SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
FAIR, ISSAC AND COMPANY, INCORPORATED
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(Name of Registrant as Specified In Its Charter)
FAIR, ISSAC AND COMPANY, INCORPORATED
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box)
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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4. Proposed maximum aggregate value of transaction:
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] 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.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 4, 1997
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of Fair, Isaac
and Company, Incorporated (the "Company") will be held at 9:30 A.M., P.S.T., on
Tuesday, February 4, 1997, at Fair, Isaac's Conference Center, 111 Smith Ranch
Road, San Rafael, California, for the following purposes:
1. To elect directors to serve until the 1998 Annual Meeting of Stockholders
and thereafter until their successors are elected and qualified.
2. To ratify the appointment of the independent auditors of the Company.
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement. Only stockholders of record at the close of business on Friday,
December 6, 1996, are entitled to notice of and to vote at the meeting or any
postponement or adjournment thereof. A list of stockholders entitled to vote at
the Annual Meeting will be available for inspection at the Company's offices,
111 Smith Ranch Road, San Rafael, California, at least 10 days before the
meeting.
All stockholders are cordially invited to attend the meeting in person. However,
to assure your representation at the meeting, you are urged to mark, sign, date
and return the enclosed proxy as promptly as possible in the postage prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if he or she returned a proxy.
Sincerely,
Peter L. McCorkell
Senior Vice President and Secretary
San Rafael, California
December 30, 1996
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Your Vote is Important. In order to assure your representation at the meeting,
you are requested to complete, sign and date the enclosed proxy as promptly as
possible and return it in the enclosed envelope (to which no postage need be
affixed if mailed in the United States).
Proxy Statement
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of Fair, Isaac and Company, Incorporated
(the "Company") of proxies to be used at the Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held on Tuesday, February 4, 1997, and
any postponement or adjournment thereof. A copy of the Company's Annual Report
to Stockholders for the fiscal year ended September 30, 1996, which includes the
Company's financial statements as of September 30, 1996, accompanies this Proxy
Statement. Stockholders may obtain a copy of the Company's Annual Report on Form
10-K and a list of the exhibits thereto without charge by written request to
Peter L. McCorkell, Corporate Secretary, 120 North Redwood Drive, San Rafael, CA
94903. This Proxy Statement and the accompanying form of proxy are being mailed
to stockholders on or about December 30, 1996.
Proxy Solicitation
The shares represented by the proxies received pursuant to this
solicitation and not revoked will be voted at the Annual Meeting. A stockholder
who has given a proxy may revoke it by giving written notice of revocation to
the Secretary of the Company or by giving a duly executed proxy bearing a later
date. Attendance in person at the Annual Meeting does not of itself revoke a
proxy; however, any stockholder who does attend the Annual Meeting may revoke a
proxy previously submitted by voting in person. Subject to any such revocation,
all shares represented by properly executed proxies will be voted in accordance
with specifications on the enclosed proxy. If no such specifications are made,
proxies will be voted FOR the election of the nine nominees for director listed
in this Proxy Statement and FOR the ratification of the appointment of KPMG Peat
Marwick LLP as the Company's auditors for the current fiscal year.
The Company will bear the expense of preparing, printing and mailing this
Proxy Statement and the proxies solicited hereby and will reimburse banks,
brokerage firms and nominees for their reasonable expenses in forwarding
solicitation materials to beneficial owners of shares held of record by such
banks, brokerage firms and nominees. In addition to the solicitation of proxies
by mail, officers and regular employees of the Company may communicate with
stockholders either in person or by telephone for the purpose of soliciting such
proxies; no additional compensation will be paid for such solicitation. The
Company has retained Skinner & Co. to assist in the solicitation of proxies at a
cost of $3,500 plus normal out-of-pocket expenses.
Outstanding Shares and Voting Rights
Only stockholders of record at the close of business on December 6, 1996
(the "record date") are entitled to notice of and to vote at the Annual Meeting.
At the close of business on the record date, there were 12,631,049 shares of the
Company's Common Stock, $0.01 par value (the "Common Stock"), issued and
outstanding, excluding 3,057 shares of Common Stock held as treasury stock by
the Company. The shares held as treasury stock are not entitled to be voted.
Each share of Common
1
Stock is entitled to one vote with respect to each matter to be voted on at the
Annual Meeting subject to the provisions regarding cumulative voting in the
election of directors as described below. A plurality of the votes cast is
required for the election of the nine nominees for director listed in this Proxy
Statement and a majority of the votes cast is required to ratify the appointment
of KPMG Peat Marwick LLP as the company's auditors for the current fiscal year.
Abstentions with respect to any matter are treated as shares present or
represented by proxy and entitled to vote on that matter and thus have the same
effect as negative votes. Broker non-votes and other circumstances in which
proxy authority has been withheld do not constitute abstentions.
In the election of the directors, each stockholder is entitled to one vote
per share multiplied by the number of directors to be elected, and the
stockholder may cast all of such votes for a single candidate or may distribute
them among the number of directors to be voted for, or for any two or more of
them as the stockholder may see fit; provided, however, that no stockholder
shall be entitled so to cumulate votes unless such candidate's or candidates'
names have been placed in nomination prior to the voting and the stockholder has
given notice at the meeting prior to the voting of the stockholder's intention
to cumulate votes. If any one stockholder has given such notice, all
stockholders may cumulate their votes for candidates in nomination. The persons
authorized to vote shares represented by executed proxies in the enclosed form
(if authority to vote for the election of directors is not withheld) will have
full discretion and authority to vote cumulatively and to allocate votes among
any or all of the Board of Directors' nominees as they may determine or, if
authority to vote for a specified candidate or candidates has been withheld,
among those candidates for whom authority to vote has not been withheld.
Election of Directors
Nominees
There are currently nine directors. The Board of Directors has nominated
the following persons, all of whom currently are serving as directors, for
election as directors to serve until the 1998 Annual Meeting of Stockholders and
thereafter until their respective successors are duly elected and qualified.
A. George Battle, Director. Mr. Battle was elected a director in August,
1996. From 1968 until his retirement in 1995, Mr. Battle was an employee and
then partner of Arthur Andersen and Andersen Consulting. Mr. Battle's last
position at Andersen Consulting was Managing Partner, Market Development. In
that role he was responsible for Andersen Consulting's worldwide industry
activities, its Change Management and Strategic Services offerings, and
worldwide marketing and advertising. He served as a Presidential Exchange
Executive with the United States Department of Health, Education and Welfare
during 1975-1976. Mr. Battle is a Senior Fellow of the Aspen Institute and a
director of PeopleSoft, Inc., Barra, Inc., and Alaska Travel Adventures. He is
also President of the Board of Trustees of the Berkeley Repertory Theatre, a
trustee and treasurer of the Head Royce School and a national trustee of the
Marcus A. Foster Educational Institute. Mr. Battle received a
2
degree in economics from Dartmouth College and an M.B.A. from the Stanford
University Business School. Mr. Battle is 52 years old.
Bryant J. Brooks, Jr., Director. Mr. Brooks was elected a director in
February 1989. Since 1975 Mr. Brooks has been an independent financial
consultant in San Francisco, California, specializing in the valuation of the
securities of privately held companies. He provided such services for the
Company's Employee Stock Ownership Plan prior to the Company's initial public
offering in July 1987. From 1968 to 1974, he was the president of Boothe
Computer Investment Corporation and its successor, Bay Equities, Inc. Prior to
that he held a number of financial and management positions in other companies.
He is currently a director of McGrath RentCorp of San Lorenzo, California. Mr.
Brooks received a B.S. in Economics from Yale University in 1950 and an M.B.A.
from Harvard in 1955. Mr. Brooks is 69 years old.
H. Robert Heller, Director and Executive Vice President. Dr. Heller was
elected a director in February 1994 and an Executive Vice President of the
Company in September 1996. He was President of International Payments Institute
from December 1994 to September 1996. He was President and Chief Executive
Officer of Visa U.S.A., Inc. from 1991 to 1993, and an Executive Vice President
of Visa International from 1989 to 1991. He served as a member of the Board of
Governors of the Federal Reserve System from 1986 to 1989. Prior to that, Dr.
Heller held positions with the Bank of America and the International Monetary
Fund and taught economics at the University of California, Los Angeles, and the
University of Hawaii. He holds an M.A. in Economics from the University of
Minnesota and a Ph.D. in Economics from the University of California, Berkeley.
Dr. Heller is 56 years old.
Guy R. Henshaw, Director. Mr. Henshaw was elected a director in February
1994. He is a partner in Henshaw, Vierra & Associates and was Chairman of
Payday, The Payroll Company, from November 1992 to April 1996 and its Chief
Executive Officer from March 1993 to April 1996. He served as a Director of
Payday since 1989. From 1984 to 1992 he was President, Chief Financial Officer
and a Director of Civic BanCorp and Treasurer and a Director of the CivicBank of
Commerce. Prior to that, Mr. Henshaw held positions with the Bank of America and
Security National Bank. He holds a B.A. in Economics from Ripon College and an
M.B.A. from the Wharton School of Business at the University of Pennsylvania.
Mr. Henshaw is 50 years old.
David S. P. Hopkins, Director. Dr. Hopkins was elected a director in August
1994. He is Director of Health Information Improvement at the Pacific Business
Group on Health, a non-profit coalition of 32 large private and public sector
employers dedicated to improving the quality of health care while moderating
costs. From January 1995 until November 1996, he was an independent consultant
in health care. Prior to that, he was Vice President, Client Services and
Corporate Development of International Severity Information Systems, Inc., a
medical severity indexing software and consulting firm. From 1971 to 1993 he
held a number of senior management positions at Stanford University and its
University Hospital, Medical Center and Medical School. A graduate of Harvard
University, he earned
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both his Ph.D. in operations research and his M.S. in statistics at Stanford
University. Dr. Hopkins is 53 years old.
Robert M. Oliver, Chairman of the Board of Directors. Dr. Oliver has been a
director of the Company since December 1986 and was elected Chairman of the
Board in January 1996. He was a Professor of Engineering Science in the College
of Engineering, University of California, Berkeley, from 1960 until his
retirement in January 1993. He is also a Director, Trustee and Chairman of the
Board of the AnSer Corporation of Arlington, Virginia, and is a former member
and President of the Board of Directors of the Berkeley Repertory Theater. He
received his Ph.D. in Physics and Operations Research from the Massachusetts
Institute of Technology in 1957, following a year as a Fulbright Scholar at the
University of London. He has served as the President of the Operations Research
Society of America and was the recipient of the Lanchester Prize, the senior
award in the field of Operations Research. Dr. Oliver is 65 years old.
Larry E. Rosenberger, Director, President and Chief Executive Officer. Mr.
Rosenberger has been employed by the Company since 1974 and was elected a
director in December 1983. In December 1977 Mr. Rosenberger was named a Vice
President, in June 1983 he was named a Senior Vice President, and in January
1985 he became an Executive Vice President. In March 1991 he was named President
and Chief Executive Officer. He received a B.S. in Physics from the
Massachusetts Institute of Technology, and an M.S. in Physics, an M.S. in
Operations Research and an M. Eng. in Operations Research from the University of
California, Berkeley. Mr. Rosenberger is 50 years old.
Robert D. Sanderson, Director. Dr. Sanderson was elected a director in
March 1977. Until his retirement as an officer of the Company effective
September 30, 1995, he had served the Company since 1969 and was elected a Vice
President in May 1974, a Senior Vice President in June 1983, an Executive Vice
President in January 1985 and Chief Operating Officer in February 1989. On
November 1, 1995 he was appointed a director of TF International, LLC, a joint
venture between the Company and Trans Union Corporation. He received a B.S.
degree in Mathematics at Cornell University and an M.S. and a Ph.D. in
Industrial Engineering and Operations Research from the University of
California, Berkeley. Dr. Sanderson is 53 years old.
John D. Woldrich, Director, Executive Vice President and Chief Operating
Officer. Mr. Woldrich joined the Company in 1972 and was elected a director in
December 1983. Mr. Woldrich was named a Vice President in December 1977, a
Senior Vice President in June 1983, appointed Executive Vice President in
January 1985 and Chief Operating Officer effective August 1, 1995. Prior to
August 1, 1995, Mr. Woldrich was in charge of the Company's Marketing and New
Business Development Division. Mr. Woldrich has a B.S. in Electrical Engineering
from the University of Santa Clara and an M.B.A. from the Wharton School of
Business at the University of Pennsylvania. Mr. Woldrich is 53 years old.
4
If any nominee is unable or declines to serve (a contingency which the
Company does not now foresee), the proxies in the accompanying form will be
voted for any nominee who may be nominated by the present Board of Directors to
fill such vacancy or the size of the Board may be reduced accordingly.
Officers are elected at the first meeting of the Board of Directors
following the Annual Meeting of Stockholders at which the directors are elected
and serve until their successors are elected and qualified. There are no family
relationships between any of the directors, nominees for director and any
executive officer.
Board and Committee Meetings
The Company has standing audit and compensation committees of the Board of
Directors.
The audit committee consists of Bryant J. Brooks, Guy R. Henshaw and David
S. P. Hopkins. The audit committee monitors the effectiveness of the audit
conducted by the Company's independent auditors and of the Company's internal
financial and accounting controls, and reports its findings to the Board of
Directors. The committee meets with management and the independent auditors as
may be required. The independent auditors have full and free access to the audit
committee without the presence of management. The audit committee held five
meetings during fiscal 1996.
The compensation committee consists of Bryant J. Brooks, Guy R. Henshaw and
A. George Battle. This committee determines all aspects of the compensation of
the Company's president, executive vice presidents and the heads of strategic
business units. This Committee also administers the Company's 1992 Long-term
Incentive Plan. The compensation committee held three meetings in fiscal 1996.
During the past fiscal year, there were four regular meetings and two
special meetings of the Board of Directors. Each incumbent director attended
more than 75 percent of the aggregate number of all board meetings and meetings
of committees on which he served during fiscal 1996.
Stock Ownership
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 6, 1996, by (i) each of
the Company's directors and nominees for director, (ii) each of the executive
officers named in the Summary Compensation Table below, (iii) all executive
officers and directors of the Company as a group, and (iv) each person known to
the Company who beneficially owns more than 5% of the outstanding shares of its
Common Stock.
5
Stock Ownership Table
Beneficial Ownership(1)
Directors, Nominees, Executive Officers -----------------------------------
and 5% Stockholders Number Percent
- ----------------------------------------------------------------------------------------------------------
Inger J. Fair(2) 1,824,361 14.4%
120 North Redwood Drive
San Rafael, CA 94903
Christian I. Fair(2) 2,100,246 16.6%
120 North Redwood Drive
San Rafael, CA 94903
Ellen I. Fair(2) 1,978,217 15.7%
120 North Redwood Drive
San Rafael, CA 94903
Erik E. Fair(2) 1,995,802 15.8%
120 North Redwood Drive
San Rafael, CA 94903
Judith W. Isaac(3) 1,591,710 12.6%
5 Capilano Drive
Novato, CA 94947
Michael C. Gordon, Peter L. McCorkel(l) 1,068,186 8.4%
and John Waller,
Trustees for Fair Isaac Employee Stock
Ownership Trust
120 North Redwood Drive
San Rafael, CA 94903
Robert D. Sanderson(4) 423,892 3.4%
Larry E. Rosenberger(4) 282,550 2.2%
John D. Woldrich(4) 141,529 1.1%
Patrick G. Culhane(4),(5) 24,050 *
Gerald de Kerchove(4) 137,310 1.1%
Barrett B. Roach(4) 5,952 *
H. Robert Heller(6) 17,000 *
A. George Battle(7) 900 *
Bryant J. Brooks(6) 18,000 *
Guy R. Henshaw(6) 17,000 *
David S. P. Hopkins(6) 17,000 *
Robert M. Oliver(8) 53,000 *
All executive officers and directors as
a group (16 persons)(4), (9) 1,306,439 10.3%
<FN>
* Represents holdings of less than one percent.
(1) To the Company's knowledge the persons named in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this
table.
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(2) Includes 1,808,361 shares held by Inger J. Fair and her adult children
as co-trustees and as beneficiaries of The William Rodden Fair and
Inger Johanne Fair Revocable Trust, Trust A under The William and Inger
Fair Trust Agreement dated 3/8/86, Trust B Exempt under the William and
Inger Fair Trust Agreement dated 3/20/86 and Trust B Non-Exempt under
the William and Inger Fair Trust Agreement dated 3/28/86. Christian I.
Fair, Ellen I. Fair and Erik E. Fair each disclaim beneficial interest
in the shares held by the trust except to the extent of such person's
pecuniary interest in such trust. Includes options for 16,000 shares
exercisable by Inger J. Fair.
(3) Does not include 262,633 shares held directly by Mrs. Isaac's adult
children nor 119,880 shares held by Mrs. Isaac as trustee for her adult
children. Mrs. Isaac disclaims beneficial ownership of such shares.
Includes 247,500 shares held as co-trustee (with F. L. Adams) and as
beneficiary under a trust.
(4) Includes the shares allocated to such individual's account under the
Company's Employee Stock Ownership Plan (amounts have been rounded to
the nearest share). Shares allocated to the accounts of listed
individuals are also included in the total shown for the Trustees of
the Employee Stock Ownership Trust.
(5) Includes 19,222 restricted shares issued pursuant to an incentive
compensation agreement.
(6) Includes options for 17,000 shares.
(7) Includes 300 shares held by Mr. Battle's son who resides with him and
includes 100 shares held by his sister for whom he has dispositive
power. Mr. Battle disclaims beneficial ownership of such shares.
(8) Includes 2,000 shares held in an Individual Retirement Account ("IRA")
for Dr. Oliver, 4,000 shares held in an IRA by his wife, 11,000 shares
held jointly by Dr. Oliver and his wife, 24,000 shares held as trustee
and as beneficiary under a trust, and options for 12,000 shares.
(9) Excludes shares excluded in note (3) above. Includes shares included in
notes (3), (4), (5), (6), (7) and (8) above, including a total of
161,730 shares subject to exercisable options.
</FN>
Compensation of Directors and Executive Officers
Directors' Compensation
Non-employee directors other than the Chairman are currently compensated at
the rate of $12,000 per year plus $1,000 for each Board meeting attended. The
Chairman is currently compensated at the rate of $100,000 per year for services
as Chairman and other consulting work, plus $2,000 for each Board meeting
attended. All directors other than the Chairman are paid $125 per hour for
committee meetings and other special assignments. See also below under "Director
Consulting Arrangements."
Under the Company's 1992 Long-term Incentive Plan as amended and restated
effective November 21, 1995, members of the Board of Directors who are not
employees of the Company ("Outside Directors") currently receive a grant of
10,000 nonqualified stock options (the "Initial Grant") upon election as an
Outside Director and a grant of nonqualified options for 1,000 shares on the
date of the annual meeting provided such person has been an Outside Director
since the prior annual meeting (the "Annual Grant"). The exercise price of all
such options is equal to the fair market value of Common Stock on the date of
grant. The Initial Grants vest in 20% increments on each of the first through
fifth anniversary dates of such person's
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election as a director and expire ten years after grant. Annual Grants vest one
year after grant and expire five years after grant. All such options granted to
an Outside Director are also exercisable in full in the event of the termination
of such Outside Director's service because of death, total and permanent
disability or voluntary retirement at or after age 65, or a change in control
with respect to the Company.
Compensation of Executive Officers
The following table sets forth the cash and non-cash compensation awarded
to, earned by or paid to the Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company for services rendered
in all capacities to the Company and its subsidiaries during the last fiscal
year.
Summary Compensation Table
Long-Term Compensation
Annual Compensation -----------------------------------------------
-------------------------- Awards Payouts
-------------- --------------
Securities Long-term
Underlying Incentive Plan All Other
Name Year Salary Bonus(1) Options Payouts(2) Compensation(3)
- -----------------------------------------------------------------------------------------------------------------
Larry E. Rosenberger 1996 $202,500 $146,250 27,500 $369,869 $21,788
President and Chief 1995 193,750 133,760 0 315,008 18,920
Executive Officer 1994 190,000 125,163 0 178,387 14,705
John D. Woldrich 1996 $195,000 $117,000 25,000 $266,460 $21,260
Executive Vice 1995 158,750 94,240 0 233,773 18,852
President and Chief 1994 155,000 92,225 0 136,521 15,540
Operating Officer
Patrick G. Culhane 1996 $180,000 $111,150 20,000 $73,680 $17,973
Executive Vice 1995 134,375 199,366 20,000 65,532 15,658
President 1994 125,000 197,863 20,000 35,180 11,721
Barrett B. Roach 1996 $161,000 $66,690 15,000 $113,894 $17,365
Executive Vice 1995 153,750 65,056 20,000 67,136 14,651
President 1994 150,000 60,605 20,000 26,254 9,903
Gerald de Kerchove 1996 $148,750 $67,860 7,500 $201,047 $22,761
Executive Vice President 1995 143,600 68,096 0 185,290 19,658
and Chief Financial Officer 1994 139,400 62,581 0 114,031 16,125
<FN>
(1) Represents the portion of amounts accrued under the Company's Officers'
Incentive Plan which is paid in cash shortly after the end of the
fiscal year in which earned, and amounts paid shortly after year-end
under other incentive plans. See description under "Compensation
Committee Report on Executive Compensation; Incentive Compensation
Plans" below.
(2) Payments under the Company's Officers' Incentive Plan for shares of
"phantom stock" awarded in prior years. See description under
"Compensation Committee Report on Executive Compensation; Incentive
Compensation Plans" below.
(3) Represents the value of employer contributions to the Company's 401(k)
Plans, employer contributions to the Company's Supplemental Retirement
and Savings Plan, and employer contributions and other allocations to
the Company's Employee Stock Ownership Plan. For fiscal 1996, employer
401(k) contributions were $2,404, $2,747, $2,555, $2,400 and $2,366 for
Messrs. Rosenberger, Woldrich, Culhane, Roach and de Kerchove,
respectively; the value of ESOP contributions and allocations were
$11,884, $11,013, $7,918, $7,465 and $12,895 for Messrs. Rosenberger,
Woldrich, Culhane, Roach and de Kerchove respectively; and the
8
value of Company contributions to the Supplemental Retirement and
Savings Plan for each of Messrs. Rosenberger, Woldrich, Culhane, Roach
and de Kerchove was $7,500.
</FN>
Option/SAR Grants in Last Fiscal Year
Individual Grants
------------------------------------------------------------- Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation
Underlying Granted to for Option Term(2)
Options Employees Exercise Price Expiration --------------------------
Name Granted(1) in Fiscal Year per share Date 5% 10%
- -------------------------------------------------------------------------------------------------------------------
Larry E. Rosenberger 27,500 9.6% $30.625 3/31/06 $529,513 $1,342,138
John D. Woldrich 25,000 8.8% $30.625 3/31/06 $481,375 $1,220,125
Patrick G. Culhane 20,000 7.0% $30.625 3/31/06 $385,100 $976,100
Barrett B. Roach 15,000 5.3% $30.625 3/31/06 $288,825 $732,075
Gerald de Kerchove 7,500 2.6% $30.625 3/31/06 $144,413 $366,038
<FN>
(1) Granted at fair market value and exercisable in full on March 31, 1999.
(2) Assuming 5% and 10% compounded annual appreciation of the stock price
over the terms of the option, the price of a share of Common Stock
would be $49.88 and $79.43, respectively, on March 31, 2006.
</FN>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Shares Options at FY-End Money Options at FY-End(2)
Acquired Value ---------------------------- -------------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
Larry E. Rosenberger 45,000 $1,186,200 0 27,500 $0 $223,438
John D. Woldrich 0 $0 0 25,000 $0 $203,125
Patrick G. Culhane 0 $0 0 60,000 $0 $1,061,250
Barrett B. Roach 20,000 $645,000 0 55,000 $0 $1,020,625
Gerald de Kerchove 45,000 $1,084,950 0 7,500 $0 $60,938
<FN>
(1) Equal to the market value of the Company's Common Stock on the date the
options were exercised, less the exercise price.
(2) Based on the closing prices of the Company's Common Stock as reported
by the New York Stock Exchange for September 30, 1996 ($38.75), less
the exercise price.
</FN>
Long-Term Incentive Plans--Awards in Last Fiscal Year
Number of Period Until
Name Shares(1) Payout(2)
- ------------------------------------------------------------------------------
Larry E. Rosenberger 3,774 4 Years
John D. Woldrich 3,019 4 Years
Patrick G. Culhane 2,868 4 Years
Barrett B. Roach 1,721 4 Years
Gerald de Kerchove 1,751 4 Years
(1) Shares of "phantom stock" awarded for fiscal 1996 pursuant to the
Company's Officers' Incentive Plan. The number of shares is equal to
half of the officer's total incentive award for fiscal 1996 divided by
the closing price of the stock on the award date ($38.75 at September
30, 1996). See the description under "Compensation Committee Report on
Executive Compensation; Incentive Compensation Plans" below. Shares of
phantom stock are converted into cash at the payout dates at the
closing price for the Company's Common Stock on the payout date.
9
(2) The shares of phantom stock will be converted to cash in 25 percent
increments as of September 30 in each of the four years following the
fiscal year for which they were accrued provided the recipient is still
employed by the Company.
Pension Plan
Employees of the Company (not including those of its subsidiary, DynaMark,
Inc.), including officers and directors who are employees, participate in the
Fair Isaac Pension Plan (the "Pension Plan") after completing one year of
service. Subject to certain age and service requirements, participants in the
Pension Plan accrue a right to a retirement income payable monthly for life. The
annual benefit is equal to 0.60% of "Final Average Compensation" up to $15,000
plus 1.20% of Final Average Compensation in excess of $15,000, multiplied by
years of service up to a maximum of 35 years. "Final Average Compensation" means
the highest average compensation for five consecutive years during the last ten
years of employment. Compensation includes all amounts paid for services. If
benefit payments commence between age 55 (the earliest permissible age) and age
65, the amount is actuarially discounted; if benefits commence after age 65, the
amount is actuarially increased. The Pension Plan also provides various forms of
survivor benefits for a participant's beneficiary and for optional forms of
payment with equal actuarial value, including a lump sum.
The following table illustrates the estimated annual benefits payable upon
retirement to an employee in the specified compensation and years of credited
service classifications shown, assuming that the benefits commence at age 65 and
are payable in the normal form. These calculations are straight-life annuity
amounts based on current plan formulae and are not reduced by any Social
Security offsets.
Years of Credited Service
Final Average ---------------------------------------------------------------------------
Compensation 15 20 25 30 35 40
-------- --------- --------- --------- --------- ------
$150,000 $25,650 $34,200 $42,750 $51,300 $59,850 64,350
$175,000 30,150 40,200 50,250 60,300 70,350 75,600
$200,000 34,650 46,200 57,750 69,300 80,850 86,850
$225,000 39,150 52,200 65,250 78,300 91,350 98,100
$250,000 43,650 58,200 72,750 87,300 101,850 109,350
$275,000 48,150 64,200 80,250 96,300 112,350 120,600
$300,000 52,650 70,200 87,750 105,300 122,850 131,850
The number of years of service credited to each of the named executives as
of September 30, 1996 was as follows: Mr. Rosenberger, 21 years; Mr. Woldrich,
23 years; Mr. Culhane, 10 years; Mr. Roach, 3 years and Mr. de Kerchove, 23
years.
The benefits shown in the foregoing table are based on the current formula
applied to all credited service. "Grandfather" provisions related to the prior
formula may result in larger benefits attributable to service credited prior to
1995. The Internal Revenue Code limits the amount of compensation which may be
taken into account for purposes of determining benefits from a tax-qualified
plan (such as the Fair Isaac Pension Plan). The current limit is $150,000.
Current law provides that this limit will increase with increases in the
Consumer Price Index.
10
Director Consulting Arrangements
From August 1, 1992 to December 31, 1995, the Company had an agreement with
Dr. Oliver under which he performed consulting services on technical matters at
the request of the Company's president. He was paid $20,800 for services
rendered pursuant to this agreement for the quarter ended December 31, 1995.
Compensation Committee Interlocks and Insider Participation
Bryant J. Brooks and Guy R. Henshaw served as the members of the Company's
Compensation Committee for the fiscal year ended September 30, 1996 and A.
George Battle served as a member of the Compensation Committee from August 23 to
September 30, 1996. Messrs. Brooks, Henshaw and Battle are non-employee
Directors of the Company and had no other relationship with the Company for the
fiscal year ended September 30, 1996. Mr. Heller, who served as a member of the
Compensation Committee until August 23, 1996 was elected an Executive Vice
President of the Company effective September 4, 1996. None of the Executive
Officers of the Company had any "interlock" relationships to report during the
fiscal year ended September 30, 1996.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is composed entirely
of directors who are not employees of the Company. The Committee determines all
aspects of the compensation of the Company's Chief Executive Officer, Executive
Vice Presidents and heads of the Company's strategic business units, and also
administers the Company's 1992 Long-term Incentive Plan under which grants of
stock options or restricted stock may be awarded to any employee.
Through December 31, 1995, the compensation of Kenneth Rapp, a Senior Vice
President of the Company and the President of the Company's DynaMark subsidiary,
was determined in accordance with the terms of an employment agreement entered
into with Mr. Rapp in connection with the Company's acquisition of DynaMark in
December 1992 and thus was not reviewed by the Compensation Committee.
The primary objectives of the Company's executive compensation program are
to provide a level of compensation that will attract and retain well qualified
executives, to structure their compensation packages so that a significant
portion is tied to achieving targets for revenue growth and operating margin,
and to align their interests with those of the Company's stockholders through
the use of stock-based compensation.
The Company's executive compensation program consists of three main
components: annual base salary, participation in the Company's Officers'
Incentive Plan, and the opportunity to receive awards of stock options or
restricted stock. The executive officers are eligible for the same benefits
available generally to the Company's employees, including group health and life
insurance and participation in the Company's pension, employee stock ownership
and 401(k) plans. The
11
Company also maintains a Supplemental Retirement and Savings Plan for the
benefit of certain highly compensated employees, including most executive
officers.
Annual Base Salary
The Compensation Committee determines the annual base salary of each of the
Company's executive officers, including the Chief Executive Officer. The same
principles are applied in setting the salaries of all officers to ensure that
salaries are equitably established. Salaries are determined annually by
considering the officer's duties and responsibilities within the Company and
business unit, the officer's ability to impact the operations and profitability
of the Company, and the officer's experience and past performance.
Officer Incentive Plan
Substantially all of the Company's employees participate in incentive plans
based on the Company's performance with respect to goals for revenue growth and
operating margin set by the Board of Directors for each fiscal year. An
incentive compensation target amount is determined for each participant at the
beginning of the fiscal year. The ratio of incentive plan target to base salary
increases with the level of the employee's responsibilities and ranges from one
percent for non-exempt employees to more than 50 percent for the Chief Executive
Officer. The Compensation Committee sets the incentive compensation targets for
each of the executive officers. Compensation increases for executive officers in
recent years have primarily resulted from increases in incentive plan targets,
reflecting the Committee's emphasis on performance-based pay. After the
conclusion of the fiscal year, the target amount for each participant is
multiplied by a factor based on the Company's actual performance with respect to
the revenue growth and operating margin goals (equally weighted) previously
established by the Board to establish his or her incentive award for the year.
Awards can range from zero to three times the target amount.
All officers receive 50 percent of their incentive awards in cash shortly
after the end of the fiscal year. The remaining 50 percent is paid in the form
of shares of "phantom stock" based on the market price of the Company's Common
Stock at the end of the fiscal year. Those shares of phantom stock are converted
to cash payments, in 25 percent increments, at the end of each of the succeeding
four fiscal years (assuming the officer remains employed by the Company), based
on the market price of the Company's stock at the end of each of those years.
Options and Restricted Stock
The Committee may award options to purchase the Company's Common Stock or
shares of restricted stock to any employee, including the executive officers,
under the Company's 1992 Long-term Incentive Plan. The exercise price for all
options granted under this Plan must be at least equal to the fair market value
of the shares on the date of grant. In addition to the level of responsibility
and performance of the recipient, the Committee takes previous grants of options
and restricted stock into consideration in making such awards. Awards of options
were made to Messrs.
12
Rosenberger, Woldrich, Culhane, Roach and de Kerchove in fiscal 1996 and are
reflected in the Option/SAR Grants in Last Fiscal Year Table and Aggregated
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
Table above.
Limits on Tax-Deductible Compensation
The Committee believes that it is highly unlikely that the combination of
base salary, Officer Incentive Plan cash awards, and payments for shares of
phantom stock for any executive officer would exceed $1 million in any year and
currently has no plans to amend the officers' incentive plan to ensure
deductibility for federal tax purposes of any "excess" amounts. The Committee
believes that the 1992 Long-term Incentive Plan meets the rules currently in
effect so that compensation arising from the exercise of options granted under
that plan will be deductible by the Company. The Committee believes it is highly
unlikely that any combination of grants of restricted stock that will be awarded
under that plan and other compensation will exceed $1 million for a single
individual in any given year.
CEO Compensation
The amounts of Mr. Rosenberger's base salary and incentive plan target are
established by the Compensation Committee using the criteria discussed above.
Mr. Rosenberger's base salary for fiscal 1996 was $202,500, compared with a base
of $193,750 for fiscal 1995. His incentive plan target for fiscal 1996 was
$121,250 which represented an increase of $15,000 over 1995. Because the
Company's revenue growth of 31 percent and operating margin of 18.8 percent
substantially exceeded the goals set by the Board for 1996, Mr. Rosenberger's
total incentive award for the year was $292,500. Of that amount, 50 percent was
paid in cash shortly after the end of the year and is shown in the Summary
Compensation Table under the column captioned "Annual Compensation; Bonus." The
remainder was awarded in the form of shares of "phantom stock" as explained
above which will become payable in 25 percent increments after each of the four
years ending September 30, 1997 through 2000, based on the stock price on those
dates. Amounts shown under the caption "Long-term Incentive Plan Payouts"
reflect payments for phantom shares awarded in prior years.
Bryant J. Brooks
Guy R. Henshaw
A. George Battle
Performance Graph
In accordance with SEC rules, the following table shows a line-graph
presentation comparing cumulative five-year stockholder returns on an indexed
basis with a broad equity market index and either a nationally recognized
industry standard or an index of peer companies selected by the Company. The
Company has selected the Center for Research in Security Prices ("CRSP") Total
Return Index for the S&P 500 Stocks for the broad equity index, and a
self-determined group of peer companies. Prior to May 6, 1996, the Company's
stock was traded on the Nasdaq
13
Stock Market and in prior years the Company used the CRSP Total Return Index for
the Nasdaq Stock Market (U.S. Companies) as the broad equity market index. Since
its stock has been listed on the New York Stock Exchange since May 6, 1996, the
Company believes the S&P 500 Index is a more appropriate broad market index.
The peer group consists of Acxiom Corporation; American Management Systems,
Inc.; Barra, Inc.; Broderbund Software, Inc.; Hogan Systems, Inc.; HNC Software
Inc.; and Inference Corporation. The Company does not believe there are any
publicly traded companies which compete with the Company across the full
spectrum of its product and service offerings. The companies in the peer group
represent a variety of information and decision service providers and software
developers which are in the same order of magnitude as the Company in revenue
and market capitalization. HNC Software, Inc. and Inference Corporation first
became publicly traded within the last two years and compete with the Company in
certain markets. Accordingly, the Company believes these companies should be
added to the peer group. Barra and Broderbund are headquartered near the
Company's headquarters and compete with the Company for available technical
staff.
Comparison of Five Year Cumulative Return
Among Fair, Isaac and Company, Incorporated, the CRSP Index for S&P 500
stocks, the CRSP Index for NASDAQ stock market (US Companies) and the
self-determined peer group indices, current and former:
CRSP Index for
CRSP Index For NASDAQ Self-determined Self-determined
Measurement Period Fair, Isaac and Company, for S&P 500 Stock Market Peer Group Peer Group
(Fiscal year covered) Incorporated Stocks (US Companies) Index (current) Index (former)
- ----------------------------------------------------------------------------------------------------------------
9/91 100 100 100 100 100
9/92 145.7 110.8 112.1 136.0 136.0
9/93 247.5 125.2 146.8 178.1 178.1
9/94 426.5 129.8 148.0 217.1 217.1
9/95 701.0 168.7 204.4 473.3 474.5
9/96 938.9 203.1 242.4 515.5 459.6
The returns shown assume $100 invested on September 30, 1991 in the
Company's stock, the CRSP Indices for the S&P 500 Stocks and the NASDAQ Stock
Market (U.S. Companies) and the current and former peer group indices, with
reinvestment of dividends. The reported dates are the last trading dates of the
Company's fiscal year which ends on September 30.
Ratification of Independent Auditors
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of KPMG Peat Marwick LLP as the Company's independent
auditors for the Company's current fiscal year ending September 30, 1997. KPMG
Peat Marwick LLP has served as the Company's independent auditors since May
1991. Representatives of KPMG Peat Marwick LLP are expected to be present at the
Company's Annual Meeting with the opportunity to make statements and/or respond
to appropriate questions from stockholders present at the meeting.
14
The Board of Directors recommends a vote FOR the ratification of KPMG Peat
Marwick LLP as the Company's independent auditors. A majority of the votes cast
is required for ratification.
Other Business
The Board of Directors does not know of any business to be presented at the
Annual Meeting other than the matters set forth above, but if other matters
properly come before the meeting it is the intention of the persons named in the
proxies to vote in accordance with their best judgment on such matters.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and
the rules of the Securities and Exchange Commission (the "Commission")
thereunder require the Company's directors, executive officers and persons who
own more than ten percent of the Company's Common Stock to file reports of their
ownership and changes in ownership of Common Stock with the Commission.
Personnel of the Company generally prepare these reports on the basis of
information obtained from each director, officer and greater than ten percent
owner. Based on such information, the Company believes that all reports required
by Section 16(a) of the Exchange Act to be filed by its directors, executive
officers and greater than ten percent owners during the last fiscal year were
filed on time except that a report filed by Barrett B. Roach for the month of
April 1996 failed to report a sale on April 30, 1996 of 3,000 shares of the
Company's stock. An amended report was subsequently filed. Upon the death of
William R. Fair in January 1996, Christian I. Fair, Ellen I. Fair and Erik E.
Fair became co-trustees and beneficiaries of The William Rodden Fair and Inger
Johanne Fair Revocable Trust, Trust A under The William and Inger Fair Trust
Agreement dated 3/20/86, Trust B Exempt under The William and Inger Fair Trust
Agreement dated 3/20/86 and Trust B Non-Exempt under The William and Inger Fair
Trust Agreement dated 3/28/86 and by virtue of this, became beneficial owners of
greater than ten percent of the Company's stock. Forms 3 were inadvertently
filed late in December 1996.
Submission of Proposals of Stockholders
Proposals of stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders must be received at the Corporate Secretary's
Office, 120 North Redwood Drive, San Rafael, California 94903, no later than
September 4, 1997, to be considered for inclusion in the proxy statement and
form of proxy for that meeting.
By Order of the Board of Directors
Peter L. McCorkell
Senior Vice President and Secretary
Dated: December 30, 1996
APPENDIX A
PROXY Fair, Isaac and Company PROXY
INCORPORATED
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING FEBRUARY 4, 1997
The undersigned hereby appoints Robert M. Oliver, Larry E. Rosenberger and
John D. Woldrich, or any of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse, all the shares of Common Stock of Fair, Isaac and Company,
Incorporated that undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held on February 4, 1997, or any postponement or adjournment
thereof.
(Continued, and to be signed on the other side)
----------------- [X] Please mark
COMMON your votes
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
1. Election of Directors:
A George Battle, Bryant J. Brooks, Jr., WITHHOLD
H. Robert Heller, Guy R. Henshaw, FOR FOR ALL
David S.P. Hopkins, Robert M. Oliver,
Larry E. Rosenberger, Robert D. [ ] [ ]
Sanderson and John D. Woldrich
FOR all nominees listed above
(except as indicated to the contrary).
WITHHOLD AUTHORITY to vote for all nominees listed above.
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To ratify the appointment of KPMG Peat
Marwick LLP as the Company's independent [ ] [ ] [ ]
auditors for the current fiscal year.
3. In their discretion upon such other business
as may properly come before the meeting.
This Proxy when properly executed will be
voted as directed by the undersigned
stockholder. If no such directions are made,
this Proxy will be voted "FOR" the
election of directors and "FOR" Item 2.
I PLAN TO ATTEND THE MEETING. [ ]
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
Signature(s) ____________________________________________ Date ______________
NOTE: Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.