FAIR ISAAC
CORPORATION
TRANSITION AGREEMENT
WITH THOMAS G. GRUDNOWSKI
THIS TRANSITION
AGREEMENT (the “Agreement”) is made and entered into as
of November 1, 2006 (the “Effective Date”) by and
between Fair Isaac Corporation, a Delaware corporation (the
“Company”), and Thomas G. Grudnowski, a resident of
Minnesota (“Grudnowski”).
A. The
Company and Grudnowski entered into an Employment Agreement dated
January 30, 2004 (the “2004 Employment
Agreement”), pursuant to which Grudnowski has been employed
by the Company as its Chief Executive Officer.
B. The
Company and Grudnowski entered into an Employee Confidentiality
Agreement and Non-Disclosure Agreement dated December 2, 1999
(the “Confidentiality Agreements”).
C. As of the
Effective Date, Grudnowski currently holds options to purchase a
total of 1,806,666 shares of common stock of the Company and
unvested options to purchase a total of 445,834 shares of common
stock of the Company (collectively, the
“Options”).
D. Grudnowski
has also served as a director on the Company’s Board of
Directors (the “Board”).
E. The
parties have agreed that it is in their mutual interests that
Grudnowski resign (1) as Chief Executive Officer of the
Company, (2) as a director on the Board, and (3) from any
other officer or director position held by Grudnowski with the
Company or any of its subsidiaries or affiliates, effective
November 1, 2006 (the “Resignation
Date”).
F. The
parties have agreed that following the Resignation Date Grudnowski
shall remain employed with the Company under the terms of this
Agreement through January 31, 2007 (the “Termination
Date”), in order to facilitate a smooth transition for the
Company.
G. The
parties desire to resolve all present and potential issues between
them relating to Grudnowski’s employment and termination of
his employment, compensation and options, and have agreed to a full
resolution of any such issues as set forth in this
Agreement.
NOW THEREFORE, in
consideration of the mutual promises and provisions contained in
this Agreement and in the Release referred to below, the parties,
intending to be legally bound, agree as follows:
1.
Resignation . Grudnowski hereby confirms his resignation
as Chief Executive Officer of the Company, as a director of the
Board, and from any other officer or director position with the
Company or any of its subsidiaries or affiliates effective as of
the Resignation Date. Grudnowski confirms that his resignation as a
director of the Company did not arise from any disagreement he has
with the Company on any matter relating to the Company’s
operations, policies or practices. A press release announcing
Grudnowski’s resignation was made by the Company on
November 1, 2006, with the text set forth in
Exhibit A.
2.
Earned Compensation . The Company shall pay Grudnowski
earned Base Salary through the Resignation Date in accordance with
Section 4(a) of the Employment Agreement. In addition, the Company
shall pay Grudnowski an Incentive Award for fiscal year ended
September 30, 2006, in the gross amount of $660,000, pursuant
to Section 4(b) of the Employment Agreement, at such time as the
Incentive Award would be paid pursuant to the Company’s
normal practices as to such awards in the past, but not earlier
than the expiration of the rescission period set forth in
Section 14 of this Agreement and in the Release. The Company
and Grudnowski acknowledge and agree that Grudnowski is not
eligible for an annual option grant pursuant to
Section 4(c)(ii) of the Employment Agreement or to any other
incentive compensation for the period ending on the Resignation
Date. The Company shall pay Grudnowski for all earned and unused
vacation time as of the Resignation Date, in the amount of
$14,942.13, no later than November 30, 2006.
(a) Scope of Engagement. Subject to the terms and
conditions of this Agreement, Grudnowski agrees to remain in the
employ of the Company, and the Company agrees to continue
Grudnowski’s employment, for the period from the Resignation
Date through January 31, 2007 (the “Transition
Term”). During the Transition Term, Grudnowski shall have no
direct reports; his responsibility and authority shall be limited
to such transition assistance and special project matters as may be
requested by the Chair of the Board and/or the Company’s
Chief Executive Officer.
(b) Pay and Benefits. Grudnowski’s Base Salary
shall be continued through the Transition Term at the rate in
effect immediately prior to November 1, 2006. In addition,
during the Transition Term Grudnowski shall participate in such
other employee benefit plans and programs for which he may be
eligible and in which he participated prior to the Resignation
Date, pursuant to the terms and conditions of such plans; provided,
however, that Grudnowski shall not accrue any additional vacation
time, and shall not be eligible for any incentive, bonus, option or
other compensation award except as specifically set forth in this
Agreement. Grudnowski’s right to continued Base Salary and
benefits shall cease immediately and automatically upon expiration
of the Transition Term. In connection with the Termination Date,
Grudnowski shall receive notice of post-employment rights and
benefits consistent with the departure from the Company of a senior
executive of the Company.
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(c) Expenses. The Company shall reimburse Grudnowski
for all reasonable and necessary out-of-pocket business, travel and
entertainment expenses incurred by him in the performance of his
duties and responsibilities for the Company, subject to the
Company’s normal policies and procedures for expense
verification and documentation. Request for reimbursement of
expenses shall be submitted by Grudnowski with supporting
documentation to the Company’s Vice President of Human
Resources.
4.
Stock Options . Grudnowski acknowledges and agrees that
the spreadsheet set forth as Exhibit B is an accurate list of
all option grants received by Grudnowski during his employment with
the Company, including the currently outstanding vested and
unvested Options. The Options shall continue to be governed by the
terms and conditions set forth in the applicable written stock
option agreements signed by Grudnowski and the Company. For
purposes of Grant Nos. 008231, 006151 and 005331, the parties agree
that Grudnowski’s employment with the Company is terminating
by mutual written agreement between the Company and Grudnowski for
reasons other than for Cause; provided, however, that Grudnowski
agrees that he is hereby waiving and forfeiting any and all right
to the 187,500 unvested shares subject to Grant No. 005331,
and the options to purchase such unvested shares shall immediately
expire effective on the Effective Date.
5.
Release . At the same time Grudnowski signs this
Agreement, he also will sign a Release, in the form attached to
this Agreement as Exhibit C (the “Release”), in
favor of the Company and its affiliates, divisions, subsidiaries,
committees, trustees, directors, officers, employees, agents,
predecessors, successors, and assigns. This Agreement will not be
interpreted or construed to limit the Release in any manner. The
existence of any dispute related to the interpretation of this
Agreement or the alleged breach of this Agreement will not nullify
or otherwise affect the validity or enforceability of the
Release.
6.
Severance Pay . In exchange for Grudnowski’s
obligations and commitments under this Agreement, including without
limitation in order to ensure a smooth transition, to allow
accessibility to Grudnowski’s experience and knowledge of the
Company’s business operations and industry, and to prevent
future employment of Grudnowski with a competitor of the Company,
the Company shall pay to Grudnowski severance pay in the aggregate
amount of two times Grudnowski’s Base Salary as of the
Resignation Date. The severance pay shall be payable to Grudnowski
in a lump sum on or about August 3, 2007.
7.
Non-Disclosure, Non-Competition and Non-Solicitation
Agreements .
(a) Confidential Information . Grudnowski acknowledges
entering into the 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.
(b) Restrictive Covenant . Grudnowski agrees that
during the Transition Term and for a period of twenty-four
(24) consecutive months following the Transition Term,
Grudnowski shall not, in North America or any other location where
the Company or any of its
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subsidiaries is
currently doing business, directly or indirectly engage or
participate in the ownership, management, operation, or control, or
invest in, be employed or perform any services for any person,
firm, corporation or other entity operating a business that
competes with, is preparing to compete with, or is engaged in any
material aspect of the business of the Company or any of the
Company’s subsidiaries. Grudnowski may, nevertheless, as a
passive investor, own less than 2% of the outstanding shares of
capital stock of any corporation listed on a national securities
exchange or publicly traded in the over-the-counter market that
competes with the Company.
(c) Covenant Not to Hire or Recruit . Grudnowski
recognizes that the Company’s work force constitutes an
important and vital aspect of its business. Grudnowski agrees that
during the Transition Term and for a period of twenty-four
(24) consecutive months following the Transition Term,
Grudnowski shall not, directly or indirectly, solicit, request,
advise, induce or influence any person who is then employed or
engaged by the Company or by any of its subsidiaries (as an agent,
employee, independent contractor, or in any other capacity), or who
was an employee of the Company or any of its subsidiaries at any
time during the Transition Term, to terminate his or her
employment, agency or relationship with the Company, any of its
subsidiaries or any successor thereto.
(d) Acknowledgement . Grudnowski agrees that the
restrictions and agreements contained in this Section 7 are
reasonable and necessary to protect the legitimate interests of the
Company and that any violation of this Section 7 will cause
substantial and irreparable harm to the Company that would not be
quantifiable and for which no adequate remedy would exist at law
and accordingly injunctive relief will be available for any
violation of this Section 7.
(e) Blue-Pencil Doctrine . If the duration or
geographical extent of, or business activities covered by, this
Section 7 are in excess of what is valid and enforceable under
applicable law, such provision will be construed to cover only that
duration, geographical extent, or activities that are valid and
enforceable. Grudnowski acknowledges the uncertainty of the law in
this respect and expressly stipulates that this Section 7 be
given the construction which renders its provisions valid and
enforceable to the maximum extent (not exceeding its express terms)
possible under applicable laws.
8.
Return of Property . Grudnowski agrees that all property
in Grudnowski’s possession belonging to the Company or any of
its subsidiaries, including without limitation, all documents,
reports, manuals, memoranda, computer print-outs, customer lists,
credit cards, keys, identification, products, access cards, and all
other property relating in any way to the business of the Company
(“Company Property”) are the exclusive property of the
Company, even if Grudnowski authored, created, or assisted in
authoring or creating such Company Property. Grudnowski shall
return to the Company all Company Property within ten
(10) business days following the Resignation Date. Grudnowski
agrees to return to the Company any and all Company Property that
may be provided to him by the Company during the Transition Term
immediately upon the end of the Transition Term, or at such earlier
time as the Company may
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reasonably
request. The Company agrees that it will return to Grudnowski all
property in its possession belonging to Grudnowski that is not
Company Property.
9.
Indemnification . Notwithstanding Grudnowski’s
resignation as an officer and director of the Company or
termination of his employment upon the conclusion of the Transition
Term, with respect to events that occurred during his tenure as an
employee, officer or director of the Company, Grudnowski will be
entitled, as a former employee, officer or director of the Company,
to the same rights that are afforded to other current or former
employees, officers, or directors of the Company, now or in the
future, to indemnification and advancement of expenses as provided
in the charter documents of the Company and under applicable law,
and to indemnification and a legal defense to the extent provided
from time to time to current officers and directors by any
applicable general liability and/or directors’ and
officers’ liability insurance policies maintained by the
Company.
(a) Agreement to Assist and Cooperate. At the
Company’s reasonable request and upon reasonable notice,
Grudnowski will, from time to time and without further
consideration, during and following the Transition Term, timely
execute and deliver such acknowledgements, instruments,
certificates, and other ministerial documents (including without
limitation, certification as to specific actions performed by
Grudnowski in his capacity as an officer or director of the
Company) as may be necessary or appropriate to formalize and
complete the applicable corporate records. In addition, at the
Company’s reasonable request and upon reasonable notice,
Grudnowski will, during the Transition Term and without further
consideration, discuss and consult with the Company regarding
business matters that he was directly and substantially involved
with while employed by the Company.
(b) Claims Involving the Company. Grudnowski agrees
that he will, at any future time, be available upon reasonable
notice from the Company, with or without subpoena, to be
interviewed, review documents or things, give depositions, testify,
or engage in other reasonable activities in connection with any
litigation or investigation, with respect to matters that
Grudnowski has or may have knowledge of by virtue of his employment
by or service to the Company or any related entity. In performing
his obligations under this Section 10(b) to testify or otherwise
provide information, Grudnowski will honestly, truthfully,
forthrightly, and completely provide the information requested.
Grudnowski will comply with this Agreement upon notice from the
Company that the Company or its attorneys believe that his
compliance would be helpful in the resolution of an investigation
or the prosecution or defense of claims. In the event that
Grudnowski’s services under Section 10(a) or 10(b) exceed
five (5) hours in any calendar month following the Transition
Term, the Company shall compensate Grudnowski for such additional
services at the hourly rate of $200.
(c) Communications. Inquiries and communications
initiated by Grudnowski to the Company regarding Company business
shall be directed to the Chair of the Board or to the
Company’s Chief Executive Officer or to any person they
designate.
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11.
Non-disparagement . Grudnowski will not malign, defame,
or disparage the reputation, character, image, products, or
services of the Company, or the reputation or character of the
Company’s directors, officers, employees, or agents. The
Company (by and through the current members of the Board and the
current executive officers of the Company) will not at any time
disparage, defame or besmirch the reputation, character or image of
Grudnowski. Nothing in this Agreement is intended to prevent or
interfere with any party making any required or reasonable
communications with, or providing information to, any governmental,
law enforcement, or stock exchange agency or representative, or in
connection with any governmental investigation, court,
administrative or arbitration proceeding.
12.
Taxes . The Company may take such action as it deems
appropriate to insure that all applicable federal, state, city and
other payroll, withholding, income or other taxes arising from any
compensation, benefits or any other payments made pursuant to this
Agreement, and in order to comply with all applicable federal,
state, city and other tax laws or regulations, are withheld or
collected from Grudnowski. This Agreement is intended to satisfy
the requirements of Section 409A(a)(2), (3) and (4) of
the Internal Revenue Code of 1986, as amended (“Code”),
including current and future guidance and regulations interpreting
such provisions. Grudnowski acknowledges and agrees that the
Company has made no assurances or representations to him regarding
the tax treatment of any consideration provided for in this
Agreement and that the Company has advised him to obtain his own
personal tax advice. Except for any tax amounts withheld by the
Company from the payments or other consideration hereunder and any
employment taxes required to be paid by the Company, Grudnowski
shall be responsible for payment of any and all taxes owed in
connection with the consideration provided for in this
Agreement.
13.
Time to Consider Agreement . Grudnowski understands that
he may take twenty-one (21) calendar days after the date he
receives this Agreement and the Release to decide whether to sign
this Agreement and the Release. Grudnowski represents that if he
signs this Agreement and the Release before the expiration of the
twenty-one (21) day period, it is because he has decided that
he does not need any additional time to d
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