<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
[X] Filed by the Registrant [ ] Filed by a Party other than the
Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
</TABLE>
Filing by:
RETEK INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[RETEK LOGO]
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of stockholders of
Retek Inc. ("Retek"), a Delaware corporation, to be held on Tuesday, May 16,
2000 at the Hilton Minneapolis, 1001 Marquette Avenue South, Minneapolis,
Minnesota. The Annual Meeting will commence at 1:00 PM, local time.
At the Annual Meeting, you will be asked to consider and vote upon the
following:
1. The election of two Class I directors;
2. The ratification of the appointment of PricewaterhouseCoopers LLP as our
independent accountants for the 2000 fiscal year.
The attached Proxy Statement presents the details of these proposals.
OUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED PROPOSAL (2) ABOVE AND
RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL'S APPROVAL AND ADOPTION.
YOUR PARTICIPATION AND VOTE ARE IMPORTANT. THE ELECTION OF THE TWO CLASS I
DIRECTORS AND THE ADOPTION OF PROPOSAL (2) WILL NOT BE EFFECTED WITHOUT THE
AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE OUTSTANDING COMMON STOCK PRESENT
AND VOTING AT THE ANNUAL MEETING.
FOR FURTHER INFORMATION REGARDING THE MATTERS TO BE VOTED ON AT THE ANNUAL
MEETING, I URGE YOU TO CAREFULLY READ THE ACCOMPANYING PROXY STATEMENT, DATED
APRIL 10, 2000. If you have more questions about these proposals or would like
additional copies of the Proxy Statement, you should contact Gregory A. Effertz,
Chief Financial Officer of Retek Inc., 801 Nicollet Mall, 11th Floor,
Minneapolis, Minnesota 55402, telephone (612) 630-5700. Even if you plan to
attend the Annual Meeting in person, please complete, sign, date, and promptly
return the enclosed proxy card in the enclosed postage-prepaid envelope or by
electronic means. This will not limit your right to attend or vote at the Annual
Meeting.
Sincerely,
/s/ John Buchanan
John Buchanan
Chairman and Chief Executive Officer
The accompanying Proxy Statement is dated April 10, 2000 and is first being
mailed to stockholders on or about April 18, 2000.
<PAGE> 3
[RETEK LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
------------------------
To the Stockholders of
RETEK INC.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders
("Annual Meeting") of Retek Inc. ("Retek"), a Delaware corporation, will be held
at the Hilton Minneapolis, 1001 Marquette Avenue South, Minneapolis, Minnesota.
The Annual Meeting will commence at 1:00 PM, local time, for the following
purposes:
1. To elect two Class I directors, each to serve a three-year term;
2. To ratify the appointment of PricewaterhouseCoopers LLP as Retek's
independent accountants for the 2000 fiscal year; and
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment(s) thereof.
Only stockholders of record at the close of business on March 22, 2000 are
entitled to notice of and to vote at the Annual Meeting. A list of such
stockholders will be available at Retek's headquarters located at Midwest Plaza,
801 Nicollet Mall, 11th Floor, Minneapolis, MN during ordinary business hours
for the ten day period prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to complete, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose or by
electronic means. Any stockholder attending the Annual Meeting may vote in
person, even though he or she has previously returned a proxy.
By Order of the Board of Directors of
Retek Inc.
/s/ Gregory A. Effertz
Gregory A. Effertz
Chief Financial Officer, Vice
President, Finance & Administration,
Treasurer and Secretary
Minneapolis, Minnesota
April 10, 2000
YOUR VOTE IS IMPORTANT
In order to ensure your representation at the Annual Meeting, you are requested
to complete, sign and date the enclosed proxy as promptly as possible and return
it in the enclosed envelope or by electronic means.
<PAGE> 4
[RETEK LOGO]
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is being furnished by our board of directors to
holders of our common stock, par value $0.01 per share, in connection with the
solicitation of proxies by our board of directors for use at the annual meeting
of our stockholders (the "Annual Meeting") to be held on Tuesday, May 16, 2000,
at the Hilton Minneapolis, 1001 Marquette Avenue South, Minneapolis, Minnesota,
commencing at 1:00 PM, local time, and at any adjournment or postponement
thereof. The purposes of the Annual Meeting are set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Stockholders.
Our complete mailing address is Retek Inc., 801 Nicollet Mall, 11th Floor,
Minneapolis, Minnesota 55402, and our telephone number is (612) 630-5700.
This Proxy Statement and the accompanying form of proxy are first being
mailed to our stockholders on or about April 18, 2000.
STOCKHOLDERS ENTITLED TO VOTE; VOTE REQUIRED
Our board of directors fixed the close of business on March 22, 2000 as the
record date for the determination of the stockholders entitled to notice of and
to vote at the Annual Meeting (the "Record Date"). Accordingly, only holders of
record on the Record Date are entitled to notice of, and to vote at, the Annual
Meeting. As of the Record Date, there were outstanding and entitled to vote
46,502,778 shares of common stock constituting all of our voting stock. As of
the Record Date, there were approximately 28 holders of record of shares of our
common stock. HNC Software, Inc. ("HNC") holds approximately 86.0% of the shares
of our common stock. Each holder of record of our common stock on the Record
Date is entitled to one vote per share, which may be cast either in person or by
properly executed proxy, at the Annual Meeting. A plurality of the shares
present in person or represented by proxy at the meeting, entitled to vote in
the election and actually cast, will elect the two Class I directors. A complete
list of stockholders entitled to vote at the Annual Meeting will be available
for inspection by any stockholder for any purpose germane to the Annual Meeting
for 10 days prior to the Annual Meeting during ordinary business hours at our
headquarters located at 801 Nicollet Mall, 11th Floor, Minneapolis, Minnesota
55402. The presence, in person or by properly executed proxy, of the holders of
a majority of the outstanding shares of common stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting. HNC
intends to be present at the Annual Meeting; therefore a quorum will be present
for election of the Class I directors and the adoption of Proposal 2.
Based on its ownership of approximately 86% of the currently outstanding
shares of our common stock, HNC has the voting power to adopt and approve all
proposals.
<PAGE> 5
Shares of our common stock represented in person or by proxy will be
counted for the purpose of determining whether a quorum is present at the Annual
Meeting. Shares which abstain from voting, and shares held by a broker nominee
in "street name" which indicates on a proxy that it does not have discretionary
authority to vote as to a particular matter, will be treated as shares that are
present and entitled to vote at the Annual Meeting for purposes of determining
whether a quorum exists, but will not be considered as votes cast and,
accordingly, will have no effect on the outcome of the vote with respect to a
particular matter.
PROXIES
This Proxy Statement is being furnished to you in connection with the
solicitation of proxies by, and on behalf of, our board of directors for use at
the Annual Meeting, and is accompanied by a form of proxy.
All shares of our common stock that are entitled to vote and are
represented at the Annual Meeting by properly executed proxies received prior to
or at the Annual Meeting, and not revoked, will be voted at the Annual Meeting
in accordance with the instructions indicated on such proxies. If no
instructions are indicated (other than in the case of broker non-votes), such
proxies will be voted as recommended by our board of directors.
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn such Annual Meeting to another time and/or place (including, without
limitation, for the purposes of soliciting additional proxies), the persons
named in the enclosed forms of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with our Secretary, at or before the taking of the vote at the Annual Meeting, a
written notice of revocation bearing a later date than the proxy, (ii) duly
executing a later dated proxy relating to the same shares and delivering it to
us before the taking of the vote at the Annual Meeting or (iii) attending the
Annual Meeting and voting in person (although attendance at the Annual Meeting
will not in and of itself constitute a revocation of the proxy). Any written
notice of revocation or subsequent proxy should be sent to Retek Inc., 801
Nicollet Mall, 11th Floor, Minneapolis, Minnesota 55402, Attention: Secretary,
or hand delivered to our Secretary at or before the taking of the vote at the
Annual Meeting.
We will pay the cost of soliciting proxies. In addition to solicitation by
use of the mails, proxies may be solicited from our stockholders by our
directors, officers and employees in person or by telephone, telegram or other
means of communication. Such directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. Arrangements will be made with
brokerage houses, custodians, nominees and fiduciaries for forwarding of proxy
materials to beneficial owners of shares held of record by such brokerage
houses, custodians, nominees and fiduciaries and for reimbursement of their
reasonable expenses incurred in connection therewith.
2
<PAGE> 6
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
Pursuant to our Amended and Restated Certificate of Incorporation, holders
of shares of the common stock are entitled to elect the members of our board of
directors. Our Amended and Restated Certificate of Incorporation fixes the
number of members of our board of directors at seven. In addition, the members
of our board of directors serve staggered three-year terms. The following table
shows the members of the different classes of the board of directors.
<TABLE>
<CAPTION>
CLASS EXPIRATION OF TERM BOARD MEMBERS
- ----- ------------------- -----------------
<S> <C> <C>
Class I 2000 Annual Meeting Glen A. Terbeek
Stephen E. Watson
Class II 2001 Annual Meeting John Buchanan
N. Ross Buckenham
Class III 2002 Annual Meeting Ward Carey
Charles H.
Gaylord
Alex Way Hart
</TABLE>
Our board of directors has nominated each of the Class I directors named
above for an additional three-year term. The persons named as proxies in the
enclosed form of proxy intend to vote your proxy for the re-election of the
Class I directors, unless otherwise directed. If, contrary to our expectations,
a nominee should become unavailable for any reason, votes may be cast pursuant
to the accompanying form of proxy for a substitute nominee designated by the
board of directors.
Two Class I directors are to be elected to our board of directors at the
Annual Meeting for a three-year term ending in 2003.
NOMINEES
<TABLE>
<CAPTION>
NAME CLASS AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---- ----- --- --------------------------------------------
<S> <C> <C> <C>
Glen A. Terbeek I 57 Mr. Terbeek has served on our board of directors since
November 1999. Mr. Terbeek is currently a consultant
with Breakaway Strategies, Inc., an independent
consulting company he founded in January 1999. From
1965 to December 1998, Mr. Terbeek was with Andersen
Consulting, a management consulting company, where he
was most recently a managing partner of Andersen's
Food and Packaged Goods Industry Practice. Mr. Terbeek
holds a Masters degree in Business Administration in
quantitative methods from the University of Michigan
and a Bachelor of Arts degree in Mathematics and
Physics from Hope College.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME CLASS AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---- ----- --- --------------------------------------------
<S> <C> <C> <C>
Stephen E. Watson I 54 Mr. Watson has served on our board of directors since
November 1999. Mr. Watson has served as chief
executive officer of Gander Mountain LLC, a specialty
retailer of outdoor recreational equipment and
clothing, since November 1997. From March 1996 to
November 1997, Mr. Watson was retired. From 1990 to
1996, Mr. Watson served as president and a member of
the board of directors of Dayton Hudson Corporation, a
general merchandise retailer. Mr. Watson has also
served as a director of Shopko Stores Inc., a chain of
retail stores specializing in discount merchandise,
since 1996. Mr. Watson holds a Bachelor of Arts degree
in American History and Literature from Williams
College and a Masters degree in Business
Administration from Harvard University.
</TABLE>
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
NAME CLASS AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---- ----- --- --------------------------------------------
<S> <C> <C> <C>
John Buchanan II 43 Mr. 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 also serves on the board of
directors of Mediconsult.com, Inc., a company that
provides patient oriented healthcare information and
services on the Internet. Mr. Buchanan holds a
Bachelor of Commerce degree in Accounting and Computer
Systems from the University of Otago, New Zealand.
N. Ross Buckenham II 42 Mr. Buckenham has served on our board of directors
since November 1999. Mr. Buckenham has served as
president of WebLink Wireless, Inc., a wireless
messaging company, since November 1997. From January
1996 to November 1997, Mr. Buckenham served with
WebLink Wireless, Inc. in a number of senior
management positions. From 1992 to 1996, Mr. Buckenham
served as president of Touchtone Solutions, Inc., a
telecommunications and interactive voice response
software and services company. From 1984 to 1991, Mr.
Buckenham served with Aquanautics Corporation, a
developer of oxygen technologies for applications in
the food and defense industries, initially as vice
president of development and then as its president.
From 1981 to 1984, Mr. Buckenham served with Bain &
Co., a management consulting company, as a senior
consultant to companies in the voice processing,
technology, finance and health care industries. Mr.
Buckenham holds a Masters degree in Business
Administration from Harvard University and a Bachelor
of Science degree in Chemical Engineering from
Canterbury University, New Zealand.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME CLASS AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---- ----- --- --------------------------------------------
<S> <C> <C> <C>
Ward Carey III III 34 Mr. Carey has served on our board of directors since
November 1999. Mr. Carey has served as senior vice
president of business strategy of HNC since March
1999. Prior to joining HNC, from July 1998 to March
1999, Mr. Carey was with Credit Suisse First Boston
Corporation, a global investment banking firm, where
he served as a charter member of the Technology Group.
From May 1996 to July 1998, Mr. Carey was with
Deutsche Bank Securities, a global investment banking
firm, where he served as a charter member of the
Technology Group. From January 1991 to May 1996, Mr.
Carey was with BT Alex. Brown, a financial services
company, where he served in several management
positions. Mr. Carey holds a Bachelor of Arts degree
in Political Science from Columbia University, New
York.
Charles H. Gaylord III 54 Mr. Gaylord has served on our board of directors since
November 1999. Mr. Gaylord has also served as a
director of HNC since May 1995. Mr. Gaylord is a
retired private technology investor. From December
1993 to September 1994, Mr. Gaylord served as
executive vice president of Intuit Inc., a
publicly-held personal and small business finance
software company. From July 1990 to December 1993, he
served first as president and chief executive officer
and a director of ChipSoft, Inc., a publisher of tax
preparation software programs, and then as ChipSoft's
chairman of the board of directors and chief executive
officer. Prior to July 1990, Mr. Gaylord served as
president of Transworld Oil America, Inc., a petroleum
marketing and trading company. Mr. Gaylord held
various senior management positions with the
Transworld Oil International group of companies over a
17-year period and was a member of the senior
management committee and the trading executive
committee. He holds a Bachelor of Science and Master
of Science degrees in Aerospace Engineering from
Georgia Institute of Technology and a Masters degree
in Business Administration from Harvard University.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
NAME CLASS AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---- ----- --- --------------------------------------------
<S> <C> <C> <C>
Alex Way Hart III 59 Mr. Hart has served on our board of directors since
November 1999. Mr. Hart has served as a director of
HNC since October 1998. Since February 1998, he has
been an independent consultant to the financial
services industry. From August 1996 to February 1998,
Mr. Hart served as chief executive officer of Advanta
Corporation, a diversified financial services company.
From March 1994 to August 1996, Mr. Hart served as
executive vice chairman of Advanta. From December 1988
to March 1994, he served as president and chief
executive officer of MasterCard International. Mr.
Hart also serves as a director of Sanchez Computer
Associates, Inc., a provider of core processing and
electronic banking software solutions. He holds a
Bachelor of Arts degree in Social Relations from
Harvard University and has completed studies at the
Graduate School of Bank Marketing at the University of
Colorado and the Graduate Program for Data Processing
Management at Harvard Business School.
</TABLE>
Ownership interests of our directors or officers in the common stock of HNC
or service as both one of our directors and a director, officer or employee of
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 us and HNC. Our Amended and Restated Certificate of
Incorporation includes provisions relating to the allocation of business
opportunities that may be suitable for both us and HNC based on the relationship
to the companies of the individual to whom the opportunity is presented and the
method by which it was presented. In addition, under Delaware law, our officers
and directors have fiduciary duties to our stockholders.
BOARD OF DIRECTORS' COMMITTEES AND MEETINGS
Our board of directors acted by unanimous written consent ten times during
fiscal year 1999. Our board of directors has an Audit Committee and a
Compensation Committee. In addition, our board of directors established a
Pricing Committee of the board of directors to evaluate and consider the
proposed terms for our initial public offering, which Committee acted once by
unanimous written consent and completed its work on November 17, 1999.
Our audit committee consists of Messrs. Hart, Terbeek and Watson. Mr.
Terbeek is chairman of our audit committee. Our audit committee did not meet or
act by written consent in fiscal year 1999. The responsibilities of our 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.
Our compensation committee consists of Messrs. Gaylord and Buckenham. Mr.
Buckenham is chairman of our compensation committee. Our compensation committee
did not meet or act by written consent in fiscal year 1999. Our compensation
committee is responsible for establishing compensation policies consistent with
corporate objectives and stockholder interests and approving and/or recommending
to the board of directors levels of compensation for our senior executives. Our
compensation committee also administers grants under our stock-based and other
performance-based incentive compensation plans and adopts and/or recommends to
our board of directors new plans or
6
<PAGE> 10
changes in compensation programs. The compensation committee may not include any
employee of Retek, HNC or any of Retek's subsidiaries.
Our board of directors may, from time to time, establish certain other
committees to facilitate the management of Retek.
DIRECTOR COMPENSATION
Directors who are not employed by us or by HNC and who are not directors of
HNC are referred to as independent directors and are reimbursed for reasonable
expenses incurred in attending our board of director or committee meetings. Each
of our two directors who are also non-employee directors of HNC are reimbursed
for reasonable expenses incurred in attending our board of director or committee
meetings. Each of our independent directors was granted options to purchase
25,000 shares of our common stock pursuant to the 1999 Directors Stock Option
Plan upon his initial election to our board of directors. Each of our
independent directors will also be granted options to purchase 7,500 shares of
our common stock annually so long as he remains a member of our board of
directors. Under our 1999 Equity Incentive Plan, we also granted 12,500 options
to each of our two directors who are also non-employee directors of HNC. These
option grants to our directors who are also non-employee directors of HNC will
become immediately exercisable upon the earlier of the completion of the
distribution by HNC of its shares of our common stock or upon the resignation of
each such director from our board of directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The board of directors established its compensation committee in November
1999. Prior to establishing the compensation committee, the board of directors
as a whole performed the functions delegated to the compensation committee upon
its establishment. No interlocking relationship exists between our board of
directors or our compensation committee and the board of directors or
compensation committee of any other company, and no interlocking relationship
existed in the past.
PROPOSAL NO. 2 -- RATIFICATION OF
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Our board of directors, upon the recommendation of our Audit Committee has
appointed PricewaterhouseCoopers LLP as our independent accountants to audit our
consolidated financial statements for the 2000 fiscal year. This appointment is
being presented to the stockholders for ratification at the Annual Meeting.
PricewaterhouseCoopers LLP has served as our independent accountants since 1999.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
meeting and will be given the opportunity to make a statement should they desire
to do so, and are expected to be available to respond to appropriate questions
from the stockholders.
OUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT ACCOUNTANTS FOR THE 2000 FISCAL
YEAR AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP.
The affirmative vote of a majority of the shares represented, in person or
by proxy, and voting at the Annual Meeting (at which a quorum is present) is
required to ratify the board of directors' selection of PricewaterhouseCoopers
LLP. If the appointment is not ratified, the board of directors will seek other
independent auditors.
7
<PAGE> 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table presents information regarding the beneficial ownership
of our outstanding common stock as of March 1, 2000 for the following
stockholders:
- each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
- each of our directors;
- our chief executive officer and our four other most highly-paid executive
officers in 1999; and
- all of our directors and executive officers as a group.
Percentage ownership calculations are based upon 46,502,778 shares of our
common stock outstanding as of March 1, 2000. Shares of our common stock subject
to options that are currently exercisable or exercisable within 60 days of March
1, 2000 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 RETEK OWNED OF RETEK OWNED
- ------------------------ ---------------- ------------------
<S> <C> <C>
HNC Software Inc.(1)................................. 40,000,000 86.0%
John Buchanan........................................ 0 *
Gordon Masson........................................ 0 *
John L. Goedert...................................... 0 *
David A.J. Bagley.................................... 0 *
Victor Holysh........................................ 0 *
N. Ross Buckenham.................................... 0 *
Ward Carey........................................... 0 *
Charles H. Gaylord, Jr.(2)........................... 400 *
Alex Way Hart........................................ 400 *
Glen A. Terbeek...................................... 0 *
Stephen E. Watson.................................... 0 *
All current executive officers and directors as a
group (15 persons)(3).............................. 2,337 *
</TABLE>
- -------------------------
* Less than 1%
(1) HNC's address is 5935 Cornerstone Court West, San Diego, California 92121.
(2) Represents 400 shares of common stock held of record by the Gaylord Family
Trust UTD 12/31/93, Charles H. Gaylord and Lynn M. Gaylord trustees.
8
<PAGE> 12
(3) Includes 337 shares held by Ms. Jill French, wife of Duncan Angove and 2,000
shares held by James Mattecheck.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD ON EXECUTIVE COMPENSATION
BACKGROUND INFORMATION
The Compensation Committee was established shortly after Retek was spun off
from HNC in November 1999. Prior to the establishment of the Compensation
Committee, the board of directors of Retek performed the compensation functions
that were delegated to the Compensation Committee upon its establishment. The
Compensation Committee has initially continued the compensation arrangements and
strategy implemented by the compensation committee of HNC. The following is a
description of the Committee, the current compensation strategy, which is
essentially the same as that provided by HNC, and the Compensation Committee's
intentions with respect to executive compensation going forward.
COMPOSITION OF THE COMMITTEE
The Compensation Committee currently consists of Messrs. Buckenham and
Gaylord, who are both "outside directors" within the meaning of Section 162(m)
of the Internal Revenue Code. Neither Mr. Buckenham nor Mr. Gaylord has
previously been an employee of Retek, HNC or any of their affiliates. Both
members meet the definition of "non-employee director" under Rule 16b-3 of the
Securities Exchange Act of 1934.
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee acts on behalf of Retek's board of directors to
establish the general compensation policy of Retek with respect to all of its
employees and administers Retek's incentive and equity plans, including the 1999
Equity Incentive Plan, the 1999 Directors' Stock Option Plan and the 1999
Employee Stock Purchase Plan. Therefore, decisions regarding executive
compensation, including stock option grants and other equity compensation awards
to executives, are made by the Compensation Committee. The Compensation
Committee intends to review base salary levels and target bonuses for Mr.
Buchanan, Retek's chief executive officer, and other executive officers and
employees of Retek at or about the beginning of each year.
The Compensation Committee intends to relate the compensation of its
executive officers, including Mr. Buchanan, directly to corporate performance.
Thus, the Compensation Committee will strive to develop a compensation policy
for Retek's executive officers and other key employees that links a portion of
each individual's total compensation to Retek's revenue and profit objectives as
well as specified individual objectives. Long-term equity incentives for
executive officers have been affected through the granting of stock options.
Stock options have value for the executive only if the price of Retek's stock
increases above the fair market value on the grant date and the executive
remains in Retek's employ for the period required for the options to vest.
The base salaries, incentive compensation and stock option grants of the
executive officers will be determined by the Compensation Committee. The
determination will be based in part on the Compensation Committee's review of
the Radford Executive Compensation Report (the "Radford Study"), and certain
other surveys of prevailing compensation practices among high-technology
companies with whom Retek competes for executive talent. The Compensation
Committee will
9
<PAGE> 13
evaluate such information in connection with Retek's corporate goals. These
surveys are nationally known for their extensive data bases of the compensation
practices of high technology companies. The Radford Survey itself includes over
500 high technology companies. To this end, the Compensation Committee intends
to compare the compensation of Retek's executive officers with comparable survey
positions and the compensation practices of comparable companies to determine
base salary, target bonuses and target total cash compensation. In addition,
each executive officer's performance for the last year and objectives for the
subsequent year will be reviewed by the Compensation Committee, together with
such executive officer's responsibility level and Retek's fiscal performance
versus objectives and potential performance targets for the subsequent year.
EXECUTIVE COMPENSATION
BASE COMPENSATION. The information included in this Proxy Statement
regarding executive salary levels reflects the compensation program that HNC had
in place prior to November 1999, which has been continued by Retek.
INCENTIVE COMPENSATION. Cash bonuses have been awarded by HNC to the
extent that an executive officer has achieved predetermined individual
objectives and Retek has met predetermined revenue and profit objectives set by
the board of directors at the beginning of the year. The Compensation Committee
intends to continue this practice. Mr. Buchanan's subjective judgement of
executive's performance (other than his own) will be taken into account in
determining whether individual objectives have been satisfied. Performance will
be measured at the end of the year. For 1999, the bases of target incentive
compensation for executive officers set by HNC were Retek's revenues and
profits, ranging from approximately 12% to 100% of an individual's target
incentive compensation, with the balance, if any, based on individual
objectives, depending on the individual executive.
STOCK OPTIONS. Stock options are an essential element of Retek's executive
compensation package. The Compensation Committee believes that equity-based
compensation in the form of stock options links the interests of management and
stockholders by focusing employees and management on increasing stockholder
value. The actual value of such equity-based compensation depends entirely on
appreciation of Retek's stock.
Accordingly, Retek has adopted the 1999 Equity Incentive Plan and, in 2000,
has granted stock options under the plan to certain executive officers to aid in
the retention of executive officers and to align their interest with those of
the stockholders. The Committee anticipates that stock options will typically be
granted to executive officers when the executive first joins Retek and in
connection with a significant change in responsibilities. The Compensation
Committee may, however, grant additional stock options to executives for other
reasons such as an executive's anticipated future contribution and ability to
impact corporate and/or business unit results or past performance. In the
discretion of the Compensation Committee, executive officers may also be granted
stock options to provide greater incentives to continue their employment with
Retek and to strive to increase the value of Retek's stock. In 2000, as part of
its initial analysis of how stock options grants should be allocated, the
Compensation Committee considered these factors. The stock options generally
become exercisable over a four-year period and are granted at a price that is
equal to the fair market value of Retek's common stock on the date of grant.
During 2000, the Compensation Committee will consider whether to grant
additional options to executive officers based on the factors described above.
10
<PAGE> 14
COMPANY PERFORMANCE AND CEO COMPENSATION
The Compensation Committee will make a recommendation to Retek's entire
board of directors regarding the base salary and incentive compensation of
Retek's CEO, Mr. Buchanan. Mr. Buchanan's most recent compensation was adopted
by the board of directors of HNC. During 1999, Mr. Buchanan earned a base salary
of $250,0000. In addition, Mr. Buchanan received incentive compensation of
$106,250 for 1999. This bonus figure represents approximately 85% of the target
bonus for Mr. Buchanan for 1999. All of Mr. Buchanan's incentive compensation
was based upon obtaining and surpassing corporate operating revenue and profit
objectives and performance relative to individual goals. These objectives
included satisfactorily managing Retek's overall corporate business plan, such
as meeting Retek's profitability projections and Retek's sales targets and
significantly strengthening Retek's market position. As an additional incentive
to Mr. Buchanan during the current transition period, the board of directors
exercised its discretion and granted Mr. Buchanan stock options to purchase
591,100 shares of Retek's common stock. Twenty-five percent of these stock
options become exercisable on October 29, 2000 while the remainder of these
stock options become exercisable at a rate of 1/48 (2%) of the total grant each
month thereafter. The board of directors reviewed the compensation practices of
comparable companies in making this award to Mr. Buchanan.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE
Retek does not expect cash compensation for 2000 to any of its executive
officers to be in excess of $1,000,000 or consequently affected by the
requirements of Section 162(m) of the Internal Revenue Code.
CONCLUSION
The Compensation Committee believes that long-term stockholder value is
enhanced by company and individual performance and achievement. The compensation
plans that the Compensation Committee will adopt for the executive officers of
Retek will be based on achievement of performance goals, as well as competitive
pay practices. The Compensation Committee believes that one of its most
important functions in serving the interests of the stockholders is to attract,
motivate and retain talented executive officers in this competitive environment.
In this regard, equity compensation in the form of stock options is vital to
this objective and, therefore, to the long term success of Retek.
Compensation Committee
N. Ross Buckenham
Charles H. Gaylord, Jr.
11
<PAGE> 15
PERFORMANCE GRAPH
The following graph compares the cumulative total return to stockholders
for Retek, the NASDAQ Stock Market Index-U.S. and the Chase H & Q Computer
Software Index. The graph assumes that $100 was invested in our common stock and
in each index on November 18, 1999, the date of our initial public offering, and
assumes reinvestment of dividends. No dividends have been declared or paid on
our common stock. Stockholder returns over the indicated period should not be
considered indicative of future stockholder returns.
COMPARISON OF 2-MONTH CUMULATIVE TOTAL RETURN*
AMONG RETEK, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE CHASE H&Q COMPUTER SOFTWARE INDEX
<TABLE>
<CAPTION>
RETEK INC. CHASE H&Q
---------- NASDAQ STOCK COMPUTER SOFTWARE
MARKET (U.S.) INDEX INDEX
------------------- -----------------
<S> <C> <C> <C>
11/18/99 100.00 100.00 100.00
12/31/99 501.67 136.67 160.85
</TABLE>
- -------------------------
* $100 INVESTED ON 11/18/1999 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
12
<PAGE> 16
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation for the
fiscal years ended December 31, 1999 and 1998 paid for services rendered by our
chairman and chief executive officer and our four other highest-paid executive
officers who earned more than $100,000 during the fiscal year ended December 31,
1999. These individuals are collectively referred to as the named executive
officers.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
----------------------------------------- UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY ($) BONUS ($) OTHER ($) OPTIONS(1)
- ---------------------------- ---- ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
John Buchanan........................... 1999 250,000 106,250 0 591,100
Chairman and Chief Executive Officer 1998 200,000 97,500 0 30,000
Gordon Masson........................... 1999 200,000 66,700 0 403,700
President 1998 150,000 170,035 0 37,500
John L. Goedert......................... 1999 190,000 81,288 0 374,100
Senior Vice President, 1998 150,000 90,000 0 35,000
Research & Development
David A. J. Bagley...................... 1999 170,000 49,610 0 201,800
Vice President, 1998 130,000 85,000 0 8,000
Product Strategy & Marketing
Victor Holysh........................... 1999 150,000 35,683 0 176,800
Vice President, Services 1998 83,016 21,000 35,000(2) 25,000
</TABLE>
- -------------------------
(1) Named executive officers were granted options to purchase stock of HNC early
in fiscal 1999. In late 1999, in connection with our initial public
offering, we granted options to our employees, including the named executive
officers, subject to their agreeing to cancel certain of their HNC stock
options. The tables below under the heading "Stock Option Grants in Fiscal
1999" set forth the amount of each issuer's stock options granted to the
named executive officers during fiscal 1999. All stock options granted to
the named executive officers during fiscal 1998 were exercisable solely for
HNC stock. Eighty percent (80%) of the HNC stock options granted to the
named executive officers during fiscal 1999 and fifty percent (50%) of the
HNC stock options granted to the named executive officers during fiscal 1998
were cancelled in connection with our stock option exchange program, which
is described below. Upon completion of HNC's spinoff of Retek, the remaining
HNC stock options held by the named executive officers will expire if not
exercised within three months after the spinoff. Prior to our initial public
offering, our employees, including the named executive officers, were
offered the opportunity to receive grants of options to purchase our common
stock in return for their agreeing to cancel all HNC stock options held by
them which were scheduled to be unvested as of March 31, 2000. Pursuant to
this stock option exchange program, the number of HNC stock options
cancelled by each of
13
<PAGE> 17
the named executive officers in return for their being granted options to
purchase our common stock is set forth below:
<TABLE>
<CAPTION>
NUMBER OF HNC OPTIONS
CANCELLED UNDER THE OPTION
NAMED EXECUTIVE OFFICER EXCHANGE PROGRAM
- ----------------------- --------------------------
<S> <C>
John Buchanan............................ 66,500
Gordon Masson............................ 52,500
John L. Goedert.......................... 48,750
David A.J. Bagley........................ 35,250
Victor Holysh............................ 23,750
</TABLE>
(2) Represents moving and relocation expenses incurred by Mr. Holysh and
reimbursed by Retek in connection with Mr. Holysh's relocation to
Minneapolis, Minnesota.
STOCK OPTION GRANTS IN FISCAL 1999
The following tables set forth information regarding stock options covering
Retek and HNC common stock granted to the named executive officers during the
fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS OF RETEK STOCK OPTIONS(1)
-------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN ($ PER ----------------------------
NAME GRANTED FISCAL YEAR(2) SHARE) 5% ($) 10% ($)
- ---- ---------- -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
John Buchanan.......... 591,100 8.1 10 3,717,396 9,420,612
Gordon Masson.......... 403,700 5.5 10 2,538,848 6,433,938
John L. Goedert........ 374,100 5.1 10 2,352,695 5,962,191
David A. J. Bagley..... 201,800 2.8 10 1,269,109 3,216,172
Victor Holysh.......... 176,800 2.4 10 1,111,886 2,817,737
</TABLE>
- -------------------------
(1) We granted these stock options to the named executive officers in connection
with the initial public offering of our common stock. In order to receive
these option grants, the named executive officers agreed to cancel a portion
of their options to purchase HNC common stock under our stock option
exchange program. The table in the footnote under the "Summary Compensation
Table" above sets forth the number of HNC stock options cancelled by each
named executive officer in connection with the receipt of our stock options
under our stock option exchange program. The stock options vest 25% on the
first anniversary of the date of grant and thereafter at the rate of 2.083%
per month for the following 36 months.
(2) Based on an aggregate of 7,316,050 shares underlying options we granted
during fiscal 1999 to our employees.
(3) 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, in the price of our common
stock.
14
<PAGE> 18
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS OF HNC STOCK OPTIONS(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(4)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED YEAR(2) ($ PER SHARE) DATE(3) 5%($) 10%($)
- ---- ---------- ---------- ------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
John Buchanan......... 30,000 0.8% 26.75 1/28/09 504,688 1,278,978
Gordon Masson......... 25,000 0.6% 26.75 1/28/09 420,573 1,065,815
John L. Goedert....... 25,000 0.6% 26.75 1/28/09 420,573 1,065,815
David A. J. Bagley.... 25,000 0.6% 26.75 1/28/09 420,573 1,065,815
Victor Holysh......... 6,250 0.2% 26.75 1/28/09 105,143 266,454
</TABLE>
- -------------------------
(1) The stock options vest 20% on each of the first three anniversaries of the
date of grant and 40% on the fourth anniversary of the date of grant.
(2) Based on an aggregate of 3,860,868 shares underlying options granted by HNC
during 1999 to employees of HNC and its subsidiaries.
(3) Eighty percent of the HNC options granted to the named executive officers in
1999 were cancelled in connection with the Company's stock option exchange
program. Upon completion of HNC's spinoff of Retek, the remaining HNC stock
options held by the named executive officers will expire if not exercised
within three months after the spinoff.
(4) 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, in the price of HNC's common
stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following tables set forth information with respect to the named
executive officers concerning Retek and HNC option exercises in 1999 and
unexercised stock options to purchase Retek and HNC common stock held as of
December 31, 1999. The "value realized" figures are based on the fair market
value of our common stock at the exercise date, minus the per share exercise
price, multiplied by the number of options exercised. The "value of unexercised
in-the-money options" figures in the right-hand column are based on the market
value of our common stock and HNC stock, at December 31, 1999, of $75.25 and
$105.75, respectively, minus the per share exercise price of the applicable
option, multiplied by the number of shares issuable upon exercise of the option.
RETEK OPTIONS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF SHARES OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
ACQUIRED ON EXERCISE 1999(#) DECEMBER 31, 1999($)
-------------------------- --------------------------- ---------------------------
EXERCISED VALUE REALIZED
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Buchanan........ 0 0 0 591,100 0 38,569,275
Gordon Masson........ 0 0 0 403,700 0 26,341,425
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF SHARES OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
ACQUIRED ON EXERCISE 1999(#) DECEMBER 31, 1999($)
-------------------------- --------------------------- ---------------------------
EXERCISED VALUE REALIZED
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John L. Goedert...... 0 0 0 374,100 0 24,410,025
David A. J. Bagley... 0 0 0 201,800 0 13,167,450
Victor Holysh........ 0 0 0 176,800 0 14,563,800
</TABLE>
HNC OPTIONS (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON EXERCISE DECEMBER 31, 1999(#) DECEMBER 31, 1999($)
-------------------------- --------------------------- ---------------------------
EXERCISED VALUE REALIZED
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Buchanan........ 0 0 90,000 13,500 6,761,250 1,027,125
Gordon Masson........ 30,625 1,152,194 0 14,375 0 1,086,406
John L. Goedert...... 34,772 1,337,692 1,250 13,750 95,000 1,040,313
David A. J. Bagley... 14,500 554,350 0 8,250 0 641,250
Victor Holysh........ 5,860 200,447 390 1,250 28,543 98,750
</TABLE>
- -------------------------
(1) Upon completion of HNC's spinoff of Retek, the remaining HNC stock options
held by the named executive officers will expire if not exercised within
three months after the spinoff.
EQUITY-BASED COMPENSATION PROGRAMS IN WHICH THE NAMED EXECUTIVE OFFICERS
PARTICIPATE
STOCK OPTION PLAN. We adopted the 1999 equity incentive plan in connection
with our initial public offering in order to provide grants of stock options and
other equity-based compensatory awards to our employees and consultants
generally. Nine million shares of our common stock have been authorized for
issuance under the equity incentive plan, with an annual increase, beginning
January 1, 2001, equal to the least of (i) four percent of the total outstanding
shares of our common stock as of that January 1, (ii) two million shares or
(iii) an amount of shares determined by our board of directors. The equity
incentive plan will be administered by our board of directors or its
compensation committee, with certain functions being delegated to our Chief
Financial Officer. Options granted under the equity incentive plan may be
incentive stock options or non-qualified stock options. The exercise price of an
incentive stock option may not be less than 100% of the fair market value of our
common stock on the date of grant and the exercise price of a non-qualified
stock option may not be less than 85% of the fair market value of our common
stock on the date of grant. Options generally expire three months after an
optionee's termination of employment or service. If an optionee's employment or
service is terminated under certain circumstances following a change in control
(as defined in the plan), all of the optionee's stock options will become
immediately exercisable.
EMPLOYEE STOCK PURCHASE PLAN. We adopted the 1999 employee stock purchase
plan in connection with our initial public offering in order to provide an
additional incentive for our employees to invest in our common stock. Seven
hundred thousand shares of our common stock have been authorized for issuance
under the employee stock purchase plan, with an annual increase,
16
<PAGE> 20
beginning January 1, 2001, equal to the least of (i) one percent of the total
outstanding shares of our common stock as of that January 1, (ii) 600,000 shares
or (iii) an amount determined by our board of directors. A committee appointed
by our board of directors administers the employee stock purchase plan.
Participants may purchase shares of our common stock under the plan at the end
of four six-month purchase periods during a two-year offering period. At the
time of each purchase, a participant's accumulated payroll deductions will be
applied to the purchase of our common stock at a price equal to the lesser of
85% of the fair market value of our common stock at the beginning of the
two-year offering period or 85% of the fair market value of our common stock at
the end of the applicable six-month purchase period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with our initial public offering, we entered into agreements
with HNC that provide for the separation of our business from HNC and other
matters relating to the potential distribution by HNC to its stockholders of all
of the shares of our common stock it currently holds. We also entered into
certain agreements with certain of our officers and directors. These agreements
are summarized below:
SEPARATION AGREEMENT
The separation agreement covers the principal corporate transactions
required to separate our company from HNC and other agreements that govern our
relationship.
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES. HNC transferred all of
the shares of the outstanding common stock of Retek Information Systems and
other assets to us and we assumed and agreed 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 did not make any representation or warranty to us with respect to
any asset it transferred to us and HNC transferred the assets to us on an "as
is, where is" basis.
THE DISTRIBUTION. HNC has stated that it currently intends 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.
HNC has 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, at HNC's direction, promptly take all actions necessary
or desirable to effect these transactions.
COVENANTS AND INDEMNIFICATION REGARDING THE DISTRIBUTION. We agreed 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
17
<PAGE> 21
Internal Revenue Service in connection with the distribution. In particular,
under the separation agreement, we agreed 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 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 agreed to indemnify HNC, on
an after-tax basis, for any tax liability incurred by HNC with respect to the
distribution as a result of its 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 a 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.
INDEMNIFICATION. We agreed 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;
18
<PAGE> 22
- any breach of the separation agreement or the other agreements between us
and HNC related to our separation from HNC;
- any material untrue or 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 our initial public offering or any
subsequent offering or transaction involving our securities.
However, our indemnification of HNC does not apply to any liability arising from
information relating to HNC provided to us by HNC.
HNC similarly agreed 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 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 our and HNC's rights and obligations
arising from the agreements between us relating to the distribution, we released
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. HNC has similarly released us.
EXPENSES. In general, unless otherwise provided for in the separation
agreement or any other agreement, we have agreed to pay the costs and expenses
incurred in connection with any offering of our securities before the
distribution.
ACCESS TO INFORMATION. Generally, we and HNC have agreed, 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 have also agreed to keep
our books and records for a specified period of time. Also, we and HNC have
agreed 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.
CORPORATE RIGHTS AGREEMENT
We entered into a corporate rights agreement with HNC that contains
agreements that continue for various time periods following our initial public
offering and provided HNC with registration rights relating to the shares of our
common stock it holds.
HNC OPTIONS TO PURCHASE ADDITIONAL SHARES. We have granted 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
19
<PAGE> 23
issuance of any of our equity securities, 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);
- 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 have granted HNC registration rights that 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 also has 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 are assignable by HNC and its
assigns. The corporate rights agreement also contains indemnification and
contribution provisions under which we and HNC have agreed to indemnify each
other and our 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 also have the right to fill any vacancy caused by the death, resignation or
removal of any of its designees.
In addition, under the terms of the corporate rights agreement, the
following corporate actions, including those taken by its subsidiary Retek
Information Systems, 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;
- 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 appointment or termination of our chief executive officer or chief
financial officer;
- the amendment or adoption by us of any employee benefit or stock option
plan, other than those previously approved by HNC;
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- 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 or any preferred
stock, or adversely affect HNC's rights as our majority stockholder; and
- any adoption or amendment of a stockholders' rights plan or other
anti-takeover defense.
In addition, the following actions require the approval of at least two of
the HNC board designees:
- the sale, lease, exchange or other disposition of all or a substantial
portion 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;
- the formation and structure of the committees of our board; and
- the commencement or settlement by us of any litigation, except where
potential liabilities and expenses are not expected to exceed $500,000.
The approval of the HNC board designees and HNC will no longer be required
when HNC owns less than 50% of the outstanding shares of our capital stock.
Furthermore, HNC has agreed that it will not vote in favor of, or take any
other action that would result in, the removal without cause of any of our
directors, except the HNC board designees or our chief executive officer if, for
any reason, he ceases to be our chief executive officer. In addition, John
Buchanan has entered into an agreement that if, for any reason, he ceases to be
our chief executive officer he will resign from its board of directors if so
requested by HNC or a majority of the members of our board of directors.
COVENANTS. We have agreed 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 also provides 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 have also entered into a services agreement with HNC under which HNC
agreed 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 pay HNC a fee for these services
equal to HNC's cost in providing these services. The fee is payable monthly in
arrears, 30 days after the close of each month. No other fees are payable in
connection with this agreement. The services agreement expires on November 23,
2000 and any and all services can be earlier terminated by us upon 30 days'
advance notice or upon other specified conditions.
LICENSE AGREEMENT
We and HNC entered into a technology license agreement under which HNC
provides us with the use of Select Profile, which includes HNC's context vectors
predictive software technology. The license is non-exclusive, perpetual,
world-wide and royalty-free and limits our use of this HNC technology to develop
and market products and services to retailers and their trading partners in the
supply chain. Under the terms of the license agreement, HNC is not obligated to
provide us any updates to their predictive software technology. The license
agreement contains provisions prohibiting the transfer or sublicensing to third
parties of the technology that HNC has licensed to us.
TAX SHARING AGREEMENT
We and our subsidiaries continue to be included in the consolidated group
of HNC for United States federal income tax purposes and a combined,
consolidated or unitary group of HNC for various state and local income tax
purposes. We and HNC have entered into a tax sharing agreement. The tax sharing
agreement requires us to make payments to HNC equal to the amount of income
taxes which would be paid by us, subject to some adjustments, as if we and each
of its 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 on or
after January 1, 1999 in which we are included in HNC's consolidated group.
Subject to the immediately preceding sentence, HNC is responsible for filing,
and paying taxes with respect to, all consolidated, combined or unitary returns
which include both HNC and us. We and our subsidiaries continue to be directly
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. Generally, liabilities resulting from audit
adjustments to tax returns for periods during which we and HNC file consolidated
returns are the responsibility of HNC if such tax adjustments are attributable
to HNC or its subsidiaries. However, we are solely responsible, and will
indemnify and hold HNC harmless, for tax adjustments arising out of, or in
connection with, the transactions contemplated by the separation agreement,
other than the distribution itself. The tax sharing agreement provides that the
indemnity provisions of the separation agreement shall govern taxes resulting
from the distribution.
TREATMENT OF OUTSTANDING STOCK OPTIONS
In connection with our separation from HNC, our executive officers and
other employees were 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. If the distribution occurs, then options to purchase HNC common stock then
held by our employees, to the extent they are unvested at the time of the
distribution, will immediately terminate upon the distribution, and to the
extent they are vested at the time of the distribution, will remain exercisable
for 90 days after the distribution at which time they will terminate. Options to
purchase our common stock granted in exchange for the cancellation of options to
purchase HNC common stock have an exercise price of $10.00 per share. These
options vest 25%
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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 us, the vesting
schedules will be credited by an additional 12 months. Furthermore, Mr. Buchanan
will receive the same option vesting credit in the event that Mr. Buchanan's
employment with us is terminated without cause prior to the distribution. For
purposes of this arrangement, "cause" is defined as intentional gross misconduct
by Mr. Buchanan in the performance of his duties that results in material injury
to us.
ACQUISITION OF WEBTRAK LIMITED
On October 29, 1999, we acquired all of the outstanding capital stock of
WebTrak Limited. In connection with the acquisition we issued to Jeremy Thomas a
note, paid on November 26, 1999, in the principal amount of $4,106,667.
We have also entered into an employment agreement with Mr. Thomas. Mr.
Thomas' employment agreement provides for a two-year term of employment, during
which he will serve as president of retail.com. Mr. Thomas earns a monthly
salary of $15,833 and is eligible to participate in our employee benefit
programs made available to executives from time to time. As a long-term
incentive, we have granted Mr. Thomas 250,000 stock options at a per share
exercise price of $10.00. In the event that we terminate Mr. Thomas' employment
other than for cause or if he resigns for good reason, he will be entitled to
receive a lump-sum severance payment equal to his base salary multiplied by the
number of whole and partial years remaining in the term of his contract, with a
minimum severance payment of one year's base salary.
Mr. Thomas has agreed to refrain from competing with us until October 29,
2004 or, if longer, until two years following his termination of employment with
us. He has also agreed not to solicit our customers or employees during this
period.
SALE OF SOFTWARE SOLUTIONS TO GANDER MOUNTAIN LLC
During 1999 we sold $1,430,025 worth of our software solutions, including
Retek Data Warehouse and Retek Merchandising System, to Gander Mountain LLC. Mr.
Stephen E. Watson, who currently serves as one of our directors, is chief
executive officer of Gander Mountain and has served in that capacity since
November 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities and Exchange Act of 1934, as amended,
our directors, executive officers, and any persons holding more than ten percent
of our common stock are required to report to the Securities and Exchange
Commission and the NASDAQ National Market their initial ownership of our stock
and any subsequent changes in that ownership. Based on a review of Forms 3, 4
and 5 under the Securities Exchange Act furnished to us, we believe that during
fiscal year 1999, our officers, directors and holders of more than 10 percent of
our common stock filed all Section 16(a) reports on a timely basis except for
(i) a trade involving our common stock by the
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spouse of Duncan Angove that was reported late on a Form 5 timely filed with the
Securities and Exchange Commission and (ii) a trade involving of our common
stock by the spouse of Gordon Masson that was reported late on a Form 5 timely
filed with the Securities and Exchange Commission.
DEADLINE FOR RECEIPT OF STOCKHOLDER
PROPOSALS FOR 2001 ANNUAL MEETING
If you want us to consider including a proposal in next year's proxy
statement, you must deliver it in writing to Retek Inc., Midwest Plaza, 801
Nicollet Mall, 11th Floor, Minneapolis, MN 55402, Attention: Secretary, no later
than January 17, 2001.
If you want to present a proposal at next year's annual meeting, but do not
wish to have it included in our proxy statement, you must deliver it in writing
to us at the above address no earlier than February 15, 2001 and no later than
March 16, 2001.
By Order of the Board of Directors
/s/ Gregory A. Effertz
Gregory A. Effertz
Chief Financial Officer, Vice
President, Finance & Administration,
Treasurer and Secretary
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[PROXY CARD]
DETACH HERE
PROXY
RETEK INC.
PROXY FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF RETEK INC.
The undersigned stockholder of Retek Inc., a Delaware corporation ("Retek"),
hereby appoints John Buchanan and Gregory A. Effertz, as proxies for the
undersigned, with full power of substitution, to attend the 2000 Annual Meeting
of Stockholders of Retek to be held on Tuesday, May 16, 2000 at 1:00 p.m., local
time, at the Hilton Minneapolis, 1001 Marquette Avenue South, Minneapolis,
Minnesota, and at any adjournment(s) or postponement(s) thereof, to cast on
behalf of the undersigned all votes that the undersigned is entitled to cast at
such meeting and otherwise to represent the undersigned at the meeting, with the
same effect as if the undersigned were present. The undersigned hereby revokes
any proxy previously given with respect to such shares.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER.
IF NO SUCH DIRECTIONS ARE INDICATED, THE PROXIES WILL HAVE AUTHORITY TO VOTE FOR
THE NOMINEE FOR DIRECTOR AND FOR THE PROPOSALS.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement.
--------------- ---------------
SEE REVERSE SEE REVERSE
SIDE SIDE
--------------- ---------------
<PAGE> 29
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION IS MADE, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE NOMINEE FOR DIRECTOR AND
FOR THE FOLLOWING PROPOSALS AND OTHERWISE IN THE DISCRETION OF THE PROXIES AT
THE MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
1. Election of Class I Directors:
Nominee: (01) Glen A. Terbeek
FOR THE WITHHELD FROM
NOMINEE [ ] THE NOMINEE [ ]
MARK
HERE IF MARK
YOU PLAN HERE FOR
TO [ ] ADDRESS
ATTEND CHANGE
THE AND NOTE [ ]
MEETING BELOW
Nominee: (01) Stephen E. Watson
FOR THE WITHHELD FROM
NOMINEE [ ] THE NOMINEE [ ]
MARK
HERE IF MARK
YOU PLAN HERE FOR
TO [ ] ADDRESS
ATTEND CHANGE
THE AND NOTE [ ]
MEETING BELOW
2. Ratification of appointment by
Retek's Board of Directors of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP to serve
as Retek's independent auditors for [ ] [ ] [ ]
the 2000 fiscal year.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon and date. If the shares are held
jointly, each holder should sign. When signing as an attorney, executor,
administrator, trustee, guardian or as an officer signing for a corporation,
please give full title under signature.
Signature: ________________________________ Date: ______________________________
