RETEK INC, S-1/A, 1999-10-20

RETEK INC
S-1/A, 1999-10-20
PREPACKAGED SOFTWARE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1999

REGISTRATION NO. 333-86841
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------

AMENDMENT NO. 2 TO

FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------------

RETEK INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7372 51-0392671
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

MIDWEST PLAZA, 801 NICOLLET MALL, 11TH FLOOR
MINNEAPOLIS, MN 55402
(612) 630-5700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------------

JOHN BUCHANAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
RETEK INC.
MIDWEST PLAZA, 801 NICOLLET MALL
11TH FLOOR, MINNEAPOLIS, MN 55402
(612) 630-5700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------------

Copies to:

<TABLE>
<S> <C>
CHRISTOPHER D. DILLON JOHN A. FORE
SHEARMAN & STERLING KATHLEEN B. BLOCH
1550 EL CAMINO REAL, SUITE 100 WILSON SONSINI GOODRICH & ROSATI
MENLO PARK, CA 94025 PROFESSIONAL CORPORATION
(650) 330-2200 650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
</TABLE>

---------------------------

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED , 1999

5,000,000 Shares

RETEKLOGO

Common Stock
------------------

Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $10.00 and $12.00 per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "RETK."

The underwriters have an option to purchase a maximum of 750,000 additional
shares to cover over-allotments of shares.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 7.

<TABLE>
<S> <C> <C> <C>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS RETEK
----------------- ----------------- -----------------
Per Share............................ $ $ $
Total................................ $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about ,
1999.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON

ROBERTSON STEPHENS

U.S. BANCORP PIPER JAFFRAY
The date of this prospectus is , 1999.
<PAGE> 3
[Insider Front Cover]

[The following text center justified appears along the top of the page:]

Retail Business-to-Business

[The Retek logo appears in the center of the page. Arranged around the Retek
logo in a circle are seven individual graphics. Each graphic represents a
different sector of the global retail supply chain. A short line points from
each of these graphics to the Retek logo that appears in the center of the page.
Centered below each graphic is a single word that identifies the sector of the
global retail supply chain represented by the graphic. From the top of the
circle, in clockwise order, the following words appear underneath the graphics:]

Retailers, Suppliers, Distributors, Consolidators, Manufacturers, Banks,
Shippers

[The following text center justified appears along the bottom of the page:]

on the Internet

[Gatefold]

[The following text left justified appears at the top of the left side of the
page:]

Retek offers:

- - Web-based business-to-business software solutions for retailers and their
trading partners

- - retail.com (TM) - an electronic commerce network for the global retail supply
chain

- - Web services to support critical business-to-business processes

- - Technologies that predict customer demand and behavior

[The following text left justified appears in a vertical column down the left
side of the page:]

Retek Strategy

- - Establish retail.com - as the leading electronic commerce network for retail
business-to-business collaboration

- - Continue to leverage our expertise in providing solutions to the retail market
and its vertical sub sectors, such as fashion, mass merchants, department
stores, grocery, drug, etc.

- - Leverage Retek's current base of more than 100 customers to continue to
innovate and extend Retek's product and technology leadership

- - Expand our relationships with partners who implement our software or make our
software available to users

<PAGE> 4
[The Retek logo appears on the left side near the middle of the page with the
words "Retek ENABLED" directly underneath]

[The Retek logo appears near the center of the page. Arranged around the Retek
logo in a circle are seven individual graphics. Each graphic represents a
different sector of the global retail supply chain. A short arrow points from
the Retek logo near the center of the page to each of the seven graphics.
Centered below each graphic is a single word that identifies the sector of the
global retail supply chain represented by the graphic. From the top of the
circle, in clockwise order, the following words appear underneath the graphics:]

Retailers, Suppliers, Distributors, Consolidators, Manufacturers, Banks,
Shippers

[The following text left justified appears in a vertical column on the middle of
the right side of the page:]

Advantages of Retek:

- - Collaborative: Exploits the real time, collaborative power of the web through
retail.com to reduce supply chain inefficiencies and costs while maximizing
supply chain sensitivity to the changing demands of consumers

- - Predictive: Employs advanced technologies to predict high value patterns in
the vast volume of business-to-business and business-to-consumer transactions

- - Scalable: Able to support the mission-critical operations of some of the
world's largest retailers

- - Web-based: Full web architecture promotes ease of use and rapid deployment

[The following left justified list of Retek customers appears in a vertical
column along the right side of the page:]

Partial Client List:

Adelsten ASA
Aldo Group, Inc.
Ames Department Store
AnnTaylor Stores Corporation
BMC, West
British Home Stores (BHS)
C&A Europe
Coto Corporation
Chapters, Inc.
CVS/pharmacy
Eckerd Corporation
Edgars
El Palacio de Hierro, S.A. de C.V.
Family Dollar Stores, Inc.
Finlay Enterprises, Inc.
FNAC SA
Fogdog.com
<PAGE> 5
Future Shop Ltd.
Gander Mountain LLC
Hallmark Cards, Inc.
Home Shopping Network Inc.
HomeBase, Inc.
Hudsons Bay Company
Ingram Micro
Internet Shopping Network
Kohls Department Stores
Lancome, Paris
Lids
Littlewoods Retail
Lojas Americanas S/A
Maurices Incorporated
Michaels Stores, Inc.
New Look
Nike Japan
North West Company Inc.
Pamida Inc.
Payless Cashways, Inc.
Rite Aid
Sears Canada Inc.
Selfridges
ShopKo Stores Inc.
Stage Stores
Starbucks Corporation
The Disney Store, Limited
Truworths
Wet Seal, Inc.
Zale Corporation

[The following text left justified appears towards the bottom right corner of
the page:]

The retail.com Web-Services Model:
- -Lower cost of ownership: No operations staff, no hardware costs, no maintenance
costs
- -Immediate and global access: Implementation time measured in minutes, rather
than months, accessible from any desktop with web access
- -Immediate communications: Real time, interactive communications across the
entire retail supply chain

<PAGE> 6

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY............... 3
RISK FACTORS..................... 7
SPECIAL NOTE REGARDING
FORWARD-LOOKING INFORMATION.... 18
OUR SEPARATION
FROM HNC....................... 19
USE OF PROCEEDS.................. 21
DIVIDEND POLICY.................. 21
CAPITALIZATION................... 22
DILUTION......................... 23
SELECTED COMBINED FINANCIAL
DATA........................... 24
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...... 25
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BUSINESS......................... 38
MANAGEMENT....................... 49
CERTAIN TRANSACTIONS............. 60
PRINCIPAL STOCKHOLDER............ 67
DESCRIPTION OF CAPITAL STOCK..... 69
SHARES ELIGIBLE FOR FUTURE
SALE........................... 74
MATERIAL UNITED STATES FEDERAL
TAX CONSEQUENCES TO NON-UNITED
STATES HOLDERS................. 76
UNDERWRITING..................... 79
NOTICE TO CANADIAN RESIDENTS..... 81
LEGAL MATTERS.................... 82
EXPERTS.......................... 82
WHERE TO FIND MORE INFORMATION... 83
INDEX TO FINANCIAL STATEMENTS.... F-1
</TABLE>

------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 7

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere is this prospectus.
This summary is not complete and does not contain all the information you should
consider before buying shares in this offering. You should carefully read the
entire prospectus and the risk factors beginning on page 7.

Unless otherwise stated, information in this prospectus assumes that the
underwriters' over-allotment option to purchase an additional 750,000 shares of
common stock at the initial offering price is not exercised.

RETEK INC.

We are a leading provider of web-based, business-to-business software
solutions for retailers and their trading partners. Our software solutions
enable retailers to use the Internet to communicate and collaborate efficiently
with the suppliers, distributors, wholesalers, logistics providers, brokers,
transportation companies, consolidators and manufacturers that make up the
global retail supply chain. Our solutions are rapidly deployable, highly
scalable, retail industry focused and incorporate technology that predicts
customer demand and behavior. We seek to enhance the ability of retailers to
interact with their supply chain by introducing Retail.com, which we believe is
the first electronic commerce network providing collaborative
business-to-business software solutions to the retail industry.

We believe that a market opportunity exists to provide retailers with a
business-to-business software solution that is web-based, collaborative and
designed specifically for the retail industry. According to Euromonitor,
worldwide retailer-to-customer sales exceeded $6.5 trillion in 1997. We estimate
that the market for business-to-business commerce is even larger than
retailer-to-customers sales, and involves, according to Dun & Bradstreet, over
three million retail, wholesale and supplier organizations operating in the
global marketplace. We believe the Internet is beginning to change the way this
market operates. Not only does the Internet provide a new distribution channel
for conducting commerce with customers, it provides an even larger opportunity
for retail businesses to communicate and transact commerce with their supply
chain. According to Forrester Research, business-to-business electronic commerce
is expected to grow from $43 billion in 1998 to $1.3 trillion in 2003 and the
market for software solutions for business-to-business electronic commerce is
estimated to grow from $171 million in 1998 to $3.1 billion in 2002.

We intend to be the leading provider of web-based, business-to-business
software solutions for retailers and their trading partners. As the retail
supply chain evolves into an electronic network, we seek to further enable
retailers to better manage, organize and drive efficiencies through this
network. Key elements of our strategy include:

- Extending our web-based, business-to-business collaborative software
solutions, principally through the introduction of our Retail.com
network;

- Introducing our existing customers to a broader offering of our software
solutions;

- Continuing to leverage our expertise in providing solutions to
retailers;

- Expanding our relationships with partners who implement our software or
make our software available to users; and

- Extending our technological and product leadership by enhancing our
software solutions' core functionality and the features that analyze and
predict customer demand and behavior.

We are currently a wholly owned subsidiary of HNC Software Inc., a public
company that develops and markets software solutions for businesses in financial
and other industries. Immediately prior to the completion of this offering, our
business will combine the business activities of Retek Information Systems, Inc.
and Retek Logistics, Inc. Retek Information Systems develops and markets
web-based business-to-business software solutions for retailers. Founded in
1995, Retek Information Systems was acquired by HNC in 1996. Retek Logistics,
founded in 1985, develops warehouse management software solutions.

3
<PAGE> 8

HNC acquired Retek Logistics in 1998. On September 9, 1999, Retek Logistics was
reincorporated as a Delaware corporation and renamed "Retek Inc." In connection
with the separation of our business from HNC, HNC will contribute all of the
outstanding capital stock of Retek Information Systems to Retek Inc.

Our principal executive offices are located at Midwest Plaza, 801 Nicollet
Mall, 11th Floor, Minneapolis, Minnesota 55402 and our telephone number is (612)
630-5700. Our web site is http://www.retek.com. The information on the web site
is not part of this prospectus.

"Retek" is a trademark of Retek. All other trademarks or service marks
appearing in this prospectus are trademarks or service marks of the respective
companies that use them.

OUR RELATIONSHIP WITH HNC SOFTWARE INC.

After the completion of this offering, HNC will own approximately 88.9% of
the total number of outstanding shares of our common stock, or approximately
87.4% if the underwriters' over-allotment option is exercised in full. HNC has
informed us that, after the completion of this offering, it is HNC's current
intention to distribute pro rata to its stockholders, as a dividend, all of the
shares of our common stock HNC will own after this offering, subject to the
satisfaction and fulfillment of several conditions, including the approval of
the HNC board of directors (this dividend will be referred to as the
distribution in this prospectus). HNC has the sole discretion to determine the
timing, structure and terms of the distribution and is not obligated to carry
out the distribution. We refer you to "Our Separation from HNC" beginning on
page 19 for additional information relating to the conditions to the
distribution and to "Risk Factors -- Risks Related to Our Separation from HNC"
beginning on page 13 for additional information on the risks related to the
distribution.

If HNC has received a written ruling from the Internal Revenue Service that
the distribution qualifies for tax-free treatment under Section 355 of the
Internal Revenue Code, and HNC fails to complete the distribution within 120
days after the first date that HNC is eligible to effect the tax-free
distribution, then John Buchanan, our chairman and chief executive officer, and
three other executive officers to be chosen by Mr. Buchanan, will receive a
12-month credit to the vesting schedule of their Retek stock options. In
addition, if at the time of this accelerated vesting, Mr. Buchanan and the three
other chosen executives execute two-year non-compete agreements with Retek,
their vesting schedules will be credited by an additional 12 months.

We will enter into agreements with HNC that provide for the separation of
our business from HNC. These agreements will generally provide for the transfer
from HNC to us of assets, including intellectual property used in our business,
and the assumption by us of liabilities relating to our business. If HNC carries
out the tax-free distribution, these agreements will restrict our ability to
take specified actions that would cause the distribution to be taxable to HNC or
its stockholders. For more information regarding these agreements, see "Certain
Transactions" beginning on page 60.

Our agreements with HNC will also govern various interim and ongoing
relationships. All of the agreements providing for our separation from HNC will
be made in the context of a parent-subsidiary relationship, will be negotiated
in the overall context of our separation from HNC and will not be conditioned on
HNC's completion of the distribution. The terms of these agreements may be more
or less favorable to us than if they had been negotiated with unaffiliated third
parties.

4
<PAGE> 9

THE OFFERING

<TABLE>
<S> <C>
Common stock offered in this offering........ 5,000,000 shares
Common stock outstanding after this
offering:.................................. 45,000,000 shares
Use of proceeds from this offering........... For working capital and general corporate
purposes, including repayment of intercompany
debt to HNC and the payment of the notes to
be issued in connection with the purchase of
all of the outstanding capital stock of
WebTrak Limited. For further information
regarding our use of the proceeds from this
offering see "Use of Proceeds" on page 21.
Proposed Nasdaq National Market Symbol....... "RETK"
</TABLE>

- ------------------

Common stock outstanding after this offering is based on shares outstanding
as of , 1999, excluding:

- the exercise of the underwriters' over-allotment option;

- shares of common stock issuable upon exercise of options outstanding at
an exercise price of $10.00 per share, none of which are exercisable;
and

- shares of common stock issuable upon conversion of a note to be issued
in connection with the purchase of all of the outstanding capital stock
of WebTrak.

5
<PAGE> 10

SUMMARY COMBINED FINANCIAL DATA

The summary combined financial data presented below should be read in
conjunction with our combined financial statements and the related notes,
beginning on page F-1, "Capitalization" on page 22, "Selected Combined Financial
Data" beginning on page 24, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" beginning on page 25.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME DATA:
Total revenue............................... $13,433 $30,923 $55,033 $25,313 $37,690
Gross profit................................ 9,554 27,278 41,181 19,601 26,970
Operating income............................ 1,418 6,619 8,088 2,504 5,792
Net income.................................. 2,233 3,476 3,878 568 3,460
Pro forma unaudited basic and diluted net
income per common share.................. $ 1.73 $ 1.55
Shares used in computing pro forma unaudited
basic and diluted net income per common
share.................................... 2,238 2,238
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
COMBINED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 930
Working capital........................................... 15,800
Total assets.............................................. 57,765
Payable to HNC Software Inc............................... 7,927
Total stockholder's equity................................ 39,121
</TABLE>

- -------------------------

For an explanation of the determination of the number of shares used in
computing pro forma unaudited basic and diluted net income per common share, see
Note 1 of the notes to our combined financial statements beginning on page F-1.

The as adjusted amounts reflect the receipt and application of the net
proceeds from the sale of 5,000,000 shares of our common stock at an assumed
initial offering price of $10.00, after deducting the estimated underwriting
discounts and offering expenses payable by us.

6
<PAGE> 11

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and all other information
contained in this prospectus before purchasing our common stock. Any of the
following risks could materially harm our business, operating results and
financial condition. Additional risks and uncertainties not currently known to
us or that we currently consider immaterial could also harm our business,
operating results and financial condition. You could lose all or part of your
investment as a result of these risks.

RISK RELATED TO OUR BUSINESS AND INDUSTRY

IF WE DO NOT RESPOND ADEQUATELY TO OUR INDUSTRY'S RAPID PACE OF CHANGE, SALES OF
OUR PRODUCTS MAY DECLINE.

If we are unable to develop new software solutions or enhancements to our
existing products on a timely and cost-effective basis, or if new products or
enhancements do not achieve market acceptance, our sales may decline. The life
cycles of our products are difficult to predict because the business-to-business
electronic commerce market for our products is new and emerging and is
characterized by rapid technological change and changing customer needs. The
introduction of products employing new technologies could render our existing
products or services obsolete and unmarketable.

In developing new products and services, we may:

- fail to respond to technological changes in a timely or cost-effective
manner;

- encounter products, capabilities or technologies developed by others
that render our products and services obsolete or noncompetitive or that
shorten the life cycles of our existing products and services;

- experience difficulties that could delay or prevent the successful
development, introduction and marketing of these new products and
services; or

- fail to achieve market acceptance of our products and services.

THE LENGTHY SALES CYCLE FOR OUR PRODUCTS MAKES OUR REVENUES SUSCEPTIBLE TO
FLUCTUATIONS.

Delay or failure to complete sales in a particular quarter or year would
reduce our quarterly and annual revenue. Implementation of our software is
complex, time consuming and expensive. In many cases, our customers must change
established business practices or conduct business in new ways to accommodate
installation and use of our software. They must also consider a wide range of
other issues before committing to purchase our products, including product
benefits, competitive alternatives, ease of installation, ability to work with
existing computer systems, ability to support a large user base and the scope of
functions our products provide. We believe that the purchase of our products is
often discretionary and generally involves a significant commitment of capital
and other resources by a customer. As a result of these factors, our sales
cycles can be lengthy, typically ranging from four to 12 months. Consequently,
sales of our software solutions that are anticipated to occur in a given quarter
or year may be accelerated or delayed, potentially resulting in significant
variations in expected quarterly or annual revenue.

FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS COULD LIKELY CAUSE OUR STOCK
PRICE TO DECLINE.

Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. If our quarterly operating results fail to meet
analysts' expectations, the trading price of our common stock could decline. In
addition, significant fluctuations in our quarterly operating results may harm
our business

7
<PAGE> 12

operations by making it difficult to implement our budget and business plan. The
factors, many of which are outside our control, which could cause our operating
results to fluctuate include:

- the size and timing of customer orders, which can be affected by
customer budgeting and purchasing cycles;

- the demand for and market acceptance of our software solutions;

- our competitors' announcements or introductions of new software
solutions, services or technological innovations;

- our ability to develop, introduce and market new products on a timely
basis;

- customer deferral of material orders in anticipation of new releases or
new product introductions;

- our success in expanding our sales and marketing programs;

- technological changes or problems in computer systems; and

- general economic conditions which may affect our customers' capital
investment levels.

In addition, we have seen historically stronger revenue growth from the
first quarter to the second quarter than between other quarters. This stronger
revenue growth is due to the fact that Oracle has a May fiscal year-end which
contributes to seasonally greater sales of Oracle Retail(TM) in our second
fiscal quarter.

Historically, a significant portion of our sales have been realized near
the end of a quarter. As a result, a cancellation or delay in an anticipated
sale past the end of a particular quarter could substantially reduce our revenue
for that quarter. To the extent that the average size of our orders increases,
customers' cancellations or delays of orders will be more likely to harm our
revenue and operating results.

As the number and size of customer orders increase, we will become more
susceptible to the risk of significant, doubtful accounts receivable from
customers who become unable or unwilling to pay amounts due to us. If we are
unable to collect these accounts receivable, our operating results will be
harmed.

Our quarterly expense levels are relatively fixed and are based, in part,
on expectations as to future revenue. As a result, if revenue levels fall below
our expectations, our net income will decrease because only a small portion of
our expenses vary with our revenue. For a more detailed description of our
quarterly results, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" beginning on page 25.

OUR RETAIL.COM NETWORK WAS RECENTLY INTRODUCED AND IS STILL AT AN EARLY STAGE OF
DEVELOPMENT. WE HAVE NOT ESTABLISHED COMPETITIVE AND PROFITABLE PRICING FOR OUR
RETAIL.COM NETWORK.

We began operations of our Retail.com network on September 26, 1999. We
incurred, and may continue to incur, significant infrastructure costs in
establishing this network. Broad and timely acceptance of our Retail.com network
is subject to a number of significant risks. These risks include:

- our need to provide value-enhancing software solutions and services on
our Retail.com network to achieve widespread commercial acceptance of
our network;

- whether our network will be able to support large numbers of retailers
and the members of their supply chain; and

- our need to significantly expand our internal resources and incur
associated expenses to support planned growth of our Retail.com network.

We have established a subscription pricing model for the WebTrak Critical
Path services provided on our Retail.com network, whereby members pay an annual
fee based on the number of the member's

8
<PAGE> 13

employees who will have access to the network. As additional services are added
to the Retail.com network, we will need to establish a pricing model for the new
services. If the pricing models for the network fail to be competitive and
profitable or if they are not acceptable to our customers, our Retail.com
network will not be commercially successful, which could harm our revenue and
business. See "Business -- Retek Products -- Business-to-Business Collaborative
Solution" on page 42 for more information regarding the Retail.com network.

OUR RELATIONSHIP WITH ORACLE IS IMPORTANT IN GENERATING SALES OF OUR PRODUCTS.
IF OUR RELATIONSHIP WITH ORACLE ENDS OR IF ORACLE DOES NOT DEVOTE ADEQUATE
RESOURCES TO PROMOTE AND SELL ORACLE RETAIL(TM) OR IF SALES OF ORACLE RETAIL(TM)
DECLINE, OUR REVENUES WILL DECLINE.

We have worked with Oracle to establish Oracle Retail(TM), a software
solution which combines our products with Oracle's financial applications. In
addition to Oracle's general sales force, Oracle has dedicated a sales team of
approximately 30 sales professionals who sell and market Oracle Retail(TM)
worldwide. Revenue generated from sales of Oracle Retail(TM) accounted for
approximately 25% of our revenue in the six months ended June 30, 1999. Both we
and Oracle currently have the right to terminate the agreement governing the
sales and marketing of Oracle Retail. In addition, this agreement is currently
being renegotiated. If Oracle were to exercise its right to terminate, or if we
fail to negotiate a new agreement on acceptable terms, our revenue will decline
and our business will be harmed. In addition, Oracle is not obligated to sell
and market Oracle Retail(TM) and, in the future, may decide to stop selling
Oracle Retail(TM) or promote products that compete with Oracle Retail(TM) or our
other products.

WE EXPECT TO SIGNIFICANTLY INCREASE OUR OPERATING EXPENSES, WHICH WILL IMPACT
OUR ABILITY TO REMAIN PROFITABLE.

We intend to significantly increase our operating expenses as we:

- increase our research and development activities;

- increase our services activities;

- develop and build our Retail.com network;

- expand our distribution channels;

- increase our sales and marketing activities, including expanding our
direct sales force;

- build our internal information technology system; and

- operate as an independent public company.

We will incur expenses before we generate any revenue from this increase in
spending. If we do not significantly increase revenue from these efforts, our
business and operating results could be seriously harmed.

COMPETITIVE PRESSURES COULD REDUCE OUR MARKET SHARE OR REQUIRE US TO REDUCE OUR
PRICES, WHICH WOULD REDUCE OUR REVENUE AND/OR OPERATING MARGINS.

The market for our software solutions is highly competitive and subject to
rapidly changing technology. Competition could seriously impede our ability to
sell additional products and services on terms favorable to us. Competitive
pressures could reduce our market share or require us to reduce our prices,
which would reduce our revenues and/or operating margins. Many of our
competitors have substantially greater financial, marketing or other resources,
and greater name recognition than we do. See "Business -- Competition" on page
47 for a discussion of our competitive position. In addition, these companies
may adopt aggressive pricing policies that could compel us to reduce the prices
of our products

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and services in response. Our competitors may also be able to respond more
quickly than we can to new or emerging technologies and changes in customer
requirements. Our current and potential competitors may:

- develop and market new technologies that render our existing or future
products obsolete, unmarketable or less competitive;

- make strategic acquisitions or establish cooperative relationships among
themselves or with other solution providers, which would increase the
ability of their products to address the needs of our customers; and

- establish or strengthen cooperative relationships with our current or
future strategic partners, which would limit our ability to sell
products through these channels.

As a result, we may not be able to maintain a competitive position against
current or future competitors.

THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL COULD HARM OUR ABILITY TO GROW OUR BUSINESS.

We believe that our future success will depend upon our ability to attract
and retain highly skilled personnel, including John Buchanan, our chairman and
chief executive officer; Gordon Masson, our president; John L. Goedert, our
senior vice president, research and development; and Gregory A. Effertz, our
vice president, finance and administration and chief financial officer. We
currently do not have any key-man life insurance relating to key personnel, who
are employees at-will and, except for Mr. Buchanan, are not subject to
employment contracts. Mr. Buchanan's employment agreement ends in November 1999.
The loss of the services of any one or more of these key persons could harm our
ability to grow our business.

We also must attract, integrate and retain skilled sales, research and
development, marketing and management personnel. Competition for these types of
employees is intense, particularly in our industry. Failure to hire and retain
qualified personnel would harm our ability to grow our business.

IF WE FAIL TO ESTABLISH, MAINTAIN OR EXPAND OUR RELATIONSHIPS WITH THIRD PARTIES
WHO IMPLEMENT OUR PRODUCTS, OUR ABILITY TO MEET OUR CUSTOMERS' NEEDS COULD BE
HARMED AND MAY RESULT IN A DECREASE IN OUR REVENUE.

We rely, and expect to continue to rely, on a number of third parties to
implement our software solutions at customer sites. If we are unable to
establish and maintain effective, long-term relationships with these
implementation providers, or if these providers do not meet the needs or
expectations of our customers, our revenue will be reduced and our customer
relationships will be harmed. Our current implementation partners are not
contractually required to continue to help implement our software solutions. If
the number of our product implementations continues to increase, we will need to
develop new relationships with additional third-party implementation providers
to provide these services.

We may be unable to establish or maintain relationships with third parties
having sufficient qualified personnel resources to provide the necessary
implementation services to support our needs. If third-party services are
unavailable, we will be required to provide these services internally, which
would significantly limit our ability to meet our customers' implementation
needs and would increase our operating expenses and could reduce our gross
margins. A number of our competitors, including IBM and SAP, have significantly
more established relationships with these third parties and, as a result, these
third parties may be more likely to recommend competitors' products and services
rather than our own. In addition, we cannot control the level and quality of
service provided by our current and future implementation partners.

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IF WE FAIL TO OBTAIN ACCESS TO THE INTELLECTUAL PROPERTY OF THIRD PARTIES, OUR
BUSINESS AND OPERATING RESULTS COULD BE HARMED.

We must now, and may in the future have to, license or otherwise obtain
access to the intellectual property of third parties and related parties,
including HNC, Lucent, MicroStrategy and Oracle. See "Business -- Technology
Characteristics" beginning on page 44 and "Certain Transactions -- License
Agreement" on page 65 for a discussion of our technology licenses from third
parties. Our business would be seriously harmed if the providers from whom we
license such software cease to deliver and support reliable products or enhance
their current products. In addition, the third-party software may not continue
to be available to us on commercially reasonable terms or prices or at all. Our
inability to maintain or obtain this software could result in shipment delays or
reduced sales of our products. Furthermore, we might be forced to limit the
features available in our current or future product offerings. Either
alternative could seriously harm our business and operating results.

IF OUR INTELLECTUAL PROPERTY IS NOT ADEQUATELY PROTECTED, OUR COMPETITORS MAY
GAIN ACCESS TO OUR TECHNOLOGY AND WE MAY LOSE CUSTOMERS.

We depend on our ability to develop and maintain the proprietary aspects of
our technology. To protect our proprietary technology, we rely primarily on a
combination of contractual provisions, confidentiality procedures, trade
secrets, and copyright and trademark laws.

We seek to protect our software, documentation and other written materials
under trade secret and copyright laws, which afford only limited protection. In
addition, we cannot assure you that any of our proprietary rights with respect
to our Retail.com network will be viable or of value in the future because the
validity, enforceability and type of protection of proprietary rights in
Internet-related industries are uncertain and still evolving.

Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult and expensive, and while we are unable to determine the extent to
which piracy of our software products exists, software piracy may be a problem.
In addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States. We intend to
vigorously protect our intellectual property rights through litigation and other
means. However, such litigation can be costly to prosecute and we cannot be
certain that we will be able to enforce our rights or prevent other parties from
developing similar technology, duplicating our products or designing around our
intellectual property.

IF, IN THE FUTURE, THIRD-PARTIES CLAIM THAT OUR PRODUCTS INFRINGE ON THEIR
INTELLECTUAL PROPERTY, WE MAY INCUR SIGNIFICANT COSTS.

There has been a substantial amount of litigation in the software industry
and the Internet industry regarding intellectual property rights. It is possible
that in the future third parties may claim that we or our current or potential
future products infringe their intellectual property. We expect that software
product developers and providers of electronic commerce solutions will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. Any claims, with or without merit, could
be time-consuming, result in costly litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on terms acceptable to us or at
all, which could seriously harm our business.

OUR BUSINESS IS SUBJECT TO ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH
INTERNATIONAL SALES.

Since we sell our products worldwide, our business is subject to risks
associated with doing business internationally. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview" beginning
on page 25 for a discussion of our percentage of revenue originating outside of
North America and our percentage of sales not denominated in US dollars. To the
extent that

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<PAGE> 16

our sales are denominated in foreign currencies, the revenue we receive could be
subject to fluctuations in currency exchange rates. If the effective price of
the products we sell to our customers were to increase due to fluctuations in
foreign currency exchange rates, demand for our technology could fall, which
would, in turn, reduce our revenue. We have not historically attempted to
mitigate the effect that currency fluctuations may have on our revenue through
use of hedging instruments, and we do not currently intend to do so in the
future.

We anticipate that revenue from international operations will continue to
represent a substantial portion of our total revenue. Accordingly, our future
results could be harmed by a variety of factors, including:

- changes in foreign currency exchange rates;

- greater risk of uncollectible accounts;

- changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;

- trade protection measures and import or export licensing requirements;

- potentially negative consequences from changes in tax laws;

- difficulty in staffing and managing widespread operations;

- international variations in technology standards;

- differing levels of protection of intellectual property; and

- unexpected changes in regulatory requirements.

IF THE INTERNET FAILS TO BE ACCEPTED AS A VIABLE LONG-TERM COMMUNICATIONS
PROTOCOL, OUR BUSINESS AND OPERATING RESULTS WILL BE SERIOUSLY HARMED.

As our software solutions are web-based, we depend on the acceptance of the
Internet as a communications protocol. However, this acceptance may not
continue. Rapid growth of the Internet is a recent phenomenon. The Internet may
not be accepted as a viable long-term communications protocol for businesses for
a number of reasons. These reasons include:

- potentially inadequate development of the necessary communications and
computer network technology, particularly if rapid growth of the
Internet continues;

- delayed development of enabling technologies and performance
improvements;

- increased security risks in transmitting and storing confidential
information over public networks; and

- potentially increased governmental regulation.

ERRORS AND DEFECTS IN OUR PRODUCTS COULD RESULT IN SIGNIFICANT COSTS TO US AND
COULD IMPAIR OUR ABILITY TO SELL OUR PRODUCTS.

Our products are complex and, accordingly, may contain undetected errors or
failures when we first introduce them or as we release new versions. This may
result in loss of, or delay in, market acceptance of our products and could
cause us to incur significant costs to correct errors or failures or to pay
damages suffered by customers as a result of such errors or failures. In the
past, we have discovered software errors in our new releases and new products
after their introduction. We have incurred costs during the period required to
correct these errors, although such costs have not been material. We may in the
future discover errors in new releases or new products after the commencement of
commercial shipments.

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CHANGES IN ACCOUNTING STANDARDS COULD AFFECT THE CALCULATION OF OUR FUTURE
OPERATING RESULTS.

Statement of Position 97-2, "Software Revenue Recognition," was issued in
October 1997 by the American Institute of Certified Public Accountants and
amended by Statement of Position 98-4. We adopted Statement of Position 97-2
effective January 1, 1998 and Statement of Position 98-4 effective March 31,
1998. The American Institute of Certified Public Accountants has also issued
Statement of Position 98-9 -- which will be effective for us for transactions
entered into beginning January 1, 2000. Full implementation guidelines for this
standard and additional standards could be issued in the future. These
guidelines and additional standards could lead to unanticipated changes in our
current revenue recognition policies, which changes could harm our business,
financial condition and operating results. Our revenue recognition policies are
further discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview" beginning on page 25.

OUR BUSINESS COULD BE HARMED IF THE SYSTEMS WE, OUR CUSTOMERS OR OUR VENDORS USE
ARE NOT YEAR 2000 COMPLIANT.

The risks posed by Year 2000 issues, which arise because computer systems
and software products may be unable to distinguish between twentieth century
dates and twenty-first century dates, could harm our business in a number of
significant ways. If we experience disruptions as a result of the Year 2000
problem, our revenues could decline and we may incur significant costs to
correct any problems. Additionally, we rely on information technology supplied
by third parties, and our strategic partners also are heavily dependent on
information technology systems and on their own third-party vendor systems. Year
2000 problems experienced by us or any of these third parties could harm our
business. Additionally, the Internet could face serious disruptions arising from
the Year 2000 problem, which would harm our business, and particularly our
Retail.com network.

We cannot guarantee that retailers and members of their supply chains will
be able to utilize our Retail.com network without serious disruptions arising
from the Year 2000 problem. Given the pervasive nature of the Year 2000 problem,
it is also possible that disruptions in industries and market segments, other
than the retail industry, will adversely affect our business.

RISKS RELATED TO OUR SEPARATION FROM HNC

AS LONG AS HNC OWNS A MAJORITY OF OUR CAPITAL STOCK, WE WILL BE CONTROLLED BY
HNC AND OUR OTHER STOCKHOLDERS WILL BE UNABLE TO AFFECT THE OUTCOME OF
STOCKHOLDER VOTING.

After the completion of this offering, HNC will own approximately 88.9% of
our outstanding common stock, or approximately 87.4% if the underwriters
exercise their over-allotment option in full. As long as HNC owns at least 25%
of our outstanding capital stock, HNC will be able to nominate three of the
seven directors on our board of directors. Investors in this offering will not
be able to affect the outcome of any stockholder vote for so long as HNC owns a
majority of our common stock. As a result, HNC will control all matters
affecting us, including:

- the allocation of business opportunities that may be suitable for HNC
and us;

- any determinations with respect to mergers or other business
combinations involving us;

- the acquisition or disposition of assets or businesses by us;

- our debt or equity financing, including future issuance of our common
stock or other securities;

- incurrence of debt by us;

- changes to the agreements providing for our separation from HNC;

- amendments to our certificate of incorporation or bylaws;

- the payment of dividends on our common stock; and

- determinations with respect to our tax returns.

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<PAGE> 18

IF WE NEED ADDITIONAL FINANCING TO MAINTAIN AND EXPAND OUR BUSINESS, HNC WILL BE
UNDER NO OBLIGATION TO PROVIDE FINANCING AND OTHER FINANCING MAY NOT BE
AVAILABLE ON FAVORABLE TERMS.

In the past, our capital needs have been satisfied by HNC. However,
following the separation, HNC will no longer have any obligation to provide
funds to finance our working capital or other cash requirements. We cannot
assure you that financing, if needed, will be available on favorable terms. If
we are unable to obtain financing on favorable terms or at all, our ability to
grow our business will be harmed.

We believe our capital requirements will vary greatly from quarter to
quarter, depending on, among other things, timing of capital expenditures,
fluctuations in our operating results and cash flows and our financing
activities. We believe that cash generated by our current operations, along with
the proceeds from this offering, will be sufficient to satisfy our working
capital, capital expenditure and research and development requirements for at
least the next 12 months. However, we may require or choose to obtain additional
debt or equity financing in the future. Future equity financings would be
dilutive to the existing holders of our common stock. Future debt financings, if
available, could have as a condition that we agree to restrictive covenants and
would require the consent of HNC. Finally, pursuant to an agreement between HNC
and us, until two years, and possibly longer, after the distribution, our
ability to issue common stock in connection with acquisitions, offerings or
otherwise will be limited.

WE MAY HAVE POTENTIAL BUSINESS CONFLICTS OF INTEREST WITH HNC WITH RESPECT TO
OUR PAST AND ONGOING RELATIONSHIP THAT COULD HARM OUR BUSINESS OPERATIONS.

Conflicts of interest may arise between HNC and us in a number of areas
relating to our past and ongoing relationships, including:

- major business combinations involving us or HNC, including an
acquisition of us by a third party;

- our efforts to raise capital in debt or equity financing;

- labor, tax, employee benefit, indemnification and other matters arising
from our separation from HNC;

- intellectual property matters;

- employee retention and recruiting;

- sales or distributions by HNC of all or any portion of its ownership
interest in us;

- the nature, quality and pricing of transitional services HNC has agreed
to provide us; and

- business opportunities that may be attractive to both HNC and us.

We may not be able to resolve any potential conflicts and, even if we do,
the resolution may be less favorable than if we were dealing with an
unaffiliated party. The agreements we will enter into with HNC may be amended if
the parties agree. While we are controlled by HNC, HNC may be able to require us
to agree to amendments to these agreements that may be less favorable to us than
the original terms of any of these agreements. For a discussion of HNC's rights
to amend these agreements, see "Certain Transactions" beginning on page 60.

WE WILL BE SUBJECT TO CERTAIN CONTRACTUAL LIMITATIONS WHICH COULD LIMIT THE
CONDUCT OF OUR BUSINESS AND OUR ABILITY TO PURSUE OUR BUSINESS OBJECTIVES.

The separation agreement that we will enter into with HNC relating to this
offering and the potential distribution will contain a number of restrictive
covenants relating to the distribution, which will require that until two years
after the completion of the distribution, and possibly longer, we cannot take
certain actions without either the consent of HNC or a supplemental ruling from
the Internal Revenue Service. For further information regarding these
restrictions on our ability to take certain actions, see "Certain
Transactions -- Separation Agreement" beginning on page 60.

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<PAGE> 19

In addition, under the separation agreement we will agree to indemnify HNC
on an after-tax-basis for any tax liability incurred to HNC as a result of our
taking any of these actions, whether or not HNC consents or a supplemental
ruling is obtained, or taking or failing to take any other action which causes
the distribution to become taxable. For further information regarding the
separation agreement, see "Certain Transactions -- Separation Agreement"
beginning on page 60.

BECAUSE HNC IS NOT UNDER ANY OBLIGATION TO DISTRIBUTE OUR COMMON STOCK, IT MAY
BE MORE DIFFICULT FOR US TO RETAIN KEY EMPLOYEES SHOULD HNC NOT PROCEED WITH THE
DISTRIBUTION.

HNC does not have any obligation with respect to the timing or any of the
terms of the distribution of our common stock. We cannot assure you as to
whether or when the distribution will occur, or as to the terms of the
distribution. Under specified conditions, if the distribution does not occur,
the vesting schedule of the Retek stock options granted to four of our key
employees will be credited by 12 months. If these employees enter into
non-compete agreements with us, the vesting schedule will be credited by an
additional 12 months. For information regarding the conditions which will result
in the crediting of these vesting schedules, we refer you to
"Management -- Treatment of Outstanding Stock Options" on page 53. Upon any
acceleration of their vesting schedules, it may be more difficult for us to
retain these key employees. The loss of the services of one or more of these
employees could harm our business.

BECAUSE MANY OF OUR DIRECTORS AND EXECUTIVE OFFICERS OWN HNC COMMON STOCK, THEY
MAY HAVE CONFLICTS OF INTEREST WHEN FACED WITH DECISIONS WHICH COULD HAVE
DIFFERENT IMPLICATIONS FOR HNC AND US.

Many of our directors and executive officers own a substantial amount of
HNC common stock and options to purchase HNC common stock. Ownership of HNC
common stock by our directors and officers after our separation from HNC could
create, or appear to create, potential conflicts of interest when directors and
officers are faced with decisions that could have different implications for HNC
and us. For information regarding directors' and officers' ownership of options
to acquire HNC common stock, see "Management -- Executive Compensation --
Aggregated HNC Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values" on page 53.

THE TRANSITIONAL SERVICES THAT HNC WILL PROVIDE TO US MAY NOT BE SUFFICIENT TO
MEET OUR NEEDS, AND WE MAY NOT BE ABLE TO REPLACE THESE SERVICES AFTER OUR
AGREEMENTS WITH HNC EXPIRE.

HNC will agree to provide certain transitional services to us for a limited
time period, including services related to employee benefits for our employees.
Although HNC will be contractually obligated to provide us with these services,
these services may not be provided at the same level as when we were part of
HNC, and we may not be able to obtain the same benefits. After the expiration of
these various arrangements, we may not be able to replace these transitional
services and employee benefits in a timely manner or on terms and conditions,
including cost, as favorable as those we will receive from HNC. The prices
charged to us under these agreements may be higher or lower than the prices that
we may be required to pay third parties for similar services or the costs of
similar services if we undertake them ourselves. For more information about
these arrangements, see "Certain Transactions -- Services Agreement" on page 65.

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK

OUR SECURITIES HAVE NO PRIOR MARKET, AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THIS OFFERING.

Before this offering, there has not been a public market for our common
stock, and an active public market for our common stock may not develop or be
sustained after this offering. The market price of our common stock could be
subject to significant fluctuations after this offering. Among the factors that
could affect our stock price are:

- quarterly variations in our operating results;

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<PAGE> 20

- changes in revenue or earnings estimates or publication of research
reports by analysts;

- strategic moves by us or our competitors, such as acquisitions or
restructurings or changes in business strategy;

- actions by institutional stockholders or by HNC prior to its
distribution of our stock;

- speculation in the press or investment community;

- general market conditions; and

- domestic and international economic factors unrelated to our
performance.

The stock markets in general, and the markets for technology stocks in
particular, have experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. These broad market
fluctuations may adversely affect the trading price of our common stock. In
particular, we cannot assure you that you will be able to resell your shares at
or above the initial public offering price, which will be determined by
negotiations between the representatives of the underwriters and us. See the
section entitled "Underwriting" beginning on page 79 for a discussion of the
factors to be considered in determining the initial public offering price.

THE PRICE OF OUR COMMON STOCK COULD DECLINE AS A RESULT OF SALES OR
DISTRIBUTIONS OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK IN THE PUBLIC MARKET.

HNC has announced that it is HNC's current intention to distribute all of
the shares of our common stock it owns after this offering is completed to HNC
stockholders provided specified conditions are met, including the approval of
the HNC Board of Directors. For further information regarding the distribution
see "Our Separation from HNC" beginning on page 19, and "Certain Transactions"
beginning on page 60. Substantially all of those shares would be eligible for
immediate resale in the public market following a distribution by HNC. We are
unable to predict whether significant amounts of our common stock will be sold
in the open market in anticipation of, or following, this distribution. We are
also unable to predict whether a sufficient number of buyers would be in the
market at that time. Sales by HNC or others of substantial amounts of our common
stock in the public market, or the perception that such sales might occur, could
cause the price of our common stock to decline.

WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR POTENTIAL STOCK
PRICE VOLATILITY.

In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation, which has
been prevalent with respect to technology companies. Securities litigation could
result in substantial costs, harm our financial condition and would divert
management's attention and resources.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT AN
ACQUISITION OF US, WHICH COULD DECREASE THE VALUE OF YOUR SHARES.

Our certificate of incorporation and bylaws and Delaware law will contain
provisions that could make it harder for a third party to acquire us without the
consent of our board of directors, although these provisions have little
significance while we are controlled by HNC. These provisions will include a
classified board of directors and limitations on actions by our stockholders by
written consent. In addition, our board of directors will have the right to
issue preferred stock without stockholder approval, which could be used to
dilute the stock ownership of a potential hostile acquiror. In addition, Section
203 of the Delaware General Corporation Law will also impose some restrictions
on mergers and other business combinations between us and any holder of 15% or
more of our outstanding common stock, other than HNC or a successor to HNC.
Although we believe these provisions will provide for an opportunity to receive
a higher bid by requiring potential acquirors to negotiate with our board of
directors, these provisions apply even if the offer may be considered beneficial
by some stockholders.

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OUR USE OF THE PROCEEDS FROM THIS OFFERING MAY NOT MAXIMIZE RETURNS ON
INVESTMENT.

We have broad discretion in how to use the proceeds of this offering.
Stockholders may not agree with the ways management decides to use the proceeds.
Our primary goal with this offering is to create a public market for our common
stock. We currently plan to use the proceeds of this offering for working
capital and general corporate purposes, including the repayment of intercompany
debt to HNC. Until we need to use the proceeds of this offering, we intend to
invest the proceeds in investment grade, interest bearing securities.

IF YOU PURCHASE COMMON STOCK IN THIS OFFERING, YOU WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION.

The initial public offering price of our common stock is substantially
higher than the book value per share of the outstanding common stock.
Accordingly, if you purchase common stock in this offering, you will experience
immediate dilution of approximately $ in the book value per share of
the common stock, meaning that the net tangible book value of each share
purchased by you will be less than the purchase price you paid. To the extent
that outstanding options to purchase our common stock are exercised, or options
reserved for issuance are issued and exercised, each stockholder purchasing in
this offering will experience further substantial dilution. For a more detailed
discussion of the dilution you can expect to experience, see "Dilution" on page
23.

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SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

This prospectus contains forward-looking statements in "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks outlined
under "Risk Factors" beginning on page 7, that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform these statements to actual future results.

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OUR SEPARATION FROM HNC

Set forth in this section is HNC's current intention as to the possible
distribution of any or all of its shares of our common stock to its
stockholders. HNC is not obligated to complete the distribution. If the
distribution is ultimately completed, HNC does not have any obligation with
respect to the timing or any of the terms of the distribution. We cannot assure
you as to whether or not or when the distribution will occur, or as to the terms
of the distribution.

OVERVIEW

We are currently a wholly owned subsidiary of HNC Software Inc., a public
company that develops and markets predictive software solutions for businesses.
Immediately prior to the completion of this offering, our business will combine
the business activities of Retek Information Systems, Inc. and Retek Logistics,
Inc. Retek Information Systems develops and markets web-based
business-to-business software solutions for retailers. Founded in 1995, Retek
Information Systems was acquired by HNC in 1996. Retek Logistics, founded in
1985, develops warehouse management software solutions. HNC acquired Retek
Logistics in 1998. On September 9, 1999, Retek Logistics was reincorporated as a
Delaware corporation and renamed "Retek Inc." In connection with the separation
of our business from HNC, HNC will contribute all of the outstanding capital
stock of Retek Information Systems to Retek Inc.

HNC develops, markets and supports software for businesses in certain
targeted service industries. HNC's software solutions convert existing data into
meaningful recommendations and actions that allow organizations to improve
profitability, competitiveness and customer satisfaction. HNC sells and markets
its software and services in North America and internationally. HNC provides
software for each of the healthcare/insurance, financial services and retail
industries. Substantially all of the revenue HNC earns from the retail industry
is attributable to our software solutions. After this offering, HNC will focus
on its remaining core software markets, namely the healthcare/insurance and
financial services industries. However, HNC is not obligated to refrain from
providing software to the retail industry or from competing with us. HNC's
address is 5935 Cornerstone Court West, San Diego, California 92121.

BENEFITS OF THE SEPARATION

We believe that we will realize certain benefits from our separation from
HNC, including the following:

- Greater Strategic Focus. As a result of having our own management team
and a board with independent outside directors, we expect to have a
sharper focus on our business and strategic opportunities. We will also
have greater ability to modify business processes to better fit the
needs of our customers and employees.

- Better Incentives for Employees and Greater Accountability. The
separation will allow us to offer our employees compensation, including
cash and stock based compensation, directly linked to the performance of
our business. We expect these incentives to enhance our ability to
attract and retain qualified personnel.

- Increased Speed and Responsiveness. We expect to be able to make
decisions more quickly, deploy resources more rapidly and efficiently
and operate with greater flexibility than when we were a part of a
larger organization. In addition, we expect to enhance our
responsiveness to customers and partners.

SEPARATION AND TRANSITIONAL AGREEMENTS

We will enter into agreements with HNC providing for the separation of our
business from HNC, including a separation agreement and a corporate rights
agreement. These agreements will generally

19
<PAGE> 24

provide for the transfer from HNC to us of assets and the assumption by us of
liabilities relating to our business. We will also enter into a license
agreement with HNC regarding the licensing to us of intellectual property
relating to our business, a transitional services agreement pursuant to which
HNC will provide us with specified interim administrative and other services and
a tax sharing agreement pursuant to which we will contribute to the payment of
HNC's income taxes while we are consolidated with HNC for income tax purposes.

If HNC carries out the tax-free distribution, these agreements will
restrict our ability to take specified actions that, if taken, would cause the
distribution to be taxable to HNC or its stockholders, unless we obtain the
consent of HNC or HNC receives a supplemental ruling from the Internal Revenue
Service. In addition, under the separation agreement, we will agree to indemnify
HNC on an after-tax-basis for any tax liability incurred by HNC with respect to
the distribution as a result of our taking any of these specified actions or any
transaction or event occurring after the distribution that involves our stock,
assets or business or that of any of our affiliates, whether or not HNC consents
or a supplemental ruling is obtained.

The agreements relating to our separation from HNC will be made in the
context of a parent-subsidiary relationship, will be negotiated in the overall
context of our separation from HNC and will not be conditioned on HNC's
completion of the distribution. The terms of these agreements may be more or
less favorable to us if they had been negotiated with unaffiliated third
parties. For more information regarding the separation agreements, see "Certain
Transactions" beginning on page 60.

POSSIBLE FUTURE DISTRIBUTION BY HNC OF OUR COMMON STOCK

- HNC's receipt of a written ruling from the Internal Revenue Service that
the distribution qualifies for tax-free treatment under Section 355 of
the Internal Revenue Code, such that HNC and HNC's stockholders will not
recognize income for federal tax purposes as a result of the
distribution;

- HNC's board of directors approval of the distribution, and determining
that the distribution is in the best interest of HNC's stockholders; and

- HNC's ability to effect the distribution in compliance with applicable
law and without violation or acceleration of its contractual
obligations.

HNC has indicated that the distribution will not occur prior to the later
of (1) March 31, 2000, and (2) 180 days after the completion of this offering
(unless the lead underwriter consents to an earlier date).

HNC has the sole discretion to determine the timing, structure and terms of
the distribution. HNC is not obligated to carry out the distribution, and we
cannot assure you as to whether or when the distribution may occur. Neither HNC
nor we have any intention of purchasing or redeeming the shares issued in this
offering if the distribution does not occur. In addition, even if the
distribution is ultimately completed, HNC does not have any obligation with
respect to the timing or any of the terms of the distribution.

20
<PAGE> 25

USE OF PROCEEDS

The net proceeds to us from the sale of the 5,000,000 shares of common
stock in this offering are estimated to be approximately $ million,
assuming an initial public offering price of $10.00 per share, after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses, and assuming no exercise of the underwriters' over-allotment option to
purchase 750,000 shares from us. The primary purposes of this offering are to
increase our working capital, create a public market for our common stock,
increase our visibility in our markets and facilitate future access to the
public finance markets.

We intend to use the net proceeds from this offering for general corporate
purposes, principally working capital, including repayment of intercompany debt
to HNC, which is approximately $8,000,000 at this time, the payment of notes in
the amount of up to $8,000,000 to be issued in connection with the purchase all
of the outstanding shares of WebTrak Limited, capital expenditures, geographic
expansion of our operations, potential acquisitions, and additional sales and
marketing efforts. Except for the purchase of all of the outstanding capital
stock of WebTrak, we have no specific understandings, commitments or agreements
with respect to any acquisition of or investment in complementary businesses,
products or technologies and are not currently engaged in any negotiations for
any such acquisition or investment. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" beginning on page 33 for discussion of our strategy as it relates to
acquisitions or investments in complementary businesses or products. Pending
such uses, we will invest the proceeds of this offering in short-term,
interest-bearing, investment-grade securities.

DIVIDEND POLICY

We currently expect to retain future earnings, if any, for use in the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.

21
<PAGE> 26

CAPITALIZATION

The following table sets forth the following information:

- our actual capitalization as of October 31, 1999, and

- our capitalization on an as adjusted basis, giving effect to the sale of
5,000,000 shares of common stock in this offering at an assumed initial
public offering price of $10.00 per share, assuming no exercise of the
underwriters' over-allotment option and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses
payable by us.

This table excludes the following shares:

- 7,100,000 shares of common stock issuable upon the exercise of stock
options outstanding under our Retek 1999 Equity Incentive Plan, and
1,900,000 shares of common stock available for issuance under this
equity incentive plan;

- 400,000 shares of common stock available for issuance under our Retek
1999 Director Stock Option Plan;

- 600,000 shares of common stock available for issuance under our Retek
1999 Employee Stock Purchase Plan; and

- 266,667 shares of common stock, assuming an initial public offering
price of $10.00 per share, which may be issued upon conversion of a note
to be issued in connection with the purchase of all of the outstanding
capital stock of WebTrak. For further information regarding the note,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" beginning on
page 33.

The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning on page and our financial statements and the related
notes beginning on page F-1.

<TABLE>
<CAPTION>
OCTOBER 31, 1999
--------------------------
ACTUAL AS ADJUSTED
--------- -------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Stockholders' equity:
Preferred stock, par value $0.01 per share: 5,000,000
shares authorized; no shares issued and outstanding
actual and no shares issued and outstanding, as
adjusted...............................................
Common stock, par value $0.01 per share: 150,000,000
shares authorized; 1,000 shares issued and outstanding
actual and 45,000,000 shares issued and outstanding, as
adjusted...............................................
Additional paid-in capital..................................
Retained earnings...........................................
------- -------
Total stockholders' equity................................
------- -------
Total capitalization.............................. $ $
======= =======
</TABLE>

22
<PAGE> 27

DILUTION

Our net tangible book value as of September 30, 1999 was $ , or
approximately $ per share. Net tangible book value per share represents the
amount of our total tangible assets less our total liabilities, divided by the
number of shares of common stock outstanding. Dilution in net tangible book
value per share represents the difference between the amount per share paid by
purchasers of shares of our common stock in this offering and the net tangible
book value per share of our common stock immediately afterwards. After giving
effect to the sale of the 5,000,000 shares of common stock in this offering at
an assumed initial public offering price of $10.00 per share, and after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by us, our pro forma net tangible book value at September 30,
1999, would have been $ , or approximately $ per share. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing shareholders and an immediate dilution in pro forma net
tangible book value of $ per share to new investors purchasing shares of
common stock in this offering. The following table illustrates this dilution on
a per share basis:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share as of September 30,
1999................................................... $
Increase attributable to new investors....................
-------
Pro forma net tangible book value per share after this
offering..................................................
-------
Dilution in pro forma net tangible book value per share to
new investors............................................. $
=======
</TABLE>

Investors who are considering participating in this offering should note
that, as a result of the substantial dilution that will occur immediately
following this distribution, they could pay as much as $ per share, an
amount that substantially exceeds the per share value of our net assets
(calculated by subtracting our total liabilities from our total assets), which
is $ per share. In addition, investors in this offering will contribute
% of the total amount to fund us, but will own % of us.

In connection with this offering, we will make grants of stock options to
executive officers and other employees and independent contractors under our
Retek 1999 Equity Incentive Plan. For further information, see
"Management -- Employee Benefit Plans -- Retek 1999 Equity Incentive Plan"
beginning on page 54. An aggregate of 7,100,000 shares of common stock are
issuable upon the exercise of these options at an exercise price of $10.00 per
share. The exercise of these or other stock options granted under our Retek 1999
Equity Incentive Plan or otherwise in the future could result in dilution to
you. The above table assumes no exercise of any such options and no exercise of
the underwriters' over-allotment option.

23
<PAGE> 28

SELECTED COMBINED FINANCIAL DATA

The data set forth below should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
beginning on page 25 and the combined financial statements and related notes
beginning on page F-1. The selected combined financial data as of December 31,
1997 and 1998, and June 30, 1999 and for each of the years in the three year
period ended December 31, 1998 and the six-month period ended June 30, 1999 have
been derived from our audited combined financial statements included elsewhere
in this prospectus. The selected combined financial data as of December 31,
1994, 1995 and 1996, for each of the years in the two-year period ended December
31, 1995 and for the six-months ended June 30, 1998, have been derived from our
separate unaudited combined financial statements, not included in this
prospectus, that have been prepared on the same basis as the audited combined
financial statements and, in the opinion of our management, contain all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of our combined operating results and combined financial position
for such periods. The combined operating results for the six months ended June
30, 1999 are not necessarily indicative of the results to be expected for any
other interim period or any future fiscal year.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- ------- ----------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME DATA:
Total revenue....................... $1,912 $3,836 $13,433 $30,923 $55,033 $25,313 $37,690
Gross profit........................ 247 698 9,554 27,278 41,181 19,601 26,970
Operating (loss) income............. (328) (536) 1,418 6,619 8,088 2,504 5,792
Net (loss) income................... (321) (244) 2,233 3,476 3,878 568 3,460
Pro forma unaudited basic and
diluted net income per common
share............................. $ 1.73 $ 1.55
Shares used in computing pro forma
unaudited basic and diluted net
income per common share........... 2,238 2,238
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------------------------- --------
1994 1995 1996 1997 1998 1999
------ ------ ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 434 $ 523 $ 1,459 $ 2,469 $ 415 $ 930
Working capital............................ (181) (480) 680 5,016 12,876 15,800
Total assets............................... 753 1,821 30,173 37,896 51,283 57,765
Payable to HNC Software Inc................ 578 883 6,197 6,491 5,944 7,927
Total stockholder's equity................. 7 237 20,469 24,607 36,016 39,121
</TABLE>

- -------------------------

24
<PAGE> 29

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of
operations should be read in conjunction with our combined financial statements
and the related notes, and the other financial information included in this
prospectus. This discussion and analysis contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" beginning on
page and elsewhere in this prospectus.

OVERVIEW

We are currently a wholly owned subsidiary of HNC. Immediately prior to the
completion of this offering, our business will combine the business activities
of Retek Information Systems, Inc. and Retek Logistics, Inc. Retek Information
Systems develops and markets web-based, business-to-business software solutions
for retailers. Founded in 1995, Retek Information Systems was acquired by HNC in
1996. Neil Thall Associates, Inc., a wholly owned subsidiary of HNC since 1991,
which develops predictive software solutions for retailers, was merged into
Retek Information Systems in April 1997. Financial results of Neil Thall
Associates are included in all periods presented. Retek Logistics, founded in
1985, develops warehouse management software solutions. HNC acquired Retek
Logistics in 1998. On September 9, 1999, Retek Logistics was reincorporated as a
Delaware corporation and renamed "Retek Inc." In connection with the separation
of our business from HNC, HNC will contribute all of the outstanding capital
stock of Retek Information Systems to Retek Inc.

The acquisition of Retek Information Systems by HNC allowed for the
integration of HNC's patented predictive technology into our software solutions
for retailers. We formalized a marketing relationship with Oracle in September
1998, providing us with an effective partnership with a world leader in
electronic commerce, an international channel to the largest retailers and the
support of Oracle's worldwide sales force.

We have generated revenue from the sale of software licenses, maintenance
and support contracts and professional consulting and contract development
services. Customers who license our software generally purchase maintenance
contracts, typically covering renewable annual periods. In addition, customers
may purchase consulting services, which are customarily billed at a fixed daily
rate plus out-of-pocket expenses. Contract development services, including new
product development services, are typically performed for a fixed fee. We also
offer training services that are billed on a per student or per class session
basis. Our total revenue has grown from $13.4 million in 1996 to $55.0 million
in 1998. We have been profitable for eleven consecutive quarters, resulting in
retained earnings of $12.8 million as of June 30, 1999.

Our revenue growth has resulted from a combination of increased market
penetration and an expanding product offering. In 1996 the majority of our
license revenue was attributable to a single client/server software solution,
our Retek Merchandising System. Our investments in research and development,
acquisitions and alliances have helped us bring new software solutions to
market. Our investments produced a suite of decision support solutions in 1997;
the retooling of our applications for the web in 1998; and the delivery of
web-based, business-to-business collaborative planning, critical path and
product design solutions in 1999. To support our growth during these periods we
also continued to invest in internal infrastructure by hiring employees
throughout various departments of the organization.

We market our software solutions worldwide through direct and indirect
sales channels. Revenue generated from our direct sales channel accounted for
approximately 100%, 89% and 74% of our total revenue in 1997, 1998 and the six
months ended June 30, 1999. Our indirect sales channel is driven mainly by our
relationship with Oracle.

25
<PAGE> 30

Revenue attributable to customers outside of North America accounted for
approximately 42%, 36% and 43% of our total revenue in 1997, 1998 and the six
months ended June 30, 1999. Approximately 22% and 25% of our sales were
denominated in currencies other than the U.S. dollar for 1998 and the six months
ended June 30, 1999.

We primarily sell perpetual licenses for which we recognize revenue in
accordance with generally accepted accounting principles, upon meeting each of
the following criteria:

- execution of a written purchase order, license agreement or contract;

- delivery of software authorization keys;

- the license fee is fixed and determinable;

- collectibility of the proceeds is assessed as being probable; and

- vendor-specific objective evidence exists to allocate the total fee to
elements of the arrangement.

Vendor-specific objective evidence is based on the price charged when an
element is sold separately, or if not yet sold separately, is established by
authorized management. All elements of each order are valued at the time of
revenue recognition. We recognize revenue:

- for sales made through our distributors, resellers and original
equipment manufacturers, at the time these partners report to us that
they have sold the software to the end-user and after all revenue
recognition criteria have been met;

- from maintenance agreements related to our software, over the respective
maintenance periods;

- from customer modifications, as the services are performed using the
percentage of completion method; and

- from services, using the percentage of completion method, based on costs
incurred to date compared to total estimated costs at completion.

We record amounts received under contracts in advance of performance as
deferred revenue and recognize these amounts within one year from receipt.

26
<PAGE> 31

RESULTS OF OPERATIONS

The following table presents selected financial data for the periods
indicated as a percentage of our total revenue. Our historical reporting results
are not necessarily indicative of the results to be expected for any future
period.

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUE
------------------------------------
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------ ---------------
1996 1997 1998 1998 1999
---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C>
Revenue:
License and maintenance................................. 73% 93% 78% 78% 73%
Services and other...................................... 27 7 22 22 27
--- --- ---- ---- ----
Total revenue........................................ 100 100 100 100 100
--- --- ---- ---- ----
Cost of revenue:
License and maintenance................................. 13 9 8 7 9
Services and other...................................... 16 3 17 15 20
--- --- ---- ---- ----
Total cost of revenue................................ 29 12 25 22 29
--- --- ---- ---- ----
Gross margin.............................................. 71 88 75 78 71
Operating expenses:
Research and development................................ 36 31 23 24 26
Sales and marketing..................................... 14 27 26 28 22
General and administrative.............................. 10 9 7 8 7
Acquired in-process research and development............ -- -- 3 7 --
Acquisition related amortization of intangibles......... -- -- 1 1 1
--- --- ---- ---- ----
Total operating expenses............................. 60 67 60 68 56
--- --- ---- ---- ----
Operating income.......................................... 11 21 15 10 15
Other income, net......................................... -- -- -- -- --
--- --- ---- ---- ----
Income before income tax (benefit) provision.............. 11 21 15 10 15
Income tax (benefit) provision............................ (6) 10 8 8 6
--- --- ---- ---- ----
Net income................................................ 17% 11% 7% 2% 9%
=== === ==== ==== ====
- -------------------------
Cost of license and maintenance revenue, as a percentage
of license and maintenance revenue...................... 18% 10% 10% 9% 12%
Cost of services and other revenue, as a percentage of
services and other revenue.............................. 56% 44% 77% 71% 72%
</TABLE>

SIX MONTHS ENDED JUNE 30, 1998 AND 1999

REVENUE

Total revenue. Total revenue is comprised of software license and
maintenance revenue and services and other revenue. Total revenue increased 49%
from $25.3 million in the six months ended June 30, 1998 to $37.7 million in the
six months ended June 30, 1999.

License and maintenance revenue. License and maintenance revenue increased
38% from $19.8 million in the six months ended June 30, 1998 to $27.3 million in
the six months ended June 30, 1999. The increase was primarily the result of an
increase in the number of software licenses sold and the introduction of new
product offerings. In addition, products of Retek Logistics were added on March
31, 1998.

27
<PAGE> 32

Services and other revenue. Services and other revenue increased 90% from
$5.5 million in the six months ended June 30, 1998 to $10.4 million in the six
months ended June 30, 1999. The increase was driven by increases in both
contract development and consulting services as a result of our expanding
customer base.

COST OF REVENUE

Cost of license and maintenance revenue. Cost of license and maintenance
revenue consists primarily of fees for third party software products that are
integrated into our products, and salaries and related expenses of our customer
support organization. Cost of license and maintenance revenue increased by 80%
from $1.8 million in the six months ended June 30, 1998 to $3.3 million in the
six months ended June 30, 1999. This increase was primarily a result of an
increase in the sale of software licenses with higher third party license fees.
As a percentage of license and maintenance revenue, cost of license and
maintenance revenue was 9% for the six months ended June 30, 1998 and 12% for
the six months ended June 30, 1999.

Cost of services and other revenue. Cost of services and other revenue
includes salaries and related expenses of our consulting organization; cost of
third parties contracted to provide consulting services to our customers; and an
allocation of our facilities and depreciation expenses. Cost of services and
other revenue increased 91% from $3.9 million for the six months ended June 30,
1998 to $7.5 million for the six months ended June 30, 1999. The increase is
attributable to the increase in staffing to meet the demand for consulting
services, as well as increased costs related to custom development projects.

OPERATING EXPENSES

Research and development. Research and development expenses, which are
expensed as incurred, consist primarily of salaries and related costs of our
engineering organization; fees paid to third-party consultants; and an
allocation of our facilities and depreciation expenses. We believe that our
success depends on continued enhancement of our current products and our ability
to develop new technologically advanced products that meet the sophisticated
requirements of our customers. We have increased our investment in research and
development in absolute dollars year over year since 1995. Research and
development expenses increased 61% from $6.1 million in the six months ended
June 30, 1998 to $9.7 million in the six months ended June 30, 1999. The
increase in these expenses was due to increases in engineering personnel and
related costs, as well as increases in third-party consulting costs. We expect
research and development expenses to increase in absolute dollars in future
periods.

Sales and marketing. Sales and marketing expenses consist primarily of
salaries and related costs of our sales and marketing organization: sales
commissions; costs of our marketing programs, including public relations,
advertising, trade shows, collateral sales materials, and our customer user
reference group program; rent and facilities costs associated with our regional
and international sales offices; and an allocation of our facilities and
depreciation expenses. Sales and marketing expenses increased 19% from $7.0
million in the six months ended June 30, 1998 to $8.4 million in the six months
ended June 30, 1999. The increases in sales and marketing expenses were due to
growth in our sales and marketing organization, an increase in sales
commissions, increased travel, and an expansion of our marketing programs.
Although we have increased our absolute sales and marketing expenses, the rate
of increase is less than the rate of increase in total revenue. We anticipate
that sales and marketing expenses will increase in absolute dollars to support
our intended expansion of our sales and marketing organization.

General and administrative. General and administrative expenses consist
primarily of costs from our finance and human resources organizations; third
party legal and other professional services fees; and an allocation of our
facilities costs and depreciation expenses. General and administrative expenses
increased 21% from $2.1 million in the six months ended June 30, 1998 to $2.6
million in the six months ended June 30, 1999. The increase in absolute general
and administrative expenses is attributable to growth of our administrative
organizations in support of our overall growth. General and administrative
expenses decreased to 7% of total revenue for the six months ended June 30, 1999
from 8% of total revenue for the
28
<PAGE> 33

six months ended June 30, 1998. The decrease in general and administrative
expenses as a percentage of total revenue reflects increasing economies of scale
and operating efficiencies. We expect that becoming an independent public
company may create a short-term increase in general and administrative expenses
as a percentage of total revenues. Our management estimates that a non-recurring
charge to general and administrative expenses of approximately $400,000 will be
incurred.

In-process research and development. In connection with the acquisition of
Retek Logistics in March 1998, in-process research and development of $1.8
million was charged to results of operations on the acquisition date. See our
further discussion of this transaction included in "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Years Ended
December 31, 1996, 1997 and 1998" beginning on page 29.

Income Tax Provision. The income tax provision was $1.9 million for the
six months ended June 30, 1998 and $2.3 million for the six months ended June
30, 1999. The income tax provisions for the six months ended June 30, 1998 and
1999 are based on management's estimates of the effective tax rates to be
incurred by us during those respective full fiscal years. The income tax
provision in 1998 includes the tax effects of non-deductible, one-time
write-offs of in-process research and development related to the purchase of
Retek Logistics, as well as research and development tax credits generated
during the six months ended June 30, 1998 that we anticipate using in the
future. The income tax provision for 1999 includes the tax effects of
non-deductible amortization related to the purchase of Retek Logistics, as well
as research and development tax credits generated during the six months ended
June 30, 1999 that we anticipate using in the future.

YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

REVENUE

Total revenue. Total revenue increased 130% from $13.4 million in 1996 to
$30.9 million in 1997 and 78% to $55.0 million in 1998.

License and maintenance revenue. License and maintenance revenue increased
197% from $9.7 million in 1996 to $28.9 million in 1997 and 48% to $42.8 million
in 1998. The increase in both 1997 and 1998 was primarily due to the addition of
new customers as well as the introduction of new software solutions. The average
dollar sale per customer has increased as we are selling proportionately more
software solutions to larger retail customers. In addition, revenue from sales
of products of Retek Logistics were added on March 31, 1998.

Services and other revenue. Services and other revenue decreased 45% from
$3.7 million in 1996 to $2.0 million in 1997 and increased 505% to $12.3 million
in 1998. The decrease from 1996 to 1997 was primarily attributable to a decrease
in commercial development contracts for the Demand Forecasting product, which
shifted to full commercial release under perpetual licensing arrangements in
early 1997. The increase in 1998 was due to increases in both custom development
and service projects as a result of our increasing customer base.

COST OF REVENUE

Cost of license and maintenance revenue. Cost of license and maintenance
revenue increased 53% from $1.8 million in 1996 to $2.7 million in 1997 and 58%
to $4.3 million in 1998. The increases are attributable to the increases in
license and maintenance revenue. As a percentage of license and maintenance
revenue, cost of license and maintenance revenue was 18% in 1996, 10% in 1997
and 10% in 1998. The decrease from 1996 to 1997 was attributable to a decrease
in royalty fees paid related to an indirect sales channel.

Cost of services and other revenue. Cost of services and other revenue
decreased from $2.1 million in 1996 to $898,000 in 1997 and increased to $9.5
million in 1998. As a percentage of services and other

29
<PAGE> 34

revenue, cost of services and other revenue was 56% in 1996, 44% in 1997 and 77%
in 1998. The decrease in cost of services and other revenue as a percentage of
services and other revenue from 1996 to 1997 was primarily due to a decrease in
the number of commercial development contracts, which have substantially lower
margins than custom development or service projects. The increase in 1998 was
primarily attributable to an increase in consulting contracts for which we
utilized a significant amount of contract labor, which in turn caused a decrease
in services and other revenue gross margins. During 1997, we started to build
our consulting services business and as a result began to incur recruiting,
training and management support expenses. This build-up contributed to the
decline in services and other gross margins.

OPERATING EXPENSES

Research and development. We have increased our investment in research and
development in absolute dollars each year since 1995. Research and development
expenses increased 96% from $4.8 million in 1996 to $9.5 million in 1997 and 36%
to $12.9 million in 1998. As a percentage of total revenue, research and
development expenses decreased as a result of increasing economies of scale. The
absolute dollar increases in research and development expenses were due to
significant increases in engineering personnel and related costs, as well as
increases in third-party consulting costs.

Sales and marketing. Sales and marketing expenses increased 337% from $1.9
million in 1996 to $8.3 million in 1997 and 70% to $14.1 million in 1998.
Increases in sales and marketing expenses were due to expansion in our sales and
marketing organization, an increase in sales commissions, increased travel, and
the expansion of our marketing programs. Although we increased our absolute
sales and marketing expenses in 1998, they decreased as a percentage of total
revenue.

General and administrative. General and administrative expenses increased
106% from $1.4 million in 1996 to $2.9 million in 1997 and 35% to $3.9 million
in 1998. The increase in absolute dollars in general and administrative expenses
was attributable to growth of our administrative organization in support of our
overall growth. The decrease in expenses as a percentage of total revenue
reflected increasing economies of scale and operating efficiencies.

In-process research and development. In connection with the acquisition of
Retek Logistics in March 1998, in-process research and development of $1.8
million was charged to results of operations on the acquisition date. Certain
products of Retek Logistics were complete in certain areas and under development
in others. The classification of the technology as complete or under development
was made in accordance with the guidelines of Statement of Financial Accounting
Standards No. 86, Statement of Financial Accounting Standards No. 2 and
Financial Accounting Standards Board Interpretation No. 4. At the time of
acquisition, Retek Logistics had a number of new software products under
development, including Retek Distribution Management Versions 6.0 and 7.0 and
Retek Distribution Management CBT. Retek Distribution Management Version 6.0 and
Retek Distribution Management CBT were both completed during 1998. Retek
Distribution Management 7.0 was in an early state of development as of the
acquisition date and was completed during the second quarter of 1999, incurring
costs of approximately $900,000 to reach technological feasibility.

We used an independent appraisal firm to assist us with our valuation of
the fair market value of the purchased assets. Fair market value is defined as
the estimated amount at which an asset might be expected to be exchanged between
a willing buyer and willing seller assuming the buyer continues to use the
assets in its current operations. We provided assumptions by product line of
revenue, cost of goods sold and operating expense to the appraiser to assist in
the valuation. The appraisal considered three traditional approaches to
valuation: the cost approach, the market approach and the income approach.

With respect to the forecasted earnings provided to the appraiser, Retek
Logistics forecast slightly higher revenue growth rates as long as it continues
to meet market demands with new releases each year. These higher growth rates
reflect Retek Logistics' expectation of greater market acceptance with the

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<PAGE> 35

release of its Oracle-based platform, as well as improvements incorporated into
Retek Distribution Management Versions 6 and 7. Retek Logistics forecast that
gross margins would remain consistent relative to prior years. Retek Logistics
also forecast that its current operating expense levels would increase only
moderately in absolute dollars and, as a result, earnings before interest and
taxes were expected to increase in later years. We believe these growth
expectations are reasonable if new product versions are offered according to
schedule. The statements regarding our expectations are forward looking
statements, which are subject to risks and uncertainties. Actual results may
differ materially from those anticipated. The important factors that could cause
actual results to differ include those discussed elsewhere in this prospectus.

With respect to the discount rates used in the valuation approach, the
incomplete technology represents a mix of near and mid-term prospects for the
business and imparts a level of uncertainty to its prospects. It is the nature
of the business to be constantly developing new software for future product
releases. A reasonable expectation of return on the incomplete technology would
be higher than that of completed technology due to these inherent risks. As a
result, the earnings associated with incomplete technology were discounted at a
rate of 40% based upon the methodologies described in the next paragraph.

Because Retek Logistics did not have short-term or long-term debt as of the
date of acquisition, the Moody's seasoned Baa rate for March 31, 1998 was used
as the cost of debt. The Capital Asset Pricing Model was used to determine the
cost of equity. It combines a risk free rate of return with an equity risk
premium multiplied by a factor, referred to as Beta, which is based on the
performance of common stock prices of similar publicly traded companies.
Employing these data, the discount rate attributable to the business was 30%,
which was used for valuing completed technology. Since incomplete technology
represents a mix of near and mid-term prospects for the business and imparts a
certain level of uncertainty and would require a higher return than completed
technology, the valuation report prepared by the appraiser suggests that a rate
of 40% be ascribed to the excess earnings of incomplete technology.

Acquisition related amortization of intangibles. In connection with the
purchase of Retek Logistics, the application of the purchase method for the
acquisition resulted in an excess of cost over net assets acquired of
approximately $6.6 million, of which $4.8 million was allocated to intangibles
and $1.8 million was allocated to in-process research and development. In
conjunction with the purchase, we recorded various intangible assets, which are
being amortized over estimated useful lives ranging from three to five years. In
connection with the acquisition of Retek Logistics, HNC has a contingent
obligation to issue additional shares of HNC common stock upon the achievement
of certain financial objectives during 1999. This consideration will not be
reflected in our financial position in the future.

Income tax (benefit) provision. The income tax benefit of $815,000 in 1996
was primarily attributable to the recognition of a $1.3 million deferred tax
asset based on anticipated future utilization of all of the remaining net
operating loss carryforwards, research and development credit carryforwards and
foreign tax credit carryforwards. A portion of the deferred tax asset had
previously been offset by a valuation allowance in the amount of $121,000. Based
on pre-tax income generated in the third and fourth quarters of fiscal 1996 and
estimates of future taxable income, our assessment was that it was more likely
than not that we would realize the deferred tax assets in future periods.
Therefore, we released the valuation allowance provided on the deferred tax
assets during the fourth quarter of 1996.

The 1997 income tax provision of $3.2 million includes the effect of the
anticipated future realization of research and development tax credits generated
during the year. The 1998 income tax provision of $4.2 million includes the tax
effects of the non-deductible, one-time write-off of in-process research and
development related to the purchase of Retek Logistics. Other items effecting
the tax provision primarily relate to the anticipated future realization of
research and development tax credits generated during the year.

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<PAGE> 36

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth a summary of our unaudited quarterly
operating results for each of the six quarters in the period ended June 30,
1999. This information has been derived from unaudited interim financial
statements that, in the opinion of management, have been prepared on a basis
consistent with the financial statements contained elsewhere in this prospectus
and include all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of such information when read in conjunction with
our combined financial statements and related notes beginning on page F-1. The
operating results for any quarter are not necessarily indicative of results for
any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------
1998 1999
--------------------------------------- ------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
License and maintenance................ $ 9,032 $10,815 $11,066 $11,840 $11,658 $15,656
Services and other..................... 2,109 3,357 3,450 3,364 4,989 5,387
------- ------- ------- ------- ------- -------
Total revenue....................... 11,141 14,172 14,516 15,204 16,647 21,043
------- ------- ------- ------- ------- -------
Cost of revenue:
License and maintenance................ 636 1,179 1,260 1,274 1,404 1,854
Services and other..................... 1,299 2,598 3,069 2,537 2,885 4,577
------- ------- ------- ------- ------- -------
Total cost of revenue............... 1,935 3,777 4,329 3,811 4,289 6,431
------- ------- ------- ------- ------- -------
Gross profit............................. 9,206 10,395 10,187 11,393 12,358 14,612
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development............... 2,896 3,170 3,235 3,617 4,277 5,460
Sales and marketing.................... 3,355 3,666 3,242 3,812 3,818 4,556
General and administrative............. 1,014 1,103 877 927 1,188 1,363
Acquired in-process research and
development......................... 1,750 -- -- -- -- --
Acquisition related
amortization of intangibles......... -- 143 143 143 258 258
------- ------- ------- ------- ------- -------
Total operating expenses............ 9,015 8,082 7,497 8,499 9,541 11,637
------- ------- ------- ------- ------- -------
Operating income......................... 191 2,313 2,690 2,894 2,817 2,975
Other income (expense), net.............. -- -- 19 (8) 16 (2)
------- ------- ------- ------- ------- -------
Income before income tax provision....... 191 2,313 2,709 2,886 2,833 2,973
Income tax provision..................... 79 1,857 1,106 1,179 1,145 1,201
------- ------- ------- ------- ------- -------
Net income............................... $ 112 $ 456 $ 1,603 $ 1,707 $ 1,688 $ 1,772
======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
License and maintenance................ 81% 76% 76% 78% 70% 74%
Services and other..................... 19 24 24 22 30 26
------- ------- ------- ------- ------- -------
Total revenue....................... 100 100 100 100 100 100
------- ------- ------- ------- ------- -------
Cost of revenue:
License and maintenance................ 6 8 9 8 8 9
Services and other..................... 12 18 21 17 17 22
------- ------- ------- ------- ------- -------
Total cost of revenue............... 18 26 30 25 25 31
------- ------- ------- ------- ------- -------
Gross margin............................. 82% 74% 70% 75% 75% 69%
------- ------- ------- ------- ------- -------
</TABLE>

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<PAGE> 37

In general, the trends identified in the six months and annual comparisons
apply to the quarterly results of operation, with the following exceptions:

- Quarter-over-quarter revenue growth from the first quarter to the second
quarter in each of 1998 and 1999 was significantly greater than the
quarter to quarter growth in each of the other quarters. This was a
result of the Oracle fiscal year-end in May, which results in greater
sales of Oracle Retail(TM) solutions in our second fiscal quarter.

- Cost of services and other revenue as a percentage of services and other
revenue increased significantly in the third quarter of 1998 as a result
of additional third party costs incurred to complete a large consulting
project.

- Net income increased in each of the six quarters shown except for the
change from the fourth quarter of 1998 to the first quarter of 1999.
This change was a result of an increase in research and development
expenses resulting from vertical expansion into the grocery and consumer
direct sectors and acquisition-related amortization expenses.

Retek has been successful in recruiting employees in all functional areas
in order to support the acquisition of new customers and the ongoing care for
our existing customer base. This staffing growth has been the key component of
the quarterly operating expense growth, and will be a significant component of
our future growth potential.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations to date primarily through funding from HNC in
the form of intercompany advances. At June 30, 1999, we had $930,000 in cash and
cash equivalents.

Net cash provided by operating activities was $734,000 in 1996, $3.8
million in 1997, $885,000 in 1998 and $1.3 million for the six months ended June
30, 1999. Sources of cash for each period resulted primarily from net income
generated in those periods. Uses of cash during these periods were principally
from increases in accounts receivable, which were partially offset by an
increase in the bad debt provision in 1998. This change in bad debt provision is
primarily attributable to the increase in accounts receivable due to increased
sales volume and reserving for specific customer accounts.

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<PAGE> 38

Net cash used in investing activities was $281,000 in 1996, $3.1 million in
1997, $2.4 million in 1998 and $2.8 million for the six months ended June 30,
1999. The uses of cash during these periods were attributable to the acquisition
of capital assets, primarily computer equipment and leasehold improvements.

Net cash provided by financing activities was $486,000 in 1996 and $294,000
in 1997. Net cash used by financing activities was $547,000 in 1998. Net cash
provided by financing activities was $2.0 million for the six months ended June
30, 1999. Net cash provided by financing activities included $1,950,000 in
borrowings from HNC in 1996, and $5,467,000 in borrowings from HNC and
$5,173,000 in repayments to HNC in 1997. Net cash used by financing activities
included $41,747,000 in borrowings from HNC and $42,294,000 in repayments to HNC
in 1998. Net cash provided by financing activities included $28,656,000 in
borrowings from HNC and $26,673,000 in repayments to HNC for the six months
ended June 30, 1999.

Deferred revenue consists principally of the unrecognized portion of
revenue received under maintenance service agreements. This revenue is
recognized ratably over the term of the service agreement. Deferred revenue was
$2.6 million at June 30, 1999.

We believe that the net proceeds from this offering, less the repayment of
intercompany debt to HNC, which is approximately $8,000,000 at this time,
together with our current cash and cash equivalents and net cash provided by
operating activities, will be sufficient to meet our working capital and capital
expenditure requirements for at least the next 12 months. As a result, HNC will
no longer be a source of funding for operating activities. Management intends to
invest our cash in excess of current operating requirements in short-term,
interest-bearing, investment-grade securities.

A portion of our cash could also be used to acquire or invest in
complementary businesses or products or otherwise to obtain the right to use
complementary technologies or data. We regularly evaluate, in the ordinary
course of business, potential acquisitions of such businesses, products,
technologies or data. On October 13, 1999, Retek Information Systems exercised
an option to purchase all of the outstanding capital stock of WebTrak Limited.
WebTrak owns the WebTrak Critical Path and Portfolio Private Label products that
we currently distribute. In connection with the purchase of WebTrak, Retek
Information Systems currently anticipates issuing to the current WebTrak
shareholders notes, due on November 26, 1999, in the principal amount of
approximately $5.33 million and a note, due on November 26, 1999, in the
principal amount of approximately $2.67 million, which may at the option of the
holder of the note be converted at the time of repayment into the number of
shares of our common stock equal to the principal amount of the note divided by
the initial public offering price of our common stock in this offering. The
option to convert this note into shares of our common stock is conditioned on
the completion of the offering and the ability to issue the shares under
applicable securities laws. None of these notes bear interest.

We have no other current plans, agreements or commitments relating to
potential acquisitions, and are not currently engaged in any negotiations with
respect to any other transaction. In addition, our ability to enter into any
acquisition of a business or assets may be limited if the distribution is
completed by HNC and under the terms of the corporate rights agreement. For
further information regarding these limitations, see "Certain
Transactions -- Separation Agreement -- Covenants and indemnification regarding
the distribution" beginning on page 61 and "Corporate Rights
Agreement -- Corporate governance" beginning on page 63.

Pursuant to an agreement between HNC and us, until two years, and possibly
longer, after the distribution, our ability to issue common stock in connection
with acquisitions, offerings or otherwise will be limited.

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<PAGE> 39

YEAR 2000 COMPLIANCE

Background of Year 2000 Issues

Many currently installed computer and communications systems and software
products are unable to distinguish 21st century dates from 20th century dates.
This situation could result in system failures or miscalculations causing
disruptions in the operations of any business. As a result, many companies'
software and computer and communications systems may need to be upgraded or
replaced to comply with these Year 2000 requirements.

Customer Representations and Warranties

Since September 1997, we have generally represented and warranted to our
customers in our software license agreements that the occurrence of the date
January 1, 2000 and any related leap-year issues will not cause our products to
fail to operate properly. In some cases, this warranty includes representations
regarding the ability of our product to store, display, calculate, compute and
otherwise process date-related data. Our warranty generally applies only to our
products and excludes failures resulting from the combination of our products
with other software or hardware or from the use of our software in a manner not
in accordance with the related documentation. If we breach this warranty,
remedies in most cases may include commercially reasonable efforts to replace
the software and to advise the customer how to achieve substantially the same
functionality through different procedures, as well as payment of monetary
damages.

Our Product Testing and Licensing

We have tested all of our software for Year 2000 compliance. We derived our
testing method from our review and analysis of the Year 2000 testing practices
of other software vendors, relevant industry Year 2000 compliance standards and
the specific functionality and operating environment of our products. The tests
are run on all supported platforms for each release and include testing for date
calculation and internal storage of date information with test numbers starting
in 1999 and going over the Year 2000 boundary. Based on these tests, we believe
our products to be Year 2000 compliant with respect to date calculations and
internal storage of date information.

Interaction of our Products with Third-Party Software

Our products contain, operate with and depend on third party code that we
may not be able to independently verify is Year 2000 compliant. The majority of
our products interface with and depend on Oracle's development tools. Oracle has
indicated that the version of their products on which current versions of our
software solutions depend is Year 2000 compliant, but Oracle has made no similar
statement regarding earlier versions of its products. Our software solutions
also contain and depend on software licensed to us by Lucent, MicroStrategy and
HNC. Each of these companies has made, either orally to us or to the public
generally, representations that its licensed code is Year 2000 compliant. We
have been able to verify, in connection with Year 2000 compliance testing of our
products, the validity of these representations. We will not purchase software
from third-parties that do not provide adequate assurances regarding their Year
2000 compliance. Finally, our products also interact with external sources,
including other software programs and operating systems, which may not be Year
2000 compliant or which may not provide date data to our products in a manner
that is Year 2000 compliant. Any interaction with third-party software that is
not Year 2000 compliant could cause our products to fail to properly operate or
to properly process date information.

Our Internal Systems

Although we do not have a formal contingency plan to address Year 2000
issues, we have assessed our internal risks associated with the Year 2000 issue
and concluded that these are minimal. We have

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<PAGE> 40

inventoried our internal software and hardware systems, as well as products and
services provided by third-party vendors. These systems include those related to
product delivery, customer service, internal and external communications,
accounting and payroll, which we consider critical areas of our business. We
have obtained vendor certification for the majority of our third-party systems
and have developed a detailed risk assessment and action plan that includes
testing of both critical systems and systems for which no certification has been
obtained.

Costs of Addressing Year 2000 Compliance

To date, our costs to address Year 2000 compliance have not been
significant. Based on our preliminary evaluations, we do not believe we will
incur significant operating expenses or be required to invest heavily in
computer system improvements to be Year 2000 compliant. We estimate that the
total costs will be less than $100,000. However, significant uncertainty exists
concerning the potential costs and effects associated with Year 2000 compliance.
Any Year 2000 compliance problem experienced by us or our customers could
decrease demand for our products, which could seriously harm our business and
operating results.

Risks of Year 2000 Issues

We are considering potential worst case Year 2000 scenarios that address
issues arising from noncompliance by our customers, suppliers or internal
operating systems. Although our Year 2000 compliance project will strive to
uncover significant noncompliance issues, in the worst case not all Year 2000
problems may be uncovered by the Year 2000, which would harm our business.
However, we believe that our most probable worst case scenario is more likely to
arise from our customers' and vendors' inability to become Year 2000 compliant
than from our failure to bring our products into compliance. As a result, our
supply chain and revenue could be harmed.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"), which is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. This statement establishes a new
model for accounting for derivatives and hedging activities. Under FAS 133, all
derivatives must be recognized as assets and liabilities and measured at fair
value. In July 1999, the FASB issued Statement of Accounting Standards No. 137
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133," which defers the effective date to
all fiscal quarters of fiscal years beginning after June 15, 2000. The adoption
of FAS 133 is not expected to have a significant impact on our combined
financial position or results of operations.

In January 1999, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-9 ("SOP 98-9"), "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." This SOP
retains the limitations of SOP 97-2 on what constitutes vendor-specific
objective evidence of fair value. SOP 98-9 will be effective for transactions
entered into in fiscal years beginning after March 15, 1999. The adoption of SOP
98-9 is not expected to have a significant impact on our combined financial
position or results of operations.

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<PAGE> 41

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The following discusses our exposure to market risk related to changes in
interest rates, foreign currency exchange rates and equity prices.

Interest Rate Risk

At June 30, 1999, we had $930,000 in cash and cash equivalents, which
consisted entirely of cash operating accounts. A decrease in market rates would
have no material effect on the value of these assets. We have no short- or
long-term debt, therefore, an increase in market rates would not directly affect
our financial results.

Foreign Currency Exchange Rate Risk

We develop products in the United States and sell in North America, Asia
and Europe. As a result, our financial results could be affected by various
factors, including changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Our foreign currency risks are mitigated
principally by contracting primarily in US dollars and maintaining only nominal
foreign currency cash balances. Working funds necessary to facilitate the
short-term operations of our subsidiaries are kept in local currencies in which
they do business, with excess funds transferred to our offices in the United
States. Approximately 22% and 25% of our total sales were denominated in
currencies other than the US dollar for the year ended December 31, 1998 and the
six months ended June 30, 1999.

Equity Price Risk

We do not own any equity investments. Therefore, we are not currently
exposed to any direct equity price risk.

Impact of European Monetary Conversion

We are aware of the issues associated with the changes in Europe resulting
from the formation of a European economic and monetary union, or EMU. One change
resulting from this union required EMU member states to irrevocably fix their
respective currencies to a new currency, the euro, as of January 1, 1999, at
which date the euro became a functional legal currency of these countries.
Through December 31, 2002, business in the EMU member states will be conducted
in both the existing national currency, such as the French franc or the Deutsche
mark, and the euro. As a result, companies operating or conducting business in
EMU member states will need to ensure that their financial and other software
systems are capable of processing transactions and properly handling these
currencies, including the euro. We are still assessing the impact that
conversion to the euro will have on our internal systems, the sale of our
solutions and the European and global economies. We will take appropriate
corrective actions based on the results of our assessment. We have not yet
determined the cost related to addressing this issue although we do not expect
these costs to be significant.

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<PAGE> 42

BUSINESS

RETEK OVERVIEW

We are a leading provider of web-based, business-to-business software
solutions for retailers and their trading partners. Our software offers a retail
focused solution that incorporates technology that can predict customer demand
and behavior, which we refer to as predictive technology. Our software solutions
enable retailers to use the Internet to communicate and collaborate efficiently
with their suppliers, distributors, wholesalers, logistics providers, brokers,
transportation companies, consolidators and manufacturers. We seek to enhance
the ability of retailers to interact with their supply chain by introducing
Retail.com, which we believe will be the first electronic commerce network
providing collaborative business-to-business software solutions to the retail
industry.

We market our software solutions through our direct and indirect sales
channels primarily to retailers who sell to their customers via traditional
retail stores, catalogs and/or web store fronts. To date we have licensed our
solutions across a variety of retail industry sectors to over 100 retailers,
including AnnTaylor, Brooks Brothers, Disney Stores, Eckerd, Hallmark, Internet
Shopping Network and Lancome USA. These listed customers represent a cross
section of our customers that have agreed to purchase at least $100,000 of our
software solutions, but they should not be considered to be actively endorsing
or promoting our solutions. We expect our Retail.com network offering to extend
our target market by making our solutions available to small and mid-sized
retailers and their trading partners.

INDUSTRY BACKGROUND

According to Euromonitor, worldwide retailer-to-consumer sales exceeded
$6.5 trillion in 1997. We estimate that the market for business-to-business
commerce is even larger than retailer-to-customer sales, and involves, according
to Dun & Bradstreet, over 3 million retail, wholesale and supplier organizations
operating in the global marketplace, with sales, distribution and manufacturing
typically involving multiple organizations in many countries.

We believe the Internet is beginning to change the way this market
operates. Not only does the Internet provide a new distribution channel for
conducting commerce with customers, it provides an even larger opportunity for
retail businesses to communicate and transact commerce with their supply chain.
According to Forrester Research, business-to-business electronic commerce is
expected to grow from $43 billion in 1998 to $1.3 trillion in 2003, accounting
for more than 90% of the dollar value of electronic commerce in the United
States. The market for software solutions for business-to-business electronic
commerce is estimated by Forrester Research to grow from $171 million in 1998 to
$3.1 billion in 2002, a market that is estimated to be more than five times the
size of the business-to-consumer electronic commerce software market.

By providing a means for streamlining and making more efficient the process
of collaboration between trading partners, the Internet can facilitate better
decision-making and help reduce the transaction costs of business-to-business
commerce. For example, the Internet enables:

- Real-time collaboration among organizations on production
priorities. This means that retailers can identify today's sale trends
at the point-of-sale and use this information to direct production
priorities in the manufacturing facility. Retailers can use this
information to reduce production of products that are in lesser demand
and eliminate the cost of manufacturing, moving, holding and eventually
marking down the price of these products.

- Collaboration on the design of new products in "virtual design
studios." By giving all parties involved in the design process
real-time input and access to information, the Internet can reduce the
time-to-market for new product offerings and help increase the
likelihood of developing a product offering that is responsive to
specific customer needs.

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<PAGE> 43

- Real-time communication among all members of the supply chain. This
means that new information from one part of the supply chain can be
easily communicated throughout the chain. A delay in a scheduled
delivery can, for instance, be quickly announced and broadly
disseminated. Actions to address the delay can then be quickly
implemented. This real-time communication helps reduce the disruption
and costs that arise when new information must be incorporated among a
diverse and disparate supply chain.

Most large and mid-sized retailers have historically relied upon
custom-built systems, typically developed internally, to manage their
interactions with trading partners. Many of these systems use 1970s mainframe
technology, are not web-based, and do not permit collaboration among members of
the supply chain. More recently, retailers have begun to purchase packaged
solutions with a specific retail industry focus. These products typically lack
the scalability required by larger retailers and are not web-based. Enterprise
resource planning systems have also been adopted on a limited scale. These
complex systems are expensive to implement and maintain, typically lack the
scalability required by retailers, and do not have a specific retail industry
focus. Recently introduced business-to-business electronic commerce products do
not offer specific retail industry focus and typically lack the scalability
required by retailers.

We believe that a market opportunity exists to provide retailers with a
business-to-business software solution that is web-based, collaborative and
designed specifically for the retail industry. This solution should be
easy-to-use, leverage a retailer's existing investments in information
technology and be flexible enough to meet the specific needs of a particular
retail sector, such as fashion, mass merchandise, grocery and drug stores. In
addition, the solution should be highly scalable to process and analyze vast
amounts of customer sales and supplier performance data unique to the retail
industry.

RETEK SOLUTION

We have developed and deployed web-based, business-to-business software
solutions that enable retailers to manage the entire retail supply chain. The
key features of our software solutions are:

- Collaborative retail supply chain. Our solutions electronically link
retailers with their trading partners to facilitate collaboration across
all aspects of the supply chain, from the initial prediction of customer
demand through product design and manufacturing to inventory management.
We believe that by facilitating this collaboration, we will enable
retailers to reduce unnecessary costs and time-to-market, while
increasing product quality and improving margins.

- Robust, predictive and analytic technologies. Our solutions provide
advanced predictive tools to process and analyze the vast amounts of
data available to retailers. Our unique, proprietary technologies enable
retailers to identify patterns in data that may not otherwise be
visible. This information helps our customers reduce inventories,
increase marketing effectiveness and improve customer satisfaction.

- Web-based, easy-to-use and rapidly deployable solutions. Our web-based
software solutions are easy to use and rapidly deployable. Retailers and
their trading partners can access our software from any desktop with a
web interface, and our software can be made available to all employees.
Furthermore, because our software solutions are web-based, their
deployment can reduce capital infrastructure and maintenance costs.

- Highly scalable and retail sector focused. Our web-based solutions are
built specifically to address the unique scalability requirements of the
retail industry. In addition, we have developed solutions that meet the
specific requirements of particular retail sectors, including fashion,
mass merchandise, grocery and drug stores.

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<PAGE> 44

STRATEGY

Our objective is to be the leading provider of web-based,
business-to-business software solutions for retailers and their trading
partners. As the retail supply chain evolves into an electronic network, we seek
to further enable our customers to better manage, organize and drive
efficiencies through this network. Key elements of our strategy include:

- Extending our web-based, business-to-business collaborative software
solution, principally through the introduction of our Retail.com
network. By leveraging our technological advantages, customer base and
retail expertise, we intend to make Retail.com the electronic commerce
network for business-to-business commerce among retailers and their
trading partners. Retail.com is designed to provide a single point of
access for all members of the retail supply chain and offer a broad range
of software solutions that enable a rich and collaborative information
exchange between retailers and their trading partners. This web-based,
retail focused, business-to-business software solution permits
interactive collaboration on the wide range of supply and demand chain
issues that retailers encounter.

- Introducing existing customers to a broader offering of our software
solutions. We intend to expand the use of our products within existing
client accounts. We have sold our software solutions products to more
than 100 retailers, primarily large companies, across a range of retail
sectors. We intend to further penetrate these accounts by cross-selling
our other software solutions or suites of software solutions, all of
which are independently deployable, and by introducing clients to the new
collaborative software solution offering at Retail.com.

- Leveraging our experience in retail. We will continue to leverage our
expertise in providing solutions to retailers. We have developed and
deployed software solutions designed specifically for retailers since our
formation. Our solutions address the need of retailers to process and
track the millions of transactions they complete with their consumers and
to communicate and transact business with their large, geographically
diverse supply chain members. This focus on the retail industry permits
us to constantly update and expand our offerings and to effectively
develop new technologies to address the specific needs of the retail
industry.

- Expanding our relationship with implementation and hosting partners. We
have established relationships with large, international system
integrators and consulting firms, such as Andersen Consulting and KPMG.
These firms provide sales leads, implementation expertise and valuable
third party endorsement of our software solutions. We plan to expand
these relationships to increase our capacity to sell and implement our
solutions. Systems integrators and consulting firms have a strong
influence on software purchasing decisions within large companies, and
they are increasingly seeking web-based collaborative software solutions
that allow them to satisfy their clients' needs more rapidly than they
can through customized product development. In addition, we intend to
continue to offer our software solutions through web-based applications
service providers for retailers that want a third party to host their
solutions. We believe that the application service provider option will
be particularly attractive to pure electronic commerce retail companies,
as well as to small and mid-sized retailers that typically have limited
internal information technology resources.

- Extending our technological leadership. We intend to increase our
technological and product leadership by enhancing our products' core
functionality and high performance analytic features. We believe that our
software solutions, derived from the proprietary analytic and predictive
technology of HNC and enhanced by our research scientists, provide us
with a first mover advantage and an essential basis for the comprehensive
Internet solution of Retail.com. We intend to continue to devote
substantial resources to the development of new and innovative web-based
products for business-to-business retail solutions and to continue to
incorporate emerging web technologies. In addition, by implementing and
actively promoting new industry standards, we intend to facilitate
widespread adoption of our solutions by retailers.
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<PAGE> 45

RETEK PRODUCTS

We have developed and deployed web-based, business-to-business software
solutions that address the entire retail operation. Our software solutions allow
retailers to effectively manage their demand and supply chain processes, getting
the right product in the right place at the right time at the right price. Our
principal software solutions consist of four integrated, but independently
deployable, components, which are accessed via a web browser and can be hosted
by an individual organization or applications service provider.

TRANSACTION SOLUTION

Our Transaction Solution is a core suite of retail business applications
providing comprehensive operational management tools. This suite of software
solutions provides the foundation of operational support and process execution
across the retail enterprise, with the scalability needed to support the
mission-critical operations of many of the world's large retailers. The
web-based design of these solutions helps reduce the cost of supporting store
employees, while improving customer service. In addition, our Transaction
Solution is designed to ensure the integrity of the data used by our decision
support and predictive solutions.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PRODUCTS FEATURES
<S> <C>
- ----------------------------------------------------------------------------------------------
Retek Merchandising System - Provides the core inventory control and merchandise
management functions that support the retail process
Retek Trade Management - Enables retailers to manage the global import process
Retek Distribution Management - Automates the entire warehousing process
Retek Store Operations - Electronically links store employees to corporate data
through radio-frequency hand-held devices and high-speed
intranets
- ----------------------------------------------------------------------------------------------
</TABLE>

DECISION SUPPORT SOLUTION

Our Decision Support Solution is a suite of job-specific data analysis and
exception management tools. This suite of software solutions supports flexible,
multidimensional access to built-in, retail-specific performance measures.
Retailers can analyze large volumes of customer sales and supplier performance
data by using the packaged data warehouse software, which allows rapid
deployment and return on investment. This suite of solutions generates
rule-based reports that highlight unusual or novel information, permitting
retailers to develop business solutions quickly.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PRODUCTS FEATURES
<S> <C>
- ----------------------------------------------------------------------------------------------
Retek Data Warehouse - Provides flexible, job-specific tools to assist retailers
in utilizing and analyzing their data to effectively
manage their business and share key information with
suppliers
Active Retail Intelligence - Generates and distributes rule-based exception reports
and enables responses, including automated responses, to
the exceptions to produce rapid resolution of performance
problems
- ----------------------------------------------------------------------------------------------
</TABLE>

PREDICTIVE SOLUTION

Our Predictive Solution is a suite of predictive technologies designed to
analyze the huge volume of customer sales and supplier performance data,
optimizing the demand and supply chains to minimize inventory costs and maximize
sales. By applying advanced algorithms to the mass of data processed by
retailers each day, our Predictive Solution is able to identify high value
information which supports one-to-one customer marketing, helps manage customer
relationships and optimize supply chain management. Analysis of the combinations
of products bought in each retail customer transaction can assist retailers in

41
<PAGE> 46

identifying opportunities for increasing sales and the effectiveness of
promotions and reducing the cost of mark-downs and unnecessary inventory.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PRODUCTS FEATURES
<S> <C>
- ----------------------------------------------------------------------------------------------
Retek Behavior Profiler - Enables retailers to cluster and segment their customer
and market basket data, uncovering meaningful and
valuable relationships between products and customers
Retek Demand Forecasting - Moves beyond traditional time-series techniques to tie
events and causal factors, such as promotions, to daily
forecasts of individual product demand at each store or
selling channel
Retek Replenishment - Uses optimization and simulation techniques to set up and
Optimization maintain efficient inventory replenishment systems
- ----------------------------------------------------------------------------------------------
</TABLE>

BUSINESS-TO-BUSINESS COLLABORATIVE SOLUTION

Our Business-to-Business Collaborative Solution is a suite of software
solutions that supports specific retail business processes and that will be
provided on Retail.com, a business-to-business electronic commerce network that
we began operating on September 26, 1999. We believe that Retail.com will be the
first electronic commerce network for the retail trading community. The network
is designed to provide a single point of access for all members of the retail
supply chain and offer a broad range of software solutions that enable a rich
and collaborative information exchange between retailers and their trading
partners.

Our Retail.com solution is designed to allow organizations to increase the
speed and effectiveness of complex processes by providing a new collaborative
approach to traditional retail challenges. We currently offer critical path and
event tracking software solutions to all members of our Retail.com network. We
intend to launch additional software solutions and new services on our
Retail.com network, including retail specific news services and communication
forums to facilitate the exchange of information among retailers and their
trading partners. These additional software solutions and services are designed
to increase revenue as well as the utility and attractiveness to retailers of
the Retail.com network. Using this solution, which is available for immediate
use with no implementation, support or hardware costs, retailers can quickly
improve performance and reduce costs.

RETEK SERVICES

We provide our customers with implementation and product support services,
conduct customer sponsored research and development and, on occasion, assist in
customizing our products to a client's specific needs. Our services range from
technical and implementation support to business benefit realization consulting,
which assists retailers in utilizing our software solutions to optimize their
potential benefits. We offer high-quality, timely, technical support to
customers via phone, e-mail and the Internet. Additionally, we publish online
versions or manuals, release notes and updates to existing documentation. We
provide a number of training programs in the United States. Courses cover topics
such as technical architecture, business use of the merchandizing functionality
and development standards and methodology.

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<PAGE> 47

CUSTOMERS

We market our software solutions primarily to retailers who sell to their
customers via traditional retail stores, catalogs and/or web store fronts.
Historically, we have focused on organizations with gross sales in excess of
$500 million a year. We market across all formats of retailing, including
fashion, department stores, catalog and consumer direct, specialty retailers,
mass merchandise retailers and grocery, drug and convenience stores. We expect
the recent launch of our Retail.com network to extend our target market,
allowing small and mid-sized retailers and suppliers of all sizes to take
advantage of our solutions.

The following is a representative list of companies that have agreed to
purchase at least $100,000 of our products and services. We do not intend the
identification of these customers to imply that these customers are actively
endorsing or promoting our products.

<TABLE>
<S> <C>
FASHION RETAILERS SPECIALTY RETAILERS
AnnTaylor Chapters
BHS Container Store
Brooks Brothers Cracker Barrel
Mothercare Disney Stores
Reitmans Hallmark
Stage Stores Lancome USA
Zale Corporation
DEPARTMENT STORES MASS MERCHANDISE RETAILERS
El Palacio Family Dollar
Hudson's Bay Company Pamida
Selfridges ShopKo
GROCERY, DRUG & CONVENIENCE STORES CATALOG AND CONSUMER DIRECT
Circle K, USA Home Shopping Network
Eckerd Internet Shopping Network
Matahari Littlewoods
The Northwest Company
NTUC Fairprice
RiteAid
</TABLE>

SELECTED CUSTOMER APPLICATIONS

The following examples span the full range of our software solutions and
illustrate how organizations are relying on us to provide high-value retail
solutions for their businesses.

<TABLE>
<CAPTION>
CUSTOMER APPLICATIONS
<S> <C>
Lancome USA Lancome USA, a leader in prestige perfume, skin care and
cosmetics, has been using Retek Demand Forecasting to
optimize the allocation of its 800 stock keeping units,
commonly known as SKUs, in the stores on its Vendor Managed
Inventory program. Since the deployment of this application,
Lancome estimates that it has been able to drastically
decrease out-of-stock items from levels as high as 12% down
to 2.5% (some key products have been reduced to below 1%),
driving up sales and customer service, without increasing
overall inventory cost.
</TABLE>

43
<PAGE> 48

<TABLE>
<CAPTION>
CUSTOMER APPLICATIONS
<S> <C>
Home Shopping Network Home Shopping Network pioneered the electronic retailing
industry in 1977. Its live 24-hour programming reaches 70
million U.S. households through broadcast, cable and
satellite dishes. HSN continued its tradition of innovation
in 1998 with the launch of Short Shopping, a division which
produces direct selling commercials for various broadcasting
partners. HSN holds interests in shopping channels in
Germany and Japan; and produces Home Shopping en Espanol, a
joint venture with Univision. HSN has been designated the
official electronic retailer for Times Square 2000. HSN has
annual revenues in excess of $1 billion. With the
implementation of the Retek Merchandising System, HSN
expects to attain tangible benefits by standardizing the
streamlining business processes across divisions and by
reducing lead times in their supply chain.
Reitmans Canada-based women's wear retailer Reitmans (Canada), Ltd.
watched its profits increase after undergoing a major
systems overhaul, including implementing the Retek
Merchandising System. In the first six months of 1999,
Reitmans saw a profit of $17.5 million, as opposed to profit
of $9.7 million for the same period the year before.
Comparable store sales have increased as well. According to
President Jeremy Reitman, "significant increases in
comparable store sales, gross margin and operating profit
were achieved in each operating division."
Chapters Chapters, Inc., Canada's largest book retailer, began using
the Retek Merchandising System in 1997. Chapters now has 250
traditional Coles and SmithBooks mall stores, 63 Chapters
superstores and also manages several campus bookstores. With
the implementation of our solutions, Chapters moved from two
platforms to one integrated system. In addition to the
benefits of one point of data entry for all stores,
according to Chapters, it has also attained improved
in-stock position and greater efficiencies in inventory
management with our solution.
AnnTaylor AnnTaylor, a U.S. fashion retailer with annual revenues of
$780 million and 360 stores, licensed the Retek
Merchandising System, Retek Demand Forecasting, Retek Active
Retail Intelligence, Retek Trade Management and Retek
Distribution Management. "We chose Retek because we wanted
an integrated core merchandising solution," says Wollaston
Morin, AnnTaylor's Senior Vice President of Information
Services. "We currently have several systems patched
together so we really wanted a solution where all the pieces
fit together seamlessly. Retek will give us this smooth
integration, we looked at a number of vendors, and felt that
Retek was the best fit."
</TABLE>

TECHNOLOGY CHARACTERISTICS

We seek to develop innovative software solutions by combining our retail
industry and application knowledge and our strategy of partnering with
technology market leaders. Although we make extensive use of a broad range of
technologies, we take advantage of two key technologies:

Web Architecture. The Oracle toolset provides us with a web-based,
scalable foundation for our software solutions. By leveraging our
applications framework into a unified architecture, we are able to focus on
creating additional business functionality in our solutions, rather than
building and maintaining complex infrastructure code. As a global alliance
partner of Oracle, our core development

44
<PAGE> 49

team works very closely with the Oracle technology group to take advantage
of the latest features of the 8i database, the developer toolset, and the
advances being driven by the Oracle mobile computing group. In addition,
our use of Sun Microsystems' Java programming language allows us to deliver
software that is portable and efficient, as well as easy to
internationalize and reconfigure.

Predictive Algorithms. Our team of research scientists has expanded and
tailored HNC's predictive technologies to fit the retail world. These
technologies are able to analyze vast amounts of retail data, recognize and
model complicated and sometimes subtle patterns, and apply these models to
predicting and understanding the retail environment. Though the mathematics
behind the predictive algorithms may be quite complex, software solutions
that use them are carefully crafted to fit seamlessly into the retailers'
business processes. These solutions enable retailers to optimize their
supply chain, target store assortments, maximize advertising payback,
minimize mark-downs and raise customer loyalty and satisfaction. The
predictive algorithms we rely on to achieve these results include:

- Hybrid Forecasting Models. The solution to many retail problems relies
on good forecasting. Forecasting enhances such functions as store and
warehouse replenishment, promotional planning, supplier collaboration,
mark-down reduction, merchandise and assortment planning and labor
scheduling. Our hybrid forecasting models were designed specifically for
retail problems, and use hybrids of standard techniques, as well as
internally developed methods. The models use hierarchical time series
techniques, filtering techniques, regression-based causal forecasting,
and exception management to provide a platform that may be applied to
all of the previous functions.

- Context Vectors. Context vectors can automatically categorize
unstructured information, providing insight from a previously
inaccessible data source. This allows our solutions to extract different
dimensions from a retailer's data, allowing actionable information to be
unlocked in the key areas of store profiling, single-customer
transaction analysis and customer segmentation.

- Simulation. Simulations are used to model systems that are too complex
for basic mathematical algorithms. We use simulation to optimize store
and warehouse replenishment. Unlike textbook generalizations and
assumptions, the modeling provided by our solutions simulates the entire
replenishment process, enabling us to optimize the variables that affect
the replenishment process.

In addition, we license the ACUMATE component software from Lucent to serve
as a foundation for Retek Demand Forecasting and the DSS Web software from
MicroStrategy to serve as a user-interface for Retek Data Warehouse. In each
case, this third party software was selected by us because it has properties
that are particularly appropriate to the function of the specific solution into
which we have integrated it. Each of these licenses is non-exclusive, world-wide
and royalty-based. Each license has a term of one year and renews automatically
unless notice of termination is given by either party. The royalty we paid
Lucent and MicroStrategy under these licenses was less than 1% of our total
revenue in each of the 1998 fiscal year and the nine months ended September 30,
1999.

STRATEGIC ALLIANCES

We have worked with Oracle to establish Oracle Retail(TM), which provides a
single source of technology products, implementation services and support to
target the world's largest retailers. Oracle Retail(TM) combines our solutions
with Oracle's financial applications to provide customers with a scalable
web-based solution for the retail industry worldwide. Oracle has established a
dedicated sales team of approximately 30 employees to sell and market these
products worldwide, in addition to the thousands of general sales
representatives at Oracle who are knowledgeable about Oracle Retail(TM).

We have developed strategic relationships with various system integrators
who assist us with sales lead generation by recommending that their clients
purchase our software solutions. Additionally, these system integrators provide
a range of services to our customers, including project implementation services
and first-line technical support. We have certified and trained approximately
650 consultants from our system

45
<PAGE> 50

integrators for the implementation and operation of our solutions. Some of our
systems integration partners include Andersen Consulting, Deloitte & Touche,
IBM, and KPMG.

In addition to providing implementation and support services for our
software solutions, Andersen Consulting has dedicated approximately 150
full-time consultants to help us in research and development and custom
modifications. This allows us to rapidly expand our research and development
efforts without the costs associated with internally hiring additional staff.

SALES, MARKETING AND DISTRIBUTION

We market and sell our software solutions worldwide through a combination
of a direct sales force, resellers and distributors. Our worldwide direct sales,
marketing and business development organizations consisted of 68 individuals as
of August 31, 1999.

Our sales, marketing and distribution approaches are designed to help
customers understand both the business and technical benefits of our software
solutions. We conduct a variety of marketing programs worldwide to educate our
target market, create awareness and generate leads for our solutions. To achieve
these goals, we have engaged in marketing activities including e-business
seminars, direct mailings, print and online advertising campaigns and trade
shows. These programs are targeted at key information technology executives and
business users, as well as chief information officers and other senior
executives.

Markets outside the United States are currently served by our direct sales
offices in the United Kingdom, France, Germany, Australia, Japan and South
Africa. In addition, we have established distribution relationships with CTC and
KPMG, which distribute our software solutions in Japan and Australia,
respectively.

RESEARCH AND DEVELOPMENT

Our research and development group has been a critical component of our
overall success. We believe that we have built a reputation for delivering on
our solution commitments in a timely manner. As of August 31, 1999, the research
and development group was comprised of 170 individuals in Cincinnati, Atlanta,
and Minneapolis. In addition, we have developed close alliances with a number of
consulting companies to provide additional staffing. These relationships allow
us to increase our development capacity as quickly as necessary to address new
market and product demand.

The majority of our research and development group is organized around
product offerings. Each of these groups is responsible for the product
management processes, strategy and release path, delivery, and support of their
respective applications. In addition to these groups, a centralized enterprise
team within research and development is responsible for maintaining consistency
across these products teams with respect to quality assurance and testing
processes, documentation, application architecture, and methodology.

The success of the research and development group is based on a consistent
and well-defined development methodology. This methodology enables the delivery
of high-quality products in a timely and predictable manner. It involves the
traditional checkpoints of development processes such as business requirements,
functional and technical specifications, unit, string and integration test
plans, and regression analysis. In addition, we use a highly interactive review
process to engage future users of the product in the product release cycle
through iterative prototypes to ensure the application design goal is met.

In addition to the predictable delivery cycles, speed to market is critical
to our success. We believe that we have effectively used build, buy, and partner
strategies over the past several years to expand our solution offering. The key
in using each of these strategies is the consistency in the underlying
technologies and an overall application architecture that allows modular design
and development.

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<PAGE> 51

Research and development expenses were $9.5 million in 1997, $12.9 million
in 1998 and $9.7 million in the six months ended June 30, 1999. We believe that
significant investments in research and development are required to remain
competitive. As a consequence, we intend to continue to increase the absolute
amount of our research and development expenses.

COMPETITION

The market for business-to-business software solutions is new, intensely
competitive and rapidly evolving. We expect competition to continue to increase
both from existing competitors and new market entrants. We encounter current
competition from a number of different sources, including such providers of
supply chain software products as SAP, IBM, Manhattan and JDA Software Group,
and, as we develop our global business-to-business electronic commerce network,
we expect to face potential competition from business-to-business electronic
commerce companies, including Ariba, Broadvision, Commerce One and i2
Technologies. We believe that our ability to compete depends on many factors
both within and beyond our control, including:

- the ease of use, performance, features, price and reliability of our
solutions as compared to those of our competitors;

- the timing and market acceptance of new solutions and enhancements to
existing solutions developed by us and our competitors;

- the quality of our customer service; and

- the effectiveness of our sales and marketing efforts.

We believe that we currently compete favorably with respect to these
factors. In particular, we believe that our products are better than those of
our competitors in their ease of use, performance, features and reliability. In
addition, we have in the past introduced new solutions and enhancements to our
existing solutions in a more timely manner than our competitors. Our prices are
generally higher than our competitors reflecting, we believe, the added value of
our software solutions. Because the market for business-to-business software
solutions is new, intensely competitive and rapidly evolving, we cannot assure
you that we will maintain our competitive position against current and potential
competitors, especially those with greater name recognition and greater
financial, marketing, and other resources.

PROPRIETARY RIGHTS AND LICENSING

Our success and ability to compete are dependent in part on our ability to
develop and maintain the proprietary aspects of our technology. We rely on a
combination of trademark, trade secret, and copyright law and contractual
restrictions to protect the proprietary aspects of our technology. We seek to
protect our source code for our software, documentation and other written
materials under trade secret and copyright laws. We license our software under
signed license agreements, which impose restrictions on the licensee's ability
to utilize the software. Finally, we seek to avoid disclosure of our
intellectual property by requiring employees and consultants with access to our
proprietary information to execute confidentiality agreements with us and by
restricting access to our source code.

We rely on technology that we license from third parties, including
software that is integrated with internally developed software and used in our
line of products to perform key functions. For example, we license the ACUMATE
component software from Lucent and the DSS Web from MicroStrategy. In addition,
we will enter into a technology license agreement with HNC, giving us a license
to specified HNC predictive technology. If we are unable to continue to license
any of this software, we will face delays in releases of our software until
equivalent technology can be identified, licensed or developed, and integrated
into our current product. These delays, if they occur, could seriously harm our
business.

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<PAGE> 52

There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
software solutions infringe on their intellectual property. We expect that
software product developers and providers of electronic commerce products will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. Any claims, with or without merit, could
be time-consuming, result in costly litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on terms acceptable to us or at
all, which could seriously harm our business.

LEGAL PROCEEDINGS

From time to time we have been subject to legal proceedings and claims in
the ordinary course of business, although we are not currently involved in any
material legal proceedings.

EMPLOYEES

At August 31, 1999, we had a total of 350 employees, 322 of whom were based
in the United States and 28 of whom were based in Europe, Asia and Australia. Of
the total, 170 were in research and development, 68 were engaged in sales,
marketing and business development, 76 were engaged in consulting services,
customer support and training, and 36 were in administration and finance. None
of our employees are subject to a collective bargaining agreement and we believe
that our relations with our employees are good.

FACILITIES

Our principal administrative, sales, marketing, and research and
development facility occupies approximately 69,971 square feet in Minneapolis,
Minnesota under a lease that expires on August 31, 2004. We also have regional
offices located in Atlanta, Georgia, Chicago, Illinois, Cincinnati, Ohio,
Australia, France and the United Kingdom. We believe that our existing
facilities are adequate for our current needs and that suitable additional or
alternative space will be available in the future on commercially reasonable
terms as needed.

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<PAGE> 53

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors, and their ages as of July 31, 1999,
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John Buchanan........................ 42 Chairman, Chief Executive Officer and Director
Gordon Masson........................ 44 President
John L. Goedert...................... 34 Senior Vice President, Research & Development
Gregory A. Effertz................... 37 Vice President, Finance & Administration, Chief
Financial Officer, Treasurer, Secretary and Director
David A. J. Bagley................... 34 Vice President, Product Strategy & Marketing
Victor Holysh........................ 40 Vice President, Services
Duncan B. Angove..................... 33 Vice President, E-Business
</TABLE>

John Buchanan joined us in May 1995 and is currently our Chairman and Chief
Executive Officer. From October 1991 to May 1995, he served as President of
Transpacific Information Systems Inc., a technology investment company
principally involved in introducing internationally developed software products
into North America. Mr. Buchanan holds a Bachelor of Commerce degree in
Accounting and Computer Systems from the University of Otago, New Zealand.

Gordon Masson has been our President since July 1999. He served as our
Senior Vice President, Sales since August 1995. Prior to joining Retek from 1983
to 1995, he was with Comshare, Inc., a decision support software company,
serving most recently as Vice-President. Mr. Masson holds a BACC degree in
Accounting and Law from Glasgow University and he is a certified chartered
accountant.

John L. Goedert joined us in June 1996 as our Senior Vice President,
Research and Development. From 1987 to 1996, Mr. Goedert was with Andersen
Consulting's Consumer Products Practice, specifically in retail and
distribution, serving most recently as Senior Manager. Mr. Goedert holds a
Bachelor of Business Administration in Finance from Iowa State University.

Gregory A. Effertz joined us in March 1997 as our Vice President, Finance
and Administration and Chief Financial Officer. From 1988 to 1997, Mr. Effertz
was with American Paging, Inc., a paging service provider, serving most recently
as Executive Director, Sales and Marketing, Corporate Controller and Treasurer.
Mr. Effertz is a certified public accountant certificate holder and holds a
Bachelor of Business Administration in Accounting and Management Information
Systems from the University of Wisconsin -- Eau Claire.

David A. J. Bagley joined us in May 1997 as Vice President, Services and is
currently Vice President, Product Strategy and Marketing. From 1989 to 1997, Mr.
Bagley was with Andersen Consulting's Consumer Products Practice, serving most
recently as Senior Manager. Mr. Bagley holds a Master of Arts in Classics from
St. Anne's College, Oxford University.

Victor Holysh joined us in June 1998 as our Vice President, Services. Prior
to joining us, Mr. Holysh was a partner at Sierra Systems Consultants, Inc. in
Toronto, Canada, a systems integration and implementation firm. From 1988 to
1996, Mr. Holysh was with SFG Technologies Inc., a software and related services
company for local government applications, where he served in several
capacities, including Chief Financial Officer and Managing Director of SFG New
Zealand. Mr. Holysh holds a Bachelor of Science in Computer Science and a
Masters of Business Administration from the University of Toronto. He is a
member of the Canadian Institute of Chartered Accountants and is a Certified
Management Consultant.

Duncan B. Angove joined us in September 1997 and is currently Vice
President, E-Business. Prior to joining Retek from 1994 to 1997, he served as a
consultant with Andersen Consulting's Consumer Products Practice, specifically
in retail and distribution, and from 1991 to 1994 as Information Technology

49
<PAGE> 54

Manager of TaiTai Retail Import Export, a furniture import/export company. Mr.
Angove holds a BSC Economics degree from the University College London.

BOARD OF DIRECTORS

Currently, our board of directors is made up of Mr. Buchanan and Mr.
Effertz. Prior to the completion of this offering, Mr. Effertz will resign and
our board of directors will have seven members. These members will include our
chairman and chief executive officer, Mr. Buchanan, three individuals who are
currently executive officers or directors of HNC, and three independent
directors. Our board of directors will be divided into three classes serving
staggered terms. Directors in each class will be elected to serve for three year
terms and until their successors are elected or qualified. Each year, the
directors of one class will stand for election as their terms of office expire.
The Class I directors will have terms of office expiring in 2000; the Class II
directors will have terms of office expiring in 2001; and the Class III
directors will have terms of office expiring in 2002.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee

The responsibilities of the audit committee include recommending to the
board of directors the independent public accountants to be selected to conduct
the annual audit of our accounts; reviewing the proposed scope of such audit and
approving the audit fees to be paid; and reviewing the adequacy and
effectiveness of our internal auditing, accounting and financial controls with
the independent public accountants and our financial and accounting staff. The
members of the audit committee will be one independent director and one director
appointed by HNC.

Compensation Committee

The compensation committee is responsible for establishing compensation
policies consistent with corporate objectives and stockholder interests. The
compensation committee has responsibility for approving and/or recommending to
the board of directors levels of compensation for our senior executives. The
compensation committee also administers grants under the Company's stock-based
and other performance-based incentive compensation plans and adopts and/or
recommends to the board of directors new plans or changes in compensation
programs. The compensation committee may not include any employee of Retek, HNC
or any Retek subsidiary. The members of the compensation committee will be one
independent director and one director appointed by HNC.

The board of directors may establish other committees to facilitate the
management of Retek.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

All of our common stock is currently owned by HNC, and thus none of our
officers or directors owns any of our common stock. To the extent our directors
and officers own shares of HNC common stock at the time of the distribution,
they will participate in the distribution on the same terms as other holders of
HNC common stock.

The following table sets forth the number of shares of HNC common stock
beneficially owned on June 30, 1999 by each director, each of the executive
officers named in the Summary Compensation Table in the "-- Executive
Compensation" section below, and all of our directors and executive officers as
a group. Except as otherwise noted, the individual director or executive officer
or their family members had

50
<PAGE> 55

sole voting and investment power with respect to such securities. The total
number of shares of HNC common stock outstanding as of June 30, 1999 was
24,064,061.

<TABLE>
<CAPTION>
SHARES OF HNC
BENEFICIALLY OWNED
------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE
------------------------ ------ ----------
<S> <C> <C>
John Buchanan(1)............................................ 64,440 *
Gordon Masson(2)............................................ 29,710 *
John L. Goedert(3).......................................... 36,439 *
David A. J. Bagley(4)....................................... 15,736 *
Gregory A. Effertz(5)....................................... 15,414 *
All directors and executive officers as a group (seven
persons)(6)............................................... 174,337 *
</TABLE>

- -------------------------
* Represents holdings of less than one percent.

(1) Includes 62,500 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1999.

(2) Includes 27,125 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1999.

(3) Represents shares issuable upon exercise of stock options exercisable within
60 days of June 30, 1999.

(4) Includes 14,500 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1999.

(5) Includes 14,500 shares issuable upon exercise of stock options exercisable
within 60 days of June 30, 1999.

(6) See notes 1 through 5. Also includes 5,313 shares issuable upon exercise of
stock options held by Duncan B. Angove and 6,250 shares issuable upon
exercise of stock options held by Victor Holysh exercisable within 60 days
of June 30, 1999.

COMPENSATION COMMITTEE

In the fiscal year ended December 31, 1998, we did not have a compensation
committee or any other committee serving a similar function. Decisions as to the
compensation of our executive officers were made by the compensation committee
or the board of directors of HNC.

DIRECTOR COMPENSATION

Directors who are not employees of Retek or HNC are referred to as
independent directors and will be reimbursed for reasonable expenses incurred in
attending board of director or committee meetings. In addition, our independent
directors will be granted options to purchase 25,000 shares of our common stock
pursuant to our 1999 Directors Stock Option Plan (described below) upon their
initial election to our board of directors and annual grants of options to
purchase 7,500 shares of our common stock so long as they remain on our board.

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<PAGE> 56

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information regarding compensation for the
fiscal year ended December 31, 1998 paid for services rendered by our chairman
and chief executive officer and our four other highest-paid executive officers
who earned more than $100,000 during the fiscal year ended December 31, 1998. We
collectively refer to these individuals as the named executive officers.

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------
NUMBER OF
SECURITIES
SALARY BONUS UNDERLYING
NAME AND PRINCIPAL POSITIONS ($) ($) OPTIONS(1)
- ---------------------------- ---------- --------- ------------
<S> <C> <C> <C>
John Buchanan
Chairman and Chief Executive Officer...................... 200,000 97,500 30,000
Gordon Masson
President................................................. 150,000 170,035 37,500
John L. Goedert
Senior Vice President, Research & Development............. 150,000 90,000 35,000
David A. J. Bagley
Vice President, Product Strategy & Marketing.............. 130,000 85,000 8,000
Gregory A. Effertz
Vice President, Finance & Administration, Chief Financial
Officer, Treasurer and Secretary.......................... 120,000 60,000 8,000
</TABLE>

- -------------------------

(1) This reflects options to acquire shares of HNC common stock. We will offer
our employees the opportunity to either cancel their HNC options which will
be unvested as of March 31, 2000 and to receive grants of options to
purchase our common stock or to retain their HNC options. Under the current
HNC option plan, unvested HNC options will be canceled at the date of the
distribution or at any time that HNC owns less than 50% of our common stock.

HNC STOCK OPTION GRANTS IN FISCAL 1998

The following table sets forth information regarding stock options covering
HNC common stock granted to the named executive officers during the fiscal year
ended December 31, 1998. The dollar amounts under these columns are the result
of calculations at the 5% and 10% rates required by the Securities and Exchange
Commission for the option term and therefore are not intended to and may not
accurately forecast possible future appreciation, if any, of HNC's common stock
price.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE ($ PER EXPIRATION -----------------------
NAME GRANTED YEAR SHARE) DATE 5% ($) 10% ($)
- ---- ----------- ---------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
John Buchanan..................... 30,000(2) .90 32.00 2/23/08 603,840 1,530,240
Gordon Masson..................... 37,500(2) 1.13 32.00 2/23/08 754,800 1,912,800
John L. Goedert................... 35,000(2) 1.05 32.00 2/23/08 704,480 1,785,280
David A. J. Bagley................ 8,000(2) .24 32.00 2/23/08 161,024 408,064
Gregory A. Effertz................ 8,000(2) .24 32.00 2/23/08 161,024 408,064
</TABLE>

- -------------------------

(1) We will offer our employees the opportunity to either cancel their HNC
options which will be unvested as of March 31, 2000 and to receive grants of
options to purchase our common stock or to retain their HNC options. Under
the current HNC option plan, unvested HNC options will be canceled at the
date of the distribution or at any time that HNC owns less than 50% of our
common stock.

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<PAGE> 57

(2) The options became exercisable with respect to one-fourth of the shares
covered thereby on February 23, 1999 and will become exercisable with
respect to one-fourth of the shares covered thereby on each of February 23,
2000, 2001 and 2002.

AGGREGATED HNC OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth information with respect to the named
executive officers concerning option exercises in 1998 and unexercised stock
options to purchase HNC common stock held as of December 31, 1998. The "value
realized" figures are based on the fair market value of HNC stock at the
exercise date, minus the per share exercise price, multiplied by the number of
shares exercised. The "value of unexercised in-the-money options at December 31,
1998" figures in the right-hand column are based on the market value of HNC
stock at December 31, 1998 of $40.438 per share, minus the per share exercise
price, multiplied by the number of shares issuable upon exercise of the option.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED ON EXERCISE OPTIONS AT THE-MONEY OPTIONS AT
---------------------------- DECEMBER 31, 1998 DECEMBER 31, 1998($)
VALUE --------------------------- ---------------------------
NAME EXERCISED (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Buchanan................. 0 0 55,000 85,000 546,590 799,730
Gordon Masson................. 27,344 1,120,512 12,500 60,000 157,975 630,030
John L. Goedert............... 12,000 432,000 14,261 59,261 359,344 810,304
David A. J. Bagley............ 0 0 6,250 26,750 61,331 251,498
Gregory A. Effertz............ 0 0 6,250 26,750 92,581 345,248
</TABLE>

TREATMENT OF OUTSTANDING STOCK OPTIONS

In connection with our separation from HNC, our executive officers and
other employees will be given the opportunity to receive options to purchase our
common stock in exchange for their agreeing to cancel their outstanding options
to purchase HNC common stock which are scheduled to be unvested as of March 31,
2000. Options to purchase HNC common stock which are not canceled will continue
to vest in accordance with their terms. Options to purchase HNC common stock
held by our employees which are unvested at the time of the distribution will
terminate. Options to purchase HNC common stock held by our employees which are
vested at the time of our separation from HNC will remain exercisable for 90
days after the distribution. Options to purchase our common stock which are
granted in exchange for the cancellation of options to purchase HNC common stock
will be granted at an exercise price of $10.00 per share under our 1999 Equity
Incentive Plan. These new options to purchase Retek common stock will vest 25%
on the first anniversary of the date of grant and thereafter at the rate of 1/48
of the amount of the original grant on a monthly basis for 36 months.

CERTAIN ARRANGEMENTS INVOLVING STOCK OPTIONS

If HNC has received a written ruling from the Internal Revenue Service that
the distribution qualifies for tax-free treatment under Section 355 of the
Internal Revenue Code, and HNC fails to complete the distribution within 120
days after the first date that HNC is eligible to effect the tax-free
distribution, John Buchanan and three other executive officers to be chosen by
Mr. Buchanan will receive a 12-month credit to the vesting schedule of their
Retek stock options. In addition, if at the time of this accelerated vesting,
these executives execute two-year non-compete agreements with Retek, their
vesting schedules will be credited by an additional 12 months.

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<PAGE> 58

EMPLOYMENT AGREEMENT

We have an employment agreement with Mr. Buchanan that expires on November
29, 1999. The employment agreement provides that Mr. Buchanan serves as chief
executive officer at an initial annual salary of $120,000 plus a possible annual
bonus. Pursuant to his employment agreement, Mr. Buchanan was granted an option
to purchase up to 110,000 shares of HNC common stock at an exercise price equal
to fair market value on the date of grant. The options vest over a four-year
period at the rate of 25% per year. Mr. Buchanan is also eligible to participate
in HNC's employee benefit plans.

If Mr. Buchanan's employment is terminated by us without cause or due to
his death or disability, he is entitled:

- to continue to be paid his then-current base salary for the lesser of six
months or the remainder of the term of the employment agreement; and

- to be paid any unpaid bonus that is both due and payable to him and which
is not subject to any unsatisfied conditions or contingencies.

Mr. Buchanan also is subject to an employee invention assignment and
confidentiality agreement.

EMPLOYEE BENEFIT PLANS

RETEK 1999 EQUITY INCENTIVE PLAN

We intend to adopt, and we expect our current sole shareholder HNC to
approve, the 1999 Equity Incentive Plan in order to provide grants of stock
options, stock appreciation rights, restricted stock and stock bonuses to
employees, officers, directors, consultants, independent contractors and
advisors of Retek or any parent, subsidiary or affiliate of Retek. A total of
9,000,000 shares of our common stock will be reserved for issuance under the
equity incentive plan, with an annual increase to be added on January 1 of each
year, beginning January 2001, equal to the least of:

- 4% of the total outstanding shares as of that January 1;

- 2,000,000 shares; or

- an amount of shares determined by the board of directors.

Administration of the Equity Incentive Plan

The board of directors or the compensation committee of the board of
directors will administer the equity incentive plan. The committee will have the
power to:

- construe, interpret and correct any defects in the equity incentive plan
or any related document;

- prescribe, amend and rescind rules and regulations relating to the equity
incentive plan;

- determine the form and terms of the awards made under the equity
incentive plan, including persons eligible to receive such awards,
whether awards have been earned and the number of shares or other
consideration subject to awards; and

- grant waivers of any plan or award conditions and vary the terms of the
award.

Options

The compensation committee will determine the exercise price of each option
when the option is granted. The exercise price may not be less than 85% of the
fair market value of our common stock on the date of grant. With respect to
options intended to qualify as "incentive stock options" within the meaning

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<PAGE> 59

of section 422 of the Internal Revenue Code, the exercise price must be at least
equal to the fair market value of our common stock on the date of grant. The
term of the options may not be more than ten years.

Options granted under the equity incentive plan are forfeited within three
months (or a shorter or longer period as determined by the compensation
committee) of the optionee's termination as an employee of our company for
reasons other than death or disability. If termination of employment is due to
death or disability, the options will be forfeited within 12 months of
termination. In no event will the options be exercisable later than their
expiration date. If an option holder's employment is terminated for "cause," all
of that individual's options will expire.

The aggregate fair market value of shares with respect to which incentive
stock options are exercisable for the first time by an optionee during a
calendar year may not exceed $100,000.

Stock Appreciation Rights

Stock appreciation rights may be granted alone, in addition to other awards
or in tandem with stock options. The compensation committee will fix the
exercise price per share covered by stock appreciation rights at the time of
grant in accordance with the method it specifies at the time of grant. The
exercise price may not be less than 85% of the fair market value of our common
stock on the date of the grant. If granted in tandem with a stock option, stock
appreciation rights will cover an equal or lesser number of shares as covered by
the stock option, will be exercisable at the same time or times and to the
extent as the related stock option will be exercisable and will have the same
term and exercise price as the related stock option. Upon exercise of a stock
appreciation right granted in tandem with an option, the related option will be
canceled automatically to the extent of the number of shares covered by the
exercise. Likewise, upon exercise of a stock option, the tandem stock
appreciation right associated with that option will be canceled.

Restricted Stock

Restricted stock will be offered to participants at a purchase price to be
determined by and subject to the terms and conditions established by the
compensation committee. The shares will be subject to restrictions on transfer
and other incidents of ownership for the periods of time, and to the vesting
conditions, as determined by the compensation committee and provided in the
award agreement. The share certificates representing the shares granted to the
participant will be registered in the name of the participant but held by us. We
may take any actions we deem necessary to restrict the transfer of unvested
restricted stock. Other than these restrictions on transfer and other
restrictions as determined by the compensation committee and provided in the
award agreement, a participant will have the rights of a stockholder, including
the right to receive dividends and to vote.

Stock Bonuses

Stock bonuses may be performance based. The compensation committee will
have the discretion to determine the number of shares to be awarded, whether the
award should be in the form of restricted stock, the nature, length and starting
date of the relevant performance periods, the performance criteria and the
number of shares to be granted to a participant. The earned portion of a stock
bonus may be paid currently or on a deferred basis with an interest or dividend
equivalent as determined by the compensation committee. A participant whose
employment is terminated during a performance period for any reason will be
entitled to payment of the stock bonus only to the extent earned as of the date
of termination in accordance with the relevant performance stock bonus
agreement, unless the compensation committee determines otherwise.

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<PAGE> 60

Non-Transferability of Awards

Awards granted under the equity plan are generally not transferable by the
participant and each award is exercisable during the lifetime of the participant
only by the participant. Any elections regarding the awards may be made only by
the participant.

Adjustments upon Merger or Change in Control

The equity incentive plan provides that in the event of a change in
control, we may provide for the assumption or substitution or conversion or
replacement of awards under the equity incentive plan. The plan defines change
in control to include:

- the dissolution or liquidation of our company, a merger or consolidation
in which our company is not the surviving corporation;

- a merger in which our company is the surviving corporation but after
which our stockholders cease to own their shares or other equity
interests in our company;

- the sale of all or substantially all the assets of our company; and

- the acquisition, sale or transfer of more than 50% of the outstanding
shares of our company's common stock by tender offer or similar
transaction.

In the event of a transaction involving a change in control, the
compensation committee may accelerate the vesting of any and all awards before
the change in control and any options not exercised before the change in control
shall expire. If a participant's employment by our company or any subsidiary or
affiliate is terminated other than for cause within 24 months after a change in
control, all the participant's options and stock appreciation rights will become
immediately exercisable, all restrictions and conditions of awards of restricted
stock and stock bonuses held by the participant will lapse and all performance
criteria applicable to any award will be deemed to be fully achieved.

Amendment and Termination of the 1999 Equity Incentive Plan

Unless terminated sooner, the equity incentive plan will terminate
automatically ten years from the date of its adoption by the board of directors
or, if earlier, from the date of stockholder approval. The board of directors
may at any time terminate or amend the plan or any related document, except that
the board of directors may not make any amendments that would require
stockholder approval without obtaining the required stockholder approval.

RETEK 1999 EMPLOYEE STOCK PURCHASE PLAN

We intend to adopt, and we expect our current sole shareholder HNC to
approve, the 1999 Employee Stock Purchase Plan in order to provide an additional
incentive for our employees to invest in our common stock. A total of 700,000
shares of our common stock will be reserved for issuance under the purchase
plan, with an annual increase to be added on January 1 of each year beginning
January 1, 2001, equal to the lesser of:

- 1.0% of the total outstanding shares as of that January 1;

- 600,000 shares; or

- an amount of shares determined by the board of directors.

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<PAGE> 61

Administration of the Purchase Plan

A committee of the board of directors will administer the purchase plan.
All questions of interpretation and application of the purchase plan will be
determined by the board of directors.

Eligibility to Participate

All employees of our company and participating subsidiaries will be
eligible to participate, except that the following individuals may not
participate in the plan:

- employees who are not employed by our company or a participating
subsidiary 15 days before the beginning of an offering period, which is a
24 month period that starts on November 1 and May 1 of each year and ends
on October 31 and April 30, except those employees who are employed on
the effective date of this registration statement;

- employees who are customarily employed for less than 20 hours per week;

- employees who are customarily employed for less five months in a calendar
year; and

- employees who own stock or options to purchase stock possessing 5% or
more of the total combined voting power or value of all classes of stock
of our company or any of its participating subsidiaries.

Purchases

Enrollment by an eligible employee in the purchase plan with respect to a
particular two-year offering period will constitute a grant to the eligible
employee of the right to purchase shares of our common stock on each of the four
purchase dates during the offering period. The purchase price of the stock will
be the lower of:

- 85% of the fair market value of a share of our common stock on the first
business day of the two-year offering period; or

- 85% of the fair market value of a share of our common stock on the
purchase date.

The purchase price will be paid through payroll deductions.

Restrictions

For any particular calendar year, no employee may purchase stock under the
purchase plan at a rate which, when added to the employee's right to purchase
stock under all other purchase plans of our company or our parent or
subsidiaries, exceeds $25,000 in fair market value as of the first business day
of any offering period. No employee may purchase more than a maximum number of
shares fixed by the committee on a single purchase date.

End of Participation

If an employee's employment terminates for any reason, including
retirement, death or the employee fails to remain an eligible employee, that
employee may no longer participate in the plan. If an employee's participation
in the purchase plan ends, we will promptly distribute to the employees all
accrued employee contributions without interest. A withdrawing employee will not
be able to participate in the purchase plan until the offering period beginning
on the next date after withdrawal.

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<PAGE> 62

Adjustments upon Merger or Change in Control

The purchase plan provides that if we are liquidated or dissolved, the
committee may terminate the plan immediately. The purchase plan will provide
that, in the event of any of the following transactions:

- a merger or consolidation in which our company is not the surviving
corporation;

- a merger in which our company is the surviving corporation but after
which our stockholders cease to own their shares or other equity
interests in our company;

- the sale of all or substantially all the assets of our company; or

- the acquisition, sale or transfer of more than 50% of the outstanding
shares of our common stock by tender offer or similar transaction,

the purchase plan will continue with regard to the offering periods that began
before the closing of the proposed transaction and shares will be purchased
based on the fair market value of the surviving corporation's stock.

Non-Assignability of Rights

An employee may not transfer rights granted under the purchase plan other
than by will or the laws of descent and distribution.

Amendment and Termination of the Purchase Plan

Unless terminated sooner, the purchase plan will terminate automatically
ten years from the date of its adoption by the board of directors. The board of
directors has the authority to amend or terminate the purchase plan at any time.

RETEK 1999 DIRECTOR STOCK OPTION PLAN

We intend to adopt the 1999 Directors Stock Option Plan to provide grants
of non-qualified stock options to our directors who are not our employees or
employees of HNC, its subsidiaries or affiliates. A maximum of 400,000 shares of
our common stock may be issued under the directors stock option plan.

Administration of the 1999 Directors Stock Option Plan

A committee of our board of directors, or the board of directors acting as
the committee, will administer the directors stock option plan. The committee
has the authority to interpret and construe the provisions of the directors
stock option plan.

Terms and Conditions of Options

The exercise price of the options will equal the fair market value of our
common stock on the date of grant. The term of the options may not be more than
ten years. The directors stock option plan provides for an initial grant of
25,000 to be made on the later of:

- the effective date of the plan; and

- the date a director first becomes a member of our board of directors.

Succeeding grants of options to buy 7,500 shares of our common stock will be
made on each anniversary date of the initial grant. The option holders have the
ability to defer the receipt of shares otherwise deliverable upon the exercise
of an option. Options vest entirely at the end of a period of one year from the
date of grant.

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<PAGE> 63

All unvested options held by a director will be forfeited upon the
director's termination of service. In the event of termination of service due to
reasons other than death or disability, all vested options must be exercised
within seven months of termination. In the event of termination of service due
to death or disability, all vested options must be exercised within 12 months of
termination. In no event will the options be exercisable later than their
expiration date.

Non-Transferability of Options

Options granted under the directors stock option plan are generally not
transferable by the optionee and each award is exercisable during the life time
of the option holder only by the option holder or by the option holder's
guardian or legal representative, unless otherwise determined by the committee.

Adjustments upon Merger or Change in Control

The directors stock option plan provides that in the event of:

- our dissolution or liquidation;

- a merger or consolidation in which we are not the surviving corporation;

- a merger in which we are the surviving corporation, but after which our
stockholders cease to own shares of stock or other equity interests in
us;

- the sale of all or substantially all of our assets; or

- an acquisition, sale or transfer of more than 50% of the outstanding
shares of our common stock by tender offer or similar transaction,

the vesting of all options granted pursuant to the directors stock option plan
will accelerate and the options will become exercisable in full prior to the
consummation of the transaction, at the time and on the conditions as the
committee determines.

Amendment and Termination of the 1999 Directors Stock Option Plan

Unless terminated sooner, the directors stock option plan will terminate
automatically ten years from its effective date. Our board of directors may at
any time terminate or amend the plan.

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<PAGE> 64

CERTAIN TRANSACTIONS

This section summarizes the separation agreement and the key related
agreements that we expect to enter into with HNC before this offering. This
summary of the material terms of these agreements is not complete. You should
read the full text of these agreements, which we filed with the Securities and
Exchange Commission as exhibits to the registration statement of which this
prospectus is a part.

We intend to enter into agreements with HNC that provide for the separation
of our business from HNC. In particular, we intend to enter into a separation
agreement, a corporate rights agreement, a services agreement, a technology
license agreement and a tax sharing agreement with HNC necessary to effect the
separation. These agreements will not be conditioned upon the completion of the
distribution. They will govern our respective rights and duties with respect to
specified offerings of our common stock and other securities, including this
offering, and other matters relating to the distribution. These agreements will
also contain agreements that will continue in effect for various periods
following this offering. Although HNC has announced that, subject to the
satisfaction of specified conditions, it currently plans to complete the
distribution, and although we intend to agree to cooperate with HNC to complete
the distribution if HNC elects to do so, HNC will not be obligated to carry out
the distribution. Thus, we cannot assure you as to whether or not the
distribution will occur, when it would occur or what the terms of the
distribution will be if it occurs.

SEPARATION AGREEMENT

The separation agreement will cover the principal corporate transactions
required to effect the transfer to us of assets and the assumptions of
liabilities by us necessary to separate our company from HNC and other
agreements governing our relationship after the separation.

Transfer of assets and assumption of liabilities. HNC will transfer, or
agree to transfer, all of the shares of the outstanding common stock of Retek
Information Systems and other assets to us in exchange for 39,999,000 shares of
our common stock and we will assume or agree to assume, and will agree to pay,
perform, satisfy and discharge on a timely basis specified liabilities in
accordance with their terms. Except as expressly stated in the separation
agreement or in any related agreement, HNC will not make any representation or
warranty to us with respect to any asset it transfers to us and the assets are
being transferred to us on an "as is, where is" basis.

We have agreed with HNC to set-off and settle all accounts payable and
receivable and all other intercompany debt payable by us or HNC at the closing
of the separation. We will repay our intercompany debt to HNC, which is
approximately $8,000,000 at this time, from the net proceeds of this offering.
For additional information regarding the intercompany accounts between us and
HNC, see "Management's Discussion and Analysis of Financial Condition and
Operating Results -- Liquidity and Capital Resources" beginning on page .

The Distribution. HNC has stated that it currently intends, following the
completion of this offering, to complete the distribution, subject to the
satisfaction and fulfillment of specified conditions, including:

- HNC's receipt of a written ruling from the Internal Revenue Service that
the distribution qualifies for tax-free treatment such that HNC, its
stockholders and its affiliates will not recognize income for federal
tax purposes as a result of the distribution;

- the approval and declaration of the distribution by HNC's board of
directors;

- the absence of any change in economic or market conditions or other
circumstances that would cause HNC's board of directors to conclude that
the distribution was not in the best interest of HNC and its
stockholders; and

- HNC being able to effect the distribution in compliance with applicable
law and HNC's contractual obligations.

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<PAGE> 65

HNC will have the sole discretion to decide whether or not to proceed with
the distribution and to determine all terms of the distribution, including the
form, structure and terms of any transaction and/or offering to effect the
distribution and the timing of and conditions to the completion of the
distribution. We will also agree that, at HNC's direction, we will promptly take
all actions necessary or desirable to effect these transactions.

Covenants and indemnification regarding the distribution. We will agree
that if the distribution is completed and qualifies for tax-free treatment, we
will not take any action that would be inconsistent with any representation or
covenant in any ruling, or any supplement to any ruling, issued by the Internal
Revenue Service in connection with the distribution. In particular, under the
separation agreement, we will agree that, during the two-year period immediately
following completion of the distribution, we and our affiliates will not:

- sell a substantial portion of our assets;

- voluntarily dissolve or liquidate;

- enter into any merger, consolidation or reorganization transaction;

- solicit any person to make a tender offer for any of our equity
securities;

- participate in or support any unsolicited tender offer for our equity
securities;

- approve any proposed business combination or any transaction which would
result in any person or persons acquiring in the aggregate, directly or
indirectly, a 50% or greater interest (within the meaning of Section
355(e) of the Internal Revenue Code) in us;

- fail to maintain the active conduct of our business;

- issue any equity securities (except pursuant to the exercise of employee
stock options) or redeem any equity securities that, including the
shares of common stock sold in this offering would result in the
acquisition in the aggregate, directly or indirectly, by any person or
persons of a 50% or greater interest (within the meaning of Section
355(e) of the Internal Revenue Code) in us;

- enter into any agreement for the sale of our stock or equity interests;

- take any action that violates or is inconsistent with the information,
representations or covenants contained in the initial ruling submission
or any supplemental ruling submission filed with the Internal Revenue
Service regarding the distribution; or

- engage in any agreement, understanding, arrangement or negotiation,
directly or indirectly with any person or persons with respect to any of
the actions described above;

unless (1) HNC expressly consents in writing to the action, which consent may be
withheld by HNC in its sole discretion taking into account solely the
preservation of the tax-free treatment of the distribution or (2) HNC obtains a
supplemental ruling from the Internal Revenue Service that the action will not
affect the tax-free nature of the distribution. HNC, however, does not have an
obligation to seek a supplemental ruling.

Under the terms of the separation agreement, we will agree to indemnify
HNC, on an after-tax basis, for any tax liability incurred by HNC with respect
to the distribution as a result of our taking any of the above actions, or any
transaction or event occurring after the distribution that involves our stock,
assets or business or any of our affiliates, whether or not HNC consents to, or
obtains supplemental ruling from the Internal Revenue Service with respect to,
the action, transaction or event.

The limitations on the issuance of shares of our capital stock and other
restrictions discussed above could have a negative impact on our financial
flexibility following a tax-free distribution.

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Indemnification. We intend to agree to indemnify and hold harmless HNC and
its affiliates and their respective officers, directors, employees, and other
related parties against any liabilities, damages, claims and expenses arising
out of or relating to:

- the failure to perform or otherwise discharge any liability or contract
we assumed from HNC under the separation agreement;

- our business and any liability or contract we assumed from HNC under the
separation agreement;

- any breach of the separation agreement or the other agreements between
us and HNC related to our separation from HNC;

- any material alleged untrue statement and any material omission in any
prospectus or the registration statement filed with the Securities and
Exchange Commission relating to this offering; and

- any violation of any federal, state or other law or rule regarding
securities in connection with this offering or any subsequent offering
or transaction involving our securities.

However, our indemnification of HNC will not apply to any liability arising from
information relating to HNC provided to us by HNC.

HNC will similarly agree to indemnify us and our affiliates and our
officers, directors, employees and other related parties against any
liabilities, damages, claims and expenses arising out of or relating to:

- HNC's failure to perform or otherwise discharge any of HNC's
liabilities, other than the liabilities assumed by us;

- any liability of HNC, other than the liabilities assumed by us; and

- any breach of the separation agreement or the other agreements between
us and HNC related to our separation from HNC;

In addition, the corporate rights agreement and the tax sharing agreement
referred to below will provide for indemnification between us and HNC relating
to the substance of those agreements.

Release relating to actions by HNC related to HNC's and our assets,
businesses and operations. Except for the rights and obligations of HNC and us
arising from the agreements between us relating to this offering or the
distribution, we will release HNC and its subsidiaries and affiliates and their
respective officers, directors, employees and other related parties for all
losses for any and all past actions and failures to take actions relating to
HNC's and our assets, businesses and operations and this offering. HNC will
similarly release us.

Expenses. In general, unless otherwise provided for in the separation
agreement or any other agreement, we will pay the costs and expenses incurred in
connection with any offering of our securities before the distribution or other
similar transaction, including this offering, and the distribution.

Access to information. Generally, we and HNC will agree, for a specified
time period and on a confidential basis to provide each other, upon request and
subject to specified conditions, with access to information relating to our
respective assets, business and operations. We and HNC will also agree to keep
our books and records for a specified period of time. Also, we and HNC will
agree to cooperate with each other with respect to any claims brought against
the other relating to the conduct of our business before completion of the
distribution.

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CORPORATE RIGHTS AGREEMENT

We intend to enter into a corporate rights agreement with HNC that will
contain agreements that will continue for various time periods following this
offering and will provide HNC with registration rights relating to the shares of
our common stock it holds.

HNC options to purchase additional shares. We will grant to HNC a
continuing option, assignable to any of its subsidiaries and some of its
affiliates, to purchase additional shares of our capital stock under specified
circumstances. These options may be exercised immediately before the issuance of
any of our equity securities, other than in this offering or upon the exercise
of the underwriters' over-allotment option, and only to the extent necessary for
HNC and its affiliates to maintain:

- control of us (within the meaning of Section 368(c) of the Internal
Revenue Code of 1986), provided such status has previously been
maintained;

- our status as a member of the affiliated group of corporations (within
the meaning of Section 1504 of the Internal Revenue Code) of which HNC
is the common parent, provided such status has previously been
maintained;

- HNC's then-existing ownership percentage of our equity value; and

- ownership of shares of our non-voting capital stock (if any) to the
extent, and only to the extent, necessary to own 80% of each outstanding
class of our stock.

The purchase price of the shares of common stock purchased upon any
exercise of the options will be based on the then current market price of our
common stock. These options will terminate when HNC owns less than 50% of our
equity value.

Registration rights. We intend to grant HNC registration rights that will
require us, upon HNC's request, to use our best efforts to register under the
applicable federal and state securities laws any shares of our common stock or
other equity securities owned by HNC for sale in accordance with HNC's intended
method of disposition and to take other actions as necessary to permit the sale
of that stock in other jurisdictions, subject to specified limitations. HNC will
also have the right to include the shares of our stock or other equity
securities it beneficially owns in other registrations of these equity
securities that we initiate under the Securities Act and state securities laws.
Subject to specified limitations, these registration rights will be assignable
by HNC and its assigns. The corporate rights agreement will also contain
indemnification and contribution provisions under which we and HNC will agree to
indemnify each other and certain related parties for specified liabilities
arising from registrations of our securities that HNC or its assigns participate
in (or, if such indemnity is unavailable, to contribute to each other's
liability).

Corporate governance. We have agreed to be governed by a board of
directors consisting of seven members including our chief executive officer,
three individuals designated by HNC and three independent directors, each of
whom will have retail industry experience and will be designated by our chief
executive officer. However, HNC's right to designate three directors will
terminate once HNC and its affiliates own less than 25% of our outstanding
common stock. For so long as HNC has the right to designate three directors, HNC
will have the right to fill any vacancy caused by the death, resignation or
removal of its designees.

In addition, under the terms of the corporate rights agreement, we will
agree that the following corporate actions, including those taken by our
subsidiary Retek Information Systems, will require the approval of at least two
of the HNC board designees and HNC:

- any acquisition or merger by us with or into another entity;

- any material change in the scope of our business;

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- any issuance of capital stock by us, other than in connection with this
offering or employee stock option and purchase plans previously approved
by HNC;

- any incurrence of debt by us in excess of $10,000,000;

- the sale, purchase or lease of any business or asset having a value of
more than $3,000,000;

- the amendment or adoption by us of any employee benefit or stock option
plan, other than those previously approved by HNC;

- any material change in the annual plan and budget we submit to HNC;

- any amendment to our certificate of incorporation or bylaws that would
authorize any new class or series of our capital stock adversely affect
HNC's rights as our majority stockholder; and

- the commencement or settlement by us of any litigation, except where
potential liabilities and expenses are not expected to exceed $500,000.

In addition, the following actions will require the approval of at least
two of the HNC board designees:

- the sale, lease, exchange or other disposition of all or substantially
all of our assets;

- our liquidation or dissolution;

- any transaction that would decrease HNC's equity ownership in us;

- the incurrence of annual capital expenditures or investments in excess
of $5,000,000 above budgeted amounts approved by HNC; and

- the formation and structure of the committees of our board.

The approval of the HNC board designees will no longer be required when HNC
owns less than 50% of the outstanding shares of our capital stock.

Covenants. We will agree that, for so long as HNC maintains beneficial
ownership of at least 50% of the total number of our outstanding shares of
capital stock, we will:

- provide HNC with financial information regarding our company and our
subsidiaries;

- provide HNC copies of all quarterly and annual financial information and
other reports and documents we intend to file with the SEC prior to the
filing, as well as final copies upon filing; and

- cooperate with HNC and provide it with financial and other information
about us to enable HNC to timely prepare and file reports and filings it
is required to make under applicable securities laws that require HNC to
incorporate financial and other information about us.

Other covenants. The corporate rights agreement will also provide that for
so long as HNC maintains beneficial ownership of at least 50% of the total
number of our outstanding shares of capital stock, we may not take any action or
enter into any commitment or agreement that may reasonably be anticipated to
result in a breach by HNC of, or a default by HNC under:

- any provision of HNC's certificate of incorporation or bylaws;

- any credit agreement or other material instrument binding upon HNC; or

- any judgment, order or decree of any governmental body, agency or court
having jurisdiction over HNC or any of its assets.

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SERVICES AGREEMENT

We also intend to enter into a services agreement with HNC under which HNC
will agree to provide to us specified accounting, financial and tax services and
employee benefit plan and insurance administration. These services may be
changed upon agreement between HNC and us. We will pay HNC a fee for these
services equal to HNC's cost in providing these services. The fee will be
payable monthly in arrears, 30 days after the close of each month. The services
agreement will expire one year after its effective date and any and all services
can be earlier terminated by us upon 30 days' advance notice or upon other
specified conditions. We cannot assure you that we will be able to provide these
services internally or find a third party provider on acceptable terms, if at
all, after the expiration of the services agreement.

LICENSE AGREEMENT

We and HNC will enter into a technology license agreement under which HNC
will provide us with the use of specific items of HNC's predictive software
technology. The license will be non-exclusive, perpetual, world-wide and
royalty-free and will limit our use of this HNC technology to develop and market
products and services to retailers and their trading partners. Under the terms
of the license agreement, HNC will not be obligated to provide us any updates to
their predictive software technology. The license agreement will contain other
provisions including prohibitions against transfer of, and sublicensing of
specified rights with respect to, HNC's technology.

TAX SHARING AGREEMENT

Following this offering, we and our subsidiaries will continue to be
included in the consolidated group of HNC for US federal income tax purposes and
the combined, consolidated or unitary group of HNC for various state and local
income tax purposes, or the consolidated group. Prior to the completion of this
offering, we and HNC will enter into a tax sharing agreement. For taxable years
and portions of taxable years before the date of this offering, HNC will pay all
taxes for the consolidated group including any liability resulting from
adjustments to tax returns relating to those taxable years or portions of those
taxable years. We and our subsidiaries will continue to be liable for all taxes
that are imposed on a separate return basis or on a combined, consolidated or
unitary basis on a group of companies that includes only us and our
subsidiaries. The tax sharing agreement will require HNC and us to make payments
to each other equal to the amount of income taxes which would be paid by us,
subject to some adjustments, as if we and each of our subsidiaries included in
the consolidated group were to file our own separate, combined, consolidated or
unitary, federal, state and local income tax returns for any taxable year or
portion of any taxable year beginning after the date of this offering in which
we are included in HNC's consolidated group.

TREATMENT OF OUTSTANDING STOCK OPTIONS

In connection with our separation from HNC, our executive officers and
other employees will be given the opportunity to receive options to purchase our
common stock in exchange for their agreeing to cancel their outstanding options
to purchase HNC common stock which are scheduled to be unvested as of March 31,
2000. Options to purchase HNC common stock which are not canceled will continue
to vest in accordance with their terms. Options to purchase HNC common stock
held by our employees which are unvested at the time of the distribution will
terminate. Options to purchase HNC common stock held by our employees which are
vested at the time of our separation from HNC will remain exercisable for 90
days after the distribution. Options to purchase our common stock which are
granted in exchange for the cancellation of options to purchase HNC common stock
will be granted at an exercise price of $10.00 per share under our 1999 Equity
Incentive Plan. It is anticipated that these options will vest 25% on the first
anniversary of the date of grant and thereafter at the rate of 1/48 of the
amount of the original grant on a monthly basis for 36 months.

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CERTAIN ARRANGEMENTS INVOLVING STOCK OPTIONS

If HNC has received a written ruling from the Internal Revenue Service that
the distribution qualifies for tax-free treatment under Section 355 of the
Internal Revenue Code and HNC fails to complete the distribution within 120 days
after the first date that HNC is eligible to effect the tax-free distribution,
John Buchanan and three other executive officers to be chosen by Mr. Buchanan
will receive a 12-month credit to the vesting schedule of their Retek stock
options. In addition, if at the time of this accelerated vesting, these
executives execute two-year non-compete agreements with Retek, the vesting
schedules will be credited by an additional 12 months.

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PRINCIPAL STOCKHOLDER

Before this offering, all of the shares of our common stock issued and
outstanding were beneficially owned by HNC. Immediately after completion of this
offering, HNC will beneficially own shares of our common stock, which
will represent approximately 88.9% of our then outstanding common stock (87.4%
if the underwriters' over-allotment option is exercised in full). HNC's address
is 5935 Cornerstone Court West, San Diego, California 92121.

Except for HNC, we are not aware of any person or group that will
beneficially own more than 5% of the outstanding shares of our common stock
following this offering.

The following table presents information regarding the beneficial ownership
of the outstanding common stock of HNC as of September 30, 1999 for the
following stockholders:

- each stockholder known by us to be the beneficial owner of more than 5%
of HNC's common stock;

- each of HNC's directors;

- HNC's chief executive officer and the four other most highly-paid
executive officers of HNC in 1998; and

- all of HNC's directors and officers as a group.

Percentage ownership calculations are based upon 24,406,864 shares of HNC
common stock outstanding as of September 30, 1999. Shares of HNC common stock
subject to options that are currently exercisable or exercisable within 60 days
of September 30, 1999 are deemed to be outstanding and to be beneficially owned
by the person holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other stockholder. To our knowledge,
except as indicated in the footnotes to the table and under applicable community
property laws, the stockholders named in the table have sole voting and
investment power over all shares listed in the table.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING SHARES
NAME OF BENEFICIAL OWNER OF HNC OWNED OF HNC OWNED
------------------------ ---------------- ------------------
<S> <C> <C>
Capital Research and Management Company(1).................. 3,409,400 14.0%
The TCW Group, Inc.(2)...................................... 2,454,155 10.1
Franklin Resources, Inc.(3)................................. 2,042,430 8.4
J. & W. Seligman & Co., Incorporated(4)..................... 1,878,295 7.7
Robert L. North(5).......................................... 462,526 1.9
Edward K. Chandler(6)....................................... 126,532 *
Raymond V. Thomas(7)........................................ 125,000 *
John Mutch(8)............................................... 98,056 *
Charles H. Gaylord, Jr.(9).................................. 71,500 *
Michael A. Thiemann(10)..................................... 65,167 *
John Buchanan(11)........................................... 63,404 *
Thomas F. Farb(12).......................................... 25,000 *
Alex W. Hart(13)............................................ 10,400 *
All current executive officers and directors as a group (13
persons)(14).............................................. 1,358,801 5.4%
</TABLE>

- -------------------------

* Less than 1%

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(1) Based upon a Schedule 13G dated February 11, 1999, indicating that Capital
Research and Management Company, or CRMC, has sole dispositive power with
respect to 3,409,400 shares of HNC common stock. Includes 1,668,500 shares
held by SMALLCAP World Fund, Inc. The address of CRMC is 333 South Hope
Street, Los Angeles, California 90071.

(2) Based upon a Schedule 13G dated October 12, 1999, indicating that The TCW
Group, Inc. and Robert Day, an individual who may be deemed to control the
TCW Group, Inc., share voting and dispositive power with respect to these
shares of HNC common stock. The address of The TCW Group, Inc. is 865 South
Figueroa Street, Los Angeles, California 90017.

(3) Based upon a Schedule 13G dated January 28, 1999, indicating that Franklin
Resources, Inc. may be deemed to have beneficial ownership of 2,042,430
shares. Includes 2,025,950 shares held by Franklin Advisors, Inc. The
address of Franklin Resources, Inc. is 777 Mariners Island Boulevard, San
Mateo, California 94404.

(4) Based upon information obtained from the Nasdaq Stock Market. The address
of J. & W. Seligman & Co., Incorporated is 100 Park Avenue, New York, New
York 10017.

(5) Includes 255,037 shares of HNC common stock held of record by the Robert L.
North & Dixie L. North Revocable Inter Vivos Trust, of which Mr. North is a
trustee. Also includes 207,489 shares of HNC common stock subject to
options exercisable within 60 days of September 30, 1999. Mr. North is the
president and chief executive officer and a director of HNC.

(6) Includes 50,000 shares of HNC common stock subject to options exercisable
within 60 days of September 30, 1999. Mr. Chandler is a director of HNC.

(7) These shares of HNC common stock are subject to options exercisable within
60 days of September 30, 1999. Mr. Thomas is vice president, finance and
administration, chief financial officer and secretary of HNC.

(8) Includes 96,250 shares of HNC common stock subject to options exercisable
within 60 days of September 30, 1999. Mr. Mutch is the president of HNC
Insurance Solutions.

(9) Represents 21,500 shares of HNC common stock held of record by the Gaylord
Family Trust UTD 12/31/93, Charles H. Gaylord, Jr. and Lynn M. Gaylord
trustees, and 50,000 shares of HNC common stock subject to options
exercisable within 60 days of September 30, 1999. Mr. Gaylord is a director
of HNC.

(10) Includes 34,167 shares of HNC common stock held of record by the Thiemann
Family Trust dated July 1, 1996, of which Mr. Thiemann is a trustee, 6,000
shares held directly by Mr. Thiemann and 25,000 shares subject to options
exercisable within 60 days of September 30, 1999. Mr. Thiemann is the
former president of HNC Financial Solutions.

(11) Includes 62,500 shares of HNC common stock subject to options exercisable
within 60 days of September 30, 1999. Mr. Buchanan is our chairman and
chief executive officer.

(12) Represents shares of HNC common stock subject to options exercisable within
60 days of September 30, 1999. Mr. Farb is a director of HNC.

(13) Includes 10,000 shares of HNC common stock subject to options exercisable
within 60 days of September 30, 1999. Mr. Hart is a director of HNC.

(14) Includes 727,489 shares of HNC common stock subject to options exercisable
within 60 days of September 30, 1999, including the options described in
footnotes (5) through (13).

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DESCRIPTION OF CAPITAL STOCK

We will file our amended and restated certificate of incorporation
immediately before the completion of this offering. The following description of
our capital stock is intended as a summary only and is not complete. You should
read the full text of our amended and restated certificate of incorporation and
our bylaws, which were filed with the registration statement of which this
prospectus is a part.

GENERAL

Upon the completion of this offering, we will be authorized to issue
150,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of undesignated preferred stock, par value $0.01 per share. After this
offering there will be 45,000,000 shares of our common stock outstanding, and
45,750,000 shares if the underwriters exercise their over-allotment option in
full.

COMMON STOCK

The holders of shares of our common stock will be entitled to one vote for
each share on all matters voted on by stockholders, including elections of
directors and, except as otherwise required by law or provided in any resolution
adopted by our board of directors with respect to any series of preferred stock,
the holders of shares of our common stock will possess all voting power. Our
certificate of incorporation does not provide for cumulative voting in the
election of directors. Subject to any preferential rights of any outstanding
series of preferred stock created by our board of directors from time to time,
holders of shares of our common stock will be entitled to such dividends as may
be declared from time to time by our board of directors from funds legally
available therefor; and upon liquidation will be entitled to receive pro rata
all of our assets available for distribution to holders of our common stock.
Holders of shares of common stock will have no liability to further calls or
assessment by us, and have no conversion, redemption or preemptive rights to
purchase additional shares of any class of our shares, except that HNC will have
specified rights to purchase additional shares of common stock as described
under "Certain Transactions -- Corporate Rights Agreement" beginning on page .

PREFERRED STOCK

There are no shares of preferred stock outstanding. The preferred stock is
issuable, without the approval of our stockholders, either as a class without
series or in one or more series and with the designations, rights, privileges,
restrictions and conditions for each class or series as is stated in the
resolutions adopted by our board of directors that provide for designation and
issue of each series. Our board of directors is authorized to determine, among
other things, the voting, dividend, redemption, conversion and liquidation
powers, rights and preferences and the limitations of such series. We believe
that the ability of our board of directors to issue one or more series of
preferred stock will provide us with flexibility in structuring possible future
financings and acquisitions, and in meeting other corporate needs that may
arise. The authorized shares of preferred stock will be available for issuance
without further action by stockholders, except as is required by applicable law,
contract or the rules of any stock exchange or automated quotation system on
which our securities may be listed or traded.

Although our board of directors has no present plans to issue any preferred
stock, it could issue a series of preferred stock that could, depending on the
terms of the series, impede the completion of a merger, tender offer or other
takeover attempt. Our board of directors will make any determination to issue
preferred stock based on its judgment as to our best interests and the best
interests of our stockholders. Our board of directors could issue preferred
stock with voting and other rights that could adversely effect the voting power
of the holders of our common stock, and that could discourage an acquisition
attempt through which an acquiror may be able to change the composition of our
board of directors, including a tender offer or other transaction that some, or
a majority, of our stockholders might believe to be in their

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best interests or in which stockholders might receive a premium over the then
current market price of their stock over the then current market price of such
stock.

CORPORATE OPPORTUNITIES

Our certificate of incorporation will provide that HNC will have no duty to
refrain from engaging in the same or similar activities or lines of business as
we are engaged, and neither HNC nor any officer or director of HNC (except as
described below), will be liable to us or our stockholders for breach of any
fiduciary duty by reason of any such activities of HNC. Under our certificate of
incorporation, if HNC learns of a potential transaction or matter that may be a
corporate opportunity for both HNC and us, HNC will have no duty to communicate
or offer the corporate opportunity to us and will not be liable to us or our
stockholders for breach of any fiduciary duty as one of our stockholders because
it pursues or acquires the corporate opportunity for itself, directs the
corporate opportunity to another person, or does not communicate information
regarding the corporate opportunity to us.

Under our certificate of incorporation, if one of our directors or officers
who is also a director or officer of HNC learns of a potential transaction or
matter that may be a corporate opportunity for both us and HNC, our director or
officer will have fully satisfied and fulfilled the director's or officer's
fiduciary duty to us and our stockholders with respect to such corporate
opportunity if director or officer acts in a manner consistent with the
following policy:

- a corporate opportunity offered to any person who is one of our
officers, and who is also a director but not an officer of HNC, will
belong to us;

- a corporate opportunity offered to any person who is a director but not
one of our officers, and who is also a director or officer of HNC, will
belong to us if the opportunity is expressly offered to the person
solely in his or her capacity as one of our directors, and otherwise it
will belong to HNC; and

- a corporate opportunity offered to any person who is an officer of both
us and HNC will belong to us if the opportunity is expressly offered to
the person solely in his or her capacity as one of our officers, and
otherwise it will belong to HNC.

For purposes of the foregoing:

- any of our directors who is chairman of our board of directors or one of
its committees will not be considered to be one of our officers, unless
the person is one of our full-time employees; and

- the terms "we", "us" and "our" mean Retek Inc. and all corporations,
partnerships, joint ventures, associations and other entities in which
it beneficially owns (directly or indirectly) 50% or more of the
outstanding voting stock, voting power, partnership interest or similar
voting interests, and

- the term "HNC" means HNC Software Inc. and all corporations,
partnerships, joint ventures, associations and other entities (other
than us) in which HNC beneficially owns (directly or indirectly) 50% or
more of the outstanding voting stock, voting power, partnership
interests or similar voting interests.

These provisions will expire on the date that HNC ceases to own
beneficially stock representing at least 50% of the total voting power of all of
our outstanding common stock and no person who is one of our directors or
officers is also a director or officer of HNC or any of its subsidiaries (other
than us).

In addition to any vote of the stockholders required by our certificate of
incorporation, until the time that HNC ceases to own beneficially stock
representing at least 50% of the total voting power of all classes of our
outstanding common stock, the affirmative vote of the holders of more than 80%
of the total voting power of all classes of outstanding common stock is required
to alter, amend or repeal in a manner adverse to the interests of HNC and its
subsidiaries (other than us), or adopt any provision adverse to the interests

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of HNC and its subsidiaries (other than us), or inconsistent with, the corporate
opportunity provisions described above in our certificate of incorporation or
bylaws.

Any person purchasing or otherwise acquiring our common stock will be
deemed to have notice of, and to have consented to, the foregoing provisions
regarding corporate opportunities.

CHARTER PROVISIONS AND DELAWARE LAWS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT

The provisions of our certificate of incorporation and bylaws summarized
below may be deemed to have an anti-takeover effect and may delay, discourage or
prevent a tender offer or takeover attempt that a stockholder might consider to
be in its best interest, including attempts that might result in a premium being
paid over the market price of our common stock.

BOARD OF DIRECTORS

Number of directors. The board of directors consists of not less than five
and not more than 10 directors, with the exact number to be determined by the
board of directors. We will have a board of directors with seven members at the
time of this offering. The directors, other than those elected by the holders of
preferred stock, will be classified, with respect to the time they hold office,
into three classes, as nearly equal in number as possible. Each director will
hold office until such person's successor is duly elected and qualified.

Filling vacancies. Our certificate of incorporation and bylaws provide
that, subject to any rights of holders of preferred stock, and unless our board
of directors otherwise determines, newly created directorships resulting from
any increase in the number of directors will be filled by the vote of the
majority of the directors then in office, provided that following the
appointment, at least three of the directors are nominees of HNC. Any director
so elected or appointed will hold office for the remainder of the full term of
the class of director in which the new directorship was created and until his or
her successor is elected and qualified.

Any vacancies on our board of directors created by the death, resignation,
disqualification or removal of a director may be filled by the vote of the
majority of the directors then in office elected by, or appointed on behalf of,
the same class of stock that elected that director whose death, resignation or
removal created the vacancy, unless there are no such directors, in which case
the vacancy may be filled by the vote of the majority of all directors then in
office, even if less than a quorum, or by the sole remaining director. Any
vacancy on our board of directors created by the death, resignation,
disqualification or removal of a director elected by (or appointed on behalf of)
the holders of a class of stock may also be filled by a vote of the holders of
such class of stock, unless there are no outstanding shares of such class of
stock, in which case any such vacancy may be filled by a vote of the holders of
the remaining class of stock. Any director elected to fill any such vacancy will
hold office for the remainder of the full term of the director whose vacancy is
being filled and until his or her successor is elected and qualified. No
decrease in the number of directors will shorten the term of any incumbent
director.

The provisions of the corporate documents described above would preclude a
third-party from removing incumbent directors and simultaneously gaining control
of our board of directors by filling the vacancies created by removal with its
own nominees. Under the classified board provision described above, it would
take at least two elections of directors for any individual or group to gain
control of our board of directors. Accordingly, these provisions could
discourage a third party from initiating a proxy contest, making a tender offer
or otherwise attempting to gain control of us.

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETING

As of the time at which HNC and its affiliates cease to beneficially own a
total of at least 50% of the then outstanding shares of our common stock, or
trigger date, any action required or permitted to be taken by the stockholders
may be effected only at a duly called annual or special meeting of stockholders
and

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may not be effected by a written consent in lieu of such a meeting. Effective as
of the trigger date, except as otherwise required by law and subject to the
rights of the holders of any preferred stock, special meetings of stockholders
for any purpose may be called only by specified officers or by any officer at
the request in writing of a majority of our board of directors and the power of
stockholders to call a special meeting is specifically denied. Before the
trigger date, we will call a special meeting of stockholders promptly upon the
request of HNC.

These provisions may have the effect of delaying consideration of a
stockholder proposal until the next annual meeting unless a special meeting is
called by our board of directors or certain specified officers.

ADVANCE NOTICE PROCEDURES

Stockholders must follow an advance notice procedure for the nomination,
other than by or at the direction of our board of directors, of candidates for
election as directors, as well as for other stockholder proposals to be
considered at annual meetings of stockholders. In general, we will have to
receive written notice of intent to nominate a director or raise matters at an
annual meeting not less than 60 nor more than 90 days before the anniversary of
the previous year's annual meeting of stockholders. The notice must contain
information concerning the person to be nominated or the matters to be brought
before the meeting and concerning the stockholder submitting the proposal. If
the chairman of a meeting determines that an individual was not nominated, or
other business was not brought before the meeting, in accordance with the
advance notice procedures, the individual will not be eligible for election as a
director, or the business will not be conducted at the meeting, as the case may
be.

The advance notice procedures do not apply to HNC and its affiliates prior
to the Trigger Date.

CHARTER AMENDMENTS

Our certificate of incorporation will provide that the affirmative vote of
the holders of at least 80% of the outstanding shares of our common stock is
required to amend, repeal or adopt any provision inconsistent with the
provisions described above. Our certificate of incorporation further provides
that specified provisions of our bylaws may be altered, amended or repealed by
the affirmative vote of directors constituting not less than a majority of our
entire board of directors (if effected by action of our board of directors) or
by the affirmative vote of the holders of at least 80% of the voting power of
all classes of outstanding capital stock, voting together as a single class (if
effected by action of the stockholders). In addition, under the terms of the
corporate rights agreement, we will agree that until the Trigger Date, any
changes to our certificate of incorporation or bylaws that would harm HNC's
rights must be approved by HNC as our majority stockholder.

SECTION 203 OF DELAWARE GENERAL CORPORATION LAW

Section 203 of the Delaware General Corporation Law provides that, subject
to specified exceptions, an "interested stockholder" of a Delaware corporation
shall not engage in any business combination, including mergers or
consolidations or acquisitions of additional shares of the corporation, with the
corporation for a three-year period following the date that the stockholder
becomes an interested stockholder unless:

- before that date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder,

- upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding certain shares), or

- on or subsequent to that date, the business combination is approved by
the board of directors of the corporation and authorized at an annual or
special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock of the corporation that is not
owned by the interested stockholder.

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<PAGE> 77

Except as otherwise specified in Section 203, an interested stockholder is
defined to include:

- any person that is the owner of 15% or more of the outstanding voting
securities of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within three years immediately
before the date of determination and

- the affiliates and associates of any such person.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. We have not elected to
be exempt from the restrictions imposed under Section 203. However, HNC and its
affiliates are excluded from the definition of "interested stockholder" under
the terms of Section 203. The provisions of Section 203 may encourage persons
interested in acquiring us to negotiate in advance with our board of directors,
since the stockholder approval requirement would be avoided if a majority of the
directors then in office approves either the business combination or the
transaction that results in any person becoming an interested stockholder.
Section 203 also may have the effect of preventing changes in our management. It
is possible that Section 203 could make it more difficult to accomplish
transactions that our stockholders may otherwise deem to be in their best
interests.

LIMITATION OF LIABILITY

Our certificate of incorporation provides that none of our directors will
be personally liable to us or our stockholders for monetary damages for breach
of fiduciary duty as a director, except, if required by law for liability

- for breach of the director's duty of loyalty to us or our stockholders,

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,

- for unlawful payments of dividends, stock purchases or redemptions, or

- for any transaction from which the director derived an improper personal
benefit.

Neither the amendment or repeal of this provision will eliminate or reduce
its application to any matter occurring, or any cause of action, suit or claim
that, but for this provision, would accrue or arise before its amendment or
repeal. While our certificate of incorporation provides directors with
protection from monetary damages for breaches of their duty of care, it does not
eliminate the duty of care. Therefore, our certificate of incorporation will not
affect the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care.

LISTING

We have applied for listing our common stock on The Nasdaq National Market
under the symbol "RETK."

TRANSFER AGENT AND REGISTRANT

The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services located at 85 Challenger Rd., Ridgefield Park, New Jersey
07660. Its phone number is (201) 296-4000.

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<PAGE> 78

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has been no market for our common stock. A
significant public market for our common stock may not develop or be sustained
after this offering. Future sales of substantial amounts of our common stock in
the public market following this offering, including shares issued upon exercise
of outstanding options or options that may be granted after this offering, could
harm market prices and could impair our ability to raise capital through sale of
our equity securities. As described below, less than 11.1% of our shares
currently outstanding will be available for sale immediately after this offering
because of contractual restrictions on resale. Sales of substantial amounts of
our common stock in the public market after the restrictions lapse could
adversely affect the prevailing market price of our common stock and our ability
to raise equity capital in the future.

Upon completion of this offering, we will have outstanding 45,000,000
shares of common stock, or 45,750,000 shares if the underwriters exercise their
over-allotment option in full, which will be freely tradable without restriction
under the Securities Act, except for shares purchased by our "affiliates," as
that term is defined in Rule 144 under the Securities Act. The shares purchased
by our affiliates generally may be sold in compliance with Rule 144 as described
below.

The 40,000,000 shares of our common stock held by HNC after this offering
are "restricted securities" within the meaning of Rule 144. The shares held by
HNC will be subject to contractual restrictions on resale based on the lock-up
agreements described below. Further, since the shares held by HNC are restricted
securities, HNC may not sell them unless they are registered under the
Securities Act or an exemption from registration is available.

HNC, Retek and our officers and directors have entered into lock-up
agreements or other contractual restrictions providing that the stockholder will
not offer, sell, contract to sell or otherwise dispose of any shares of our
common stock for a period of 180 days after the date of this prospectus, without
the prior written consent of Credit Suisse First Boston Corporation. As a result
of these lock-up agreements and other contractual restrictions, notwithstanding
possible earlier eligibility for sale under the provisions of Rule 144, none of
these shares will be resellable until 181 days after the date of this
prospectus. Credit Suisse First Boston Corporation may, in its sole discretion
and at any time without notice, release any portion of the securities subject to
lock-up agreements or other contractual restrictions.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year, including the holding period of any prior owner
except an affiliate of us, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:

- 1% of the number of shares of our common stock then outstanding, which
will equal approximately 450,000 shares immediately after this offering;
or

- the average weekly trading volume of our common stock during the four
calendar weeks preceding the filing of a Form 144 in connection with the
sale.

Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been an affiliate of
ours at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except an affiliate, is entitled
to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

Within 90 days following the effectiveness of this offering, we will file a
registration statement on Form S-8 to register shares of our common stock
subject to outstanding options or reserved for future issuance under our stock
plans. As of , 1999, options to purchase a total of shares
were outstanding and shares were reserved for future issuance under
our stock plans. The common

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<PAGE> 79

stock issued upon exercise of outstanding vested options, other than common
stock issued to our affiliates, will be available for immediate resale in the
open market.

REGISTRATION RIGHTS

At any time more than six months after the closing of this offering, HNC
and specified affiliates of HNC, who are holders of 40,000,000 shares of our
common stock, will be entitled to rights with respect to the registration of
those shares under the Securities Act. Registration of those shares under the
Securities Act would result in those shares becoming freely tradable without
restriction under the Securities Act, except for shares purchased by affiliates,
immediately upon effectiveness of registration.

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<PAGE> 80

MATERIAL UNITED STATES FEDERAL TAX
CONSEQUENCES TO NON-UNITED STATES HOLDERS

GENERAL

The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of common
stock that may be relevant to you if you are a non-United States holder. In
general, a "non-United States Holder" is a person or entity that is, for United
States federal income tax purposes, a foreign corporation, a nonresident alien
individual, a foreign partnership or a foreign estate or trust. This discussion
is based on current law, which is subject to change, possibly with retroactive
effect, or different interpretations. This discussion is limited to non-United
States Holders who hold shares of common stock as capital assets. Moreover, this
discussion is for general information only and does not address all of the tax
consequences that may be relevant to you in light of your personal
circumstances, nor does it discuss special tax provisions that may apply to you
if you relinquished United States citizenship or residence.

If you are an individual, you may, in many cases, be treated as a resident
alien, as opposed to a nonresident alien, by virtue of being present in the
United States for at least 31 days in the calendar year and for a total of at
least 183 days during a three-year period ending in the current calendar year
counting for these purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year. Resident aliens are subject to
United States federal income tax as if they were United States citizens.

EACH PROSPECTIVE PURCHASER OF OUR COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY UNITED STATES STATE,
MUNICIPALITY OR OTHER TAXING JURISDICTION.

DIVIDENDS

If dividends are paid, as a non-United States Holder, you will be subject
to withholding of United States federal income tax at a 30% rate or a lower rate
as may be specified by an applicable income tax treaty. To claim the benefit of
a lower rate under an income tax treaty, you must properly file with the payor
an IRS Form 1001, or successor form, claiming an exemption from or reduction in
withholding under the applicable tax treaty.

If dividends are considered effectively connected with the conduct of a
trade or business by you within the United States and, where a tax treaty
applies, are attributable to a United States permanent establishment of yours,
those dividends will not be subject to withholding tax, but instead will be
subject to United States federal income tax on a net basis at applicable
graduated individual or corporate rates, provided an IRS Form 4224, or successor
form, is filed with the payor. If you are a foreign corporation, any effectively
connected dividends may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or a lower rate as may be
specified by an applicable income tax treaty.

Unless the payor has knowledge to the contrary, dividends paid before
January 1, 2001 to an address outside the United States are presumed to be paid
to a resident of that country for purposes of the withholding discussed above
and for purposes of determining the applicability of a tax treaty rate. However,
recently finalized Treasury Regulations pertaining to United States federal
withholding tax provide that you must comply with certification procedures, or,
in the case of payments made outside the United States with respect to an
offshore account, certain documentary evidence procedures, directly or under
certain circumstances through an intermediary, to obtain the benefits of a
reduced rate under an income tax treaty with respect to dividends paid after
December 31, 2000. In addition, these regulations will require you, if you
provide an IRS Form 4224 or successor form, as discussed above, to provide your
identification number.

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<PAGE> 81

If you are eligible for a reduced rate of United States withholding tax
under an income tax treaty, you may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

As a non-United States Holder, you generally will not be subject to United
States federal income tax on any gain recognized on the sale or other
disposition of common stock unless:

(1) the gain is considered effectively connected with the conduct of a
trade or business by you within the United States and, where a tax
treaty applies, is attributable to a United States permanent
establishment of yours (and, in which case, if you are a foreign
corporation, you may be subject to an additional branch profits tax
equal to 30% or a lower rate as may be specified by an applicable
income tax treaty);

(2) you are an individual who holds the common stock as a capital asset
and are present in the United States for 183 or more days in the
taxable year of the sale or other disposition and other conditions are
met; or

(3) we are or have been a "United States real property holding
corporation," or a USRPHC, for United States federal income tax
purposes. We believe that we are not currently, and are likely not to
become, a USRPHC. If we were to become a USRPHC, then gain on the sale
or other disposition of common stock by you generally would not be
subject to United States federal income tax provided:

- the common stock was "regularly traded" on an established securities
market; and

- you do not actually or constructively own more than 5% of the common
stock during the shorter of the five-year period preceding the
disposition or your holding period.

FEDERAL ESTATE TAX

If you are an individual, common stock held at the time of your death will
be included in your gross estate for United States federal estate tax purposes,
and may be subject to United States federal estate tax, unless an applicable
estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

We must report annually to the Internal Revenue Service and to each of you
the amount of dividends paid to you and the tax withheld with respect to those
dividends, regardless of whether withholding was required. Copies of the
information returns reporting those dividends and withholding may also be made
available to the tax authorities in the country in which you reside under the
provisions of an applicable income tax treaty or other applicable agreements.

Backup withholding is generally imposed at the rate of 31% on payments to
persons that fail to furnish the necessary identifying information to the payor.
Backup withholding generally will not apply to dividends paid before January 1,
2001 to a non-United States Holder at an address outside the United States,
unless the payor has knowledge that the payee is a United States person. In the
case of dividends paid after December 31, 2000, the recently finalized Treasury
Regulations provide that you generally will be subject to withholding tax at a
31% rate unless you certify your non-United States status.

The payment of proceeds of a sale of common stock effected by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless you provide the payor with your name and address
and you certify your non-United States status or you otherwise establish an
exemption. In general, backup withholding and information reporting will not
apply to the payment of the

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<PAGE> 82

proceeds of a sale of common stock by or through a foreign office of a broker.
If, however, the broker is, for United States federal income tax purposes, a
United States person, a controlled foreign corporation, or a foreign person that
derives 50% or more of its gross income from the conduct of a trade or business
in the United States, or, in addition, for periods after December 31, 2000, a
foreign partnership that at any time during its tax year either is engaged in
the conduct of a trade or business in the United States or has as partners one
or more United States persons that hold more than 50% of the income or capital
interest in the partnership, the payments will be subject to information
reporting, but not backup withholding, unless the broker has documentary
evidence in its records that you are a non-United States Holder and other
conditions are met or you otherwise establish an exemption.

Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against the United States federal income tax
liability, provided the required information is furnished in a timely manner to
the IRS.

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<PAGE> 83

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters
named below, for whom Credit Suisse FirstBoston Corporation, BancBoston
Robertson Stephens Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives, the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
Number of
Underwriter Shares
- ----------- ----------
<S> <C>
Credit Suisse First Boston Corporation......................
BancBoston Robertson Stephens Inc...........................
U.S. Bancorp Piper Jaffray Inc..............................
----------
Total.....................................................
==========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or this
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
Per Share Total
------------------------------- -------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions payable by us................. $ $ $ $
Expenses payable by us...................... $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

We, our officers and directors and our stockholder have agreed that we and
they will not offer, sell, contract to sell, announce an intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act relating to any additional shares of our common stock or securities
convertible into or exchangeable or exercisable for any of our common stock, or
publicly disclose the intention to make any such offer, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
in our case for issuances pursuant to the exercise of employee stock options
outstanding on the date hereof.

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<PAGE> 84

The underwriters have reserved for sale, at the initial public offering
price up to 350,000 shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in this offering. The number of shares available for
sale to the general public in this offering will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same terms as the
other shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.

We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "RETK."

Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors that will be considered
in determining the public offering price include:

- the information set forth in this prospectus and otherwise available to
the underwriters;

- the history and the prospects for the industry in which we will compete;

- the ability of our management;

- the prospects for our future earnings;

- the present state of our development and our current financial condition;

- the general condition of the securities markets at the time of this
offering; and

- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.

The representatives on behalf of the underwriters may engage in
overallotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

- Overallotment involves syndicate sales in excess of this offering size,
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

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<PAGE> 85

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or under a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the common
stock.

REPRESENTATION OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase common stock without the
benefit of a prospectus qualified under the securities laws, (2) where required
by law, that the purchaser is purchasing as principal and not as agent, and (3)
the purchaser has reviewed the text above under "Resale Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer and these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult with their own legal and
tax advisors with respect to the tax consequences of an investment in our common
stock in their particular circumstances and with respect to the eligibility of
our common stock for investment by the purchaser under relevant Canadian
legislation.
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<PAGE> 86

LEGAL MATTERS

The validity of the common stock offered under this prospectus will be
passed upon for Retek by Shearman & Sterling, Menlo Park, California. Other
legal matters will be passed upon for the underwriters by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California.

EXPERTS

The combined financial statements of Retek Logistics, Inc. and Retek
Information Systems, Inc. as of December 31, 1997 and 1998, and June 30, 1999
and for each of the three years in the period ended December 31, 1998, and for
the six months ended June 30, 1999 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of such firm as experts in auditing and
accounting.

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<PAGE> 87

WHERE TO FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission with respect to the common stock offered under this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information in the registration statement
or the exhibits and schedules that are part of the registration statement. For
further information on Retek and the common stock we are offering, reference is
made to the registration statement and the exhibits filed as a part of the
registration statement. Statements contained in this prospectus concerning the
contents of any contract or any other document referred to may be only summaries
of these documents. The exhibits to this registration statement should be
referenced for the complete contents of these contracts and documents. Each
statement is qualified by reference to the exhibit. The registration statement,
including the exhibits, may be inspected without charge at the public reference
facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Commission's regional offices located in New
York, New York and Chicago, Illinois. Copies of all or any part of the
registration statement may be obtained from these offices after payment of fees
prescribed by the Commission. Please call the Commission at 1-800-SEC-0330 for
further information on the public reference rooms. The Commission also maintains
a Web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.

Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act and, in
accordance with this law, will file periodic reports, proxy statements and other
information with the SEC. These periodic reports, proxy statements and other
information will be available for inspection and copying at the SEC's public
reference rooms and the web site of the SEC referred to above.

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<PAGE> 88

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.:
Report of Independent Accountants........................... F-2
Combined Balance Sheet as of December 31, 1997 and 1998, and
June 30, 1999............................................. F-3
Combined Statement of Income for the years ended December
31, 1996, 1997 and 1998, for the six months ended June 30,
1998 (unaudited) and for the six months ended June 30,
1999...................................................... F-4
Combined Statement of Cash Flows for the years ended
December 31, 1996, 1997 and 1998, for the six months ended
June 30, 1998 (unaudited) and for the six months ended
June 30, 1999............................................. F-5
Combined Statement of Changes in Stockholder's Equity and
Comprehensive Income for the years ended December 31,
1996, 1997 and 1998, and for the six months ended June 30,
1999...................................................... F-6
Notes to Combined Financial Statements...................... F-7
RETEK LOGISTICS, INC.:
Report of Independent Accountants........................... F-22
Balance Sheet as of December 31, 1996 and 1997, and March
31, 1998.................................................. F-23
Statement of Operations for the years ended December 31,
1996 and 1997, and for the three months ended March 31,
1997 (unaudited) and for the three months ended March 31,
1998...................................................... F-24
Statement of Cash Flows for the years ended December 31,
1996 and 1997, and for the three months ended March 31,
1997 (unaudited) and for the three months ended March 31,
1998...................................................... F-25
Statement of Changes in Stockholders' Equity and
Comprehensive Income for the years ended December 31, 1996
and 1997 and for the three months ended March 31, 1998.... F-26
Notes to Financial Statements............................... F-27
PRO FORMA COMBINED FINANCIAL INFORMATION OF RETEK LOGISTICS,
INC. AND RETEK INFORMATION SYSTEMS, INC.:
Pro Forma Combined Statement of Income for the year ended
December 31, 1998......................................... F-34
Notes to Pro Forma Combined Statement of Income............. F-35
</TABLE>

F-1
<PAGE> 89

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

In our opinion, the accompanying combined balance sheet and the related combined
statements of income, of cash flows and of changes in stockholder's equity and
comprehensive income present fairly, in all material respects, the combined
financial position of Retek Logistics, Inc. and Retek Information Systems, Inc.
(the "Company") at December 31, 1997 and 1998, and June 30, 1999, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998, and the six months in the period
ended June 30, 1999, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
September 9, 1999

F-2
<PAGE> 90

RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,469 $ 415 $ 930
Accounts receivable, net.................................. 11,972 22,050 28,346
Current portion of deferred income taxes.................. 2,706 2,972 3,627
Other current assets...................................... 1,158 2,706 1,541
------- ------- -------
Total current assets................................... 18,305 28,143 34,444
Deferred income taxes, less current portion................. 15,455 13,960 13,511
Property and equipment, net................................. 3,006 4,887 6,634
Intangible assets, net...................................... 1,130 4,010 3,143
Other assets................................................ -- 283 33
------- ------- -------
$37,896 $51,283 $57,765
======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,212 $ 3,289 $ 4,842
Accrued liabilities....................................... 2,140 2,970 3,246
Deferred revenue.......................................... 1,446 3,064 2,629
Payable to HNC Software Inc............................... 6,491 5,944 7,927
------- ------- -------
Total current liabilities.............................. 13,289 15,267 18,644
Commitments and contingencies (Notes 3 and 7)
Stockholder's equity:
Retek Logistics, Inc.:
Common stock, no par value -- 5,000,000 shares
authorized; and 2,237,683 shares issued and
outstanding.......................................... -- 6,564 6,564
Retek Information Systems, Inc.:
Common stock, $1.00 par value -- 1,000 shares
authorized; and 100 shares issued and outstanding.... -- -- --
Paid-in capital........................................ 19,230 20,290 20,327
Accumulated other comprehensive loss...................... (95) (188) (580)
Retained earnings......................................... 5,472 9,350 12,810
------- ------- -------
Total stockholder's equity............................. 24,607 36,016 39,121
------- ------- -------
$37,896 $51,283 $57,765
======= ======= =======
</TABLE>

See accompanying notes to combined financial statements.
F-3
<PAGE> 91

RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
License and maintenance....................... $ 9,740 $28,895 $42,753 $19,847 $27,314
Services and other............................ 3,693 2,028 12,280 5,466 10,376
------- ------- ------- ------- -------
Total revenue.............................. 13,433 30,923 55,033 25,313 37,690
------- ------- ------- ------- -------
Cost of revenue:
License and maintenance....................... 1,797 2,747 4,349 1,815 3,258
Services and other............................ 2,082 898 9,503 3,897 7,462
------- ------- ------- ------- -------
Total cost of revenue...................... 3,879 3,645 13,852 5,712 10,720
------- ------- ------- ------- -------
Gross profit............................... 9,554 27,278 41,181 19,601 26,970
Operating expenses:
Research and development...................... 4,829 9,485 12,918 6,066 9,737
Sales and marketing........................... 1,892 8,261 14,075 7,021 8,374
General and administrative.................... 1,415 2,913 3,921 2,117 2,551
Acquired in-process research and
development................................ -- -- 1,750 1,750 --
Acquisition related amortization of
intangibles................................ -- -- 429 143 516
------- ------- ------- ------- -------
Total operating expenses................... 8,136 20,659 33,093 17,097 21,178
------- ------- ------- ------- -------
Operating income................................ 1,418 6,619 8,088 2,504 5,792
Other income, net............................... -- 24 11 -- 14
------- ------- ------- ------- -------
Income before income tax (benefit)
provision.................................. 1,418 6,643 8,099 2,504 5,806
Income tax (benefit) provision.................. (815) 3,167 4,221 1,936 2,346
------- ------- ------- ------- -------
Net income.................................... $ 2,233 $ 3,476 $ 3,878 $ 568 $ 3,460
======= ======= ======= ======= =======
Pro forma unaudited basic and diluted net income
per common share (Note 1)..................... $ 1.73 $ 1.55
======= =======
Shares used in computing pro forma unaudited
basic and diluted net income per common share
(Note 1)...................................... 2,238 2,238
======= =======
</TABLE>

See accompanying notes to combined financial statements.
F-4
<PAGE> 92

RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- ----------------------
1996 1997 1998 1998 1999
------- ------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 2,233 $ 3,476 $ 3,878 $ 568 $ 3,460
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Provision for doubtful accounts............. 309 212 1,652 283 1,491
Depreciation and amortization............... 804 1,266 2,420 953 1,873
Acquired in-process research and
development.............................. -- -- 1,750 1,750 --
Deferred income tax expense................. (1,255) 1,971 753 515 (206)
Tax benefit from stock option
transactions............................. 18 815 1,060 530 37
Changes in assets and liabilities:
Accounts receivable...................... (3,632) (5,915) (10,814) (9,488) (8,165)
Other assets............................. (430) (869) (1,736) 849 1,415
Accounts payable......................... 1,000 1,567 185 (633) 1,552
Accrued liabilities...................... 1,118 726 532 59 276
Deferred revenue......................... 848 580 1,205 908 (435)
Other liabilities........................ (279) -- -- 6 --
------- ------- -------- -------- --------
Net cash provided by (used in)
operating activities................ 734 3,829 885 (3,700) 1,298
------- ------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash purchased in business acquisition...... -- -- 559 559 --
Acquisitions of property and equipment...... (281) (3,101) (2,938) (1,105) (2,753)
------- ------- -------- -------- --------
Net cash used in investing
activities.......................... (281) (3,101) (2,379) (546) (2,753)
------- ------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt........................... (1,464) -- -- -- --
Borrowings from HNC Software Inc. .......... 1,950 5,467 41,747 19,322 28,656
Repayments to HNC Software Inc. ............ -- (5,173) (42,294) (15,592) (26,673)
------- ------- -------- -------- --------
Net cash provided by (used in) financing
activities............................... 486 294 (547) 3,730 1,983
------- ------- -------- -------- --------
Effect of exchange rate changes on cash....... (3) (12) (13) (30) (13)
------- ------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents................................. 936 1,010 (2,054) (546) 515
Cash and cash equivalents at beginning of
period...................................... 523 1,459 2,469 2,469 415
------- ------- -------- -------- --------
Cash and cash equivalents at end of period.... $ 1,459 $ 2,469 $ 415 $ 1,923 $ 930
======= ======= ======== ======== ========
SIGNIFICANT NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Assets purchased through issuance of debt... $ 4,710 $ -- $ -- $ -- $ --
======= ======= ======== ======== ========
Repayment of debt by HNC Software Inc....... $ 3,246 $ -- $ -- $ -- $ --
======= ======= ======== ======== ========
Net assets acquired through issuance of HNC
Software Inc. stock...................... $ -- $ -- $ 6,564 $ 5,088 $ --
======= ======= ======== ======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income taxes paid........................... $ -- $ 3 $ 67 $ 5 $ 146
======= ======= ======== ======== ========
</TABLE>

See accompanying notes to combined financial statements.
F-5
<PAGE> 93

RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

COMBINED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
AND COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETEK RETEK INFORMATION
LOGISTICS, INC. SYSTEMS, INC.
--------------- ------------------------- ACCUMULATED (ACCUMULATED
COMMON STOCK COMMON STOCK OTHER DEFICIT) TOTAL
--------------- --------------- PAID-IN COMPREHENSIVE RETAINED STOCKHOLDER'S
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) EARNINGS EQUITY
------ ------ ------ ------ ------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995........ -- $ -- -- $ -- $ $ $ (237) $ (237)
Tax benefit from stock options...... 18 18
Tax benefit from taxable pooling
(Note 4).......................... 18,397 18,397
Foreign currency translation
adjustment........................ 58 58
Net income.......................... 2,233 2,233
----- ------ --- ------ ------- ----- ------- -------
BALANCE AT DECEMBER 31, 1996........ -- -- -- 18,415 58 1,996 20,469
Tax benefit from stock options...... 815 815
Foreign currency translation
adjustment........................ (153) (153)
Net income.......................... 3,476 3,476
----- ------ --- ------ ------- ----- ------- -------
BALANCE AT DECEMBER 31, 1997........ -- -- -- 19,230 (95) 5,472 24,607
Acquisition of Retek Logistics, Inc.
by HNC Software Inc............... 2,238 6,564 6,564
Tax benefit from stock options...... 1,060 1,060
Foreign currency translation
adjustment........................ (93) (93)
Net income.......................... 3,878 3,878
----- ------ --- ------ ------- ----- ------- -------
BALANCE AT DECEMBER 31, 1998........ 2,238 6,564 -- -- 20,290 (188) 9,350 36,016
Tax benefit from stock options...... 37 37
Foreign currency translation
adjustment........................ (392) (392)
Net income.......................... 3,460 3,460
----- ------ --- ------ ------- ----- ------- -------
BALANCE AT JUNE 30, 1999............ 2,238 $6,564 -- $ -- $20,327 $(580) $12,810 $39,121
===== ====== === ====== ======= ===== ======= =======

COMPREHENSIVE
INCOME
-------------
<S> <C>
BALANCE AT DECEMBER 31, 1995........
Tax benefit from stock options......
Tax benefit from taxable pooling
(Note 4)..........................
Foreign currency translation
adjustment........................ $ 58
Net income.......................... 2,233
-------
BALANCE AT DECEMBER 31, 1996........ $ 2,291
=======
Tax benefit from stock options......
Foreign currency translation
adjustment........................ $ (153)
Net income.......................... 3,476
-------
BALANCE AT DECEMBER 31, 1997........ $ 3,323
=======
Acquisition of Retek Logistics, Inc.
by HNC Software Inc...............
Tax benefit from stock options......
Foreign currency translation
adjustment........................ $ (93)
Net income.......................... 3,878
-------
BALANCE AT DECEMBER 31, 1998........ $ 3,785
=======
Tax benefit from stock options......
Foreign currency translation
adjustment........................ $ (392)
Net income.......................... 3,460
-------
BALANCE AT JUNE 30, 1999............ $ 3,068
=======
</TABLE>

See accompanying notes to combined financial statements.
F-6
<PAGE> 94

RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

The Company

Retek Logistics, Inc. (formerly Practical Control Systems Technologies,
Inc.) and Retek Information Systems, Inc. (collectively referred to as the
"Company" or "Retek") are wholly owned subsidiaries of HNC Software Inc.
("HNC"). Retek Logistics, Inc. was acquired by HNC in March 1998 in a
transaction that was accounted for under the purchase method of accounting by
HNC. Retek Information Systems, Inc. was acquired by HNC in November 1996 in a
transaction that was accounted for under the pooling-of-interests method of
accounting by HNC. In April 1997, Neil Thall Associates, Inc. ("NTA"), formerly
a wholly owned subsidiary of HNC, which was formed in 1991, was merged with the
business of Retek Information Systems, Inc. Retek Logistics, Inc. and Retek
Information Systems, Inc. are headquartered in Minneapolis, Minnesota.

Retek Logistics, Inc. develops warehouse management software solutions.
Retek Information Systems, Inc., markets and supports management decision
software products for retailers and their vendors. These predictive software
solutions employ proprietary neural-network predictive decision engines,
profiles, traditional statistical modeling, business models, expert rules and
context vectors to convert existing data and business experiences into
meaningful recommendations and actions.

Basis of Presentation

The combined financial statements reflect the combined financial position,
results of operations and cash flows of the companies as if Retek Logistics, Inc
and Retek Information Systems, Inc. were combined. The combined financial
statements include the accounts of Retek Logistics, Inc. for the periods after
its acquisition by HNC in March 1998 and the accounts of Retek Information
Systems, Inc. for all periods presented. The combined financial statements also
include the financial position, results of operations and cash flows of NTA for
all periods presented. The financial statements have been prepared using HNC's
historical basis in the assets and liabilities and historical results of
operations of each of the entities which comprise the Company's business. All
significant intercompany transactions and balances have been eliminated.

General corporate overhead related to HNC's corporate headquarters and
common support divisions have been allocated to the Company based on the
proportion of the Company's revenues and headcount to HNC's consolidated
revenues and headcount. Management believes these allocations reasonably
approximate the costs incurred by HNC on behalf of the Company's operations and
the costs that would have been incurred if the Company had performed these
functions as a stand-alone entity. Subsequent to the sale of a minority interest
in the Company through a public offering, the Company expects to have its own
staff perform necessary functions using its own resources or purchased services
and will be responsible for the costs and expenses associated with the
management of a separate publicly held corporation.

The Company's financing activities are represented by cash transactions
with HNC and are reflected in the payable to HNC Software Inc. Activity in the
payable to HNC Software Inc. primarily relates to cash activity with HNC as well
as cost allocations and other intercompany charges to the Company from HNC.

The financial information included herein may not necessarily reflect the
combined results of operations, financial position, results of operations and
cash flows of the Company in the future or what it would have been had it been a
stand-alone separate entity from HNC during the periods presented.

F-7
<PAGE> 95
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following unaudited pro forma information presents the combined results
of operations of the Company as if the Retek Logistics, Inc. acquisition by HNC
had occurred on January 1, 1997 and 1998, and includes acquired in-process
research and development expense of $1,750 during each of the years ended
December 31, 1997 and 1998.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Total revenues.............................................. $36,009 $56,264
Total net income............................................ $ 1,105 $ 3,234
Pro forma basic and diluted net income per common share..... $ -- $ 1.45
</TABLE>

The above unaudited pro forma information is not necessarily indicative of
the combined results of operations that would have occurred had the purchase
been made at the beginning of the periods presented or the future results of the
combined operations.

Financial Statement Preparation

The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Cash Equivalents

Cash equivalents are highly liquid investments and consist of investments
in money market accounts and commercial paper purchased with maturities of three
months or less.

Property and Equipment

Property and equipment are recorded at cost. The Company recognizes
depreciation and amortization expense using the straight-line method over the
estimated useful lives of the assets of three to seven years. The Company
amortizes leasehold improvements over the shorter of their estimated useful
lives or the remaining term of the related lease. Repair and maintenance costs
are charged to expense as incurred. Depreciation and amortization expense of
property and equipment was $162, $569 and $1,268 for the years ended December
31, 1996, 1997 and 1998, respectively, and $547 and $1,006 for the six months
ended June 30, 1998 (unaudited) and June 30, 1999, respectively.

Capitalized Software

Development costs for software to be licensed or sold that are incurred
from the time technological feasibility is established until the product is
available for general release to customers are capitalized and reported at the
lower of cost or net realizable value. Through June 30, 1999, no significant
amounts were expended subsequent to reaching technological feasibility.

F-8
<PAGE> 96
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Intangible Assets

Retek Logistics, Inc. was acquired by HNC in exchange for 143 shares of HNC
common stock, 14 of which are subject to an escrow to secure certain
indemnification obligations of the former stockholders plus the contingent
right, subject to the achievement of certain financial objectives during
calendar 1998 and 1999, to receive certain additional shares of HNC common
stock. In April 1999, HNC issued an additional 45 shares of HNC common stock for
the achievement of these financial objectives during calendar 1998, which was
recorded as an addition to goodwill of $1,476 in the combined financial
statements in 1998. However, if such financial objectives are achieved by Retek
Logistics, Inc. during calendar year 1999 and additional shares of HNC common
stock are issued, such issuance will not be reflected in the financial
statements of the Company. HNC may issue additional shares in conjunction with
this contingent right for calendar 1999. The application of the purchase method
of accounting for the acquisition resulted in an excess of cost over net assets
acquired of approximately $6,564, of which $4,031 has been allocated to
intangible assets and $1,750 has been allocated to in-process research and
development.

In conjunction with the purchase, the Company recorded various intangible
assets. Intangible assets are comprised of purchased software and other rights
that are stated at lower of cost or net realizable value. Intangible assets are
amortized as follows:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE AMORTIZATION METHOD
------------- -------------------
<S> <C> <C>
Purchased software costs.................................. Straight-line 36 to 42 months
Assembled work force...................................... Straight-line 3 years
Customer base............................................. Straight-line 5 years
Trademarks................................................ Straight-line 5 years
Goodwill.................................................. Straight-line 5 years
</TABLE>

Amortization expense of intangible assets was $642, $809, and $1,152 for
the years ended December 31, 1996, 1997 and 1998, respectively, and $406 and
$866 for the six months ended June 30, 1998 (unaudited) and June 30, 1999,
respectively.

Long-Lived Assets

The Company investigates potential impairments of long-lived assets,
certain identifiable intangibles and associated goodwill when events or changes
in circumstances have made recovery of an asset's carrying value unlikely. An
impairment loss would be recognized if the sum of the expected future net cash
flows were less than the carrying amount of the asset. No such impairments of
long-lived assets existed through June 30, 1999.

Revenue Recognition

The Company recognizes software license revenue upon meeting each of the
following criteria: execution of a written purchase order, license agreement or
contract; delivery of software and authorization keys; the license fee is fixed
and determinable; collectibility of the proceeds is assessed as being probable;
and vendor specific objective evidence exists to allocate the total fee to
elements of the arrangement. Vendor-specific objective evidence is based on the
price charged when an element is sold separately, or if not yet sold separately,
is established by authorized management. All elements of each order are valued
at the time of revenue recognition. For sales made through distributors,
resellers and original equipment
F-9
<PAGE> 97
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

manufacturers, the Company recognizes revenue at the time these partners report
to the Company that they have sold the software to the end user and all revenue
recognition criteria have been met. Service revenue includes maintenance
revenue, which is deferred and recognized ratably over the maintenance period,
and revenue from consulting and training services, which is recognized as
services are performed. Consulting services are customarily billed at a fixed
daily rate plus out-of-pocket expenses.

The Company's revenue from contract development services is generally
recognized as the services are performed using the percentage of completion
method based on costs incurred to date compared to total estimated costs at
completion. Amounts received under contracts in advance of performance are
recorded as deferred revenue and are generally recognized within one year from
receipt. Contract losses are recorded as a charge to income in the period such
losses are first identified. Unbilled accounts receivable are stated at
estimated realizable value.

Deferred revenue consists primarily of deferred maintenance revenue.

During the first quarter of 1998, the Company adopted Statement of Position
No. 97-2 ("SOP 97-2"), "Software Revenue Recognition." SOP 97-2 provides
guidance for software revenue recognition. The adoption of SOP 97-2 did not have
a significant impact on the Company's combined financial position or results of
operations. During the second quarter of 1998, the Company adopted Statement of
Position No. 98-4 ("SOP 98-4"), "Deferral of the Effective Date of a Provision
of SOP 97-2, Software Revenue Recognition." This SOP defers for one year the
application of several passages in SOP 97-2. The adoption of SOP 98-4 did not
have a significant impact on the Company's combined financial position or
results of operations.

Income Taxes

The taxable income or loss of the Company is included in the consolidated
tax return of HNC. Income taxes are computed on a stand-alone basis under the
provisions of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." In accordance with HNC's policy, the current tax receivable or payable
is included in the amount due to or due from HNC. A deferred income tax asset or
liability is computed for the expected future impact of differences between the
financial reporting and tax bases of assets and liabilities as well as the
expected future tax benefit to be derived from tax loss and tax credit
carryforwards. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount "more likely than not" to be realized in
future tax returns. Tax rate changes are reflected in income during the period
such changes are enacted.

Foreign Currency Translation

The combined financial statements of the Company's international operations
are translated into U.S. dollars using period-end exchange rates for assets and
liabilities and average exchange rates during the period for revenues and
expenses. Cumulative translation gains and losses are excluded from the combined
results of operations and are recorded as a separate component of stockholder's
equity. Gains and losses resulting from foreign currency transactions
(transactions denominated in a currency other than the entity's local currency)
are included in the combined statement of income and are not material.

Diversification of Credit Risk

The Company's financial instruments that are subject to concentrations of
credit risk consist primarily of cash equivalents and accounts receivable, which
are generally not collateralized. The Company's policy

F-10
<PAGE> 98
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

is to place its cash and cash equivalents with high credit quality financial
institutions in order to limit the amount of its credit exposure. The Company's
software license and installation agreements and commercial development
contracts are primarily with large customers in the retail industries. The
Company maintains allowances for potential credit losses.

Disclosures about Fair Value of Financial Instruments

The carrying amounts of cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of the short-term
maturities of these financial instruments.

Comprehensive Income

During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 ("FAS 130"), "Reporting Comprehensive
Income." FAS 130 requires the Company to report in the combined financial
statements, in addition to net income, comprehensive income and its components
including foreign currency items and unrealized gains and losses on certain
investments in debt and equity securities. Comprehensive income is defined as
"the change in equity (net assets) of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources." It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners.

Segment Reporting

For the year ended December 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131 ("FAS 131"), "Disclosures about Segments
of an Enterprise and Related Information" (see Note 6). This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Under FAS 131, operating segments are to
be determined consistent with the way that management organizes and evaluates
financial information internally for making operating decisions and assessing
performance.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards No. 133 ("FAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. This statement
establishes a new model for accounting for derivatives and hedging activities.
Under FAS 133, all derivatives must be recognized as assets and liabilities and
measured at fair value. In July 1999, the FASB issued Statement of Accounting
Standards No. 137 "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133" which
defers the effective date to all fiscal quarters of fiscal years beginning after
June 15, 2000. The adoption of FAS 133 is not expected to have a significant
impact on the Company's combined financial position or results of operations.

F-11
<PAGE> 99
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

beginning after March 15, 1999. The adoption of SOP 98-9 is not expected to have
a significant impact on the Company's combined financial position or results of
operations.

Pro Forma Net Income Per Share (unaudited)

Pro forma net income per share (unaudited) is calculated based upon the
shares outstanding of Retek Logistics, Inc. at June 30, 1999 as if Retek
Information Systems, Inc. became a wholly owned subsidiary of Retek Logistics,
Inc. on January 1, 1998. Historical net income per share is not presented
because such amounts are not determinable due to the presentation of the
combined capital structures of two entities in these financial statements.

Interim Results (unaudited)

The accompanying combined statement of income and the related combined
statement of cash flows for the six months ended June 30, 1998 are unaudited. In
the opinion of management, these combined statements have been prepared on the
same basis as the audited combined financial statements included herein and
include all adjustments, consisting of only normal recurring adjustments,
necessary for the fair statement of results of the interim periods. The data
disclosed in these notes to combined financial statements for this period is
also unaudited.

NOTE 2 -- COMPOSITION OF CERTAIN COMBINED FINANCIAL STATEMENT CAPTIONS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Accounts receivable, net:
Billed.................................................... $ 9,167 $18,735 $28,559
Unbilled.................................................. 3,187 4,886 2,764
------- ------- -------
12,354 23,621 31,323
Less allowance for doubtful accounts........................ (382) (1,571) (2,977)
------- ------- -------
$11,972 $22,050 $28,346
======= ======= =======
</TABLE>

The following is a rollforward of the activity within the allowance for
doubtful accounts:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1996 1997 1998 1999
---- ----- ------ --------
<S> <C> <C> <C> <C>
Balance at beginning of period.......................... $ -- $ 299 $ 382 $1,571
Provisions.............................................. 309 212 1,652 1,491
Write-offs.............................................. (10) (129) (463) (85)
---- ----- ------ ------
Balance of end of period................................ $299 $ 382 $1,571 $2,977
==== ===== ====== ======
</TABLE>

F-12
<PAGE> 100
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Unbilled accounts receivable represent revenue recorded in excess of
amounts billable pursuant to contract provisions and generally become billable
at contractually specified dates or upon the attainment of milestones. Unbilled
amounts are expected to be collected within one year.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Other current assets:
Other receivables......................................... $ 864 $ 1,976 $ 803
Prepaid expenses.......................................... 136 484 573
VAT tax receivable........................................ 158 246 165
------- ------- -------
$ 1,158 $ 2,706 $ 1,541
======= ======= =======
Property and equipment, net:
Computer equipment........................................ $ 1,236 $ 3,093 $ 3,971
Furniture and fixtures.................................... 1,878 2,943 4,408
Leasehold improvements.................................... 532 749 1,134
------- ------- -------
3,646 6,785 9,513
Less accumulated depreciation and amortization.............. (640) (1,898) (2,879)
------- ------- -------
$ 3,006 $ 4,887 $ 6,634
======= ======= =======
Intangible assets, net:
Purchased software costs.................................. $ 2,472 $ 3,572 $ 3,572
Goodwill.................................................. 109 2,362 2,362
Other..................................................... -- 570 570
------- ------- -------
2,581 6,504 6,504
Less accumulated amortization............................... (1,451) (2,494) (3,361)
------- ------- -------
$ 1,130 $ 4,010 $ 3,143
======= ======= =======
Accrued liabilities:
Payroll and related benefits.............................. $ 1,842 $ 2,875 $ 3,144
Other..................................................... 298 95 102
------- ------- -------
$ 2,140 $ 2,970 $ 3,246
======= ======= =======
</TABLE>

NOTE 3 -- COMMITMENTS

At June 30, 1999, the Company was obligated through 2004 under
noncancelable operating leases for its facilities and certain equipment as
follows:

<TABLE>
<CAPTION>
NET FUTURE
FUTURE MINIMUM LESS SUBLEASE MINIMUM LEASE
LEASE PAYMENTS INCOME PAYMENTS
-------------- ------------- -------------
<S> <C> <C> <C>
1999........................................... $ 684 $540 $ 144
2000........................................... 1,188 -- 1,188
2001........................................... 996 -- 996
2002........................................... 982 -- 982
2003........................................... 742 -- 742
2004........................................... 475 -- 475
</TABLE>

F-13
<PAGE> 101
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The lease for the Company's headquarters provides for two options to extend
the term for five years each with certain changes to the terms of the lease
agreement. Rent expense under operating leases for the years ended December 31,
1996, 1997 and 1998 was approximately $132, $229 and $758, respectively, and for
the six months ended June 30, 1998 (unaudited) and June 30, 1999 was
approximately $307 and $527, respectively, net of sublease income of $0, $261,
and $886, for the years ended December 31, 1996, 1997 and 1998, respectively,
and $411 and $527 for the six months ended June 30, 1998 (unaudited) and June
30, 1999, respectively.

NOTE 4 -- INCOME TAXES

Income before income tax (benefit) provision was taxed under the following
jurisdictions:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Domestic................................ $(1,796) $5,631 $6,276 $1,593 $5,015
Foreign................................. 3,214 1,012 1,823 911 791
------- ------ ------ ------ ------
$ 1,418 $6,643 $8,099 $2,504 $5,806
======= ====== ====== ====== ======
</TABLE>

The income tax (benefit) provision is summarized as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CURRENT:
Federal............................... $ 389 $ 795 $2,258 $ 900 $1,669
State................................. -- 168 699 266 482
Foreign............................... 51 233 511 255 401
DEFERRED:
Federal............................... (743) 1,070 489 289 (62)
State................................. (215) 722 144 144 (10)
Foreign............................... (297) 179 120 82 (134)
------- ------ ------ ------ ------
$ (815) $3,167 $4,221 $1,936 $2,346
======= ====== ====== ====== ======
</TABLE>

F-14
<PAGE> 102
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Deferred tax assets are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------ --------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Taxable pooling-of-interests basis difference............... $17,085 $15,857 $15,243
Net operating loss carryforwards............................ 185 31 178
Tax credit carryforwards.................................... 786 344 344
Allowance for doubtful accounts............................. 142 631 1,179
Depreciation................................................ -- (175) (172)
Intangible assets........................................... -- (462) (462)
Bonus accrual............................................... -- 306 322
Commission advances......................................... -- 277 270
Other....................................................... (37) 123 236
------- ------- -------
Net deferred tax asset.................................... $18,161 $16,932 $17,138
======= ======= =======
</TABLE>

During 1996, the Company released its deferred tax asset valuation
allowance of $121 that existed at December 31, 1995 related to the Company's
deferred tax based on management's assessment that it was more likely than not
that the Company would realize those assets in future periods due to
improvements in its operating results.

During 1996, the Company made an Internal Revenue Code Section 338 election
for federal and state tax purposes, resulting in the treatment of the
acquisition of Retek Information Systems, Inc. by HNC as a taxable transaction,
whereby the tax bases of the acquired assets and liabilities were adjusted to
their fair values as of the date of the acquisition. As the purchase price
exceeded the carrying value of the net assets acquired by approximately $46,000,
the Company recorded a deferred tax asset in the amount of $18,397.

A reconciliation of the income tax (benefit) provision to the amount
computed by applying the statutory federal income tax rate to income before
income tax (benefit) provision is summarized as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------- -----------------
1996 1997 1998 1998 1999
----- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Amounts computed at statutory federal rate........ $ 482 $2,259 $2,754 $ 851 $1,974
State income taxes, net of federal benefit...... (142) 791 740 309 346
Tax credit carryforwards generated.............. (89) (116) (429) (251) (251)
Release of valuation allowance.................. (121)
Non-deductible acquired technology and other
non-deductible acquisition costs............. -- -- 1,004 906 176
Foreign income taxes............................ (950) 68 11 26 (3)
Other, net...................................... 5 165 141 94 104
----- ------ ------ ------ ------
Income tax provision (benefit).................... $(815) $3,167 $4,221 $1,935 $2,346
===== ====== ====== ====== ======
</TABLE>

The Company had foreign net operating loss carryforwards of approximately
$76 at December 31, 1998 and $445 at June 30, 1999. The Company also has
approximately $344 of foreign tax credit carryforwards.

F-15
<PAGE> 103
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 5 -- ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

In connection with the acquisition of Retek Logistics, Inc. by HNC,
acquired in-process research and development of $1,750 was charged to operations
on the acquisition date. The Company's products may be classified into two
categories: Nautilus, an off-the-shelf warehouse management software system
designed to provide the tools needed to control the course of warehouse
operations and Nautilus CBT, an operational tutorial database which guides the
user through Nautilus operations. The classification of the technology as
complete or under development was made in accordance with the guidelines of
Statement of Financial Accounting Standards No. 86, Statement of Financial
Accounting Standards No. 2 and Financial Accounting Standards Board
Interpretation No. 4. At the time of acquisition, Retek Logistics, Inc. had a
number of new software products under development including Nautilus Versions
6.0 and 7.0 and Nautilus CBT. Nautilus Version 6.0 and Nautilus CBT were both
completed during 1998 and Nautilus Version 7.0 was completed during 1999.

NOTE 6 -- SEGMENT INFORMATION

The Company operates in one reportable segment as defined in FAS 131. The
operations of the Company are primarily conducted in the United States, the
Company's country of domicile. Geographic data, determined by references to the
location of the Company's operations for the years ended December 31, 1996, 1997
and 1998 and for the six months ended June 30, 1998 (unaudited) and June 30,
1999 are as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ----------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue by geographic area:
United States...................... $ 7,717 $17,070 $29,183 $11,039 $20,196
Canada............................. 990 860 6,310 5,581 1,281
United Kingdom..................... 1,491 3,835 4,224 2,015 7,243
France............................. -- 3,358 1,546 293 762
Germany............................ -- -- 1,837 -- 4,322
South Africa....................... 2,628 2,476 2,706 781 933
Other.............................. 607 3,324 9,227 5,604 2,953
------- ------- ------- ------- -------
Total revenue................... $13,433 $30,923 $55,033 $25,313 $37,690
======= ======= ======= ======= =======
</TABLE>

The following is long-lived asset information by geographic area:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------- JUNE 30,
1996 1997 1998 1999
------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Long-lived assets by geographic area:
United States...................... $ 2,174 $ 3,850 $ 8,987 $ 9,673
Foreign............................ 114 286 193 137
------- ------- ------- -------
Total long-lived assets......... $ 2,288 $ 4,136 $ 9,180 $ 9,810
======= ======= ======= =======
</TABLE>

The Company's foreign sales represent revenues from export sales and
international operations. Export sales include sales from the United States to
foreign countries. Export sales were $394, $2,643 and $12,414

F-16
<PAGE> 104
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

for the years ended December 31, 1996, 1997 and 1998, respectively, and $8,654
and $6,131 for the six months ended June 30, 1998 (unaudited) and June 30, 1999,
respectively. International operations include sales by foreign operations.

NOTE 7 -- EMPLOYEE BENEFIT PLANS

During 1995, HNC adopted the 1995 Equity Incentive Plan (the "Incentive
Plan") and the 1995 Employee Stock Purchase Plan (the "Purchase Plan"). For
purposes of the discussion contained in the two paragraphs below, "fair market
value" means the closing price of HNC's common stock on the Nasdaq National
Market on the grant date.

The Incentive Plan provides for the issuance of up to 5,250 shares of HNC's
common stock in the form of nonqualified or incentive stock options, restricted
stock or stock bonuses to employees of HNC and its affiliates including Retek
Logistics, Inc. and Retek Information Systems, Inc. Nonqualified stock options
and restricted stock may be awarded at a price not less than 85% of the fair
market value of the stock at the date of the award. Incentive stock options must
be awarded at a price not less than 100% of the fair market value of the stock
at the date of the award. Options granted under the Incentive Plan may have a
term of up to ten years. The Company has the discretion to provide for
restrictions and the lapse thereof in respect of restricted stock awards.
Options typically vest at the rate of 25% of the total grant per year over a
four-year period; however, the Company may, at its discretion, implement a
different vesting schedule with respect to any new stock option grant. At
December 31, 1998, 217 shares were exercisable.

The Purchase Plan provides for the issuance of a maximum of 400 shares of
common stock to employees of HNC and its affiliates, including Retek Logistics,
Inc. and Retek Information Systems, Inc. Each purchase period, eligible
employees may designate between 2% and 10% of their cash compensation, subject
to certain limitations, to be deducted from their compensation for the purchase
of common stock under the Purchase Plan. The purchase price of the shares under
the Purchase Plan is equal to 85% of the lesser of the fair market value per
share on the first date of the twelve-month offering period or the last day of
each six-month purchase period. Approximately 31% of eligible employees have
participated in the Purchase Plan in the last three years.

During 1998, HNC adopted the 1998 Stock Option Plan ("1998 Plan"). The 1998
Plan provides for the issuance of up to 1,000 shares of HNC's common stock in
the form of nonqualified stock options to employees, officers, consultants and
independent advisors of HNC and its affiliates including Retek Logistics, Inc.
and Retek Information Systems, Inc. Options granted under the 1998 Plan may have
a term of up to ten years. Options typically vest at the rate of 25% of the
total grant per year over a four-year period; however, the Company may, at its
discretion, implement a different vesting schedule with respect to any new stock
option grant. At December 31, 1998, there were no shares exercisable under the
1998 Plan.

All Retek Information Systems, Inc. options, outstanding on the date of the
acquisition in 1996, were converted into options to purchase HNC's common stock
and adjusted to give effect to the acquisition exchange ratio. Retek Information
Systems, Inc. stock options are administered by HNC's Board of Directors. No
changes were made to the terms of the Retek Information Systems, Inc. options in
connection with the exchange. Those options granted vest ratably over periods
from one to four years and have a term of up to ten years. At December 31, 1998,
options to purchase 13 shares were exercisable.

F-17
<PAGE> 105
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Transactions relating to employees of the Company under HNC's stock option
and purchase plans during the years ended December 31, 1996, 1997 and 1998,
including options converted from the Retek Logistics, Inc. stock option plan,
are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1996 1997 1998
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year....... 249 $ 2.34 494 $21.19 981 $28.89
Options granted...................... 423 27.11 624 32.13 743 35.36
Options exercised.................... (115) 0.70 (71) 8.94 (108) 16.56
Options canceled..................... (63) 23.62 (66) 23.23 (238) 31.96
------ ------ ------
Outstanding at end of year............. 494 21.19 981 28.89 1,378 32.81
====== ====== ======
Options exercisable at end of year..... 34 93 233
Weighted average fair value of options
granted during the year.............. $19.69 $19.50 $21.50
</TABLE>

The following table summarizes information about employee stock options
relating to employees of the Company outstanding at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -------------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE OUTSTANDING AT AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1998 LIFE (IN YEARS) PRICE 1998 PRICE
--------------- -------------- --------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ 0.92 to $29.75...................... 283 8.01 $24.04 97 $23.08
30.13 to 31.25...................... 204 8.53 30.42 63 30.52
31.44 to 32.56...................... 222 9.14 32.04 5 31.73
32.63 to 35.81...................... 207 8.98 34.51 27 34.83
35.88 to 37.75...................... 218 9.17 37.43 12 37.28
37.88 to 41.38...................... 202 9.12 39.46 26 38.80
42.19 to 46.75...................... 42 9.25 43.33 3 45.25
----- ---
0.92 to 46.75...................... 1,378 8.80 32.81 233 29.40
===== ===
</TABLE>

The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock-based compensation. No compensation
expense has been recognized for its employee stock option grants, which are
fixed in nature, as the options have been granted at fair market value. No
compensation expense has been recognized for the Purchase Plan. Had compensation
cost for the Company's stock-based compensation awards issued during 1998 and
1997 been determined based on the fair value at the grant dates of awards
consistent with the method of Financial Accounting Standards

F-18
<PAGE> 106
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Board Statement No. 123 ("FAS 123"), the Company's net income and basic and
diluted pro forma net income per common share would have been reduced to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997 1998
------ ------ -------
<S> <C> <C> <C>
Net income (loss):
As reported............................................... $2,233 $3,476 $ 3,878
Pro forma................................................. 1,743 (893) (2,758)
Basic and diluted net income per common share:
As reported............................................... $ 1.73
Pro forma................................................. $ (1.23)
Diluted net income per common share:
As reported............................................... -- -- 1.73
Pro forma................................................. -- -- (1.46)
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumption used for grants during the years ended December 31, 1996, 1997 and
1998, respectively: dividend yield of 0.0% for all three years, risk-free
interest rates of 6.03%, 6.10% and 5.14%, expected volatilities of 70%, 65% and
65% (0% for options granted by Retek Information Systems, Inc. prior to its
acquisition by HNC), and expected lives of 3.5, 3.0 and 3.0 years. The fair
value of the employees' purchase rights pursuant to the Purchase Plan is
estimated using the Black-Scholes model with the following assumptions: dividend
yield of 0.0% for all three years, risk-free interest rates of 5.36%, 5.32% and
5.23%, expected volatilities of 70%, 65% and 65%, and an expected life of six
months for all three years. The weighted average fair value of those purchase
rights granted in 1996, 1997 and 1998 was $8.73, $14.23 and $16.32,
respectively.

NOTE 8 -- CONTINGENCIES

Various claims arising in the course of business, seeking monetary damages
and other relief are pending. The amount of the liability, if any, from such
claims cannot be determined with certainty; however, in the opinion of
management, the ultimate liability for such claims will not have a material
adverse effect on the Company's combined financial position, results of
operations or cash flows.

NOTE 9 -- RELATED PARTY TRANSACTIONS

As described in Note 1, the combined financial statements include
significant transactions with HNC for services such as treasury, cash
management, employee benefits, taxes, financial reporting, legal, corporate
marketing and general corporate services. HNC charged the Company $449, $348 and
$953 for such expenses during the years ended December 31, 1996, 1997, 1998,
respectively, and $854 and $1,057 for the six months ended June 30, 1998
(unaudited) and June 30, 1999, respectively. These charges were principally
included in sales and marketing expenses and general and administrative
expenses. Management believes these allocations approximate the costs that would
have been incurred had the Company performed these functions as a stand-alone
entity.

Beginning in 1998, the Company utilized research and development services
of HNC. HNC charged the Company $1,383 for such expenses during the year ended
December 31, 1998, and $600 and $68 for the six months ended June 30, 1998
(unaudited) and June 30, 1999, respectively. Management believes these
allocations approximate the costs that would have been incurred had the Company
performed these functions as a stand-alone entity.

F-19
<PAGE> 107
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Certain of the Company's employees participate in the HNC Purchase Plan.
Amounts included in the payable to HNC Software Inc. related to the Purchase
Plan were $38, $181 and $526 as of December 31, 1996, 1997 and 1998,
respectively, and $206 and $442 as of June 30, 1998 (unaudited) and June 30,
1999, respectively.

In conjunction with the acquisition of Retek Information Systems, Inc. in
1996, HNC repaid $3,246 of debt to a third party on Retek Information System
Inc.'s behalf.

Employees of the Company also participate in an HNC-sponsored 401(k) plan.
The Company matched employee contributions up to the lesser of 50% of the
employee contribution or eight hundred dollars. Contributions were $0, $60 and
$120 for the years ended December 31, 1996, 1997 and 1998, respectively, and $60
and $136 for the six months ended June 30, 1998 (unaudited) and June 30, 1999,
respectively.

HNC also provides a treasury service for affiliated companies, and cash
transferred between companies is recorded in the payable to HNC.

The amount payable to HNC Software Inc. includes allocations of expenses
for all corporate services, income taxes and other intercompany transactions,
plus cash advances net of repayments. The amount payable does not bear interest.
The average monthly balances due to HNC for the years ended December 31, 1996,
1997 and 1998 were $2,453, $5,370 and $6,728, respectively, and for the six
months ended June 30, 1998 (unaudited) and June 30, 1999 were $7,602 and $7,930,
respectively.

The change in the amounts payable to HNC include the following:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1997 1998 1998 1999
------ ------- -------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Borrowings from HNC for cost allocations....... $ 487 $ 529 $ 2,862 $ 1,760 $ 1,567
Borrowings from HNC for income taxes payable... 8 231 1,934 799 2,037
Borrowings from HNC for working capital........ 1,455 4,707 36,951 16,763 25,052
Repayments to HNC.............................. -- (5,173) (42,294) (15,592) (26,673)
Repayment of debt by HNC....................... 3,246 -- -- -- --
------ ------- -------- -------- -------
$5,196 $ 294 $ (547) $ 3,730 $ 1,983
====== ======= ======== ======== =======
</TABLE>

NOTE 10 -- SUBSEQUENT EVENTS

In September 1999, HNC approved an Agreement and Plan of Merger and
Reorganization whereby Retek Logistics, Inc. was merged with and into a newly
incorporated Delaware corporation, Retek Inc., which is the surviving
corporation. In conjunction with the merger, each share of Retek Logistics,
Inc.'s common stock were exchanged for approximately .000447 share of Retek
Inc.'s common stock.

In September 1999, HNC assigned to Retek Information Systems, Inc. its
rights and interests in, to and under an option agreement (Agreement) by and
between HNC and Webtrak Limited (Webtrak), a United Kingdom Company. Upon
assignment, the Agreement provides Retek Information Systems, Inc. with the
option to purchase either (i) all assets of Webtrak, or (ii) all the issued and
outstanding shares of Webtrak. The purchase price under the option is the
greater of $8.0 million or 2.7 times gross revenues, as defined, of Webtrak for
the twelve months preceding the exercise of the option. The purchase option is
exercisable by Retek Information Systems, Inc. during the period September 30,
1999 to December 31,

F-20
<PAGE> 108
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1999. Management intends to exercise this purchase option during the exercise
period, anticipates paying \$8.0 million for the purchase and does not
anticipate incurring significant costs in connection with the exercise.

NOTE 11 -- SUBSEQUENT EVENTS (UNAUDITED)

In October 1999, Retek Information Systems, Inc. provided notice to WebTrak
of its intent to exercise its option to purchase WebTrak.

F-21
<PAGE> 109

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
RETEK LOGISTICS, INC.

In our opinion, the accompanying balance sheet and the related statements of
operations, of cash flows and of changes in stockholders' equity and
comprehensive income present fairly, in all material respects, the financial
position of Retek Logistics, Inc. (formerly Practical Control Systems
Technologies, Inc.) at December 31, 1996 and 1997, and March 31, 1998, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1997, and the three months in the period ended March
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
September 9, 1999

F-22
<PAGE> 110

RETEK LOGISTICS, INC.

BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------- ---------
1996 1997 1998
------ ------ ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 388 $ 413 $ 559
Accounts receivable, net.................................. 560 1,061 997
Accounts receivable, affiliates........................... 14 -- --
Current portion of deferred income taxes.................. 9 13 13
Other current assets...................................... 2 47 37
------ ------ ------
Total current assets................................... 973 1,534 1,606
Property and equipment, net................................. 380 247 211
Software development costs, net............................. 1,211 1,181 1,232
Graphic design costs, net................................... 382 183 133
Other assets................................................ 33 55 58
------ ------ ------
$2,979 $3,200 $3,240
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 27 $ 79 $ 126
Accounts payable, affiliates.............................. 194 178 --
Accrued liabilities....................................... 249 250 352
Deferred revenue.......................................... 106 323 412
Notes payable............................................. 180 -- --
------ ------ ------
Total current liabilities.............................. 756 830 890
Deferred income taxes....................................... 457 493 514
Stockholders' equity:
Common stock, without par value -- 5,000,000 shares
authorized:
2,237,683 shares issued and outstanding................ 1 1 1
Paid-in capital........................................... 2,238 2,238 2,238
Retained earnings......................................... (410) (299) (340)
Treasury stock at cost, 144 shares........................ (63) (63) (63)
------ ------ ------
Total stockholders' equity............................. 1,766 1,877 1,836
------ ------ ------
$2,979 $3,200 $3,240
====== ====== ======
</TABLE>

See accompanying notes to financial statements.
F-23
<PAGE> 111

RETEK LOGISTICS, INC.

STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------- ---------------------
1996 1997 1997 1998
------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Licensing and other revenue........................ $5,108 $5,086 $ 957 $1,231
Operating expenses:
Cost of sales.................................... 1,662 1,880 297 431
Selling, general and administrative.............. 3,812 2,813 723 670
------ ------ ------ ------
Total operating expenses...................... 5,474 4,693 1,020 1,101
------ ------ ------ ------
(Loss) income from operations................. (366) 393 (63) 130
------ ------ ------ ------
Other income (expense), net........................ 129 (211) (1) (104)
Interest expense................................... 49 10 -- --
------ ------ ------ ------
(Loss) income before income taxes............. (286) 172 (64) 26
------ ------ ------ ------
Income tax expense (benefit)....................... 448 61 (24) 67
------ ------ ------ ------
Net (loss) income............................. $ (734) $ 111 $ (40) $ (41)
====== ====== ====== ======
</TABLE>

See accompanying notes to financial statements.
F-24
<PAGE> 112

RETEK LOGISTICS, INC.

STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------- --------------------
1996 1997 1997 1998
------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income.................................... $ (734) $ 111 $ (40) $ (41)
Adjustments to reconcile net (loss) income to net
cash provided (used in) by operating activities:
Depreciation and amortization........................ 509 634 153 155
Loss on disposition of property and equipment........ -- 38 -- --
Increase in bad debts provision...................... -- 15 -- --
Deferred income taxes................................ 448 31 (23) 21
Changes in operating assets and liabilities:
Accounts receivable, trade........................ 85 (516) 59 64
Accounts receivable, affiliates................... 12 14 -- --
Other assets...................................... 107 (57) (163) (113)
Accounts payable.................................. (100) 53 105 47
Accounts payable, affiliates...................... 156 (16) (194) (178)
Unearned revenue.................................. (92) 216 (10) 89
Accrued expenses.................................. 42 1 (214) 102
------ ------ ------ ------
Net cash provided by (used in) operating
activities................................... 433 524 (327) 146
------ ------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Software development costs........................... (309) (236) -- --
Acquisition of non-compete agreement and related
assets............................................ -- (61) -- --
Purchase of property and equipment................... (73) (32) (2) --
Proceeds from sale of property and equipment......... -- 10 -- --
------ ------ ------ ------
Net cash used in investing activities........... (382) (319) (2) --
------ ------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit....................................... (923) -- 185 --
Payments on debt..................................... (43) -- -- --
Payments on note payable, affiliate.................. (16) (180) (48) --
Distributions to stockholders........................ (125) -- -- --
Issuance of common stock............................. 1,303 -- -- --
------ ------ ------ ------
Net cash provided by (used in) financing
activities................................... 196 (180) 137 --
------ ------ ------ ------
Net increase in cash................................... 247 25 (192) 146
Cash balance, beginning of year........................ 141 388 388 413
------ ------ ------ ------
Cash balance, end of year.............................. $ 388 $ 413 $ 196 $ 559
====== ====== ====== ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest............... $ 49 $ 9 $ 3 $ --
====== ====== ====== ======
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Note payable to affiliate for purchase of equipment,
furniture and fixtures............................ $ 196 $ -- $ -- $ --
====== ====== ====== ======
Distribution of rental property to stockholders...... $ 115 $ -- $ -- $ --
====== ====== ====== ======
</TABLE>

See accompanying notes to financial statements.
F-25
<PAGE> 113

RETEK LOGISTICS, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
(ACCUMULATED
COMMON STOCK DEFICIT) TOTAL
--------------- PAID-IN TREASURY RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK EARNINGS EQUITY
------ ------ ------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995............................... 375 $ 1 $ 262 $(63) $1,237 $1,437
Issuance of common stock, net of issuance costs............ 1,863 1,303 1,303
Distributions to stockholders.............................. (240) (240)
PCS contribution to capital................................ 673 (673) --
Net and comprehensive loss................................. (734) (734)
----- ------ ------ ---- ------ ------
BALANCE AT DECEMBER 31, 1996............................... 2,238 1 2,238 (63) (410) 1,766
Net and comprehensive income............................... 111 111
----- ------ ------ ---- ------ ------
BALANCE AT DECEMBER 31, 1997............................... 2,238 1 2,238 (63) (299) 1,877
Net and comprehensive income............................... (41) (41)
----- ------ ------ ---- ------ ------
BALANCE AT MARCH 31, 1998.................................. 2,238 $ 1 $2,238 $(63) $ (340) $1,836
===== ====== ====== ==== ====== ======
</TABLE>

See accompanying notes to financial statements.
F-26
<PAGE> 114

RETEK LOGISTICS, INC.

NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

The Company

Retek Logistics, Inc. (formerly Practical Control Systems Technologies,
Inc.), an Ohio corporation (the "Company"), is a supplier of fully integrated
distribution center management software products that address the distribution
needs of the retail, wholesale and manufacturing industries.

In March 1998, the Company's stockholders approved an agreement between the
Company and HNC Software Inc. ("HNC") pursuant to which the Company's
stockholders exchanged all issued and outstanding capital stock of the Company
for HNC stock.

Use of Estimates

The preparation of the financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Income Taxes

On June 1, 1996, the Company terminated its S Corporation status and
recognized deferred tax assets and liabilities based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the years in which the differences are expected to
reverse. The Company's current income tax expense is the amount of income taxes
expected to be payable for the current year. A deferred income tax asset or
liability is computed for the expected future impact of differences between the
financial reporting and tax bases of assets and liabilities as well as the
expected future tax benefit to be derived from tax loss and tax credit
carryforwards. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount "more likely than not" to be realized in
future tax returns. Tax rate changes are reflected in income during the period
such changes are enacted.

Revenue Recognition

On certain systems development contracts, the percentage of completion
method is used to recognize the revenues. The Company measures a contract's
progress based on actual costs incurred to date compared to total estimated
contract costs. A contract is considered complete once formal acceptance from a
customer has been obtained. Because the percentage of completion method requires
estimates of costs to complete contracts, it is possible that estimated costs to
complete contracts will be revised in the near term. Revenues from software
maintenance agreements are deferred and are recognized over the maintenance
period. Software licensing revenues are recognized when delivery of the software
occurs if the Company does not have to provide additional significant service
under the contract. All other revenues are recognized when the services are
performed.

Included in accounts receivable are unbilled accounts receivable, which
represent revenue recognized in excess of amounts billed. From time to time,
depending upon billing terms, cash may be received in advance of the performance
of services or providing systems. When this occurs, these amounts are recorded
as unearned revenue.

F-27
<PAGE> 115
RETEK LOGISTICS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Cash Equivalents

The Company considers its investments with an original maturity of three
months or less to be cash equivalents. The Company invests excess funds in
reverse repurchase agreements for U.S. government securities. At December 31,
1996 and 1997, respectively, the Company had purchased $537 and $455 of U.S.
government securities under agreements to resell. Generally, the maturity date
of the Company's reverse repurchase agreements is the next day of business. Due
to the short-term nature of the agreements, the Company does not take possession
of the securities, which are instead held at the Company's principal bank from
which it purchases the securities. The carrying value of the agreements
approximates fair market value because of the short maturity of the investments
and the Company believes that it is not exposed to any significant risk on its
investments in reverse repurchase agreements.

Software Development Costs

Costs incurred internally in creating computer software products are
charged to expense until technological feasibility of the software has been
established. Thereafter, all software production costs are capitalized.
Capitalization of computer software costs is discontinued when the product is
available for sale to customers. The costs capitalized include the direct labor
costs of those involved with the software development effort, their supervision
and indirect costs of overhead relating to those employees, the facilities they
occupy and equipment they utilize.

The ultimate realization of these costs requires considerable judgment from
management related to the estimated useful life and anticipated future sales.
Computer software costs are amortized by the straight-line method over the
estimated useful life of the products developed, which is five years.
Amortization expense related to software development costs was $234 and $265 for
the years ended December 31, 1996 and 1997, and $64 and $69 for the three months
ended March 31, 1997 (unaudited) and March 31, 1998, respectively.

Graphic Design Costs

Costs associated with the production of graphic design applications include
computer programs to assist in the sale of the Company's product. These costs
have been capitalized and are being amortized by the straight-line method over
the asset's estimated useful life of three years. Amortization of graphic design
costs was $200 and $199 for the years ended December 31, 1996 and 1997 and $50
for both the three months ended March 31, 1997 (unaudited) and March 31, 1998.

Property and Equipment

Property and equipment are recorded at cost. The Company computes
depreciation using the straight-line method over the estimated useful lives of
the assets of three to seven years. The Company amortizes leasehold improvements
over the shorter of their estimated useful lives or the remaining term of the
related lease. Repair and maintenance costs are charged to expense as incurred.
In 1996, rental property with a net book value of $115 was distributed to the
principal stockholders in a non-cash distribution. Depreciation expense was $75
and $169 for the years ended December 31, 1996 and 1997, respectively, and $41
and $35 for the three months ended March 31, 1997 (unaudited) and March 31,
1998, respectively.

F-28
<PAGE> 116
RETEK LOGISTICS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Long-Lived Assets

Diversification of Credit Risk

The Company had approximately 45% and 42% of its sales for the years ended
December 31, 1996 and 1997, respectively, and 49% and 29% for the three months
ended March 31, 1997 (unaudited) and March 31, 1998, respectively, to
international customers in South America, Africa, and Asia. The same five
customers comprised 81% of revenues for the years ended December 31, 1996 and
1997 and 87% and 91% of the revenues for the three months ended March 31, 1997
(unaudited) and March 31, 1998.

Disclosures about Fair Value of Financial Instruments

The carrying amounts of cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of the short-term
maturities of these financial instruments.

Comprehensive Income

During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("FAS
130"). FAS 130 requires the Company to report in the financial statements, in
addition to net income, comprehensive income and its components including
foreign currency items and unrealized gains and losses on certain investments in
debt and equity securities. Comprehensive income is defined as "the change in
equity (net assets) of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources." It includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133") which is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. This statement establishes a new
model for accounting for derivatives and hedging activities. Under FAS 133, all
derivatives must be recognized as assets and liabilities and measured at fair
value. In July 1999, the FASB issued Statement of Accounting Standard No. 137
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133" ("FAS 137") which defers the effective
date to all fiscal quarters of fiscal years beginning after June 15, 2000. The
adoption of FAS 133 is not expected to have a significant impact on the
Company's financial position or results of operations.

F-29
<PAGE> 117
RETEK LOGISTICS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

beginning after March 15, 1999. The adoption of SOP 98-9 is not expected to have
a significant impact on the Company's financial position or results of
operations.

Interim Results (unaudited)

The accompanying statement of operations and the related statements of cash
flows for the three months ended March 31, 1997 are unaudited. In the opinion of
management, these statements have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting of only normal
recurring adjustments, necessary for the fair statement of results of the
interim periods. The data disclosed in these notes to financial statements for
this period is also unaudited.

NOTE 2 -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1996 1997 1998
------ ------ ---------
<S> <C> <C> <C>
Accounts receivable, net
Billed.................................................... $ 577 $1,090 $ 743
Unbilled.................................................. 1 4 296
------ ------ ------
578 1,094 1,039
Less allowance for doubtful accounts........................ (18) (33) (42)
------ ------ ------
$ 560 $1,061 $ 997
====== ====== ======
Property and equipment, net
Equipment................................................. $ 264 $ 308 $ 307
Furniture and fixtures.................................... 29 28 28
Leasehold improvements.................................... 105 77 77
Purchased software........................................ 121 122 122
------ ------ ------
519 535 534
Less accumulated depreciation and amortization.............. (139) (288) (323)
------ ------ ------
$ 380 $ 247 $ 211
====== ====== ======
Software development costs, net
Software development costs................................ $1,445 $1,680 $1,800
Less accumulated amortization............................. (234) (499) (568)
------ ------ ------
$1,211 $1,181 $1,232
====== ====== ======
Graphic design costs, net
Software development costs................................ $ 598 $ 598 $ 598
Less accumulated amortization............................. (216) (415) (465)
------ ------ ------
$ 382 $ 183 $ 133
====== ====== ======
</TABLE>

NOTE 3 -- RELATED PARTY TRANSACTIONS

During 1996 and 1997, one of the principal stockholders of the Company had
a majority stock ownership in Professional Contract Systems Technical Services,
Inc. ("Technical Services"), a provider of contract engineering services. Also
during 1996 and 1997, another principal stockholder of the Company had a
majority stock ownership in PCS Computers, Inc. ("Computers"), a company engaged
in the design

F-30
<PAGE> 118
RETEK LOGISTICS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

and sale of specialized computer systems and electrical components for
industrial computer applications. In October 1997, one of the principal
stockholders sold his interest in the Company to the other principal stockholder
and, subsequently, in November 1997, terminated his employment with the Company.

Operating expenses include the following amounts from related parties:

<TABLE>
<CAPTION>
FOR THE YEAR
ENDING FOR THE THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------- ---------------------
1996 1997 1997 1998
---- ------ ------------ -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Technical services.................................... $146 $ 483 $43 $ 83
Computers............................................. 679 541 10 315
---- ------ --- ----
Total............................................... $825 $1,024 $53 $398
==== ====== === ====
</TABLE>

The Company leases office space from a company owned by one the Company's
previous principal stockholders under an agreement expiring December 31, 2002.
Rent expense related to this agreement for the years ended December 31, 1996 and
1997 was $259 and $252, respectively, and for the three months ended March 31,
1997 (unaudited) and March 31, 1998 was $66 and $51, respectively. At March 31,
1998, the Company was obligated under non-cancelable operating leases for its
facilities as follows:

The Company purchased equipment, furniture and fixtures in 1996 for
consideration equal to an 8.25% note payable to Technical Services in the amount
of $196. Monthly principal and interest payments were paid through November
1997. The note was repaid during 1997. The equipment, furniture and fixtures had
previously been leased from Technical Services. Rent expense in 1996 includes
$109 related to the lease.

NOTE 4 -- LINE OF CREDIT

In 1996, the Company negotiated a line of credit agreement with a bank that
was collateralized by substantially all corporate assets and was payable on
demand. The line of credit allowed borrowings of up to $500,000 with an interest
rate equal to the bank's prime rate. No outstanding borrowings existed at
December 31, 1996, 1997 or at March 31, 1998.

F-31
<PAGE> 119
RETEK LOGISTICS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 5 -- INCOME TAXES

Prior to June 1, 1996 the Company was taxed as an S Corporation. Income tax
expense for 1996 includes a net deferred tax liability of $512 recorded in
connection with the termination of the Company's S Corporation status. Income
tax expense for the years-ended December 31, 1996 and 1997 and the three months
ended March 31, 1997 (unaudited) and March 31, 1998 is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------ -------------------
1996 1997 1997 1998
---- ---- ----------- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Current.................................................. $ -- $30 $ -- $45
Deferred................................................. 448 31 (24) 22
---- --- ---- ---
$448 $61 $(24) $67
==== === ==== ===
</TABLE>

The components of the Company's net deferred tax liability are as follows:

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------- --------------------
1996 1997 1997 1998
----- ----- ----------- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................. $ 64 $ -- $ 40 $ --
Accounts receivable............................... 7 12 12 17
State taxes
Other............................................. 2 1 6 2
----- ----- ----- -----
Gross deferred tax assets...................... 73 13 58 19
Deferred tax liabilities:
Capitalized software.............................. (514) (478) (467) (501)
Property and equipment............................ (7) (15) (15) (13)
Other............................................. (6)
----- ----- ----- -----
Gross deferred tax liability................... (521) (493) (482) (520)
----- ----- ----- -----
Net deferred tax liability................... $(448) $(480) $(424) $(501)
===== ===== ===== =====
</TABLE>

F-32
<PAGE> 120
RETEK LOGISTICS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

A reconciliation of the income tax provision (benefit) to the amount
computed by applying the statutory federal income tax rate to income before
income tax provision (benefit) is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------ -------------------
1996 1997 1997 1998
---- ---- ----------- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Amounts computed at statutory federal rate.................. $(97) $59 $(22) $ 9
State income taxes, net of federal benefit................ 47 13 (2) 27
Tax credit carryforwards generated........................ (7)
Non-deductible purchased technology and other
non-deductible acquisition costs....................... 37
S-corp termination deferred balances...................... 501
Other, net................................................ (3) (11) 1
---- --- ---- ---
Income tax provision (benefit).............................. $448 $61 $(24) $67
==== === ==== ===
</TABLE>

NOTE 6 -- PROFIT SHARING PLANS

The Company has a Sec. 401(k) profit sharing plan covering all eligible
employees who desire to participate in the plan. Company matching contributions
are based on a percentage of the employees' contributions. Company matching
contributions were $14 and $12 during the years ended December 31, 1996, 1997,
and $0 for both the three months ended March 31, 1997 (unaudited) and March 31,
1998. Additionally, the Company may, at its option, contribute a portion of
annual profits to the plan. The Company did not make such a contribution during
the years ended December 31, 1996, 1997 or the three months ended March 31,
1998.

NOTE 7 -- SUBSEQUENT EVENTS

On March 24, 1998, the Company's stockholders approved an agreement between
the Company and HNC pursuant to which the Company's stockholders would exchange
all issued and outstanding capital stock of the Company for HNC stock.

On March 31, 1998, the Company's stockholders received 143 shares of HNC
common stock in exchange for all of the issued and outstanding shares of the
Company.

F-33
<PAGE> 121

RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)

On March 31, 1998, HNC Software Inc. ("HNC") completed its acquisition of
Retek Logistics, Inc. in a transaction accounted for under the purchase method
of accounting by HNC. Under the purchase method, the aggregate purchase price is
required to be allocated to the tangible and identifiable intangible assets
acquired and liabilities assumed on the basis of their fair values on the
acquisition date. The pro forma unaudited combined statement of income is based
on the audited combined statement of income of Retek Logistics, Inc. and Retek
Information Systems, Inc. for the year ended December 31, 1998, which includes
the accounts of Retek Logistics, Inc. for the period from March 31, 1998 through
December 31, 1998, and the audited financial statements for Retek Logistics,
Inc. for the period from January 1, 1998 through March 31, 1998. Adjustments
have been made to such information to give effect to the acquisition of Retek
Logistics, Inc. as if the acquisition had occurred on January 1, 1998.

The information has been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission and is provided for
comparative purposes only. The pro forma information does not purport to be
indicative of the results that actually would have occurred had the acquisition
been effected at the beginning of the period presented.

F-34
<PAGE> 122

RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

PRO FORMA COMBINED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
---------------------
COMBINED THREE MONTHS YEAR ENDED
RETEK LOGISTICS, INC. ENDED MARCH 31, DECEMBER 31,
AND 1998 1998
RETEK INFORMATION --------------------- PRO FORMA ------------
SYSTEMS, INC. RETEK LOGISTICS, INC. ADJUSTMENTS PRO FORMA
--------------------- --------------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue.................................... $55,033 $1,231 $ -- $56,264
Cost of revenue............................ 13,852 431 -- 14,283
------- ------ ----- -------
Gross profit............................... 41,181 800 -- 41,981
Operating expenses:
Research and development................. 12,918 -- -- 12,918
Selling, general and administrative...... 17,996 670 -- 18,666
Acquisition related amortization of
intangible............................. 429 -- 603(A) 1,032
Acquired in-process research and
development............................ 1,750 -- -- 1,750
------- ------ ----- -------
Total operating expenses............... 33,093 670 603 34,366
------- ------ ----- -------
Operating income........................... 8,088 130 (603) 7,615
Other income (expense), net................ 11 (104) -- (93)
------- ------ ----- -------
Income before income tax provision......... 8,099 26 (603) 7,522
Income tax provision....................... 4,221 67 -- 4,288
------- ------ ----- -------
Net income (loss).......................... $ 3,878 $ (41) $(603) $ 3,239
======= ====== ===== =======
Pro forma unaudited basic and diluted net
income per common share (Note 3)......... $ 1.73 $ 1.45
======= =======
Pro forma unaudited weighted average
shares -- basic and diluted (Note 3)..... 2,238 2,238
======= =======
</TABLE>

(A) See Note 4 to Pro Forma Combined Statement of Income

See accompanying notes to pro forma combined statement of income.
F-35
<PAGE> 123

RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME
(IN THOUSANDS)
(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION

In March 1998 HNC acquired Retek Logistics, Inc. (formerly Practical
Control Technologies, Inc.) which develops warehouse management software
solutions.

The pro forma unaudited combined statement of income presented is not
necessarily indicative of the future combined operating results of Retek
Logistics, Inc. and Retek Information Systems, Inc. (the "Company") or the
combined operating results that would have resulted had the acquisition taken
place on January 1, 1998. The unaudited pro forma combined statement of income
for the year ended December 31, 1998 reflects the effects of the acquisition,
assuming the acquisition occurred on January 1, 1998.

NOTE 2--PURCHASE PRICE ALLOCATION:

The unaudited pro forma combined financial statements reflect a total
purchase price of $6,564 consisting of the initial purchase price of $5,088 and
the additional consideration of $1,476 paid by HNC related to the achievement of
financial objectives by Retek Logistics, Inc. in 1998. HNC has a contingent
obligation to issue additional shares of HNC common stock upon the achievement
of certain financial objectives during 1999. This additional consideration will
not be reflected in the Company's financial position or results of operations in
the future.

The Company's allocation of Retek Logistics, Inc.'s aggregate purchase
price to the tangible and identifiable intangible assets acquired in connection
with this acquisition was based on fair values as determined by independent
appraisers. The allocation is summarized below:

<TABLE>
<S> <C>
Goodwill.................................................... $2,360
Acquired in-process research and development................ 1,750
Purchased software costs.................................... 1,100
Customer base............................................... 300
Assembled work force........................................ 200
Trademarks.................................................. 70
Net assets.................................................. 784
------
Total purchase price................................... $6,564
======
</TABLE>

The goodwill, customer base and trademarks are being amortized on a
straight-line basis over the estimated period of benefit of five years. The
purchased software costs is being amortized on a straight-line basis over the
estimated period of benefit of thirty-six to forty-two months. The assembled
work force is being amortized on a straight-line basis over the estimated period
of benefit of two years.

NOTE 3--PRO FORMA UNAUDITED COMBINED NET INCOME PER SHARE

Pro forma unaudited net income per share is calculated based upon the
outstanding shares of Retek Logistics, Inc. of 2,238 at December 31, 1998, as if
Retek Information Systems, Inc. became a wholly-owned subsidiary of Retek
Logistics, Inc. on January 1, 1998.

F-36
<PAGE> 124
NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME -- (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)

NOTE 4--PURCHASE ADJUSTMENTS:

The following adjustment was applied to the combined financial statements
of Retek Logistics, Inc. and Retek Information Systems, Inc. and the financial
statements of Retek Logistics, Inc. to arrive at the pro forma combined
statement of operations:

(A) To record annual amortization of goodwill and other identifiable
intangible assets that is being amortized over the estimated period of
benefit of three to five years.

This adjustment is calculated as follows:

<TABLE>
<CAPTION>
HISTORICAL AMORTIZATION ANNUAL
COST PERIOD AMORTIZATION
---------- ------------ ------------
<S> <C> <C> <C>
Purchased software costs................................ $1,100 3 years $ 367
Assembled workforce..................................... 200 3 years 67
Customer base........................................... 300 5 years 60
Trademark............................................... 70 5 years 14
Goodwill................................................ 2,361 4 - 5 years 524
------ ------
$4,031 1,032
======
Amortization recognized for the year ended December 31, 429
1998..................................................
------
Adjustment to reflect acquisition as of January 1, $ 603
1998..................................................
------
</TABLE>

F-37
<PAGE> 125
[Inside Back Cover]

[The following text center justified appears at the top of the page:]

Retek knows retail

[Five images, each representative of a different segment of the retail market,
are arranged in a vertical column down the middle of the page. Centered below
each image is a one or two word description of the retail market segment
represented by that image. From top to bottom, the following words appear below
these images:]

fashion, grocery, specialty, mass merchandise, department store

[Outside Back Cover]

[The Company's logo appears at the center of the page with the word "Retek"
directly underneath.]
<PAGE> 126

RETEKLOGO
<PAGE> 127

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale and distribution of the common stock being registered. All amounts
are estimated, except the Securities and Exchange Commission Registration Fee,
the NASD Filing Fee and the Nasdaq National Market Filing Fee:

<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- ----------
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 25,896
NASD Filing Fee............................................. 9,815
Nasdaq National Market Filing Fee........................... 15,000
Blue Sky Fees and Expenses.................................. 0
Accounting Fees and Expenses................................ 650,000
Legal Fees and Expenses..................................... 750,000
Transfer Agent and Registrar Fees........................... 20,000
Printing and Engraving...................................... 225,000
Miscellaneous............................................... 50,000
----------
Total..................................................... $1,745,711
==========
</TABLE>

- -------------------------

* To be provided by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer or director of such corporation or is or was
serving at the request of such corporation as a director, officer, employer or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such officer or director acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, in the case of criminal proceedings, had
no reasonable cause to believe his or her conduct was illegal. A Delaware
corporation may indemnify officers and directors against expenses (including
attorneys' fees) in connection with the defense or settlement of an action by or
in the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against expenses
which such officer or director actually and reasonably incurred. The Certificate
of Incorporation of the Registrant provides for indemnification of the officers
and directors of the Registrant to the full extent permitted by applicable law.

In accordance with Delaware law, the Certificate of Incorporation of the
Registrant contains, and the Amended and Restated Certificate of Incorporation
of the Registrant will contain, a provision to limit the personal liability of
directors of the Registrant for violations of their fiduciary duty. This
provision eliminates each director's liability to the Registrant or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Registrant or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law,

II-1
<PAGE> 128

(iii) under Section 174 of the DGCL, providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions or (iv)
for any transaction from which a director derived an improper personal benefit.
The effect of this provision is to eliminate the personal liability of directors
for monetary damages for actions involving a breach of their fiduciary duty of
care, including any such actions involving gross negligence.

Pursuant to the underwriting agreement between the Registrant and the
underwriters filed as an exhibit to this Registration Statement, the
underwriters, a party thereto, have agreed to indemnify each officer and
director of the Registrant and each person, if any, who controls the Registrant
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), against certain liabilities, including liabilities under the Securities
Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In connection with the incorporation in Delaware of Retek Inc., the
Registrant issued shares of its common stock to HNC Software Inc. The
Registrant believes that this issuance was exempt from registration under
Section 4(2) of the Securities Act as a transaction not involving any public
offering.

In addition, in connection with the exercise of the option to purchase all
of the issued and outstanding capital stock of WebTrak Limited, a company
organized under the laws of England, the Registrant issued notes, payable in
cash, and a note, payable in cash or, at the election of the holder thereof, in
shares of the Registrant's common stock. The Registrant believes that this
issuance was exempt from registration under Regulation S of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
2.1* Agreement and Plan of Merger and Reorganization between
Retek Logistics, Inc. and Registrant.
2.2* Form of Separation Agreement.
2.3* Form of Licensing Agreement.
2.4** Form of Tax Sharing Agreement.
2.5* Form of Services Agreement.
2.6* Form of Corporate Rights Agreement.
3.1* Certificate of Incorporation of the Registrant.
3.2 Certificate of Amendment to the Certificate of Incorporation
of the Registrant.
3.3* Bylaws of the Registrant.
3.4** Form of Amended and Restated Certificate of Incorporation of
the Registrant as in effect immediately prior to the closing
of this offering.
3.5** Form of Amended and Restated Bylaws of the Registrant as in
effect immediately prior to the closing of this offering.
4.1 Specimen Common Stock Certificate.
5.1 Opinion of Shearman & Sterling.
10.1*+ Industry Solutions Initiative Master Agreement between
Oracle Corporation and Retek Information Systems, Inc.
</TABLE>

II-2
<PAGE> 129

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
10.2* Employment Agreement of John Buchanan.
10.3 Assignment of Option Agreement relating to Webtrak Limited
between HNC Software Inc. and Retek Information Systems,
Inc.
10.4* Option Agreement between HNC Software Inc., Webtrak Limited
and the shareholders of Webtrak Limited.
10.5 Retek 1999 Equity Incentive Plan.
10.6 Retek 1999 Employee Stock Purchase Plan.
10.7 Retek 1999 Director Stock Option Plan.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Shearman & Sterling (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1* Financial Data Schedule.
27.2* Financial Data Schedule.
27.3* Financial Data Schedule.
27.4* Financial Data Schedule.
</TABLE>

- -------------------------
* Filed previously.
** To be filed by amendment.

+ The Registrant applied for confidential treatment of portions of this
Exhibit. Accordingly, portions thereof have been omitted and filed
separately.

(B) FINANCIAL STATEMENT SCHEDULES

ITEM 17. UNDERTAKINGS

(a) The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item
14 or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.

(1) for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant
to

II-3
<PAGE> 130

Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it
was declared effective; and

(2) for purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein and this offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.

II-4
<PAGE> 131

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 20 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota, on October 20, 1999.

RETEK INC.
*
By:
--------------------------------------

Name: John Buchanan
Title: Chairman, Chief Executive
Officer
and Director

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman, Chief Executive Officer October 20, 1999
- --------------------------------------------- and Director (Principal Executive
John Buchanan Officer)

/s/ GREG EFFERTZ Vice President, Finance and October 20, 1999
- --------------------------------------------- Administration, Chief Financial
Gregory A. Effertz Officer, Treasurer, Secretary and
Director (Principal Financial and
Accounting Officer)

*By /s/ GREG EFFERTZ
---------------------------------------
Gregory A. Effertz
Attorney-in-fact
</TABLE>

<PAGE> 132

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.

2.1* Agreement and Plan of Merger and Reorganization between
Retek Logistics, Inc. and Registrant.
2.2* Form of Separation Agreement.
2.3* Form of Licensing Agreement.
2.4** Form of Tax Sharing Agreement.
2.5* Form of Services Agreement.
2.6* Form of Corporate Rights Agreement.
3.1* Certificate of Incorporation of the Registrant.
3.2 Certificate of Amendment to the Certificate of Incorporation
of the Registrant.
3.3* Bylaws of the Registrant.
3.4** Form of Amended and Restated Certificate of Incorporation of
the Registrant as in effect immediately prior to the closing
of this offering.
3.5** Form of Amended and Restated Bylaws of the Registrant as in
effect immediately prior to the closing of this offering.
4.1 Specimen Common Stock Certificate.
5.1 Opinion of Shearman & Sterling.
10.1*+ Industry Solutions Initiative Master Agreement between
Oracle Corporation and Retek Information Systems, Inc.
10.2* Employment Agreement of John Buchanan.
10.3 Assignment of Option Agreement relating to Webtrak Limited
between HNC Software Inc. and Retek Information Systems,
Inc.
10.4* Option Agreement between HNC Software Inc., Webtrak Limited
and the shareholders of Webtrak Limited.
10.5 Retek 1999 Equity Incentive Plan.
10.6 Retek 1999 Employee Stock Purchase Plan.
10.7 Retek 1999 Director Stock Option Plan.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Shearman & Sterling (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1* Financial Data Schedule.
27.2* Financial Data Schedule.
27.3* Financial Data Schedule.
27.4* Financial Data Schedule.
</TABLE>

- -------------------------

* Filed previously.

** To be filed by amendment.

+ The Registrant applied for confidential treatment of portions of this
Exhibit. Accordingly, portions thereof have been omitted and filed
separately.

<PAGE> 1
EXHIBIT 3.2

CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
RETEK INC.

RETEK INC., a Delaware corporation, HEREBY CERTIFIES AS FOLLOWS:

1. The name of the corporation is Retek Inc. (the "Corporation"). The
date of filing of its original Certificate of Incorporation with the Secretary
of State of the State of Delaware was August 30, 1999 and a Certificate of
Correction was filed on September 2, 1999.

2. This Certificate of Amendment sets forth an amendment to the
Certificate of Incorporation of the Corporation which was duly adopted by the
written consent of the sole stockholder of the Corporation entitled to vote
thereon in accordance with the provisions of Section 242 and 228 of the General
Corporation Law of the State of Delaware.

3. Article IV of the Certificate of Incorporation is hereby amended in
full to be and read as follows:

"ARTICLE IV

Capital Stock

The total number of shares of all classes of capital stock that the
Corporation shall have the authority to issue is 155,000,000 shares, of which
(i) 150,000,000 shares shall be common stock, par value $0.01 per share ("Common
Stock"), and (ii) 5,000,000 shares shall be preferred stock, par value $0.01 per
share ("Preferred Stock")."

IN WITNESS WHEREOF, Retek Inc. has caused this certificate to be signed by
John Buchanan, its Chairman of the Board of Directors and Chief Executive
Officer, and attested by Gregory A. Effertz, its Secretary, this 18th day of
October, 1999.

RETEK INC.

By: /s/ JOHN BUCHANAN
----------------------------------------
Name: John Buchanan
Title: Chairman of the Board of Directors and
Chief Executive Officer

ATTEST:

/s/ GREGORY A. EFFERTZ
- ----------------------------
Name: Gregory A. Effertz
Title: Secretary

<PAGE> 1
EXHIBIT 4.1

[FRONT SIDE OF STOCK CERTIFICATE]

COMMON STOCK COMMON STOCK

NUMBER SHARES

RETEK INC.

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFIES THAT CUSIP

SEE REVERSE FOR
CERTAIN DEFINITIONS

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK PAR VALUE OF $0.001
SHARE OF

RETEK INC. (hereinafter called the Corporation), transferable on the books of
the Corporation by the holder hereof in person or by duly authorized attorney,
upon surrender of this Certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held subject to all of the
provisions of the Certificate of Incorporation and By-laws of the Corporation
and of amendments from time to time made thereto (copies of which are on file
with the Transfer Agent), to all of which the holder, by acceptance hereof,
assents. This certificate is not valid until countersigned by the Transfer Agent
and registered by the Registrar.

Witness the seal facsimile of the Corporation and the facsimile signatures of
its duly authorized Officers.

Dated: COUNTERSIGNED AND REGISTERED:
CHASE MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT
AND REGISTRAR

By
-----------------------

Authorized Signature
SECRETARY PRESIDENT

[CORPORATE SEAL] -------------------------------

[REVERSE SIDE OF STOCK CERTIFICATE]

RETEK INC.

The Corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof of the Corporation and the qualifications, limitations or
restrictions of such preferences and/or rights. Such request may be made to the
Secretary of the Corporation.

The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
-------------------------
(Cust) (Minor)
under Uniform Gifts to
Minors Act
---------------
(State)
TEN ENT - as tenants by the entireties

UT TEN - as joint tenants with the right
of survivorship and not as
tenants in common

Additional abbreviations may also be used though not in the above list.
<PAGE> 2

For Value Received, _________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________
____________________________________
____________________________________

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

__________________________________________________
__________________________________________________
__________________________________________________
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________ Attorney to transfer the said shares on
the books of the within-named Corporation with full power of substitution in
the premises.

________________
Dated

Notice: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

SIGNATURE GUARANTEED:
_________________________

<PAGE> 1
EXHIBIT 5.1

[SHEARMAN & STERLING LETTERHEAD]

October 8, 1999

Retek Inc.
Midwest Plaza
801 Nicollet Mall
11th Floor
Minneapolis, MN
55402

Dear Sirs:

We are acting as counsel for Retek Inc. (the "Company") in connection with
the Registration Statement on Form S-1, as amended (Registration Statement No.
333-86841) (the "Registration Statement"), filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, (the
"Securities Act") relating to the offering, as set forth in the prospectus
contained in the Registration Statement (the "Prospectus"), of the Company's
shares of common stock, $0.01 par value per share (the "Shares"). The Shares
are to be sold by the Company pursuant to the terms of an underwriting
agreement (the "Underwriting Agreement") between the Company and the
underwriters named therein.

We have examined originals, or copies certified or otherwise identified to
our satisfaction, of such documents and corporate and public records as we have
deemed necessary as a basis for the opinion hereinafter expressed. In our
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents presented to us as originals and the conformity to
the originals of all documents presented to us as copies. In rendering our
opinion, we have relied as to factual matters upon certificates of officers of
the Company and certificates of public officials.

Our opinion expressed herein is limited to the Federal law of the United
States, the law of the State of New York and the General Corporation Law of the
State of Delaware.

Based on the foregoing and having regard for such legal considerations as
we deem relevant, we are of the opinion that, when issued and delivered in
accordance with the terms of the Underwriting Agreement, the Shares will be
legally issued, fully paid and non-assessable.

<PAGE> 2
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" contained in the Prospectus which is included in the Registration
Statement. In giving this consent, we do not thereby concede that we come within
the category of persons whose consent is required by the Securities Act or the
rules and regulations promulgated thereunder.

Very truly yours,

/s/ SHEARMAN & STERLING

<PAGE> 1
Exhibit 10.3

ASSIGNMENT OF OPTION AGREEMENT

This Assignment of Option Agreement is made and entered into effective as
of September 9, 1999 (the "EFFECTIVE DATE") between HNC Software Inc., a
Delaware corporation ("HNC") and Retek Information Systems, Inc., a Delaware
corporation ("RETEK").

R E C I T A L S

A. HNC, Webtrak Limited, a United Kingdom company ("WEBTRAK") and
shareholders of Webtrak have entered into a certain Option Agreement dated as
of January 11, 1999 (the "OPTION AGREEMENT").

B. Pursuant to the Option Agreement, Webtrak and the Webtrak
shareholders who are parties thereto granted HNC an option to purchase either
(i) all assets owned by Webtrak or (ii) all the issued and outstanding shares
of Webtrak stock not owned by HNC and certain other options, warrants and
securities of Webtrak not owned by HNC.

C. Retek and HNC contemplate that their businesses will be separated
pursuant to the terms of a Separation Agreement that the parties expect to
enter into in connection with the initial public offering of Retek's common
stock.

D. Section 7.2 of the Option Agreement provides that HNC may assign all
or any portion of its rights or interests in the Option Agreement to any
subsidiary or affiliate of HNC. Retek is currently a wholly-owned subsidiary of
HNC and an affiliate of HNC, and the parties desire that HNC assign to Retek
HNC's rights, interests, duties and obligations under the Option Agreement and
that Retek accept and assume such rights interests, duties and obligations.

AGREEMENT

NOW THEREFORE, in consideration of the facts recited above and the mutual
promises made therein, the parties hereby agree as follows:

1. ASSIGNMENT. HNC hereby assigns to Retek all of HNC's rights and
interests in, to and under the Option Agreement pursuant to the provisions of
Section 7.2 of the Option Agreement, with such assignment to be effective as of
the Effective Date of this Assignment Agreement, in consideration of Retek's
agreements set forth herein.

2. ASSUMPTION; INDEMNITY. In consideration of the foregoing assignment by
HNC, Retek hereby agrees to accept the foregoing assignment of all HNC's rights,
interests, obligations and duties in, to and under the Option Agreement on an
"as is" basis, and Retek hereby agrees to assume all of HNC's duties and
obligations under the Option Agreement. Retek further hereby agrees to indemnify
and hold HNC harmless from and against any and all claims, suits, demands,
actions, proceedings, losses, liabilities, damages, costs and/or expenses
(including without limitation reasonable attorneys' fees) arising out of or
relating in any way to (i) the Option Agreement, (ii) the exercise or attempted
exercise by Retek of any rights or interests under the Option Agreement or (iii)
the performance or non-performance by Retek of any of the duties and obligations
of HNC under the Option Agreement that are hereby being assigned to and assumed
by Retek hereunder provided, however, that notwithstanding the foregoing, Retek
will not be

<PAGE> 2
obligated to indemnify HNC for any material breach of the Option Agreement by
HNC that occurred prior to the Effective Date if such breach did not involve
any act or omission of Retek Information Systems, Inc., a Delaware corporation.

3. GOVERNING LAW. This Assignment Agreement shall be governed by and
construed in accordance with the internal laws of the State of California as
such laws are applied to contracts made and entered into within the State of
California by residents of such California, without regard to any laws or rules
regarding of conflict of laws or choice of laws. Any disputes regarding this
Agreement shall be resolved in California or U.S. federal courts in the County
of San Diego, San Diego, California.

4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts and will be deemed executed when each party hereto signs and
delivers to the other counterpart signature page to this agreement.

/s/ R.V. Thomas /s/ Gregory A. Effertz
- ------------------------------- ------------------------------
HNC Software Inc. Retek Information Systems, Inc.

<PAGE> 1

EXHIBIT 10.5

RETEK INC.

1999 EQUITY INCENTIVE PLAN

1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company and its Subsidiaries
and Affiliates by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.

2. SHARES AVAILABLE UNDER THE PLAN.

2.1 Number of Shares Available. Subject to Sections 2.2, 2.3 and
18, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 9,000,000 Shares, plus an annual increase to be
added on January 1 of each year, beginning January 1, 2001, equal to the lesser
of:

(a) 4% of the total number of Shares outstanding as of such
January 1;

(b) 2,000,000 Shares; or

Shares issued under this Plan may be either authorized but unissued shares,
treasury shares or any combination thereof.

2.2 Shares Returned to Plan. Subject to Sections 2.3 and 18,
Shares that: (a) are subject to issuance upon exercise of an Option or SAR but
cease to be subject to such Option or SAR for any reason other than exercise of
such Option or SAR, (b) are subject to an Award granted hereunder but are
forfeited, repurchased by the Company at the original issue price or used to pay
the exercise price or withholding taxes with respect to an Award, or (c) are
subject to an Award that otherwise terminates without Shares being issued; will
again be available for grant and issuance in connection with future Awards under
this Plan. At all times the Company shall reserve and keep available a
sufficient number of Shares as shall be required to satisfy the requirements of
all outstanding Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.

2.3 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable

<PAGE> 2

securities laws; provided, however, that fractions of a Share will not be issued
but will either be replaced by a cash payment equal to the Fair Market Value of
such fraction of a Share or will be rounded up to the nearest whole Share, as
determined by the Committee.

3. ELIGIBILITY. ISOs (as defined in Section 5) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Subsidiary of the Company. All other Awards may be granted
to employees, officers, directors, consultants, independent contractors and
advisors of the Company or any Parent, Subsidiary or Affiliate of the Company;
provided that such consultants, contractors and advisors render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. No person will be eligible to receive grants of
Awards covering more than 2,000,000 Shares in any calendar year under this Plan
pursuant to the grant of Awards hereunder. A person may be granted more than one
type of Award under this Plan.

4. ADMINISTRATION.

4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:

(a) construe and interpret this Plan, any Award Agreement and
any other agreement or document executed pursuant to this Plan;

(b) prescribe, amend and rescind rules and regulations relating
to this Plan;

(d) determine the form and terms of Awards;

(e) determine the number of Shares or other consideration
subject to Awards;

(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or compensation plan of the
Company or any Subsidiary or Affiliate of the Company;

(g) grant waivers of Plan or Award conditions;

(h) determine the vesting, exercisability and payment of Awards;

(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;

(j) determine whether an Award has been earned;

<PAGE> 3

(k) vary the terms of Awards to take account of tax law,
securities law and other regulatory requirements of foreign jurisdictions;

(l) subject to the provisions of the Plan and such additional
limitations and restrictions as the Committee may impose, delegate to one or
more officers of the Company some or all of its authority under the Plan;
provided that no delegation of the authority to make grants of Awards to
Insiders may be made; and

(m) make all other determinations and to formulate such
procedures as may be necessary or advisable for the administration of this Plan.

4.2 Committee Discretion. Any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.

5. OPTIONS. The Committee may grant Options to eligible persons
and will determine whether such Options will be incentive stock options within
the meaning of Section 422 of the Code ("ISOs") or Nonqualified Stock Options
("NQSOs"), the number of Shares subject to the Option, the Exercise Price of the
Option, the period during which the Option may be exercised, and all other terms
and conditions of the Option, subject to the following:

5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO (the "Stock Option Agreement"), and will be in such form
and contain such provisions (which need not be the same for each Participant) as
the Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.

5.3 Exercise Period. Options will be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further, that no ISO granted to a person who directly
or by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company (a "Ten Percent Stockholder") will be exercisable after the
expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for the exercise of Options to become

<PAGE> 4

exercisable at one time or from time to time, periodically or otherwise, in such
number of Shares or percentage of Shares as the Committee determines.

5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will not be less than 100% of the Fair Market
Value of the Shares on the date of grant, and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.

5.5 Method of Exercise. Unless otherwise determined by the
Committee, Options may be exercised only by delivery to the Company of a written
stock option exercise agreement (the "Exercise Agreement") in a form approved by
the Committee (which need not be the same for each Participant), stating the
number of Shares being purchased, the restrictions imposed on the Shares
purchased under such Exercise Agreement, if any, and such representations and
agreements regarding Participant's investment intent and access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with payment in full of the
Exercise Price for the number of Shares being purchased.

5.6 Termination. Notwithstanding the exercise periods set forth
in the Stock Option Agreement, exercise of an Option will always be subject to
the following:

(a) If a Participant is Terminated for any reason except death
or Disability, then the Participant may exercise such Participant's Options only
to the extent that such Options would have been exercisable upon the Termination
Date no later than three (3) months after the Termination Date (or such shorter
or longer time period not exceeding five (5) years as may be determined by the
Committee, with any Option exercised beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no later than the
expiration date of the Options.

(b) If a Participant is Terminated because of death or
Disability (or such Participant dies within three (3) months after a Termination
other than because of Participant's death or Disability), then such
Participant's Options may be exercised only to the extent that such Options
would have been exercisable on the Termination Date and must be exercised by
such Participant (or by such Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination Date (or such
shorter or longer time period not exceeding five (5) years as may be determined
by the Committee, with any such Option exercised beyond (i) three (3) months
after the Termination Date when the Termination is for any reason other than
death or Disability, or (ii) twelve (12) months after the Termination Date when
the Termination is for death or Disability, deemed to be an NQSO), but in any
event no later than the expiration date of the Options.

<PAGE> 5

(c) Notwithstanding the provisions in paragraph 5.6(a) above, if
a Participant is terminated for Cause, neither the Participant, the
Participant's estate nor any other person who may then hold the Option shall be
entitled to exercise such Option with respect to any Shares whatsoever after
termination of service, whether or not the Participant may be entitled to
receive payment for vacation pay, services rendered prior to termination,
services rendered for the day on which termination occurs, for salary in lieu of
notice, or for any other benefits. For the purpose of this Section 5.6(c),
termination of service shall be deemed to occur on the date when the Company
dispatches notice or advice to the Participant that his service is terminated
for Cause.

5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.

5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) will not exceed $100,000. If the
Fair Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the adoption of this Plan to provide for a different limit on the Fair
Market Value of Shares permitted to be subject to ISOs, such different limit
will be automatically incorporated herein and will apply to any Options granted
after the effective date of such amendment.

5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.

5.10 No Disqualification. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

<PAGE> 6

6. STOCK APPRECIATION RIGHTS.

6.1 General. An SAR shall entitle a Participant to receive, upon
satisfaction of the conditions specified in the applicable Award Agreement, an
amount equal to the excess, if any, of the Fair Market Value on the exercise
date of the number of Shares for which the SAR is exercised over the exercise
price for such specified in the applicable Award Agreement. The exercise price
per Share covered by an SAR shall be fixed by the Committee at the time of grant
or, alternatively, shall be determined by a method specified by the Committee at
the time of grant; provided, however, that except as provided in Section 6.2
below, the exercise price per Share shall be no less than 85% of the Fair Market
Value per Share on the date of grant (or if the exercise price is not fixed on
the date of grant, then on such date as the exercise price is fixed). At the
sole discretion of the Committee, payments to a Participant upon exercise of an
SAR may be made in cash, in Shares having an aggregate Fair Market Value as of
the date of exercise equal to such amount, or in a combination of a cash and
Shares having an aggregate value as of the date of exercise equal to such
amount. An SAR may be granted alone or in addition to other awards, or in tandem
with an Option.

6.2 Stock Appreciation Rights in Tandem with Options. An SAR
granted in tandem with an Option may be granted either at the same time as such
Option or subsequent thereto. If granted in tandem with an Option, an SAR shall
cover the same number of Shares as covered by the Option (or such lesser number
of Shares as the Committee may determine) and shall be exercisable only at such
time or times and to the extent the related Option shall be exercisable, and
shall have the same term and exercise price as the related Option (which, in the
case of an SAR granted after the grant of the related Option, may be less than
the Fair Market Value per share on the date of grant of the tandem SAR). Upon
exercise of an SAR granted in tandem with an Option, the related Option shall be
canceled automatically to the extent of the number of Shares covered by such
exercise. Conversely, if the related Option is exercised as to some or all of
the Shares covered by the tandem grant, the tandem SAR shall be canceled
automatically to the extent of the number of Shares covered by the Option
exercise.

<PAGE> 7

7. RESTRICTED STOCK AND STOCK BONUSES.

7.1 Restricted Stock.

(a) General. An Award of Restricted Stock shall consist of a
grant of one or more Shares to a Participant for no consideration other than the
provision of services or may be offered for sale to a Participant at a purchase
price determined by the Committee, subject to the terms and conditions
established by the Committee in connection with the Award as set forth in the
applicable Award Agreement. Such Shares shall be subject to such restrictions on
transfer or other incidents of ownership for such periods of time, and shall be
subject to such conditions of vesting, as the Committee may determine and as
shall be set forth in the Award Agreement relating to such stock. If Shares are
offered for sale under the Plan, the purchase price shall be payable in cash,
or, in the sole discretion of the Committee and to the extent provided in any
applicable Award Agreement, in Shares already owned by the Participant, or other
consideration acceptable to the Committee or in any combination of cash, Shares
or such other consideration.

(b) Share Certificates; Rights and Privileges. At the time
Restricted Stock is granted or sold to a Participant, share certificates
representing the appropriate number of shares of Restricted Stock shall be
registered in the name of the Participant but shall be held by the Company in
custody for the account of such person. The Company may take whatever actions it
determines necessary to restrict the transferability of the unvested Restricted
Stock, including providing that the certificates bear a legend restricting their
transferability. Except for such restrictions on transfer or other incidents of
ownership as may be determined by the Committee and set forth in the Award
Agreement relating to an award or sale of Restricted Stock, a Participant shall
have the rights of a stockholder as to such Restricted Stock, including the
right to receive dividends and the right to vote in accordance with the
Company's certificate of incorporation.

(c) Distributions. Any Shares or other securities of the Company
received by a Participant to whom Restricted Stock has been granted or sold as a
result of a stock distribution or stock dividend shall be subject to the same
terms, conditions and restrictions as such Restricted Stock.

7.2 Stock Bonuses.

(a) Awards of Stock Bonuses. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent, Subsidiary or
Affiliate of the Company (provided that the Participant pays the Company the par
value of the Shares awarded by such Stock Bonus in cash) pursuant to an Award
Agreement (the "Stock Bonus Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. A Stock Bonus may be awarded upon satisfaction of such performance goals
as are set out in advance in

<PAGE> 8

the Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent, Subsidiary or Affiliate
and/or individual performance factors or upon such other criteria as the
Committee may determine.

(b) Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the Participant and whether such Shares will
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee will (a) determine the nature, length and starting date of any
Performance Period for each Stock Bonus, (b) select from among the Performance
Factors to be used to measure the performance, if any, and (c) determine the
number of Shares that may be awarded to the Participant. Prior to the payment of
any Stock Bonus, the Committee shall determine the extent to which such Stock
Bonus has been earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Stock Bonuses that are subject to
different Performance Periods and different performance goals and other
criteria. The number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
impact of extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.

(c) Form of Payment. The earned portion of a Stock Bonus may be
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of cash,
whole Shares, including Restricted Stock, or a combination thereof, either in a
lump sum payment or in installments, all as the Committee will determine.

(d) Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee will
determine otherwise.

8. PAYMENT FOR SHARE PURCHASES.

8.1 Payment. Payment for Shares purchased pursuant to this Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:

(a) by cancellation of indebtedness of the Company to the
Participant;

<PAGE> 9

(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid with respect to such
shares); or (2) were obtained by Participant in the public market;

(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and 1274 of the
Code; provided, however, that Participants who are not employees or directors of
the Company will not be entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral other than the Shares;
provided, further, that the portion of the Purchase Price equal to the par value
of the Shares, if any, must be paid in cash;

(d) by waiver of compensation due or accrued to the Participant
for services rendered; provided, however, that the portion of the Purchase Price
equal to the par value of the Shares, if any, must be paid in cash;

(e) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock exists:

(i) through a "same day sale" commitment from the Participant
and a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of the
Shares so purchased to pay for the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or

(ii) through a "margin" commitment from the Participant and a
NASD Dealer whereby the Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer in a
margin account as security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise Price directly to
the Company; or

(f) by any combination of the foregoing.

8.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.

9. WITHHOLDING TAXES.

9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the

<PAGE> 10

Company an amount sufficient to satisfy federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be
made in cash, such payment will be net of an amount sufficient to satisfy
federal, state and local withholding tax requirements.

9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Participant may satisfy
the minimum withholding tax obligation by directing the Company to withhold from
the Shares to be issued that number of Shares having a Fair Market Value equal
to the minimum amount required to be withheld, determined on the date that the
amount of tax to be withheld is to be determined.

10. PRIVILEGES OF STOCK OWNERSHIP.

10.1 Voting and Dividends. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's original Purchase Price pursuant to Section
12.

10.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, that the Company will not
be required to provide such financial statements to Participants whose services
in connection with the Company assure them access to equivalent information.

11. TRANSFERABILITY. Awards granted under this Plan, and any
interest therein, will not be transferable or assignable by Participant, and may
not be made subject to execution, attachment or similar process, otherwise than
by will or by the laws of descent and distribution or as determined by the
Committee and set forth in the Award Agreement with respect to Awards that are
not ISOs. During the lifetime of the Participant an Award will be exercisable
only by the Participant, and any elections with respect to an Award may be made
only by the Participant, unless otherwise determined by the Committee and set
forth in the Award Agreement with respect to Awards that are not ISOs.

12. RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
(a) a right of first

<PAGE> 11

refusal to purchase all Shares that a Participant (or a subsequent transferee)
may propose to transfer to a third party, and/or (b) a right to repurchase a
portion of or all Shares held by a Participant following such Participant's
Termination at any time within ninety (90) days after the later of Participant's
Termination Date and the date Participant purchases Shares under this Plan, for
cash and/or cancellation of purchase money indebtedness, at the Participant's
Exercise Price or Purchase Price, as the case may be.

13. CERTIFICATES. All certificates for Shares or other
securities delivered under this Plan will be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or foreign
securities law, or any rules, regulations and other requirements of the SEC or
any stock exchange or automated quotation system upon which the Shares may be
listed or quoted.

14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.

15. EXCHANGE AND BUYOUT OF AWARDS; DEFERRAL. The Committee may,
at any time or from time to time, authorize the Company, with the consent of the
respective Participants, to issue new Awards in exchange for the surrender and
cancellation of any or all outstanding Awards. The Committee may at any time buy
from a Participant an Award previously granted with payment in cash, Shares
(including Restricted Stock) or other consideration, based on such terms and
conditions as the Committee and the Participant may agree. If permitted under
the terms of any applicable Award Agreement, any Award, including an Option, may
be settled on a deferred basis, subject to such rules and procedures as may be
implemented by the Committee from time to time.

16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award
will not be effective unless such Award is in compliance with all applicable
federal and state securities laws, rules and regulations of any governmental
body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed or quoted, as

<PAGE> 12

they are in effect on the date of grant of the Award and also on the date of
exercise or other issuance. Notwithstanding any other provision in this Plan,
the Company will have no obligation to issue or deliver certificates for Shares
under this Plan prior to (a) obtaining any approvals from governmental agencies
that the Company determines are necessary or advisable and/or (b) completion of
any registration or other qualification of such Shares under any state or
federal law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any
inability or failure to do so.

17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Participant's employment or other relationship at any
time, with or without cause.

18. CORPORATE TRANSACTIONS.

18.1 Assumption or Replacement of Awards by Successor.

(a) Change in Control. In the event of a Change in Control, any
or all outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement will be
binding on all Participants. In the alternative, the successor corporation may
substitute equivalent Awards or provide substantially similar consideration to
Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant.

(b) If Awards Not Assumed. In the event such successor
corporation (if any) refuses to assume or substitute Awards, as provided above,
pursuant to a transaction described in this subsection 18.1, such Awards will
expire on such transaction at such time and on such conditions as the Committee
will determine. Notwithstanding anything in this Plan to the contrary, the
Committee may, in its sole discretion, provide that the vesting of any or all
Awards granted pursuant to this Plan will accelerate upon a transaction
described in this Section 18. If the Committee exercises such discretion with
respect to Options or SARs, such Options or SARs will become exercisable in full
prior to the consummation of such event at such time and on such conditions as
the Committee determines, and if such Options are not exercised prior to the
consummation of the corporate transaction, they shall terminate at such time as
determined by the Committee.

(c) Termination of Employment Following Change in Control. In
the event of a Participant's Termination other than for Cause within twenty-four
(24) months after a Change

<PAGE> 13

in Control, (i) all of such Participant's Options and SARs will become
immediately exercisable, (ii) all restrictions and conditions of Awards of
Restricted Stock and Stock Bonuses held by such Participant shall lapse and
(iii) all performance criteria applicable to any Award shall be deemed to be
fully achieved.

18.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."

18.3 Assumption of Awards by the Company. The Company, from time
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under this Plan in substitution of
such other company's award or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

19. STOCKHOLDER APPROVAL. This Plan shall be approved by the
stockholders of the Company (excluding Shares issued pursuant to this Plan),
consistent with applicable laws, within twelve (12) months before or after the
date this Plan is adopted by the Board.

20. TERM OF PLAN. Unless earlier terminated as provided herein,
this Plan will terminate ten (10) years from the date this Plan is adopted by
the Board or, if earlier, ten (10) years from the date of stockholder approval.

21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.

22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this
Plan by the Board, the submission of this Plan to the stockholders of the
Company for approval, nor any provision of this Plan will be construed as
creating any limitations on the power of the Board to adopt such additional
compensation arrangements as it may deem desirable, including, without
limitation, the granting of stock options and bonuses otherwise than under this
Plan, and such

<PAGE> 14

arrangements may be either generally applicable or applicable only in specific
cases.

23. DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:

"Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.

"Award" means any award under this Plan, including any Option,
SAR, Restricted Stock or Stock Bonus.

"Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.

"Board" means the Board of Directors of the Company.

"Cause" means (i) the commission of any act of theft,
embezzlement, fraud, dishonesty or a breach of fiduciary duty to the Company or
any Affiliate, as determined in the sole discretion of the Committee, or (ii)
the conviction or plea of no contest to a felony.

"Change in Control" means:

(a) a dissolution or liquidation of the Company;

(b) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial
change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted
or replaced by the successor corporation, which assumption will be
binding on all Participants);

(c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company (other than any
stockholder which merges (or which owns or controls another corporation
which merges) with the Company in such merger) cease to own their shares
or other equity interests in the Company;

(d) the sale of all or substantially all of the assets of the
Company; or

(e) the acquisition, sale or transfer of more than 50% of the
outstanding Shares by tender offer or similar transaction.

<PAGE> 15

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee" means the Compensation Committee of the Board.

"Company" means Retek Inc., a corporation organized under the
laws of the State of Delaware, or any successor corporation.

"Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee. For purposes of ISOs,
"Disability" means a disability within the meaning of Section 22(e)(3) of the
Code, as determined by the Committee.

"Exchange Act" means the Securities Exchange Act of 1934, as
amended.

"Exercise Price" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.

"Fair Market Value" means, as of any date, the value of a share
of the Company's Shares determined as follows:

(a) if the Shares are then quoted on the Nasdaq National Market,
the closing price on the Nasdaq National Market on the date of
determination (if such day is a trading day) as reported in The Wall
Street Journal, and, if such date of determination is not a trading day,
then on the last trading day prior to the date of determination;

(b) if the Shares are publicly traded and are then listed on a
national securities exchange, the closing price on the last trading day
prior to the date of determination on the principal national securities
exchange on which the Shares are listed or admitted to trading as
reported in The Wall Street Journal;

(c) if the Shares are publicly traded but are not quoted on the
Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on
the last trading day prior to the date of determination as reported in
The Wall Street Journal; or

(d) if none of the foregoing is applicable, by the Committee in
good faith.

"Insider" means an officer or director of the Company or any
other person whose transactions in the Company's Shares are subject to Section
16 of the Exchange Act.

"Option" means an award of an option to purchase Shares pursuant
to Section 5.

"Participant" means a person who receives an Award under this
Plan.

<PAGE> 16

"Performance Factors" means the factors selected by the
Committee from among the following measures to determine whether the performance
goals established by the Committee and applicable to Awards have been satisfied:

(a) Net revenue and/or net revenue growth;

(b) Earnings before income taxes and amortization and/or
earnings before income taxes and amortization growth;

(d) Net income and/or net income growth:

(e) Earnings per share and/or earnings per share growth;

(f) Total stockholder return and/or total stockholder return
growth;

(g) Return on equity;

(h) Operating cash flow return on income;

(i) Adjusted operating cash flow return on income;

(j) Economic value added; and

(k) Individual confidential business objectives.

"Performance Period" means the period of service determined by
the Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock or Stock Bonuses.

"Plan" means this Retek Inc. 1999 Equity Incentive Plan, as
amended from time to time.

"Purchase Price" means the price at which Shares are purchased
under this Plan.

"Restricted Stock" means an award of Shares pursuant to Section
7.

"SAR" means an award of stock appreciation rights pursuant to
Section 6.

"SEC" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended.

<PAGE> 17

"Shares" means shares of the Company's common stock, par value
$0.01 per share.

"Stock Bonus" means an award of Shares, or cash in lieu of
Shares, pursuant to Section 7.

"Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

"Termination" or "Terminated" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, director, consultant, independent contractor or
advisor, except in the case of sick leave, military leave, or any other leave of
absence approved by the Committee, provided that such leave is for a period of
not more than ninety (90) days, or reinstatement upon the expiration of such
leave is guaranteed by contract or statute. In the case of any employee on an
approved leave of absence, the Committee may make such provisions respecting
suspension of vesting of the Award while on leave as it may deem appropriate,
except that in no event may an Option be exercised after the expiration of the
term set forth in the Award Agreement. The Committee will have sole discretion
to determine whether a Participant has ceased to provide services and the
effective date on which the Participant ceased to provide services (the
"Termination Date").

<PAGE> 1
EXHIBIT 10.6

RETEK INC.

1999 EMPLOYEE STOCK PURCHASE PLAN

1. ESTABLISHMENT OF PLAN. Retek Inc., a Delaware corporation
(the "Company"), proposes to grant options for purchase of the Company's common
stock, par value $0.01 per share (the "Common Stock"), to eligible employees of
the Company and its Subsidiaries (as hereinafter defined) pursuant to this
Employee Stock Purchase Plan (this "Plan"). For purposes of this Plan, "Parent
Corporation" and "Subsidiary" (collectively, "Subsidiaries") shall have the same
meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code"). The Company intends this Plan to qualify as an "employee stock purchase
plan" under Section 423 of the Code (including any amendments to or replacements
of such Section), and this Plan shall be so construed. Any term not expressly
defined in this Plan but defined for purposes of Section 423 of the Code shall
have the same definition herein. A total of 700,000 shares of the Common Stock
is reserved for issuance under this Plan, plus an annual increase to be added on
January 1 of each year beginning January 1, 2001 equal to the lesser of:

(a) 1.0% of the total number of shares of Common Stock
outstanding on a fully diluted basis as of such January 1;

(b) 600,000 shares; or

Such number shall be subject to adjustments effected in accordance with Section
14 of this Plan.

2. PURPOSE. The purpose of this Plan is to provide employees
of the Company and Subsidiaries designated by the Board of Directors of the
Company (the "Board") as eligible to participate in this Plan with a convenient
means of acquiring an equity interest in the Company through payroll deductions,
to enhance such employees' sense of participation in the affairs of the Company
and Subsidiaries, and to provide an incentive for continued employment.

3. ADMINISTRATION. This Plan shall be administered by a
committee appointed by the Board (the "Committee"). Subject to the provisions of
this Plan and the limitations of Section 423 of the Code or any successor
provision in the Code, all questions of interpretation or application of this
Plan shall be determined by the Board and its decisions shall be final and
binding upon all participants. Members of the Board shall receive no
compensation for their services in connection with the administration of this
Plan, other than standard fees as established from time to time by the Board for
services rendered by Board members serving on Board committees. All expenses
incurred in connection with the administration of this Plan shall be paid by the
Company.
<PAGE> 2
2

4. ELIGIBILITY. Any employee of the Company or of any
Subsidiary designated by the Committee (the "Participating Subsidiaries") is
eligible to participate in an Offering Period (as hereinafter defined) under
this Plan except the following:

(a) employees who are not employed by the Company or a
Participating Subsidiary fifteen (15) days before the beginning of such Offering
Period, except that employees who are employed on the first day of the first
Offering Period shall be eligible to participate therein;

(b) employees who are customarily employed for less than
twenty (20) hours per week;

(d) employees who, together with any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold options to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or any of its Participating Subsidiaries who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Participating Subsidiaries.

5. OFFERING DATES. The offering periods of this Plan (each, an
"Offering Period") shall be of twenty-four (24) months duration commencing on
November 1 and May 1 of each year and ending on October 31 and April 30,
respectively, thereafter; provided, however, that notwithstanding the foregoing,
the first such Offering Period shall commence on the date on which the price at
which the Common Stock will be offered to the public is determined (the "First
Offering Date") and shall end on October 31, 2001. Each Offering Period shall
consist of four (4) six-month purchase periods (individually, a "Purchase
Period") during which payroll deductions of the participants are accumulated
under this Plan. The first business day of each Offering Period is referred to
as the "Offering Date". The last business day of each Purchase Period is
referred to as the "Purchase Date". The Board shall have the power to change the
duration of Offering Periods or Purchase Periods with respect to future
offerings without stockholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
or Purchase Period to be affected.

6. PARTICIPATION IN THIS PLAN. Except as provided in Section
4(a), eligible employees may become participants in an Offering Period under
this Plan on such Offering Period's Offering Date after satisfying the
eligibility requirements by delivering an enrollment form to the Company's human
resources department (the "HR Department") not later than the 15th day of the
month before such Offering Date unless a later time for filing the enrollment

<PAGE> 3
3

form authorizing payroll deductions is set by the Board for all eligible
employees with respect to a given Offering Period; provided, however, that
eligible employees may become participants in the first Offering Period under
this Plan by delivering an the enrollment form to the HR Department at any time
prior to the commencement of such Offering Period. Notwithstanding the
foregoing, the Committee may set a later time for filing the enrollment form
authorizing payroll deductions for all eligible employees with respect to a
given Offering Period. An eligible employee who does not deliver an enrollment
form to the HR Department by such date after becoming eligible to participate in
such Offering Period shall not participate in that Offering Period or any
subsequent Offering Period unless such employee enrolls in this Plan by filing
an enrollment form with the HR Department not later than five (5) days preceding
a subsequent Offering Date. Once an employee becomes a participant in an
Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws or is deemed to withdraw from this Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. Such participant is not required to file any additional enrollment
forms in order to continue participation in this Plan.

7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible
employee in this Plan with respect to an Offering Period will constitute the
grant (as of the Offering Date) by the Company to such employee of an option to
purchase on the Purchase Date up to that number of shares of Common Stock
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Common
Stock on the Offering Date (but in no event less than the par value of a share
of the Common Stock), and (ii) eighty-five percent (85%) of the fair market
value of a share of the Common Stock on the Purchase Date (but in no event less
than the par value of a share of the Common Stock); provided, however, that the
number of shares of the Common Stock subject to any option granted pursuant to
this Plan shall not exceed the maximum number of shares set by the Board
pursuant to Section 10.2 below with respect to the applicable Offering Period.
The fair market value of a share of the Common Stock shall be determined as
provided in Section 8.

8. PURCHASE PRICE. The purchase price per share at which a
share of Common Stock will be sold in any Offering Period shall be eighty-five
percent (85%) of the lesser of:

(a) The fair market value on the Offering Date; or

(b) The fair market value on the Purchase Date; provided,
however, that in no event may the purchase price per share of the Common Stock
be below the par value per share of the Common Stock.

<PAGE> 4
4

For purposes of this Plan, the term "Fair Market Value" means,
as of any date, the value of a share of the Common Stock determined as follows:

(a) if the Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;

(b) if the Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the date of
determination on the principal national securities exchange on which the Common
Stock is listed or admitted to trading as reported in The Wall Street Journal;

(c) if the Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the date
of determination as reported in The Wall Street Journal; or

(d) if none of the foregoing is applicable, by the Committee
in good faith, which in the case of the First Offering Date will be the price
per share at which shares of the Common Stock are initially offered for sale to
the public by the Company's underwriters in the initial public offering of the
Common Stock pursuant to a registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended from time to
time (the "Securities Act").

9. PAYROLL DEDUCTIONS; ISSUANCE OF SHARES.

9.1 Payroll Deductions. The purchase price of the shares is
accumulated by regular payroll deductions made during each Offering Period. The
deductions are made as a percentage of the participant's compensation in one
percent (1%) increments not less than two percent (2%), nor greater than fifteen
percent (15%) or such lower limit set by the Committee. Compensation shall mean
all W-2 compensation, including, but not limited to base salary, wages,
commissions, overtime, shift premiums and bonuses, plus draws against
commissions; provided, however, that for purposes of determining a participant's
compensation, any election by such participant to reduce his or her regular cash
remuneration under Sections 125 or 401(k) of the Code shall be ignored. Payroll
deductions shall commence on the first payday following the Offering Date and
shall continue to the end of the Offering Period unless sooner altered or
terminated as provided in this Plan.

9.2 Change of Payroll Deductions. A participant may increase
or decrease the rate of payroll deductions during an Offering Period by filing
with the HR Department a change of enrollment form in which case the new rate
shall become effective for the next payroll period commencing more than fifteen
(15) days after the HR Department's receipt of the authorization

<PAGE> 5
5

and shall continue for the remainder of the Offering Period unless changed as
described below. Such change in the rate of payroll deductions may be made at
any time during an Offering Period, but not more than one (1) change may be made
effective during any Purchase Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Purchase Period by filing with the
HR Department a new authorization for payroll deductions not later than the 15th
day of the month before the beginning of such Purchase Period.

9.3 Cessation of Payroll Deductions. A participant may reduce
his or her payroll deduction percentage to zero during an Offering Period by
filing with the HR Department a request for cessation of payroll deductions (on
a change of enrollment form) during such Offering Period. Such reduction shall
be effective beginning with the next payroll period commencing more than fifteen
(15) days after the HR Department's receipt of the request and no further
payroll deduction will be made for the duration of the Offering Period, unless
the participant resumes making payroll deductions by notifying the Company.
Payroll deductions credited to the participant's account prior to the effective
date of the request shall be used to purchase shares of Common Stock in
accordance with Section 9.5 below. A participant may not resume making payroll
deductions until the Purchase Period following the Purchase Period in which he
or she reduced his or her payroll deductions to zero.

9.4 Account. All payroll deductions made for a participant are
credited to his or her account under this Plan and are deposited with the
general funds of the Company. No interest accrues on the payroll deductions. All
payroll deductions received or held by the Company may be used by the Company
for any corporate purpose, and the Company shall not be obligated to segregate
such payroll deductions.

9.5 Purchase of Shares. On each Purchase Date, so long as this
Plan remains in effect and provided that the participant has not submitted a
signed and completed withdrawal form before that date which notifies the Company
that the participant wishes to withdraw from that Offering Period under this
Plan and have all payroll deductions accumulated in the account maintained on
behalf of the participant as of that date returned to the participant, the
Company shall apply the funds then in the participant's account to the purchase
of whole shares of Common Stock reserved under the option granted to such
participant with respect to the Offering Period to the extent that such option
is exercisable on the Purchase Date. The purchase price per share shall be as
specified in Section 8 of this Plan. Any cash remaining in a participant's
account after such purchase of shares shall be refunded to such participant in
cash, without interest; provided, however that any amount remaining in such
participant's account on a Purchase Date which is less than the amount necessary
to purchase a full share of Common Stock shall be carried forward, without
interest, into the next Purchase Period or Offering Period, as the case may be.
In the event that this Plan has been oversubscribed, all funds not used to
purchase shares on the Purchase Date shall be returned to the participant,
without interest. No Common Stock shall be purchased on a Purchase Date on
behalf of any employee whose participation in this Plan has terminated prior to
such Purchase Date.

<PAGE> 6
6

9.6 Delivery of Shares. As promptly as practicable after the
Purchase Date, the Company shall arrange the delivery to each participant of a
certificate representing the shares purchased upon exercise of his option or
shall arrange for the deposit of uncertificated shares in a brokerage account
approved by the Committee in the name of such participant.

9.7 No Transfer. During a participant's lifetime, such
participant's option to purchase shares hereunder is exercisable only by him or
her. The participant will have no interest or voting right in shares covered by
his or her option until such option has been exercised.

10. LIMITATIONS ON SHARES TO BE PURCHASED.

10.1 $25,000 Limit. No employee shall be entitled to purchase
stock under this Plan at a rate which, when aggregated with his or her rights to
purchase stock under all other employee stock purchase plans of the Company or
any Parent Corporation or Subsidiary, exceeds $25,000 in fair market value,
determined as of the Offering Date (or such other limit as may be imposed by the
Code) for each calendar year in which the employee participates in this Plan.
The Company shall automatically suspend the payroll deductions of any
participant as necessary to enforce such limit, provided that when the Company
automatically resumes such payroll deductions, the Company must apply the rate
in effect immediately prior to such suspension.

10.2 Maximum Share Amount. Not less than thirty (30) days
prior to the commencement of any Offering Period, the Committee may, in its sole
discretion, set a maximum number of shares which may be purchased by any
employee at any single Purchase Date (hereinafter the "Maximum Share Amount").
No participant shall be entitled to purchase more than the Maximum Share Amount
on any single Purchase Date. If a new Maximum Share Amount is set, then all
participants must be notified of such Maximum Share Amount not less than fifteen
(15) days prior to the commencement of the next Offering Period. Once the
Maximum Share Amount is set, it shall continue to apply with respect to all
succeeding Purchase Dates and Offering Periods unless revised by the Committee
as set forth above.

10.3 Plan Limits. If the number of shares to be purchased on a
Purchase Date by all employees participating in this Plan exceeds the number of
shares then available for issuance under this Plan, then the Company will make a
pro rata allocation of the remaining shares in as uniform a manner as shall be
reasonably practicable and as the Committee shall determine to be equitable. In
such event, the Company shall give written notice of such reduction of the
number of shares to be purchased under a participant's option to each
participant affected thereby.

10.4 Excess Deductions. Any payroll deductions accumulated in
a participant's account which are not used to purchase stock due to the
limitations in this Section 10 shall be

<PAGE> 7
7

returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.

11. WITHDRAWAL.

11.1 Notice. Each participant may withdraw from an Offering
Period under this Plan by signing and delivering to the HR Department a written
notice to that effect on a form provided for such purpose. Such withdrawal may
be elected at any time at least fifteen (15) days prior to the end of an
Offering Period.

11.2 Return of Deductions. Upon withdrawal from this Plan, the
accumulated payroll deductions shall be returned to the withdrawn participant,
without interest, and his or her interest in this Plan shall terminate. In the
event a participant voluntarily elects to withdraw from this Plan, he or she may
not resume his or her participation in this Plan during the same Offering
Period, but he or she may participate in any Offering Period under this Plan
which commences on a date subsequent to such withdrawal by filing a new
authorization for payroll deductions in the same manner as set forth above for
initial participation in this Plan.

11.3 Automatic Enrollment in Subsequent Offering Period. If
the purchase price on the first day of any current Offering Period in which a
participant is enrolled is higher than the purchase price on the first day of
any subsequent Offering Period, the Company will automatically enroll such
participant in the subsequent Offering Period. A participant does not need to
file any forms with the Company to automatically be enrolled in the subsequent
Offering Period.

12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement, death or the failure of a
participant to remain an eligible employee, immediately terminates his or her
participation in this Plan. In such event, the payroll deductions credited to
the participant's account will be returned to him or her or, in the case of his
or her death, to his or her legal representative, without interest. For purposes
of this Section 12, an employee will not be deemed to have terminated employment
or failed to remain in the continuous employ of the Company in the case of sick
leave, military leave, or any other leave of absence approved by the Committee;
provided that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.

13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's
interest in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall promptly deliver to the participant all payroll deductions credited to
such participant's account; provided, however, that in the event of the
termination of the Plan, the Committee or the Board may provide for a final
purchase of shares of

<PAGE> 8
8

Common Stock hereunder. No interest shall accrue on the payroll deductions of a
participant in this Plan.

14. CAPITAL CHANGES. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each option under this Plan which has not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under this Plan
but have not yet been placed under option, as well as the price per share of
Common Stock covered by each option under this Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued and outstanding shares of Common Stock resulting from a stock
split or the payment of a stock dividend (but only on the Common Stock) or any
other increase or decrease in the number of issued and outstanding shares of
Common Stock effected without receipt of any consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration";
and provided further, that the price per share of Common Stock shall not be
reduced below its par value per share. Such adjustment shall be made by the
Board, whose determination shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.

In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, declare that the options under this Plan shall terminate as of a date
fixed by the Committee and give each participant the right to purchase shares
under this Plan prior to such termination. In the event of (i) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the successor corporation, which
assumption will be binding on all participants), (ii) a merger in which the
Company is the surviving corporation but after which the stockholders of the
Company immediately prior to such merger (other than any stockholder that
merges, or which owns or controls another corporation that merges, with the
Company in such merger) cease to own their shares or other equity interest in
the Company, (iii) the sale of all or substantially all of the assets of the
Company or (iv) the acquisition, sale or transfer of more than 50% of the
outstanding shares of the Company by tender offer or similar transaction, the
Plan will continue with regard to Offering Periods that commenced prior to the
closing of the proposed transaction and shares will be purchased based on the
Fair Market Value of the surviving corporation's stock on each Purchase Date,
unless otherwise provided by the Committee.

<PAGE> 9
9

The Committee may, if it so determines in the exercise of its
sole discretion, also make provision for adjusting the number of shares of
Common Stock reserved for issuance under the Plan, as well as the price per
share of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, or
in the event of the Company being consolidated with or merged into any other
corporation.

15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.

16. REPORTS. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the end
of each Purchase Period a report of his or her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Purchase Period or Offering Period, as the case may be.

17. NOTICE OF DISPOSITION. Each participant shall notify the
Company if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "Notice Period"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.

18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor
the grant of any option hereunder shall confer any right on any employee to
remain in the employ of the Company or any Subsidiary, or restrict the right of
the Company or any Subsidiary to terminate such employee's employment.

19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall
have equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company or
the Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.

<PAGE> 10
10

20. NOTICES. All notices or other communications by a
participant to the Company under or in connection with this Plan shall be deemed
to have been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the receipt
thereof.

21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by
the Board, this Plan will become effective on the date that is the First
Offering Date (as defined above). This Plan shall be approved by the
stockholders of the Company, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board. No purchase of shares pursuant to this Plan shall occur prior to such
stockholder approval. This Plan shall continue until the earlier to occur of (a)
termination of this Plan by the Board (which termination may be effected by the
Board at any time), (b) issuance of all of the shares of Common Stock reserved
for issuance under this Plan, or (c) ten (10) years from the adoption of this
Plan by the Board.

22. DESIGNATION OF BENEFICIARY.

22.1 Designation. A participant may file a written designation
of a beneficiary who is to receive any shares and cash, if any, from the
participant's account under this Plan in the event of such participant's death
subsequent to the end of a Purchase Period but prior to delivery to him of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under this
Plan in the event of such participant's death prior to a Purchase Date.

22.2 Change in Designation. Such designation of a beneficiary
may be changed by the participant at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under this Plan who is living at the time of such participant's
death, the Company shall deliver such shares or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares or cash to the spouse or to any one
or more dependents or relatives of the participant, or if no spouse, dependent
or relative is known to the Company, then to such other person as the Company
may designate.

23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF
SHARES. Shares shall not be issued with respect to an option unless the exercise
of such option and the issuance and delivery of such shares pursuant thereto
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act, the Securities Exchange Act
of 1934, as amended from time to time, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or automated quotation
system upon which the shares may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.

<PAGE> 11
11

24. APPLICABLE LAW. The Plan shall be governed by the
substantive laws (excluding the conflict of laws rules) of the State of
Delaware.

25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at
any time amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant. Notwithstanding the foregoing,
the Board may make such amendments to the Plan as the Board determines to be
advisable, if the continuation of the Plan or any Offering Period would result
in financial accounting treatment for the Plan that is different from the
financial accounting treatment in effect on the date this Plan is adopted by the
Board.

<PAGE> 1
EXHIBIT 10.7

RETEK INC.

1999 DIRECTORS STOCK OPTION PLAN

1. PURPOSE. This 1999 Directors Stock Option Plan (this
"Plan") is established to provide equity incentives for certain nonemployee
members of the Board of Directors of Retek Inc. (the "Company"), who are
described in Section 6.1 below, by granting such persons options to purchase
shares of stock of the Company.

2. ESTABLISHMENT OF PLAN. This Plan shall become effective on
the date (the "Effective Date") on which it is approved by the Board of
Directors of the Company (the "Board").

3. TYPES OF OPTIONS AND SHARES. Options granted under this
Plan ("Options") shall be non-qualified stock options ("NQSOs"). The shares of
stock that may be purchased upon exercise of Options granted under this Plan
(the "Shares") are shares of the common stock of the Company, par value $0.01
per share (the "Common Stock").

4. NUMBER OF SHARES. The maximum number of Shares that may be
issued pursuant to Options granted under this Plan (the "Maximum Number") is
400,000 Shares, subject to adjustment as provided in this Plan. If any Option is
terminated for any reason without being exercised in whole or in part, the
Shares thereby released from such Option shall be available for purchase under
other Options subsequently granted under this Plan. At all times during the term
of this Plan, the Company shall reserve and keep available such number of Shares
as shall be required to satisfy the requirements of outstanding Options granted
under this Plan; provided, however that if the aggregate number of Shares
subject to outstanding Options granted under this Plan plus the aggregate number
of Shares previously issued by the Company pursuant to the exercise of Options
granted under this Plan equals or exceeds the Maximum Number, then
notwithstanding anything herein to the contrary, no further Options may be
granted under this Plan until the Maximum Number is increased or the aggregate
number of Shares subject to outstanding Options granted under this Plan plus the
aggregate number of Shares previously issued by the Company pursuant to the
exercise of Options granted under this Plan is less than the Maximum Number.

5. ADMINISTRATION. This Plan shall be administered by the
Board or by a committee of not less than two members of the Board appointed to
administer this Plan (the "Committee"). As used in this Plan, references to the
Committee shall mean either such Committee or the Board if no Committee has been
established. The Committee will have authority to adopt such rules as it may
deem appropriate to carry out the purposes of this Plan, and shall have
authority to interpret and construe the provisions of this Plan and any
agreements and notices under this Plan and to make determinations pursuant to
any Plan provision. The interpretation, determination or other action made or
taken by the Committee of any of the provisions of this Plan or any Option
granted under this Plan shall be final and binding upon the Company and all
persons having an interest in any Option or any Shares purchased pursuant to an
Option. In the performance of its functions with respect to this Plan, the
Committee shall be

<PAGE> 2
entitled to rely upon information and advice furnished by the Company's
officers, the Company's accountants, the Company's counsel and any other party
the Committee deems necessary, and no member of the Committee shall be liable
for any action taken or not taken in reliance upon any such advice.

6. ELIGIBILITY AND AWARD FORMULA.

6.1 Eligibility. Options shall be granted only to directors of
the Company who are not employees of the Company or any Parent, Subsidiary or
Affiliate of the Company, as those terms are defined in Section 19 below or
representatives of corporate investors (each such person referred to as an
"Optionee").

6.2 Initial Grant. Each Optionee who is or first becomes a
member of the Board on or after the Effective Date will automatically be granted
an Option for 25,000 Shares (an "Initial Grant") on the later of the Effective
Date or on the date such Optionee first becomes a member of the Board.

6.3 Succeeding Grants. On each anniversary of the Initial
Grant, if the Optionee is still a member of the Board and has served
continuously as a member of the Board since the date of the Optionee's Initial
Grant, the Optionee will automatically be granted an Option for 7,500 Shares (a
"Succeeding Grant").

7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following
and to Section 6 above:

7.1 Form of Option Grant. Each Option granted under this Plan
shall be evidenced by a written stock option grant ("Grant") in such form (which
need not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.

7.2 Vesting. The date an Optionee receives an Initial Grant or
a Succeeding Grant is referred to in this Plan as the "Grant Date" for such
Option. Each Grant will vest as to the entire amount of the Shares on the first
anniversary of the Grant Date for such Grant, so long as the Optionee
continuously remains a director of the Company.

7.3 Exercise Price. The exercise price of an Option shall be
the Fair Market Value (as defined in Section 19) of the Shares at the time that
the Option is granted.

7.4 Termination of Option. Except as provided below in this
Section, each Option shall expire ten (10) years after its Grant Date (the
"Expiration Date"). The Option shall cease to vest when the Optionee ceases to
be a member of the Board. The date on which the Optionee ceases to be a member
of the Board shall be referred to as the "Termination Date". The unvested
portion of any Options awarded to the Optionee shall be forfeited as of the
Termination Date. An Option may be exercised after the Termination Date only as
set forth below:

<PAGE> 3
(a) Termination Generally. If the Optionee ceases to
be a member of the Board for any reason except death of the Optionee or
disability of the Optionee (whether temporary or permanent, partial or total, as
determined by the Committee), then each Option then held by such Optionee, to
the extent (and only to the extent) that it would have been exercisable by the
Optionee on the Termination Date, may be exercised by the Optionee no later than
seven (7) months after the Termination Date, but in no event later than the
Expiration Date.

(b) Death or Disability. If the Optionee ceases to be
a member of the Board because of the death of the Optionee or the disability of
the Optionee (whether temporary or permanent, partial or total, as determined by
the Committee) then each Option then held by such Optionee to the extent (and
only to the extent) that it would have been exercisable by the Optionee on the
Termination Date, may be exercised by the Optionee (or the Optionee's legal
representative) no later than twelve (12) months after the Termination Date, but
in no event later than the Expiration Date.

7.5 Deferral of Profit Shares. Optionees may elect to defer
receipt of Shares otherwise deliverable upon exercise of an Option. Unless
otherwise determined by the Committee, an election to defer such delivery shall
be irrevocable and shall be made in writing on a form acceptable to the Company
at least six months prior to exercise.

8. EXERCISE OF OPTIONS.

8.1 Exercise Period. Subject to the provisions of Section 8.5
below, Options shall be exercisable as they vest; provided that the Committee
may provide that such Options shall become immediately exercisable subject to
repurchase in accordance with the vesting schedule set forth in Section 7.

8.2 Notice. Options may be exercised only by delivery to the
Company of an exercise agreement in a form approved by the Committee stating the
number of Shares being purchased, the restrictions imposed on the Shares and
such representations and agreements regarding the Optionee's investment intent
and access to information as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.

8.3 Payment. Payment for the Shares purchased upon exercise of
an Option may be made (a) in cash or by check; (b) by surrender of shares of
Common Stock of the Company that have been owned by the Optionee for more than
six (6) months (and which have been paid for within the meaning of Securities
and Exchange Commission ("SEC") Rule 144 and, if such shares were purchased from
the Company by use of a promissory note, such note has been fully paid with
respect to such shares) or were obtained by the Optionee in the open public
market, having a Fair Market Value equal to the exercise price of the Option;
(c) by waiver of compensation due or accrued to the Optionee for services
rendered; (d) provided that a public market for the Company's stock exists,
through a "same day sale" commitment from the Optionee and a broker-dealer that
is a member of the National Association of Securities Dealers (a "NASD Dealer")
whereby the Optionee irrevocably elects to exercise the Option and to sell a
portion of

<PAGE> 4
the Shares so purchased to pay for the exercise price and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to forward the exercise
price directly to the Company; (e) provided that a public market for the
Company's stock exists, through a "margin" commitment from the Optionee and an
NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; or (f) by any combination of
the foregoing.

8.4 Withholding Taxes. Prior to issuance of the Shares upon
exercise of an Option, the Optionee shall pay or make adequate provision for any
federal or state withholding obligations of the Company, if applicable.

8.5 Limitations on Exercise. Notwithstanding the exercise
periods set forth in the Grant, exercise of an Option shall always be subject to
the following limitations:

(a) An Option shall be exercisable unless such
exercise is in compliance with the Securities Act and all applicable state
securities laws, as they are in effect on the date of exercise.

(b) The Committee may specify a reasonable minimum
number of Shares that may be purchased upon any exercise of an Option, provided
that such minimum number will not prevent the Optionee from exercising the full
number of Shares as to which the Option is then exercisable.

9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or by the
Optionee's guardian or legal representative, unless otherwise determined by the
Committee. No Option may be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner other than by will or by the laws of descent and
distribution, unless otherwise determined by the Committee.

10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any
of the rights of a stockholder with respect to any Shares subject to an Option
until the Option has been validly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
the date of exercise, except as provided in this Plan. The Company shall provide
to each Optionee a copy of the annual financial statements of the Company at
such time after the close of each fiscal year of the Company as they are
released by the Company to its stockholders.

11. ADJUSTMENT OF OPTION SHARES.

11.1 The existence of this Plan shall not affect or restrict
in any way the right or power of the Company or the shareholders of the Company
to make or authorize any adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights

<PAGE> 5
to purchase stock or of bonds, debentures, preferred or prior preference stocks
whose rights are superior to or affect the Common Stock or the rights thereof or
which are convertible into or exchangeable for Common Stock, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

11.2 Notwithstanding any other provision of the Plan, in the
event that the number of outstanding shares of Common Stock of the Company is
changed by a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company
without consideration, the number of Shares available under this Plan and the
number of Shares subject to outstanding Options and the exercise price per share
of such outstanding Option shall be proportionately adjusted, subject to any
required action by the Board or stockholders of the Company and compliance with
applicable securities laws; provided, however, that no fractional shares shall
be issued upon exercise of any Option and any resulting fractions of a Share
shall be rounded up to the nearest whole Share.

12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this
Plan or any Option granted under this Plan shall confer on any Optionee any
right to continue as a director of the Company.

13. COMPLIANCE WITH LAWS. The grant of Options and the
issuance of Shares upon exercise of any Options shall be subject to and
conditioned upon compliance with all applicable requirements of law, including
without limitation compliance with the Securities Act, compliance with all other
applicable state securities laws and compliance with the requirements of any
stock exchange or national market system on which the Shares may be listed. The
Company shall be under no obligation to register the Shares with the SEC or to
effect compliance with the registration or qualification requirement of any
state securities laws, stock exchange or national market system.

14. ACCELERATION OF OPTIONS ON CERTAIN CORPORATE TRANSACTIONS.
In the event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption, conversion or
replacement will be binding on all Optionees), (c) a merger in which the Company
is the surviving corporation but after which the stockholders of the Company
(other than any stockholder which merges (or which owns or controls another
corporation which merges) with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transactions, the vesting of all options granted pursuant to this Plan
will accelerate and the options will become exercisable in full prior to the
consummation of such event at such times and on such conditions as the

<PAGE> 6
Committee determines, and if such options are not exercised prior to the
consummation of the corporate transaction, they shall terminate in accordance
with the provisions of this Plan.

15. AMENDMENT OR TERMINATION OF PLAN. The Board may at any
time terminate or amend this Plan or any outstanding Option, provided that the
Board may not terminate or amend the terms of any outstanding Option without the
consent of the Optionee. In any case, no amendment of this Plan may adversely
affect any then outstanding Options or any unexercised portions thereof without
the written consent of the Optionee.

16. TERM OF PLAN. Options may be granted pursuant to this Plan
from time to time within a period of ten (10) years from the Effective Date.

17. EXPENSES. The costs and expenses of administering this
Plan shall be borne by the Company.

18. APPLICABLE LAW. Except as to matters of federal law, this
Plan and all actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
conflicts of law principles.

19. CERTAIN DEFINITIONS. As used in this Plan, the following
terms shall have the following meanings:

"Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is
under common control with, another corporation, where "control"
(including the terms "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to cause the
direction of the management and policies of the corporation, whether
through the ownership of voting securities, by contract or otherwise.

"Fair Market Value" means, as of any date, the value of a
share of the Common Stock determined as follows:

(a) if the Common Stock is then quoted on the Nasdaq National
Market, its closing price on the date of determination as reported in
The Wall Street Journal;

(b) if the Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the date of
determination on the principal national securities exchange on which
the Common Stock is listed or admitted to trading as reported in The
Wall Street Journal;

(c) if the Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and asked
prices on the date of determination as reported in The Wall Street
Journal;
<PAGE> 7
(d) if none of the foregoing is applicable, by the Committee
in good faith.

"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of
the other corporations in such chain.

"Securities Act" means the Securities Act of 1933, as amended
from time to time.

"Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of
the corporations other than the last corporation in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.

<PAGE> 1
Exhibit 23.1

Consent of Independent Accountants

We hereby consent to the use in this Registration Statement on Form S-1 of Retek
Inc. of our report dated September 9, 1999, relating to the combined financial
statements of Retek Logistics, Inc. and Retek Information Systems, Inc., which
appears in such Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
September 18, 1999

<PAGE> 1

EXHIBIT 23.2

Consent of Independent Accountants

We hereby consent to the use in this Registration Statement on Form S-1 of Retek
Inc. of our report dated September 9, 1999, relating to the financial statements
of Retek Logistics, Inc., which appears in such Registration Statement.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
September 18, 1999