SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number
0-16439
FAIR, ISAAC AND COMPANY, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-1499887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Smith Ranch Road, San Rafael, California 94903
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 472-2211
----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ].
The number of shares of Common Stock, $0.01 par value per share,
outstanding on February 7, 2001, was 14,347,764.
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements............................................... 3
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 9
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk......... 19
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders................ 20
ITEM 6. Exhibits and Reports on Form 8-K................................... 20
SIGNATURES ................................................................ 21
EXHIBIT INDEX.............................................................. 22
-2-
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
FAIR, ISAAC AND COMPANY, INCORPORATED
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and September 30, 2000
(in thousands)
(Unaudited)
December 31, September 30,
2000 2000
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 33,550 $ 39,506
Short-term investments 39,740 19,109
Accounts receivable, net 44,743 41,625
Unbilled work in progress 24,946 26,484
Prepaid expenses and other current assets 5,078 4,769
Deferred income taxes 5,752 5,719
--------- ---------
Total current assets 153,809 137,212
Investments 28,924 34,502
Property and equipment, net 46,168 48,565
Intangibles, net 8,105 8,630
Deferred income taxes 8,778 8,778
Other assets 4,613 3,601
--------- ---------
$ 250,397 $ 241,288
========= =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,470 $ 1,606
Accrued compensation and employee benefits 15,799 15,581
Other accrued liabilities 14,033 8,863
Billings in excess of earned revenues 9,905 10,104
Capital lease obligations 253 364
--------- ---------
Total current liabilities 41,460 36,518
--------- ---------
Long-term liabilities:
Accrued compensation and employee benefits 4,930 4,886
Other liabilities 877 883
--------- ---------
Total long-term liabilities 5,807 5,769
--------- ---------
Total liabilities 47,267 42,287
--------- ---------
Stockholders' equity:
Preferred stock -- --
Common stock 148 148
Paid in capital in excess of par value 54,929 52,269
Retained earnings 164,547 156,021
Less treasury stock, at cost (15,926) (8,793)
Accumulated other comprehensive loss (568) (644)
--------- ---------
Total stockholders' equity 203,130 199,001
--------- ---------
$ 250,397 $ 241,288
========= =========
See accompanying notes to the consolidated financial statements.
-3-
FAIR, ISAAC AND COMPANY, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the three months ended December 31, 2000 and 1999
(in thousands, except per share data)
(Unaudited)
Three Months Ended
December 31,
----------------------------
2000 1999
------------ ------------
Revenues $ 77,090 $ 70,094
Costs and expenses:
Cost of revenues 31,884 29,780
Research and development 6,899 9,612
Sales general and administrative 23,910 20,963
Amortization of intangibles 525 525
Restructuring charge -- 1,674
------------ ------------
Total costs and expenses 63,218 62,554
------------ ------------
Income from operations 13,872 7,540
Other income, net 1,148 866
------------ ------------
Income before income taxes 15,020 8,406
Provision for income taxes 6,203 3,472
------------ ------------
Net income 8,817 4,934
============ ============
Net Income 8,817 4,934
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investments (48) (150)
Foreign currency translation adjustments 124 (67)
------------ ------------
Other comprehensive income (loss) 76 (217)
------------ ------------
Comprehensive income $ 8,893 $ 4,717
============ ============
Earnings per share:
Diluted $ 0.60 $ 0.34
============ ============
Basic $ 0.61 $ 0.35
============ ============
Shares used in computing earnings per share:
Diluted 14,778,000 14,392,000
============ ============
Basic 14,534,000 14,028,000
============ ============
See accompanying notes to the consolidated financial statements.
-4-
FAIR, ISAAC AND COMPANY, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 2000 and 1999
(in thousands)
(Unaudited)
Three Months Ended
December 31,
--------------------
2000 1999
-------- --------
Cash flows from operating activities
Net income $ 8,817 $ 4,934
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 5,936 4,624
Deferred compensation 249 122
Tax benefit from exercise of stock options 233 648
Other 169 135
Changes in operating assets and liabilities:
Accounts receivable (3,034) (565)
Unbilled work in progress 1,538 1,903
Prepaid expenses and other assets (1,084) 2,078
Accounts payable 5,744 (1,432)
Accrued compensation and employee benefits 1,294 (8,173)
Other accrued liabilities and other liabilities (921) (2,575)
Billings in excess of earned revenues (199) 1,911
-------- --------
Net cash provided by operating activities 18,742 3,610
-------- --------
Cash flows from investing activities
Purchases of property and equipment (3,039) (5,591)
Purchases of investments (26,380) (12,240)
Proceeds from maturities of investments 11,110 2,606
-------- --------
Net cash used in investing activities (18,309) (15,225)
-------- --------
Cash flows from financing activities
Principal payments of capital lease obligations (111) (108)
Proceeds from the exercise of stock options and
issuance of treasury stock 2,205 2,919
Dividends paid (291) (281)
Repurchase of company stock (8,192) --
-------- --------
Net cash provided by financing activities (6,389) 2,530
-------- --------
Decrease in cash and cash equivalents (5,956) (9,085)
Cash and cash equivalents, beginning of period 39,506 20,715
-------- --------
Cash and cash equivalents, end of period 33,550 11,630
======== ========
See accompanying notes to the consolidated financial statements.
-5-
FAIR, ISAAC AND COMPANY, INCORPORATED
Notes to Consolidated Financial Statements
Note 1 General
In management's opinion, the accompanying unaudited consolidated financial
statements for Fair, Isaac & Company, Incorporated (the "Company") for the three
months ended December 31, 2000 and 1999 have been prepared in accordance with
generally accepted accounting principles for interim financial statements and
include all adjustments (consisting only of normal recurring accruals unless
otherwise stated) that the Company considers necessary for a fair presentation
of its financial position, results of operations, and cash flows for such
periods. However, the accompanying financial statements do not contain all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. All such financial statements
presented herein are unaudited, however, the September 30 balance sheet has been
derived from audited financial statements. This report and the accompanying
financial statements should be read in connection with the Company's audited
financial statements and notes thereto presented in its Annual Report on Form
10-K for the fiscal year ended September 30, 2000. Notes that would
substantially duplicate the disclosures in the Company's audited financial
statements for the fiscal year ended September 30, 2000, contained in the 2000
Form 10-K have been omitted. The interim financial information contained in this
Report is not necessarily indicative of the results to be expected for any other
interim period or for the full fiscal year ending September 30, 2001.
Note 2 Earnings Per Share
The following reconciles the numerators and denominators of diluted and
basic earnings per share (EPS):
Three months ended December 31,
-------------------------------
(in thousands, except per share data) 2000 1999
- --------------------------------------------------------------------------------------
Numerator - Net income $ 8,817 $ 4,934
======== ========
Denominator - Shares:
Diluted weighted-average shares and assumed
conversion of stock options 14,778 14,392
Effect of dilutive securities - employee stock options (244) (364)
-------- --------
Basic weighted-average shares 14,534 14,028
======== ========
Earnings per share:
Diluted $ 0.60 $ 0.34
======== ========
Basic $ 0.61 $ 0.35
======== ========
The computation of diluted EPS at December 31, 2000 and 1999 respectively,
excludes stock options to purchase 532,000 and 139,000 shares of common stock.
The shares were excluded because the exercise prices for the options were
greater than the respective average market price of the common shares and their
inclusion would be antidilutive.
-6-
Note 3 Cash Flow Statement
Supplemental disclosure of cash flow information:
Three months ended December 31,
-------------------------------
(in thousands) 2000 1999
- --------------------------------------------------------------------------------------
Income tax payments $ 99 $ 196
Interest paid 100 14
Non-cash investing and financing activities:
Issuance of treasury stock to ESOP and ESPP $1,032 --
Note 4 New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, as amended by SFAS
No. 137 and SFAS No. 138. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities. The Company adopted SFAS No. 133 for the fiscal year
beginning October 1, 2000. The adoption of SFAS No. 133 did not have any
material impact on the Company's consolidated financial position, results of
operations or cash flows.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101 regarding recognition, presentation and
disclosure of revenue. SAB 101 is required to be implemented no later than the
fourth quarter of fiscal year 2001. Management believes that the adoption of SAB
No. 101 will not have a material impact on the Company's consolidated financial
position, results of operations or cash flows.
Note 5 Segment information
Effective October 1, 2000, the Company reorganized its operating structure.
As a result, the Company changed to a global segment reporting structure to
align closely with the Company's internal management reporting of its business
operations. There are three reportable segments: Global Data Repositories &
Processors, Global Financial Services and Other, which include Analytics, Liquid
Credit, Retail, and Telecommunications. The segment information for the three
months ended December 31, 1999 has been restated to conform with the fiscal year
2001 presentation.
The Company's Chief Executive Officer evaluates financial performance based
on measures of business segment revenues and operating profit or loss.
Unallocated other income consists mainly of interest revenues and equity share
from investments. The Company does not evaluate the financial performance of
each segment based on its assets or capital expenditures.
-7-
Global Data Global
Repositories Financial
(in thousands) & Processors Services Other Total
- -----------------------------------------------------------------------------------------
Three months ended December 31, 2000
- ------------------------------------
Revenue $37,313 $24,795 $14,982 $77,090
======= ======= ======= =======
Operating income 8,528 3,916 1,428 13,872
Unallocated other income, net 1,148
------
Income before income taxes 15,020
======
Three months ended December 31, 1999
- ------------------------------------
Revenue 35,902 23,737 10,455 70,094
======= ======= ======= =======
Operating income $ 4,415 $ 2,277 $ 848 $ 7,540
Unallocated other income, net 866
------
Income before income taxes $ 8,406
======
Note 6 Restructuring Charge
In October 1999, the Company announced discontinuance of its Healthcare
Receivables Management System ("HRMS") product line. As a result of exiting the
HRMS line of business, the Company recorded restructuring charges totaling
$1,674,000 in the first quarter ended December 31, 1999. The Company's
restructuring actions were completed under the plan by June 30, 2000. At the
fiscal year end of September 30, 2000, the Company had an outstanding provision
of $385,000 for restructuring charges included under other accrued liabilities.
Through the first quarter ended December 31, 2000, the Company made cash
payments of $221,000 and wrote off operating assets of $24,000, resulting in an
outstanding provision of $140,000 included under other accrued liabilities at
December 31, 2000.
The following table depicts the restructuring activity:
Payments to Write-down
Employees of Operating Payments on
Involuntarily Assets Cancelled
(in thousands) Terminated to Be Sold Contracts Total
- ------------------------------------------------------------------------------------------
Fiscal year 2000 provision $ 1,827 $ 263 $ 833 $2,923
Cash payments (1,806) (633) (2,439)
Write-down of operating assets (99) (99)
------- ----- ------- ------
Balance at September 30, 2000 21 164 200 385
Cash payments (21) (200) (221)
Write-down of operating assets (24) (24)
------- ----- ------- ------
Balance at December 31, 2000 $ -- $ 140 $ -- $ 140
======= ===== ======= ======
-8-
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
Certain statements contained in this Report which are not statements of
historical fact constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act (the "Act"). In addition, certain
statements in our future filings with the Securities and Exchange Commission, in
press releases, and in oral and written statements made by or with our approval
which are not statements of historical fact constitute forward-looking
statements within the meaning of the Act. Examples of forward-looking statements
include, but are not limited to: (i) projections of revenue, income or loss,
earnings or loss per share, the payment or nonpayment of dividends, capital
structure and other financial items; (ii) statements of our plans and objectives
or our management or Board of Directors, including those relating to products or
services; (iii) statements of future economic performance; and (iv) statements
of assumptions underlying such statements. Words such as "believes,"
"anticipates," "expects," "intends," "targeted," and similar expressions are
intended to identify forward-looking statements but are not the exclusive means
of identifying such statements. Forward-looking statements involve risks and
uncertainties which may cause actual results to differ from those in such
statements. Factors that could cause actual results to differ from those
discussed in the forward-looking statements include, but are not limited to,
those described in the "Risk Factors" section of this discussion and analysis.
Such forward-looking statements speak only as of the date on which statements
are made, and we undertake no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which such statement is
made to reflect the occurrence of unanticipated events or circumstances.
Business Overview
Fair, Isaac and Company, Incorporated is a global provider of analytics and
decision technology. In this Report, Fair, Isaac and Company, Inc. is referred
to as "we," "our," and "the Company". We provide products and services designed
to help a variety of businesses use data to make faster, more profitable
decisions on their marketing, customers, operations and portfolios. In fiscal
2000 we powered more than 12 billion decisions. Widely recognized for our
pioneering work in predictive technology, we develop, produce, market and
distribute advanced decision-making solutions to the financial services, retail,
telecommunications, e-business, insurance and other industries.
Our products include statistically derived, rule-based analytical tools;
software that automates strategy design and implementation; and consulting
services to help clients use and track the performance of those tools. We also
provide a range of credit scoring and credit account management services to
credit bureaus and credit card processing agencies, as well as data processing
and database management services to businesses engaged in direct marketing
activities, many of which are in the financial services and insurance
industries.
-9-
RESULTS OF OPERATIONS
Revenues
Effective October 1, 2000, we reorganized the operating structure of our
business segments. As a result, we changed to a global segment reporting
structure to align closely with our internal management reporting of our
business operations. There are three reportable segments: Global Data
Repositories and Processors, Global Financial Services and Other, which are
described below:
o Global Data Repositories and Processors. This segment consists of our
former Alliance Products and Services products, expanded beyond the
United States and Canadian markets to include these products
worldwide. This segment includes our credit scoring services
distributed through major credit bureaus, including the three major
credit bureaus in the United States--Trans Union Corporation, Experian
Information Solutions, Inc. and Equifax Inc., our credit account
management services distributed through third-party bankcard
processors worldwide, our ScoreNet and PreScore services, insurance
bureau scores, and other related products. The majority of these
services generate usage revenues.
o Global Financial Services. This segment is comprised principally of
the former Targeting and Prospecting products (data processing and
database management services for companies and organizations involved
in direct marketing), on a global basis, together with our Fair, Isaac
MarketSmart Decision System(TM), ClickPremium(TM), StrategyWare(R)and
TRIAD(TM)products. We are migrating some of our existing database
clients to the Fair, Isaac MarketSmart Decision System. Our Fair,
Isaac MarketSmart Decision System and ClickPremium products are sold
on a usage basis and the TRIAD and StrategyWare products are generally
sold to a single user on a fixed-price basis. Other Global Financial
Services products are sold under a combination of fixed-fee and
usage-based pricing.
o Other. This segment covers Analytics, LiquidCredit(TM), Retail, and
Telecommunications on a worldwide basis. Analytics products include
our custom models, custom software and related consulting projects
used for screening lists of prospective customers, evaluating
applicants for credit or insurance and managing existing credit
accounts. Our LiquidCredit products automate the processing of credit
applications including the implementation of our credit application
scoring models and include both our traditional products such as
CreditDesk(R)and one of our new products, LiquidCredit. Retail
products include the Fair, Isaac MarketSmart Decision System for the
retail market. Products in the Other segment are priced in various
ways. Our products developed specifically for a single user such as
our application and behavior scoring models (also known as "Analytic
Products," "scorecards" or "models") are generally sold on a
fixed-price basis. Software systems usually also have a component of
ongoing maintenance revenue, and CreditDesk and LiquidCredit systems
are sold under time or volume-based price arrangements.
Comparative segment revenues, operating income and related financial
information for this quarter and the corresponding period in fiscal 2000 are set
forth in Note 5 to the Consolidated Financial Statements.
-10-
The following table displays (a) the percentage of revenues by segment and
(b) the percentage change in revenues within each segment from the prior fiscal
year.
Period-to-Period
Percentage of Percentage Changes
Revenue Quarter Ended
Quarter Ended 12/31/00
December 31, Compared to
2000 1999 12/31/99
- --------------------------------------------------------------------------------
Global Data Repositories and Processors 48% 51% 4%
Global Financial Services 32% 34% 4%
Other 20% 15% 43%
---- ----
Total Revenues 100% 100% 10%
==== ====
The growth in Global Data Repositories and Processors revenues in the
current quarter compared to the same period in the prior fiscal year was
primarily due to increased revenues from services provided through bankcard
processors and the PreScore service. Revenues from services provided through
bankcard processors increased by approximately 26% compared to the same period
in the prior fiscal year. We believe this increase in revenues is due to
increases in the number of accounts at these processors attributable to
increased outsourcing of processing services by banks. These increases were
partially offset by decreased revenues derived from risk scoring services at the
credit bureaus. The slight decline in revenues for risk scoring services at the
credit bureaus primarily reflects the inclusion in the first quarter of the
prior fiscal year of certain revenues on a one-time basis that related to past
periods.
Revenues derived from alliances with credit bureaus and credit card
processors have accounted for most of our revenue growth in the last three
years. Revenues from services produced through credit bureaus increased 13% in
fiscal 2000 and 14% in fiscal 1999 and accounted for approximately 37% of
revenues in fiscal 2000 and 36% in fiscal 1999. Revenues from services provided
through bankcard processors also increased in each of these years, primarily due
to increases in the number of accounts at each of the major processors.
While we have been successful in extending or renewing our agreements with
credit bureaus and credit card processors in the past, and believe we will
likely be able to do so in the future, the loss of one or more such alliances or
an adverse change in terms could have a material adverse effect on revenues and
operating margin. In fiscal 2000, Trans Union Corporation accounted for
approximately 12% of our revenues and Equifax, Inc., approximately 10%. Revenues
generated through our alliances with Equifax, Experian and Trans Union each
accounted for approximately 8% to 10% in fiscal 1999.
The increases in revenues derived from Global Financial Services segment in
the current quarter compared with same period in fiscal 2000 were due primarily
to increased sales of StrategyWare and TRIAD products and sales of the new
ClickPremium product.
Percentage of revenues by principal product units in the Other segment are
as follows: Retail, Analytics, LiquidCredit, and Telecommunications. Increases
in revenues for the Other segment in the current quarter compared to the same
period in the prior fiscal year are primarily due to increases in sales of the
LiquidCredit category of products.
-11-
Expenses
The following table sets forth for the fiscal periods indicated (a) the
percentage of revenues represented by certain line items in our Consolidated
Statements of Income and Comprehensive Income and (b) the percentage change in
the amount of each such line item from the prior fiscal year.
Period-to-Period
Percentage of Revenue Percentage Changes
--------------------- ------------------
Quarter Ended
Quarter Ended 12/31/00
December 31, Compared
--------------------- to Quarter Ended
2000 1999 12/31/99
---- ---- -----------------
Revenues 100% 100% 10%
Costs and expenses:
Cost of revenues 41% 42% 7%
Research and development 9% 14% (28)%
Sales, general and administrative 31% 30% 14%
Amortization of intangibles 1% 1% 1%
Restructuring charge 0% 2% 100%
---- ----
Total costs and expenses 82% 89% 1%
---- ----
Income from operations 18% 11% 84%
Other income, net 1% 1% 33%
---- ----
Income before income taxes 19% 12% 79%
Provision for income taxes 8% 5% 79%
---- ----
Net income 11% 7% 79%
==== ====
Cost of revenues
Cost of revenues consists primarily of personnel directly involved in
creating revenue, travel and related overhead costs; costs of computer services
and the amounts paid to credit bureaus for scores and related information in
connection with the ScoreNet Service. As compared with the same quarter a year
earlier, the cost of revenues, as a percentage of revenues, decreased slightly
in the current quarter primarily due to elimination of costs relating to our
former Healthcare Receivables Management System ("HRMS") product line.
Research and development
Research and development expenses include the personnel and related
overhead costs incurred in new and existing product development, researching
mathematical and statistical models and developing software aimed at
improving productivity, profitability and management control. Research and
development expenditures in the current quarter, as a percentage of revenues,
were down as compared with the corresponding quarter of fiscal 2000, due
primarily to redeployment of research and development personnel to support roles
for our new products.
Sales, general and administrative
Sales, general and administrative expenses consist principally of employee
salaries and benefits, sales commissions, travel, overhead, advertising and
other promotional expenses, corporate facilities expenses, the costs of
administering certain benefit plans, legal expenses, business development, the
costs of operating administrative functions, such as finance and computer
information systems and compensation expenses for certain senior management. As
a percentage of revenues, these expenses for the current quarter increased
compared to the corresponding period of fiscal 2000, due primarily to increases
in personnel and software and hardware expenses.
-12-
Amortization of intangibles
We are amortizing the intangible assets arising from various acquisitions
over periods ranging from four to fifteen years.
Restructuring charge
In October 1999, we announced discontinuance of our HRMS product line. As a
result of exiting the HRMS line of business, we recorded restructuring charges
totaling $1,674,000 in the first quarter ended December 31, 1999. Our
restructuring actions were completed under the plan by June 30, 2000. At the
fiscal year end of September 30, 2000, we had an outstanding provision of
$385,000 for restructuring charges included under other accrued liabilities.
Through the first quarter ended December 31, 2000, we made cash payments of
$221,000 and wrote off operating assets of $24,000, resulting in an outstanding
provision of $140,000 included under other accrued liabilities at December 31,
2000. See Note 6 to the Consolidated Financial Statements for additional
information.
Other income and expense
Other income and expense consists mainly of interest income from
investments, interest expense, exchange rate gains/losses from holding foreign
currencies in bank accounts, and other non-operating items. Interest income,
derived from the investment of funds surplus to our immediate operating
requirements, increased significantly in the current quarter compared with the
corresponding period a year earlier due to higher balances invested in interest
bearing instruments, partially offset by interest expense related to a state tax
audit, our share of operating losses in an early stage development company that
is accounted for using the equity method and minimal foreign currency losses.
Provision for income taxes
The Company's effective tax rate was unchanged from 41.3% for the current
quarter compared to the same period in fiscal 2000.
Financial Condition
Working capital increased to $112,349,000 at December 31, 2000 from
$100,694,000 at September 30, 2000. Cash and marketable investments increased to
$102,214,000 at December 31, 2000 from $93,117,000 at September 30, 2000. The
Company's long-term obligations are mainly related to employee incentive and
benefit obligations.
In fiscal 1999, we initiated a stock repurchase program to purchase up to
one million shares of our common stock, to be funded by cash on hand. During
fiscal 2001, we repurchased approximately 425,000 shares at a cost of $19.8
million. Since the program was initiated we have purchased a total of 785,000
shares at an aggregate cost of $32.1 million. We intend to continue to evaluate
opportunities to repurchase shares under the program.
We believe that our current cash and cash equivalents, short-term cash
investments and cash expected to be generated from operations will be sufficient
to meet our working capital, capital expenditure, and investment needs for both
the current fiscal year and the foreseeable future.
European Economic and Monetary Union (EMU)
Under the European Union's plan for Economic and Monetary Union (EMU), the
euro becomes the sole accounting currency of EMU countries on January 1, 2002.
Its initial phase went into effect on January 1, 1999, in 11 participating
countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Portugal and Spain. In this initial phase the EMU
mandated that key financial systems be able to triangulate conversion rates so
that any amount booked will be logged and processed simultaneously in both the
local currency and euros. We believe that our computer systems and programs are
euro-compliant and have experienced no material disruptions to date. We also
believe the conversion to the euro will not have a material impact on our
consolidated financial results.
-13-
Risk Factors
Our revenues are dependent, to a great extent, upon general economic conditions
and more particularly, upon conditions in the consumer credit and the financial
services industries.
The majority of our revenues are derived from sales to the consumer credit
industry. In addition, during fiscal 2000, 24% of our revenues were derived
from financial services related products. A downturn in the consumer credit
industry or the financial services industry caused by increases in interest
rates or a tightening of credit, among other factors could harm our results of
operations. The revenue growth and profitability of our business depends on the
overall demand for our existing and new products, particularly in the product
segments in which we compete. Because our sales are primarily to major
corporations, our business also depends on general economic and business
conditions. A softening of demand for our decisioning solutions caused by a
weakening of the economy may result in decreased revenues or lower growth rates.
In particular, one of the challenges we face in promoting future growth in
revenues is the successful refocusing of our marketing and sales efforts to our
new initiatives. There can be no assurances that we will be able to effectively
promote future revenue growth in our business. Since 1990, while the rate of
account growth in the U S bankcard industry has been slowing and many of our
largest institutional clients have merged and consolidated, we have generated
most of our revenue growth from our bankcard-related scoring and account
management business by cross-selling our products and services to large banks
and other credit issuers. As this industry continues to consolidate, we may have
fewer opportunities for revenue growth.
Quarterly operating results have varied significantly in the past and this
unpredictability will likely continue in the future.
Our revenues and operating results have varied significantly in the past.
We expect fluctuations in our operating results to continue for the foreseeable
future. Consequently, we believe that period-to-period comparisons of our
financial results should not be relied upon as an indication of future
performance. It is possible that in some future periods our operating results
may fall below the expectations of market analysts and investors, and in this
event the market price of our common stock would likely fall. Factors that
affect our revenues and operating results include the following:
o Decrease in recurring revenues
o The lengthy sales cycle of many of our products
o Failure of our target markets and customers to accept our new products
o Our ability to successfully and timely develop, introduce and market
new products and product enhancements
o The timing of our new product announcements and introductions in
comparison with our competitors
o Changes in the level of our operating expenses
o Competitive conditions in the consumer credit industry
o Competitive conditions in the financial services industry
o Domestic and international economic conditions
o Changes in prevailing technologies
o Acquisition-related expenses and charges
o Timing of orders for and deliveries of certain software systems
o Increased operating expenses related to the development of products
for the Internet and
o Other factors unique to our product lines
With the exception of the cost of ScoreNet data purchased by us, most of
our operating expenses are not affected by short-term fluctuations in revenues;
thus, short-term fluctuations in revenues may have a significant impact on
operating results.
-14-
Our ability to increase our revenues is highly dependent upon the introduction
of new products and services and if our products and services are not accepted
by the marketplace, our business may be harmed.
We have a significant share of the available market for our traditional
products and services, such as the products and services included in our Global
Data Repositories and Processors segment. To increase our revenues, we must
enhance and improve existing products and continue to introduce new products and
new versions of existing products that keep pace with technological
developments, satisfy increasingly sophisticated customer requirements and
achieve market acceptance. We believe much of our future growth prospects will
rest on our ability to expand into newer markets for our products and services,
such as direct marketing, insurance, small business lending, retail and
telecommunications. If our current or potential customers are not willing to
switch to or adopt our electronic commerce solution, our growth and revenues
will be limited. The failure to generate a large customer base for our new
products would harm our ability to grow and increase revenues. This failure
could occur for several reasons. Some of our business-to-business electronic
commerce competitors charge their customers large fees upon the execution of
customer agreements. Businesses that have made substantial up-front payments to
our competitors for electronic commerce solutions may be reluctant to replace
their current solution and adopt our solution. As a result, our efforts to
create a larger customer base may be more difficult than expected even if we are
deemed to offer products and services superior to those of our competitors.
Further, because the business-to-business electronic commerce market is new and
underdeveloped, potential customers in this market may be confused or uncertain
about the relative merits of each electronic commerce solution or which
electronic commerce solution to adopt, if any. Confusion and uncertainty in the
marketplace may inhibit current or potential customers from adopting our
solution, which could harm our business, operating results and financial
condition.
There are significant risks associated with the introduction of new products.
Significant undetected errors or delays in new products or new versions of
a product, especially in the area of customer relationship management, may
affect market acceptance of our products and could harm our business, results of
operations or financial position. If we were to experience delays in the
commercialization and introduction of new or enhanced products, if customers
were to experience significant problems with the implementation and installation
of products, or if customers were dissatisfied with product functionality or
performance, our business, results of operations or financial position could be
harmed.
There can be no assurance that our new products will achieve significant
market acceptance or will generate significant revenue. Additional products that
we plan to directly or indirectly market in the future are in various stages of
development. We are expanding our technology into a number of new business areas
to foster long-term growth, including exchanges for a number of business
procurement needs, Internet/electronic commerce, online business services and
Internet computing. These areas are relatively new to our product development
and sales and marketing personnel. There is no assurance that we will compete
effectively or will generate significant revenues in these new areas. The
success of Internet computing and, in particular, our current Internet computing
software products is difficult to predict because Internet computing represents
a method of computing that is relatively new to the computer industry. The
successful introduction of Internet computing to the market will depend in large
measure on (i) the lower cost of ownership of Internet computing relative to
client/server architecture, (ii) the ease of use and administration relative to
client/server architecture, and (iii) the means by which hardware and software
vendors choose to compete in this market. There can be no assurances that
sufficient numbers of vendors will undertake this commitment, that the market
will accept Internet computing or that Internet computing will generate
significant revenues for us.
Failure to obtain data from our clients to update and redevelop or to
create new models could harm our business.
Updates of models and development of new and enhanced models depend to a
significant extent on availability of statistically relevant data. Such data is
usually obtained under agreements with our clients. Refusals by clients to
provide such data or to obtain permission of their customers to provide such
data, and privacy and data protection restrictions, could result in loss of
access to required data.
-15-
Our business and the business of our clients is subject to government regulation
and changes in regulation.
Our current and prospective clients, which primarily consist of credit
bureaus, credit card processors, state and federally chartered banks, savings
and loan associations, credit unions, consumer finance companies and other
consumer lenders, as well as customers in the industries that we may target in
the future, operate in markets that are subject to extensive and complex federal
and state regulations. While we may not be directly subject to such regulations,
our products and services must be designed to work within the extensive and
evolving regulatory constraints in which our clients operate and to meet our
client expectations with respect to handling data in conformity with applicable
data protection laws. These constraints include federal and state
truth-in-lending disclosure rules, state usury laws, the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Community Reinvestment Act
and the Financial Services Modernization Act of 1999.
Amendments to the federal Fair Credit Reporting Act (which became law in
September 1997) expressly permits the use of credit bureau data to prescreen
consumers for offers of credit and insurance and allows affiliated companies to
share consumer information with each other subject to certain conditions. These
amendments impose a seven-year moratorium on new state legislation on certain
issues; however, score disclosure regulation by states is not pre-empted under
this legislation and the states remain free to regulate the use of credit bureau
data in connection with insurance underwriting.
On September 30, 2000, the Score Disclosure Statute was signed into law in
California and is the first legislation to require the disclosure of credit risk
scores. The Score Disclosure Statute becomes effective July 1, 2001, and imposes
significant new requirements on credit reporting agencies and residential
creditors and brokers to disclose credit risk scores. In addition, there are
several pending federal score disclosure bills and other states may follow
California's lead and pass score disclosure legislation. In September 2000, we
initiated the FICO Guide service which delivers to lenders and brokers a
personalized explanation of the factors considered in a given consumer's FICO
score, and suggestions on how to improve the score over time.
We believe enacted or proposed state regulation of the insurance industry
has had some detrimental impact on our efforts to sell insurance risk scores
through credit reporting, but state regulation has not prevented growth of such
sales. Examples of recent legislation include legislation pending in Missouri
that would prohibit sole use of credit information in the issuance, renewal, and
cancellation of policies covering private passenger automobiles and a
Connecticut law that will not allow use of credit inquiries in a model used in
insurance underwriting.
Providing an individual with control over what personal information a
business collects and uses is a growing, global trend. The recent Financial
Services Modernization Act of 1999 (Gramm-Leach-Bliley Act) includes several
privacy provisions and introduces new controls over the transfer and use of
individual data by financial institutions. Additional federal legislation is
proposed. In addition over 400 state privacy bills are pending. On the
International front, in the European Union (EU), the Data Protection Directive
became effective October 1998 and places strict controls on the collection, use
and transfer of personal data. We have registered under the US Safe Harbor
provisions in the UK, pledging to meet the EU level of adequate protection for
personal data, have another registration pending in Spain and are evaluating the
desirability of registering in other countries. We expect increased costs of
compliance with these regulations but such costs are not expected to have a
material impact on our results of operation or financial condition.
Furthermore, some consumer groups have expressed concern regarding the
privacy and security of automated credit processing, the use of automated credit
scoring tools in credit underwriting and whether electronic lending is a
desirable technological development in light of the current level of consumer
debt.
The failure of our products and services to support customers' compliance
with current regulations and to address changes in customers' regulatory
environment, or our failure to comply with current regulations or adapt to
changes in regulatory environment, in an efficient and cost-effective manner,
could harm our business, results of operations and financial condition.
-16-
Our operations outside the United States subject us to unique risks that may
harm our results of operations.
A growing portion of our revenues is derived from international sales.
During the last fiscal year, we received approximately 19% of our revenues from
business outside the United States. As part of our growth strategy, we plan to
continue to pursue opportunities outside the United States. Accordingly, our
future operating results could be negatively affected by a variety of factors,
some of which are beyond our control. These factors include:
o The general economic conditions in each country
o Incongruent tax structures
o Difficulty in managing an organization spread over various countries
o Compliance with a variety of foreign laws and regulations
o Import and export licensing requirements
o Trade restrictions and tariffs
o Longer payment cycles and
o Volatile exchange rates for foreign currencies
There can be no assurances that we will be able to successfully address
each of these challenges in the near term. Although some of our business is
conducted in currencies other than the US dollar, foreign currency translation
gains and losses are not currently material to our position, results of
operations or cash flows. However, an increase in our foreign revenues could
subject us to foreign currency translation risks in the future. We have found it
to be impractical to hedge all foreign currencies in which we conduct business.
As a result, we have experienced non-material foreign currency gains and losses
and may continue to do so.
If we do not recruit and retain qualified personnel, our business could be
harmed.
Our continued growth and success depend to a significant extent on the
continued service of our senior management and other key research, development,
sales and marketing personnel and the hiring of new qualified personnel.
Competition for highly skilled business, product development, technical and
other personnel is becoming more intense due to lower overall unemployment
rates, the dramatic increase in information technology spending and private
companies that can offer equity incentives that provide the potential for
greater compensation in connection with an initial public offering. Accordingly,
we expect to experience increased compensation costs that may not be offset
through either improved productivity or higher prices. There can be no
assurances that we will be successful in continually recruiting new personnel
and in retaining existing personnel. In general, we do not have long-term
employment or non-competition agreements with our employees. The loss of one or
more key employees or our inability to attract additional qualified employees or
retain other employees could harm our continued growth.
Over the long term, our rate of revenue growth is likely to be limited by
the rate at which we can recruit and absorb additional professional staff. We
believe this constraint will continue to exist indefinitely. At times we may
forego short-term revenue growth in order to devote limited resources to
opportunities that we believe have exceptional long-term potential. This is the
basis for our strategic focus of becoming an e-business company and implementing
new growth initiatives targeted at the retail and telecommunications markets.
We rely upon our proprietary technology rights and if we are unable to protect
them, our business could be harmed.
Because the protection of our proprietary technology is limited, our
proprietary technology could be used by others without our consent. Our success
depends, in part, upon our proprietary technology and other intellectual
property rights. To date, we have relied primarily on a combination of
copyright, patent, trade secret, and trademark laws, and nondisclosure and other
contractual restrictions on copying and distribution to protect our proprietary
technology. We have only seven patent applications and no issued patents to
date. We cannot assure you that our means of protecting our intellectual
property rights in the United States or abroad will be adequate or that others,
including our competitors, will not use our proprietary technology without our
consent. Furthermore, litigation may be necessary to enforce our intellectual
property rights, to protect our trade secrets, to determine the validity and
scope of the proprietary rights of others, or to defend against claims of
infringement or invalidity. Such litigation could result in substantial costs
and diversion of resources and could harm our business, operating results and
financial condition.
-17-
We may be subject to possible infringement claims that could harm our business.
With recent developments in the law that permit patentability of business
methods, we expect that products in the industry segments in which we compete
will increasingly be subject to such claims as the number of products and
competitors in our industry segments grow and the functionality of products
overlaps. In addition, we expect to receive more patent infringement claims as
companies increasingly seek to patent their software, also in light of recent
developments in the law that extend the ability to patent software. Regardless
of the merits, responding to any such claim could be time-consuming, result in
costly litigation and require us to enter into royalty and licensing agreements
which may not be offered or available on terms acceptable to us. If a successful
claim is made against us and we fail to develop or license a substitute
technology, our business, results of operations or financial position could be
harmed.
Security is important to our business, and breaches of security, or the
perception that e-commerce is not secure could harm our business.
Internet-based, business-to-business electronic commerce requires the
secure transmission of confidential information over public networks. Security
breaches of networks on which netsourced products are used or well-publicized
security breaches affecting the Internet in general, could significantly harm
our business, operating results and financial condition. We cannot be certain
that advances in computer capabilities, new discoveries in the field of
cryptography, or other developments will not result in a compromise or breach of
the models we use to protect content and transactions on the networks on which
the netsourced products or proprietary information in our databases. Anyone who
is able to circumvent our security measures could misappropriate proprietary,
confidential customer information or cause interruptions in our operations. We
may be required to incur significant costs to protect against security breaches
or to alleviate problems caused by such breaches. Further, a well-publicized
compromise of security could deter people from using the Internet to conduct
transactions that involve transmitting confidential information.
We are dependent upon major contracts with credit bureaus.
A substantial portion of our revenues is derived from contracts with the
three major credit bureaus with usual terms of five years or less. In the last
fiscal year, these contracts accounted for approximately 30% of our revenues. If
we are unable to renew any of these contracts on the same or similar terms with
one or more of these credit bureaus, our revenues and results of operations may
be harmed.
We may incur risks related to acquisitions or significant investment in
businesses.
As part of our business strategy, we have made in the past and may make in
the future acquisitions of, or significant investments in, businesses that offer
complementary products, services and technologies. Although we do not currently
have plans to do so, any acquisitions or investments will be accompanied by the
risks commonly encountered in acquisitions of businesses. Such risks include,
among other things, the possibility that we will pay much more than the acquired
company or assets are worth, the difficulty of assimilating the operations and
personnel of the acquired businesses, the potential product liability associated
with the sale of the acquired company's products, the potential disruption of
our ongoing business, the distraction of management from our business, the
inability of management to maximize our financial and strategic position,
the maintenance of uniform standards, controls, procedures and policies and the
impairment of relationships with employees and clients as a result of any
integration of new management personnel. These factors could harm our business,
results of operations or financial position, particularly in the case of a
larger acquisition. Consideration paid for future acquisitions, if any, could be
in the form of cash, stock, rights to purchase stock or a combination thereof.
Dilution to existing stockholders and to earnings per share may result in
connection with any such future acquisitions.
-18-
Backlog orders may be cancelled or delayed.
There is no assurance that backlog will result in revenues. We believe that
increased revenue growth in fiscal 2001 and later years will depend to a
significant extent on sales of newly developed products.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Disclosures. The following discussion about our market risk
disclosures involves forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements. We are
exposed to market risk related to changes in interest rates, foreign currency
exchange rates and equity security price risk. We do not use derivative
financial instruments for speculative or trading purposes.
Interest Rate Sensitivity. We maintain an investment portfolio consisting
mainly of income securities with an average maturity of less than five years.
These available-for-sale securities are subject to interest rate risk and will
fall in value if market interest rates increase. We have the ability to hold our
fixed income investments until maturity, and therefore we would not expect its
operating results or cash flows to be affected to any significant degree by the
effect of a sudden change in market interest rates on its securities portfolio.
We believe foreign currency and equity risk is not material.
The following table presents the principal amounts and related
weighted-average yields for our fixed rate investment portfolio at December 31,
2000:
Carrying Average
Amounts Yield
------- -----
Cash and cash equivalents:
Commercial paper $25,024,200 6.34%
Money market funds 2,367,704 6.30%
-----------
27,391,904 6.34%
-----------
Short-term investments:
US government obligations 39,739,000 6.06%
Long-term investments:
US government obligations 21,773,224 5.53%
-----------
Total $88,904,777
===========
-19-
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
Set forth below is information concerning each matter submitted to a vote
at the Annual Meeting of Stockholders held on February 6, 2001.
Election of Directors
Broker
Matter For Withheld Against Abstain Non-votes
- ------ --- -------- ------- ------- ---------
A. George Battle 12,496,084 822,772 N/A N/A 0
Tony J. Christianson 12,782,022 536,834 N/A N/A 0
Thomas G. Grudnowski 12,483,659 835,197 N/A N/A 0
Philip G. Heasley 12,425,052 893,804 N/A N/A 0
Guy R. Henshaw 12,808,359 510,497 N/A N/A 0
David S.P. Hopkins 12,848,906 469,950 N/A N/A 0
Robert M. Oliver 12,890,831 428,025 N/A N/A 0
Robert D. Sanderson 12,483,154 835,702 N/A N/A 0
Margaret L. Taylor 12,819,316 499,540 N/A N/A 0
Amendment to the Restated Certificate of Incorporation, as amended, to Eliminate
Cumulative Voting in the Election of Directors
The stockholders did not approve the Amendment to the Restated Certificate
of Incorporation, as amended, to eliminate cumulative voting in the election of
directors (with 5,826,573 affirmative votes, 5,506,426 negative votes, 30,811
votes abstaining, and 1,955,046 broker non-votes). Approval required a vote of
the majority of the stockholders.
Ratification of Auditors
The stockholders ratified the appointment of KPMG LLP as the Company's
independent auditors for the fiscal year ended December 31,2001 (with 12,586,776
affirmative votes, 723,855 negative votes, and 8,225 votes abstaining).
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3.1 Amended and Restated Bylaws
(b) Reports on Form 8-K:
One report on Form 8-K was filed during the quarter ended December 31, 2000
which stated the date, time and location of the Annual Meeting of Stockholders
of the Company in fiscal 2001.
-20-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FAIR, ISAAC AND COMPANY, INCORPORATED
DATE: February 14, 2001
By /s/ Henk J. Evenhuis
----------------------------------
Henk J. Evenhuis
Executive Vice President, Finance
and Chief Financial Officer
-21-
EXHIBIT INDEX
TO FAIR, ISAAC AND COMPANY, INCORPORATED
REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2000
Exhibit No. Exhibit
- ----------- -------
3.1 Amended and Restated Bylaws
-22-
BY-LAWS
OF
FAIR, ISAAC AND COMPANY, INCORPORATED
(as amended and restated effective February 6, 2001)
ARTICLE I
Offices
1.1 Registered Office. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
1.2 Additional Offices. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
Stockholders
2.1 Annual Meetings. An annual meeting of stockholders shall be held for
the election of directors and scheduled for the first Tuesday of February of
each year, at 10:00 A.M. or, should such day fall upon a legal holiday, at the
same time on the next business day thereafter that is not a legal holiday, or at
such other date and time as may be designated by the Board of Directors from
time to time. The annual meeting of stockholders may be held at such place
either within or without the State of Delaware, or by means of remote
communication, as may be designated by the Board of Directors from time to time;
in the absence of any such designation, the annual meeting shall be held at the
principal executive offices of the Corporation. At such meeting, the
stockholders shall elect directors and transact such other business as may be
properly brought before the meeting.
To be properly brought before the annual meeting, business must be either
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder of record. In
addition to any other applicable requirements, for business to be properly
brought before the annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a stockholder's notice must be delivered by a nationally recognized
courier service or mailed by first class United States mail, postage or delivery
charges prepaid, and received at the principal executive offices of the
Corporation, addressed to the attention of the Secretary of the Corporation, not
less than 60 days nor more than 90 days prior to the scheduled date of the
meeting (regardless of any postponements, deferrals or adjournments of that
meeting to a later date); provided, however, that in the event that the annual
meeting is held at a date other than the first Tuesday of February, or the next
business day if such Tuesday is a legal holiday and less than 70 days' notice or
prior public disclosure of the date of the scheduled meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the earlier of (a) the close of business on the 10th day following
the day on which such notice of the date of the scheduled annual meeting was
mailed or such public disclosure was made, whichever first occurs, and (b) two
days prior to the date of the scheduled meeting. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class, series and number of
shares of the Corporation that are owned beneficially by the stockholder, and
-1-
(iv) any material interest of the stockholder in such business. Notwithstanding
anything in these by-laws to the contrary, no business shall be conducted at the
annual meeting except in accordance with the procedures set forth in this
Section 2.1; provided, however, that nothing in this Section 2.1 shall be deemed
to preclude discussion by any stockholder of any business properly brought
before the annual meeting.
The Chairman of the Board of Directors (or such other person presiding at
the meeting in accordance with Section 2.7 of these by-laws) shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section
2.1, and if he or she should so determine, he or she shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
2.2 Special Meetings. Special meetings of stockholders may be called at any
time only by the Chairman of the Board of Directors, if any, the Vice Chairman
of the Board of Directors, if any, the President or the Board of Directors, to
be held at such date, time and place (if any) as may be stated in the notice of
the meeting. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice of the meeting.
2.3 Notice of Meetings. Whenever stockholders are required or permitted to
take any action at a meeting, notice of the meeting shall be given in accordance
with Section 2.4 which shall state the place (if any), date and hour of the
meeting, the means of remote communication (if any) by which stockholders and
proxyholders may be deemed to be present in person and vote at such meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise provided by law, the notice of any meeting shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
2.4 Manner Of Giving Notice. Notice of any meeting of stockholders shall be
given personally, by mail, by electronic transmission or by other written
communication, addressed to the stockholder at the address, number, electronic
mail address or other location of that stockholder appearing on the books of the
Corporation or given by the stockholder to the Corporation for the purpose of
notice. If no such address, number, email address or other location appears on
the Corporation's books or is given, notice shall be deemed to have been given
if sent to that stockholder by mail or telegraphic or other written
communication to the Corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or, if sent by electronic
transmission, as follows: (i) if by facsimile telecommunication, when directed
to a number at which the stockholder has consented to receive notice, (ii) if by
electronic mail, when directed to an electronic mail address at which the
stockholder has consented to receive notice, (iii) if by a posting on an
electronic network together with separate notice to the stockholder of such
specific posting, upon the later of (a) such posting and (b) the giving of such
separate notice, and (iv) if by any other form of electronic transmission, when
directed to the stockholder.
An affidavit of mailing or of electronic transmission of any notice or
report in accordance with the provisions of this Section 2.4, executed by the
Secretary, Assistant Secretary or any transfer agent or other agent, shall be
prima facie evidence of the giving of the notice.
2.5 Adjournments. Any meeting of stockholders, annual or special, may
adjourn from time to time to reconvene at the same or some other place (if any),
and notice need not be given of any such adjourned meeting if the time and place
(if any) thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the Corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.6 Quorum. At each meeting of stockholders, except where otherwise
provided by law or the certificate of incorporation or these by-laws, the
holders of a majority of the outstanding shares of each class of stock entitled
to vote at the meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, two or more classes or
series of stock shall be considered a single class if the holders thereof are
entitled to vote together as a single class at the meeting. In the absence of a
quorum the stockholders so present may, by majority vote, adjourn the meeting
-2-
from time to time in the manner provided by Section 2.5 of these by-laws until a
quorum shall attend. Shares of its own capital stock belonging on the record
date for the meeting to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
If authorized by the Board of Directors in its sole discretion, and subject
to such guidelines and procedures as the Board of Directors may adopt,
stockholders and proxyholders not physically present at a meeting of
stockholders may, by means of remote communication:
(1) participate in a meeting of stockholders; and
(2) be deemed present in person and vote at a meeting of stockholders
whether such meeting is to be held at a designated place or solely by means
of remote communication, provided that (i) the Corporation shall implement
reasonable measures to verify that each person deemed present and permitted
to vote at the meeting by means of remote communication is a stockholder or
proxyholder, (ii) the Corporation shall implement reasonable measures to
provide such stockholders and proxyholders a reasonable opportunity to
participate in the meeting and to vote on matters submitted to the
stockholders, including an opportunity to read or hear the proceedings of
the meeting substantially concurrently with such proceedings, and (iii) if
any stockholder or proxyholder votes or takes other action at the meeting
by means of remote communication, a record of such vote or other action
shall be maintained by the Corporation.
2.7 Organization. Meetings of stockholders shall be presided over by the
Chairman of the Board of Directors, if any, or in the absence of the Chairman of
the Board of Directors by the President, or in the absence of the President by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, or in the absence of the Secretary by an Assistant Secretary, or in
their absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
2.8 Voting; Proxies. Unless otherwise provided in the certificate of
incorporation, each stockholder entitled to vote at any meeting of stockholders
shall be entitled to one vote for each share of stock held by such stockholder
which has voting power upon the matter in question. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for such stockholder by proxy, but no such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting, whether in person or by
other means provided for in these by-laws or the certificate of incorporation,
and voting or by filing an instrument in writing revoking the proxy or another
duly executed proxy bearing a later date with the Secretary of the Corporation.
Voting at meetings of stockholders need not be by written ballot and need not be
conducted by inspectors unless the holders of a majority of the outstanding
shares of all classes of stock entitled to vote thereon present in person or by
proxy at such meeting shall so determine. If authorized by the Board of
Directors, votes may be submitted by electronic transmission, provided that any
such electronic transmission must either set forth or be submitted with
information from which it can be determined that the electronic transmission was
authorized by the stockholder or proxyholder. At all meetings of stockholders
for the election of directors a plurality of the votes cast shall be sufficient
to elect. With respect to other matters, unless otherwise provided by law or by
the certificate of incorporation or these by-laws, the affirmative vote of the
holders of a majority of the shares of all classes of stock present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders, provided that (except as otherwise
required by law or by the certificate of incorporation) the Board of Directors
may require a larger vote upon any such matter. Where a separate vote by class
is required, the affirmative vote of the holders of a majority of the shares of
each class present in person or represented by proxy at the meeting shall be the
act of such class, except as otherwise provided by law or by the certificate of
incorporation or these by-laws.
-3-
2.9 Fixing Date for Determination of Stockholders of Record. In order that
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. If no record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
2.10 List of Stockholders Entitled To Vote. The Secretary shall prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Nothing contained herein shall
require the Corporation to include electronic mail address or other electronic
contact information on such list. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting for a period of at least
ten days prior to the meeting: (i) on a reasonably accessible electronic
network, provided that the information required to gain access to such list is
provided with the notice of the meeting, or (ii) during ordinary business hours
at the principal place of business of the Corporation. In the event the meeting
is to be held at a place, the list shall be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. If the meeting is to be held solely by means of
remote communication, then the list shall also be open to examination of any
stockholder during the whole time of the meeting on a reasonably accessible
electronic network, and the information required to access such list shall be
provided with the notice of the meeting.
2.11 Consent of Stockholders in Lieu of Meeting. Unless otherwise provided
in the certificate of incorporation, any action required by law to be taken at
any annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
Board of Directors
3.1 Powers; Number; Qualifications. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the certificate of
incorporation. The number of directors which shall constitute the Board of
Directors shall be nine (9). Directors need not be stockholders.
3.2 Election; Term of Office; Resignation; Removal; Vacancies; Nominations.
Each director shall hold office until the annual meeting of stockholders next
succeeding his or her election and until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any director may
resign at any time upon notice in writing or electronic transmission to the
Board of Directors or to the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
-4-
to make it effective. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. Unless otherwise provided in the
certificate of incorporation or these by-laws, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
or from any other cause may be filled by a majority of the directors then in
office, although less than a quorum, or by the sole remaining director.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for election
to the Board of Directors at the annual meeting, by or at the direction of the
Board of Directors, may be made by any Nominating Committee or person appointed
by the Board of Directors; nominations may also be made by any stockholder of
record of the Corporation entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in this Section 3.2.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered by a
nationally recognized courier service or mailed by first class United States
mail, postage or delivery charges prepaid, and received at the principal
executive offices of the Corporation addressed to the attention of the Secretary
of the Corporation not less than 60 days nor more than 90 days prior to the
scheduled date of the meeting (regardless of any postponements, deferrals or
adjournments of that meeting to a later date); provided, however, that, in the
case of an annual meeting and in the event that the annual meeting is held at a
date other than the first Tuesday of February, or the next business day if such
Tuesday is a legal holiday and less than 70 days' notice or prior public
disclosure of the date of the scheduled meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the earlier of (a) the close of business on the 10th day following
the day on which such notice of the date of the scheduled meeting was mailed or
such public disclosure was made, whichever first occurs, or (b) two days prior
to the date of the scheduled meeting. Such stockholder's notice to the Secretary
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or reelection as a director, (i) the name, age, business address
and residence address of the person, (ii) the principal occupation or employment
of the person, (iii) the class, series and number of shares of capital stock of
the Corporation that are owned beneficially by the person, (iv) a statement as
to the person's citizenship, and (v) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Section 14 of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder; and (b)
as to the stockholder giving the notice, (i) the name and record address of the
stockholder and (ii) the class, series and number of shares of capital stock of
the Corporation that are owned beneficially by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein.
In connection with any annual meeting, the Chairman of the Board of
Directors (or such other person presiding at such meeting in accordance with
Section 2.7 of these by-laws) shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he or she should so determine, he or she shall so declare to
the meeting and the defective nomination shall be disregarded.
3.3 Regular meetings. Regular meetings of the Board of Directors may be
held at such places within or without the State of Delaware and at such times as
the Board of Directors may from time to time determine, and if so determined
notice thereof need not be given.
3.4 Special Meetings. Special meetings of the Board of Directors may be
held at any time or place within or without the State of Delaware whenever
called by the Chairman of the Board of Directors, if any, by the Vice Chairman
of the Board of Directors, if any, by the President or by any two directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.
3.5 Participation in Meetings by Conference Telephone Permitted. Unless
otherwise restricted by the certificate of incorporation or these by-laws,
members of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors or of such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
-5-
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
3.6 Quorum; Vote Required for Action. At all meetings of the Board of
Directors one third of the entire Board of Directors, but not less than two
shall constitute a quorum for the transaction of business. The vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors unless the certificate of
incorporation or these by-laws shall require a vote of a greater number. In case
at any meeting of the Board of Directors a quorum shall not be present, the
members of the Board of Directors present may adjourn the meeting from time to
time until a quorum shall attend.
3.7 Organization. Meetings of the Board of Directors shall be presided over
by the Chairman of the Board of Directors, if any, or in the absence of the
Chairman of the Board of Directors by the Vice Chairman of the Board of
Directors, if any, or in the absence of the Vice Chairman of the Board of
Directors by the President, or in their absence by a chairman chosen at the
meeting. The Secretary, or in the absence of the Secretary an Assistant
Secretary, shall act as secretary of the meeting, but in the absence of the
Secretary and any Assistant Secretary the chairman of the meeting may appoint
any person to act as secretary of the meeting.
3.8 Action by Directors Without a Meeting. Unless otherwise restricted by
the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or of such committee, as the case may be, consent thereto in writing
or electronic transmission, and the writing or writings or electronic
transmission or transmissions are filed with the minutes of proceedings of the
Board of Directors or committee. All such actions by written consent or
electronic transmission shall have the same force and effect as a unanimous vote
of such directors.
3.9 Compensation of Directors. The Board of Directors shall have the
authority to fix the compensation of directors.
ARTICLE IV
Committees
4.1 Executive Committee. The Board of Directors may, by resolution approved
by at least a majority of the authorized number of directors, establish and
appoint one or more members of the Board of Directors to constitute an Executive
Committee (the "Executive Committee"), with such powers as may be expressly
delegated to it by resolution of the Board of Directors. The Executive Committee
shall act only in the intervals between meetings of the Board of Directors and
shall be subject at all times to the control of the Board of Directors.
4.2 Committees. In addition to the Executive Committee, the Board of
Directors may, by resolution passed by a majority of the whole Board of
Directors, designate one or more other committees, each committee to consist of
one or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in place of any
such absent or disqualified member. Any such committee, to the extent provided
in the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall have
power or authority in reference to amending the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
-6-
of Directors as provided in Section 151(a) of the General Corporation Law of
Delaware fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of
dissolution, removing or indemnifying directors or amending these by-laws; and,
unless the resolution expressly so provides, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock
or adopt a certificate of ownership and merger.
4.3 Committee Rules. Unless the Board of Directors otherwise provides, the
committee designated by the Board of Directors may adopt, amend and repeal rules
for the conduct of its business. In the absence of a provision by the Board of
Directors or a provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of a majority of
the members present at a meeting at the time of such vote if a quorum is then
present shall be the act of such committee, and in other respects each committee
shall conduct its business in the same manner as the Board of Directors conducts
its business pursuant to Article III of these by-laws.
ARTICLE V
Officers
5.1 Officers; Election. As soon as practicable after the annual meeting of
stockholders in each year, the Board of Directors shall elect a President and a
Secretary, and it may, if it so determines, elect from among its members a
Chairman of the Board of Directors. The Board of Directors may also elect one or
more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such
other officers as the Board of Directors may deem desirable or appropriate and
may give any of them such further designations or alternate titles as it
considers desirable. Any number of offices may be held by the same person;
provided, however, that the offices of President and Secretary shall not be held
by the same person.
5.2 Term of Office; Resignation; Removal; Vacancies. Except as otherwise
provided in the resolution of the Board of Directors electing any officer, each
officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his or her election,
and until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Board of Directors or to the President or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. The Board of Directors may remove any officer
with or without cause at any time. Any such removal shall be without prejudice
to the contractual rights of such officer, if any, with the Corporation, but the
election of an officer shall not of itself create contractual rights. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise may be filled for the unexpired portion of the term by the
Board of Directors at any regular or special meeting.
5.3 Powers and Duties. The officers of the Corporation shall have such
powers and duties in the management of the Corporation as shall be stated in
these by-laws or in a resolution of the Board of Directors which is not
inconsistent with these by-laws and, to the extent not so stated, as generally
pertain to their respective offices, subject to the control of the Board of
Directors. The Board of Directors may require any officer, agent or employee to
give security for the faithful performance of his or her duties.
5.4 Chairman of the Board of Directors. The Chairman of the Board of
Directors, if there shall be such an officer, shall, if present, preside at all
meetings of the Board of Directors and exercise and perform such other powers
and duties as may be from time to time assigned to him by the Board of Directors
or prescribed by the by-laws.
5.5 President. The President shall be the chief executive officer of the
Corporation. Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board of Directors, if there be such
an officer, and subject to the provisions of these by-laws and to the direction
of the Board of Directors, the President shall have supervision over and may
exercise general executive powers of the business and affairs of the Corporation
and shall perform all duties and have all powers which are commonly incident to
the office of chief executive or which are delegated to him by the Board of
-7-
Directors. He shall have power to sign all stock certificates, contracts and
other instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation. The President shall be ex officio, a member of all the standing
committees, including the Executive Committee. In the absence of the Chairman of
the Board of Directors, the President shall preside at all meetings of the Board
of Directors.
5.6 Vice President. In the absence of the President or in his inability or
refusal to act, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated by the directors, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
5.7 Secretary. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
5.8 Assistant Secretary. The Assistant Secretary, or if there be more than
one, the Assistant Secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
5.9 Treasurer. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as Treasurer
and of the financial condition of the Corporation.
5.10 Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
ARTICLE VI
Stock
6.1 Certificates. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by or in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, if any, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the Corporation, certifying the
number of shares owned by such holder in the Corporation. If such certificate is
manually signed by one officer or manually countersigned by a transfer agent or
-8-
by a registrar, any other signature on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if such person were such
officer, transfer agent or registrar at the date of issue.
Upon the face or back of each stock certificate issued to represent any
partly paid shares, or upon the books and records of the Corporation in the case
of uncertificated partly paid shares, shall be set forth the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
If the Corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such owner's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
6.3 Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertified shares such uncertified shares shall be
canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation.
6.4 Fixing Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
6.5 Registered Stockholders. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE VII
Miscellaneous
7.1 Fiscal Year. The fiscal year of the Corporation shall be determined by
the Board of Directors.
-9-
7.2 Seal. The Corporation may have a corporate seal which shall have the
name of the Corporation inscribed thereon and shall be in such form as may be
approved from time to time by the Board of Directors. The corporate seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
7.3 Waiver of Notice of Meetings of Stockholders, Directors and Committees.
Whenever notice is required to be given by law or under any provision of the
certificate of incorporation or these by-laws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice unless so required by the certificate of incorporation or these by-laws.
7.4 Interested Directors; Quorum. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or her or their
votes are counted for such purpose, if: (1) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
7.5 Amendment of By-Laws. These by-laws may be amended or repealed, and new
by-laws adopted, by the Board of Directors, but the stockholders entitled to
vote may adopt additional by-laws and may amend or repeal any by-law whether or
not adopted by them.
-10-
CERTIFICATE OF SECRETARY
I hereby certify that:
I am the duly elected and acting Secretary of Fair, Isaac and Company,
Incorporated, a Delaware corporation (the "Corporation"); and
Attached hereto is a complete and accurate copy of the by-laws of the
Corporation as duly adopted by the Board of Directors at a meeting held on
February 6, 2001 and said by-laws are presently in effect.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal
of the Corporation this 6th day of February, 2001.
/s/ Henk J. Evenhuis
----------------------------------------
Henk J. Evenhuis
Secretary
-11-
