280G of the Code, payable to
Executive by the Company or any successor thereto under this Agreement
and any other plan, agreement or otherwise. If there would be any
excess parachute payments, the Accounting Firm will compute the net
after-tax proceeds to Executive, taking into account the excise tax
imposed by Section 4999 of the Code, if (i) the payments hereunder were
reduced, but not below zero, such that the total parachute payments
payable to Executive would not exceed three (3) times the "base amount"
as defined in Section 280G of the Code, less One Dollar ($1.00), or
(ii) the payments hereunder were not reduced. If reducing the payments
hereunder would result in a greater after-tax amount to Executive, such
lesser amount shall be paid to Executive. If not reducing the payments
hereunder would result in a greater after-tax amount to Executive, such
payments shall not be reduced. The determination by the Accounting Firm
shall be binding upon the Company and Executive subject to the
application of Section 3(b) hereof.
(b) As a result of uncertainty in the application of
Sections 280G of the Code, it is possible that excess parachute
payments will be paid when such payment would result in a lesser
after-tax amount to Executive; this is not the intent hereof. In such
cases, the payment of any excess parachute payments will be void ab
initio as regards any such excess. Any excess will be treated as an
overpayment by the Company to Executive. Executive will return the
overpayment to the Company, within fifteen (15) business days of any
determination by the Accounting Firm that excess parachute payments
have been paid when not so intended, with interest at an annual rate
equal to the rate provided in Section 1274(d) of the Code (or 120% of
such rate if the Accounting Firm determines that such rate is necessary
to avoid an excise tax under Section 4999 of the Code) from the date
Executive received the excess until it is repaid to the Company.
(c) All fees, costs and expenses (including, but not
limited to, the cost of retaining experts) of the Accounting Firm shall
be borne by the Company and the Company shall pay such fees, costs, and
expenses as they become due. In performing the computations required
hereunder, the Accounting Firm shall assume that taxes will be paid for
state and federal purposes at the highest possible marginal tax rates
which could be applicable to Executive in the year of receipt of the
payments, unless Executive agrees otherwise.
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4. DEFINITION OF CERTAIN ADDITIONAL TERMS.
(a) "Cause" shall mean, and be limited to, (i) willful
and gross neglect of duties by the Executive or (ii) an act or acts
committed by the Executive constituting a felony and substantially
detrimental to the Company or its reputation.
(b) "Disability" shall mean Executive's absence from his
duties with the Company on a full time basis for 180 consecutive
business days, as a result of Executive's incapacity due to physical or
mental illness, unless within 30 days after written notice of intent to
terminate is given by the Company following such absence Executive
shall have returned to the full time performance of Executive's duties.
(c) "Good Reason" shall mean if, without Executive's
express written consent, any of the following shall occur:
(i) the assignment to Executive of any material
duties inconsistent with Executive's status
or position with the Company, or any other
action by the Company that results in a
substantial diminution in such status or
position, excluding any isolated,
insubstantial, or inadvertent action not
taken in bad faith and which is remedied by
the Company promptly after receipt of notice
thereof from Executive; a change in title or
reporting relationship alone shall be deemed
to be a substantial diminution in an
Executive's status or position.
(ii) a material reduction by the Company in
Executive's annual base salary or target
incentive in effect immediately prior to the
First Event;
(iii) the failure by the Company to continue to
provide Executive with benefits at least as
favorable in the aggregate to those enjoyed
by Executive under the Company's pension,
life insurance, medical, health and
accident, disability, deferred compensation,
incentive awards, employee stock options or
savings plans in which Executive was
participating at the time of the First
Event, the taking of any action by the
Company that would directly or indirectly
materially reduce any of such benefits or
deprive Executive of any material fringe
benefit enjoyed at the time of the First
Event, or the failure by the Company to
provide Executive with the number of paid
vacation days to which Executive is entitled
at the time of the First Event, but
excluding any failure or action by the
Company that is not taken in bad faith and
which is remedied by the Company promptly
after receipt of notice thereof from
Executive; or
(iv) the Company requiring Executive to relocate
to any place other than a location within
forty miles of the location at which
Executive
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performed his primary duties immediately
prior to the First Event or, if Executive is
based at the Company's principal executive
offices, the relocation of the Company's
principal executive offices to a location
more than forty miles from its location
immediately prior to the First Event, except
for required travel on the Company's
business to an extent substantially
consistent with Executive's prior business
travel obligations;
(v) the failure of the Company to obtain
agreement from any successor to assume and
agree to perform this Agreement, as
contemplated in Section 5(b).
(d) As used herein, other than in Section 1(a) hereof,
the term "person" shall mean an individual, partnership, corporation,
estate, trust or other entity.
(e) "Termination Date" shall mean the date of termination
of Executive's employment, which in the case of termination for
Disability shall be the 30th day after notice is given as required in
Section 4(b).
(f) "Transition Period" shall mean the one-year period
commencing on the date of the earliest to occur of an Event described
in Section 1(a)(i), 1(a)(ii) or 1(a)(iii) hereof (or, if an Event
described in Section 1(a)(iv) occurs and there does not occur any Event
described in Sections 1(a)(i), 1(a)(ii) or 1(a)(iii), upon the
satisfaction of the condition that gives rise to the Event described in
Section 1(a)(iv)) (the "Commencement Date") and ending on the first
anniversary of the Commencement Date.
5. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the
benefit of the successors, legal representatives and assigns of the
parties hereto; provided, however, that the Executive shall not have
any right to assign, pledge or otherwise dispose of or transfer any
interest in this Agreement or any payments hereunder, whether directly
or indirectly or in whole or in part, without the written consent of
the Company or its successor.
(b) The Company will require any successor (whether
direct or indirect, by purchase of a majority of the outstanding voting
stock of the Company or all or substantially all of the assets of the
Company, or by merger, consolidation or otherwise), by agreement in
form and substance satisfactory to Executive, to assume expressly and
agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession (other than
in the case of a merger or consolidation) shall be a breach of this
Agreement and shall entitle Executive to compensation from the Company
in the same amount and on the same terms as Executive would be entitled
hereunder in the event of termination by Executive for Good Reason,
except that for purposes of implementing the foregoing, the date on
which any such
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succession becomes effective shall be deemed the Termination Date. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that is required to execute and deliver the agreement as
provided for in this Section 5(b) or that otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
6. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Minnesota.
7. NOTICES. All notices, requests and demands given to or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered or certified
mail, return receipt requested, postage pre-paid, addressed to the last known
residence address of Executive or in the case of the Company, to its principal
executive office to the attention of each of the then directors of the Company
with a copy to its Secretary, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
8. REMEDIES AND CLAIM PROCESS. If Executive disputes any
determination made by the Company regarding Executive's eligibility for any
benefits under this Agreement, the amount or terms of payment of any benefits
under this Agreement, or the Company's application of any provision of this
Agreement, then Executive shall, before pursuing any other remedies that may be
available to Executive, seek to resolve such dispute by submitting a written
claim notice to the Company. The notice by Executive shall explain the specific
reasons for Executive's claim and basis therefor. The Board of Directors shall
review such claim and the Company will notify Executive in writing of its
response within 60 days of the date on which Executive's notice of claim was
given. The notice responding to Executive's claim will explain the specific
reasons for the decision. Executive shall submit a written claim hereunder
before pursuing any other process for resolution of such claim. This Section 8
does not otherwise affect any rights that Executive or the Company may have in
law or equity to seek any right or benefit under this Agreement.
9. SEVERABILITY. In the event that any portion of this Agreement
is held to be invalid or unenforceable for any reason, it is hereby agreed that
such invalidity or unenforceability shall not affect the other portions of this
Agreement and that the remaining covenants, terms and conditions or portions
hereof shall remain in full force and effect.
10. INTEGRATION. The benefits provided to Executive under this
Agreement shall be in lieu of any other severance pay or benefits available to
Executive under any other agreement, plan or program of the Company. In the
event that any payments or benefits become payable to Executive pursuant to
Section 2 of this Agreement, then this Agreement will supersede and replace any
other agreement, plan or program applicable to Executive to the extent that such
other agreement, plan or program provides for payments or benefits to Executive
arising out of the involuntary termination of Executive's employment or
termination by Executive for Good Reason. In addition, the acceleration of stock
options and lapsing of forfeiture provisions of restricted stock provided
pursuant to Section 2(a)(iv) of this Agreement shall not be subject to the
provisions of
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Article 13 of the Company's 1992 Long-Term Incentive Plan (or similar successor
provision or plan).
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party hereto at any
time of any breach by the other party to this Agreement of, or compliance with,
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior to similar time.
12. TERM. This Agreement shall commence on the date of this
Agreement and shall terminate, and the Term of this Agreement shall end, on the
later of (A) the expiration of the term of Executive's employment pursuant to
that certain Employment Agreement between the Company and Executive of even date
herewith, if the same is not renewed in accordance with its terms, or (B) if the
Commencement Date occurs on or prior to such expiration, the first anniversary
of the Commencement Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FAIR ISAAC CORPORATION
By
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THOMAS G. GRUDNOWSKI
By
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