<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 30, 1996
HNC SOFTWARE INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-26146 33-0248788
(Commission File Number) (I.R.S. Employer Identification Number)
5930 Cornerstone Court West, San Diego, CA 92121
(Address of Principal Executive Offices)
(619) 546-8877
(Registrant's Telephone Number, Including Area Code)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS.
On August 30, 1996, HNC Software Inc., a Delaware corporation (the
"Company" or "HNC"), acquired control of all of the stock of Risk Data
Corporation, a California corporation ("RDC"), pursuant to the merger (the
"Merger") of HNC Merger Corp., a Delaware corporation that was a wholly-owned
subsidiary of the Company ("Sub") with and into RDC, with RDC surviving the
Merger and becoming a wholly-owned subsidiary of the Company. The Merger was
effected pursuant to an Agreement of Merger dated as of August 30, 1996 between
Sub and RDC and an Agreement and Plan of Reorganization dated as of July 19,
1996 (the "Plan") by and among HNC, Sub and RDC. The Company intends to account
for the Merger as a "pooling of interests" transaction for accounting purposes
and the Merger was structured to be a "tax-free" reorganization for federal
income tax purposes. Although most of the directors of RDC were replaced as a
result of the Merger by persons affiliated with HNC, the executive officers of
RDC were not changed as a result of the Merger.
Prior to consummation of the Merger, RDC, a privately held, insurance
information technology services firm based in Irvine, California, was engaged in
the business of developing and marketing analytical benchmarking and risk
management software products primarily for insurance carriers, state insurance
funds and third party administrators ("TPAs"). The Company currently plans to
continue and augment RDC's historical business. RDC's assets include software
products that employ statistical modeling techniques to assist its customers in
analyzing data and making business decisions. RDC's flagship product, MIRA, is a
software product that includes an insurance history claims database that assists
insurance companies, TPAs and state workers' compensation funds in estimating
future loss reserves for workers' compensation insurance claims. RDC's
"CompCompare" product enables insurance companies to compare their claims
history to industry averages comprised of many other insurers contained in a
claims history database, and RDC's "ProviderCompare" product enables insurers
and insurance administrators to quickly compare the relative cost of various
healthcare providers. Following the Merger, RDC will continue to operate out of
its Irvine, California headquarters.
Pursuant to the terms of the Plan, each share of RDC Common Stock ("RDC
Common Stock") that was issued and outstanding immediately prior to the
effective time of the Merger was exchanged for approximately 0.57999 shares of
the Company's Common Stock, each share of RDC Series A Preferred Stock ("RDC
Series A Stock") that was issued and outstanding immediately prior to the
effective time of the Merger was exchanged for approximately 0.61893 shares of
the Company's Common Stock and each share of RDC Series B Preferred Stock ("RDC
Series B Stock") that was issued and outstanding immediately prior to the
effective time of the Merger was exchanged for approximately 0.86747 shares of
the Company's Common Stock. In addition, upon consummation of the Merger, each
issued and outstanding option to purchase shares of RDC Common Stock that was
outstanding immediately prior to the effectiveness of the Merger (an "RDC
Option") was assumed by the Company and converted into an option to purchase
that number of shares of the Company's Common Stock determined by multiplying
the number of shares of RDC Common Stock subject to such RDC Option immediately
prior to the effectiveness of the Merger by 0.57999 (the same conversion rate at
which each share of RDC Common Stock was converted into HNC Common Stock in the
Merger), at an exercise price per share of the Company's Common Stock equal to
the exercise price per share of RDC Common
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Stock that was in effect for such RDC Option immediately prior to the
effectiveness of the Merger divided by 0.57999. Pursuant to these exchange
ratios, in the Merger a total of 1,891,456 shares of the Company's Common Stock
were issued in exchange for all the issued and outstanding shares of RDC's
capital stock and options to purchase a total of 248,504 shares of the Company's
Common Stock were issued by the Company upon its assumption of all the issued
and outstanding RDC Options. The principal RDC shareholders from whom the
Company acquired RDC's stock included Mark S. Hammond, RDC's founder and
President, and two venture capital investment firms (and their affiliated
companies) who had representatives on RDC's Board of Directors.
The above exchange ratios were determined on the basis of: (i) the
assumed value of RDC, as determined by the Company's management following its
review of RDC's business and financial position and discussions with RDC's
management; (ii) the relative merger preference rights of the RDC Common Stock,
RDC Series A Preferred Stock and RDC Series B Preferred Stock set forth in RDC's
Restated Articles of Incorporation; (iii) other information provided to the
Company's management by certain investment banking firms; (iv) a comparison of
of certain financial and stock market information for the Company and RDC with
similar types of information for certain other companies in businesses
comparable to those of the Company and RDC.
The shares of the Company's Common Stock received by the former RDC
shareholders and the options to purchase HNC Common Stock issued to the former
RDC stock option holders have not been registered under the Securities Act of
1933, as amended (the "1933 Act"), in reliance upon the exemption from
registration provided by Section 3(a)(10) thereof. The Company intends to
register the issuance of the shares of the Company's Common Stock issuable upon
the exercise of such stock options on a Form S-8 registration statement on or
before October 30, 1996. In order to comply with the requirements for pooling
accounting treatment, the affiliates of the Company and the former affiliates of
RDC have agreed not to sell or transfer their shares of the Company's stock
until the Company has publicly released a report including the combined
financial results of the Company and RDC covering a period of at least thirty
(30) days of post-Merger combined operations of the Company and RDC.
Furthermore, the officers, directors, ten percent shareholders and other
"affiliates" of RDC (within the meaning of Rule 145 or Rule 405 of the
Securities Act) have each entered into an affiliates agreement, primarily to
enforce certain legal restrictions on the transfer of the shares of the
Company's Common Stock issued to the RDC shareholders in the Merger that are
imposed by Rule 145(d) under the 1933 Act and, if applicable, Rule 144 under the
1933 Act, and to help assure the tax-free treatment of the Merger.
Pursuant to the terms of the Plan, the Company, RDC, the shareholders
of RDC and an escrow agent entered into an escrow agreement, pursuant to which
eight and three-quarters percent (8.75%) of the shares of HNC Common Stock that
were issued in the Merger to the RDC shareholders were placed in an escrow
account to secure and collateralize certain indemnification obligations of RDC
to HNC and Sub.
In addition, the Company and the former RDC shareholders have entered
into a Registration Rights Agreement, pursuant to which HNC granted certain
registration rights on Form S-3 in connection with the resale of shares of the
Company's Common Stock issued in the Merger. Under the terms of the Registration
Rights Agreement, at any time (a) after such time as the Company has publicly
released a report including the combined financial results of HNC and RDC
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for a period of at least thirty (30) days of post-Merger combined operations of
HNC and RDC and (b) before the second anniversary of the Effective Time, the
holders of at least thirty percent (30%) of the then outstanding shares of the
Company's Common Stock issued to former RDC shareholders in the Merger may
request HNC in writing to effect a registration on Form S-3 under the 1933 Act
covering the resale by such holders of any or all of such shares of the
Company's Common Stock at an aggregate price to the public of at least
$2,000,000, and any related qualification or compliance with respect to all or a
part of such shares that are issued and outstanding and then owned by such
holders.
Contemporaneously with the Merger, Mark S. Hammond, who was the
President, a director and principal shareholder of RDC immediately prior to the
effective time of the Merger, also entered into: (i) a three-year Employment
Agreement with RDC, as the surviving corporation in the Merger, providing for,
among other things, certain terms of employment at a specified minimum salary;
and (ii) a Noncompetition Agreement with the Company providing, among other
things, that Mr. Hammond will not engage in certain activities that the Company
views as competitive to its interests for a period of up to three years.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
It is impracticable for the Company to currently provide the required
financial statements for RDC called for by this Item. Pursuant to paragraph (a)
(4) of Item 7, the financial statements required to be filed under paragraph (a)
of this Item 7 will be filed as soon as practicable, but not later than November
13, 1996.
(b) Pro Forma Financial Information.
It is impracticable for the Company to currently provide the required
financial statements for RDC called for by this Item. Pursuant to paragraph (b)
(2) and (a) (4) of Item 7, the pro forma financial statements required to be
filed under paragraph (b) of this Item 7 will be filed as soon as practicable,
but not later than November 13, 1996.
(c) Exhibits.
The following exhibits are filed herewith:
2.01 Agreement and Plan of Reorganization dated as of July 19, 1996
by and among the Company, HNC Merger Corp. and Risk Data
Corporation, as amended. Pursuant to Item 601(b)(2) of
Regulation S-K, certain schedules have been omitted but will
be furnished supplementally to the Commission upon request.
2.02 Agreement of Merger dated as of August 30, 1996 by and between
HNC Merger Corp. and Risk Data Corporation.
4.01 Registration Rights Agreement dated as of August 30, 1996 by
and among the Company and the former shareholders of Risk Data
Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: September 13, 1996
HNC SOFTWARE INC.
By: /s/ RAYMOND V. THOMAS
________________________________
Raymond V. Thomas
Chief Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<S> <C>
2.01 Agreement and Plan of Reorganization dated as of July 19, 1996 by and among the
Company, HNC Merger Corp. and Risk Data Corporation, as amended
2.02 Agreement of Merger dated as of August 30, 1996 by and between HNC Merger Corp. and
Risk Data Corporation
4.01 Registration Rights Agreement dated as of August 30, 1996 by and among the Company
and the former shareholders of Risk Data Corporation.
</TABLE>
<PAGE> 1
EXHIBIT 2.01
Agreement and Plan of Reorganization dated as of July 19, 1996 by and among the
Company, HNC Merger Corp. and Risk Data Corporation, as amended
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made
and entered into as of July 19, 1996 (the "AGREEMENT DATE") by and among HNC
SOFTWARE INC., a Delaware corporation ("HNC"), HNC MERGER CORP., a Delaware
corporation that is a wholly-owned subsidiary of HNC ("SUB") and RISK DATA
CORPORATION, a California corporation ("RDC").
RECITALS
A. The parties intend that, subject to the terms and conditions of this
Agreement, Sub will be merged with and into RDC in a reverse triangular merger,
with RDC to be the surviving corporation of such merger, all pursuant to the
terms and conditions of this Agreement and applicable law. The parties also
intend for such merger to qualify as a "pooling of interests" transaction for
accounting purposes.
B. Upon the effectiveness of the Merger, the capital stock of RDC that
is outstanding prior thereto will be converted into shares of HNC Common Stock
plus cash for eliminated fractional shares, the employee stock options to
purchase shares of RDC Common Stock that are outstanding immediately prior to
the Effective Time under RDC's 1992 Stock Option Plan shall be assumed by HNC
and converted into options to purchase HNC Common Stock and Sub shall be merged
with and into RDC, all as provided herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
will have the meanings set forth below:
1.1 The "MERGER" means the statutory merger of Sub with and
into RDC to be effected pursuant to the terms and conditions of this Agreement.
1.2 The "EFFECTIVE TIME" means the time and date on which the
Merger first becomes legally effective under the laws of the States of
California and Delaware as a result of the filing with the Delaware Secretary of
State of an Agreement of Merger between Sub and RDC in substantially the form of
Exhibit A (the "AGREEMENT OF MERGER") or, in lieu thereof at HNC's option, a
Certificate of Merger (the "CERTIFICATE OF Merger"), conforming to the
requirements of Section 252 of the Delaware General Corporation Law, and the
filing with the California Secretary of State of the Agreement of Merger (and
related officers' certificates).
1.3 "HNC COMMON STOCK" means HNC's Common Stock, $0.001 par
value per share.
1.4 "HNC PRICE PER SHARE" means $35.631 per share of HNC
Common Stock.
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1.5 "HNC CLOSING AVERAGE PRICE PER SHARE" means the average of
the closing prices per share of HNC Common Stock as quoted on the Nasdaq
National Market (or such other exchange or quotation system on which HNC Common
Stock is then traded or quoted) and reported in The Wall Street Journal for the
ten (10) trading days immediately preceding (but not including) the Closing Date
(as defined in Section 7.1); provided, however, that notwithstanding the
foregoing, the HNC Closing Average Price Per Share shall in no event be greater
than the HNC Price Per Share nor less than eighty percent (80%) of the HNC Price
Per Share.
1.6 "RDC COMMON STOCK" means RDC's Common Stock, no par value
per share. "RDC SERIES A PREFERRED STOCK" means RDC's Series A Preferred Stock,
no par value per share. "RDC SERIES B PREFERRED STOCK" means RDC's Series B
Preferred Stock, no par value per share. "RDC PREFERRED STOCK" means the RDC
Series A Preferred Stock and RDC Series B Preferred Stock, collectively. "RDC
STOCK" means RDC Common Stock and RDC Preferred Stock, collectively.
1.7 "RDC OPTIONS" means, collectively: (i) options to purchase
RDC Common Stock granted by RDC to RDC employees under RDC's 1992 Stock Option
Plan (the "RDC OPTION PLAN"); and (ii) options to purchase an aggregate of
247,000 shares of RDC Common Stock granted to certain employees and/or
consultants of RDC in March 1990.
1.8 "RDC DERIVATIVE SECURITIES" means, collectively, (a) any
warrant, option, right or other security that entitles the holder thereof to
purchase or otherwise acquire any shares of the capital stock of RDC
(collectively, "RDC STOCK RIGHTS"); (b) any note, evidence of indebtedness,
stock or other security of RDC that is convertible into or exchangeable for any
shares of the capital stock of RDC or any RDC Stock Rights ("RDC CONVERTIBLE
SECURITY"); and (c) any warrant, option, right, note, evidence of indebtedness,
stock or other security that entitles the holder thereof to purchase or
otherwise acquire any RDC Stock Rights or any RDC Convertible Security;
provided, however, that the term "RDC Derivative Securities" does not include
any RDC Options, any outstanding shares of RDC Series A Preferred Stock or any
outstanding shares of RDC Series B Preferred Stock.
1.9 "RDC FULLY DILUTED NUMBER" means that number of shares of
RDC Common Stock that is equal to the sum of: (a) the total number of shares of
RDC Common Stock that are issued and outstanding immediately prior to the
Effective Time; plus (b) the total number of shares of RDC Common Stock, if any,
that as of immediately prior to the Effective Time are issuable upon the
conversion of all shares of RDC Series A Preferred Stock and all shares of RDC
Series B Preferred Stock that are issued and outstanding immediately prior to
the Effective Time; plus (c) the total number of shares of RDC Common Stock
that, immediately prior to the Effective Time, are directly or indirectly
ultimately issuable by RDC upon the exercise, conversion or exchange of all RDC
Derivative Securities (if any) that are issued and outstanding immediately prior
to the Effective Time. The number of shares of RDC Common Stock subject to RDC
Options that are issued and outstanding immediately prior to the Effective Time
shall not be included in the RDC Fully Diluted Number.
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1.10 "RDC STOCKHOLDERS" means those persons who, immediately
prior to the Effective Time, hold the shares of RDC Stock that are outstanding
immediately prior to the Effective Time; provided, however, that for purposes of
Section 2.4 and Section 11 of this Agreement, the term "RDC Stockholders" means
only those RDC Stockholders (as defined above in this Section 1.11) who are
issued shares of HNC Common Stock in the Merger.
1.11 "RDC DISSENTING SHARES" means any shares of RDC Stock
that are outstanding immediately prior to the Effective Time which qualify fully
as "dissenting shares" within the meaning of Section 1300(b) of the California
Corporations Code and with respect to which dissenter's rights to require the
purchase of such dissenting shares for cash at their fair market value in
accordance with Chapter 13 of the California Corporations Code have (in
connection with the Merger) been duly and properly exercised and perfected.
1.12 "SERIES A PREFERENCE AMOUNT" means the dollar amount
equal to the product obtained by multiplying (a) $1.66 by (b) the number of
shares of RDC Series A Preferred Stock that are issued and outstanding
immediately prior to the Effective Time.
1.13 "SERIES B PREFERENCE AMOUNT" means the dollar amount
equal to the product obtained by multiplying (a) $8.72 by (b) the number of
shares of RDC Series B Preferred Stock that are issued and outstanding
immediately prior to the Effective Time.
1.14 "COMMON AMOUNT" means the dollar amount equal to the
product obtained by multiplying (a) $0.55 by (b) the number of shares of RDC
Common Stock that are issued and outstanding immediately prior to the Effective
Time.
1.15 "REMAINDER AMOUNT" means the dollar amount (if positive)
equal to Sixty-One Million Dollars ($61,000,000) minus the sum of the sum of the
Series A Preference Amount, the Series B Preference Amount and the Common
Amount.
1.16 "OPTION AMOUNT" means the dollar amount equal to "X" in
the following formula, where for purposes of such formula: (a) "O" is the total
number of shares of RDC Common Stock that are subject to all RDC Options that
are issued and outstanding immediately prior to the Effective Time (without
regard to whether the right to exercise such RDC Options has or has not vested);
(b) "R" is the Remainder Amount; and (c) "S" is the RDC Fully Diluted Number:
X = O (R + 0.55S)
______________
O + S
1.17 "PARTICIPATION AMOUNT" means the dollar amount equal to
the Remainder Amount minus the Option Amount. The "PARTICIPATION SHARES" means
the number of shares of HNC Common Stock obtained by dividing the Participation
Amount by the HNC Closing Average Price Per Share. The "PARTICIPATION NUMBER"
means the number of shares of HNC
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Common Stock obtained by dividing the Participation Shares by the RDC Fully
Diluted Number, such quotient being rounded to the fourth decimal place.
1.18 "HNC MERGER SHARES" means that number of shares of HNC
Common Stock, as presently constituted, that will be issued under this Agreement
upon the conversion of the shares of RDC Common Stock, RDC Series A Preferred
Stock and RDC Series B Preferred Stock that are issued and outstanding
immediately prior to the Effective Time and is equal to the quotient obtained by
dividing (i) the sum of the Series A Preference Amount, the Series B Preference
Amount, the Common Amount and the Participation Amount by (ii) the HNC Closing
Average Price Per Share; provided, however, that the number of HNC Merger Shares
shall not exceed the number of shares of HNC Common Stock equal to the quotient
obtained by dividing (a) Sixty-One Million Dollars ($61,000,000) minus the
Option Amount, by (b) the HNC Closing Average Price Per Share.
1.19 "SERIES A CONVERSION NUMBER" means the number of shares
of HNC Common Stock equal to the sum of (a) $1.66 divided by the HNC Closing
Average Price Per Share (such quotient being rounded to the fourth decimal
place), plus (b) the Participation Number.
1.20 "SERIES B CONVERSION NUMBER" means the number of shares
of HNC Common Stock equal to the sum of (a) $8.72 divided by the HNC Closing
Average Price Per Share (such quotient being rounded to the fourth decimal
place), plus (b) the Participation Number.
1.21 "COMMON CONVERSION NUMBER" means the number of shares of
HNC Common Stock equal to the sum of (a) $0.55 divided by the HNC Closing
Average Price Per Share (such quotient being rounded to the fourth decimal
place), plus (b) the Participation Number.
1.22 "OPTION CONVERSION NUMBER" means the number of shares of
HNC Common Stock obtained by dividing the Option Pool Shares (as defined below)
by the total number of shares of RDC Common Stock that are subject to all RDC
Options that are issued and outstanding immediately prior to the Effective Time
(without regard to whether the right to exercise such RDC Options has or has not
vested), with such quotient being rounded to the fourth decimal place. "OPTION
POOL SHARES" means the number of shares of HNC Common Stock equal to the
quotient obtained by dividing (a) the Option Amount, by (b) the HNC Closing
Average Price Per Share.
1.23 "HNC ANCILLARY AGREEMENTS" means, collectively, each
agreement, certificate or document (other than this Agreement) to which HNC is
to enter into as a party thereto, or to otherwise execute and deliver, pursuant
to or in connection with the execution of this Agreement. "SUB ANCILLARY
AGREEMENTS" means, collectively, the Agreement of Merger and each other
agreement, certificate or document (other than this Agreement) to which Sub is
to enter into as a party thereto, or to otherwise execute and deliver, pursuant
to or in connection with the execution of this Agreement. "RDC ANCILLARY
AGREEMENTS" means, collectively, the
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Agreement of Merger and each other agreement, certificate or document (other
than this Agreement) to which RDC is to enter into as a party thereto, or to
otherwise execute and deliver, pursuant to or in connection with the execution
of this Agreement.
Other capitalized terms defined elsewhere in this Agreement and not
defined in this Section 1 shall have the meanings assigned to such terms in this
Agreement.
2. PLAN OF REORGANIZATION
2.1 Conversion of Shares.
2.1.1 Conversion of Sub Stock. At the Effective Time,
each share of Common Stock of Sub that is issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without the need
for any further action on the part of the holder thereof, be converted into and
become one (1) share of RDC Common Stock that is issued and outstanding
immediately after the Effective Time, and the shares of RDC Common Stock into
which the shares of Sub Common Stock are so converted shall be the only shares
of RDC Stock that are issued and outstanding immediately after the Effective
Time.
2.1.2 Conversion of RDC Stock. At the Effective Time,
each share of RDC Common Stock, each share of RDC Series A Preferred Stock and
each share of RDC Series B Preferred Stock that is issued and outstanding
immediately prior to the Effective Time (other than any RDC Dissenting Shares as
provided in Section 2.1.3) will, by virtue of the Merger, and without the need
for any further action on the part of the holder thereof, be converted as
follows:
(a) RDC Common Stock. Each share of RDC Common
Stock that is issued and outstanding immediately prior to the Effective Time
shall be converted into a number of shares of HNC Common Stock equal to the
Common Conversion Number, subject to the provisions of Section 2.1.4 regarding
the elimination of fractional shares;
(b) RDC Series A Preferred Stock. Each share of
RDC Series A Preferred Stock that is issued and outstanding immediately prior to
the Effective Time shall be converted into a number of shares of HNC Common
Stock equal to the Series A Conversion Number, subject to the provisions of
Section 2.1.4 regarding the elimination of fractional shares; and
(c) RDC Series B Preferred Stock. Each share of
RDC Series B Preferred Stock that is issued and outstanding immediately prior to
the Effective Time shall be converted into a number of shares of HNC Common
Stock equal to the Series B Conversion Number, subject to the provisions of
Section 2.1.4 regarding the elimination of fractional shares.
2.1.3 RDC Dissenting Shares. Holders of RDC
Dissenting Shares (if any) shall be entitled to their appraisal rights under
Chapter 13 of the California Corporations
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<PAGE> 7
Code with respect to such RDC Dissenting Shares and such RDC Dissenting Shares
shall not be converted into shares of HNC Common Stock in the Merger; provided,
however, that nothing in this Section 2.1.3 is intended to remove, waive, alter
or affect HNC's conditions to Closing set forth in Sections 9.8 and 9.9 hereof,
or any other provision of this Agreement relating to RDC Dissenting Shares.
Shares of RDC Stock as to which dissenting shareholders' rights of appraisal
under the California Corporations Code have not been properly perfected shall,
when such dissenting shareholders' rights can no longer be legally exercised
under the California Corporations Code, be converted into HNC Common Stock as
provided in Section 2.1.2.
2.1.4 Fractional Shares. No fractional shares of HNC
Common Stock shall be issued in connection with the Merger. In lieu thereof,
each holder of RDC Stock who would otherwise be entitled to receive a fraction
of a share of HNC Common Stock under Section 2.1.2, after aggregating all shares
of HNC Common Stock to be received by such holder, shall instead receive from
HNC, within twenty (20) business days after the Effective Time, an amount of
cash equal to the HNC Closing Average Price Per Share (as adjusted to reflect
any Capital Change (as defined below) of HNC) multiplied by the fraction of a
share of HNC Common Stock to which such holder would otherwise be entitled to
receive.
2.1.5 Purpose. It is the purpose and intent of the
foregoing provisions of this Section to carry into effect the merger
"liquidation" preference provisions set forth in Section 2, Part B of Article
III of RDC's Restated Articles of Incorporation, as such is in effect
immediately prior to the Effective Time.
2.2 Assumption and Conversion of RDC Options.
2.2.1 Assumption by HNC. Each RDC Option that is
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and at the Effective Time and without the need for any further action on
the part of any holder thereof, be assumed by HNC and converted into an option
(an "HNC OPTION") to purchase that number of shares of HNC Common Stock
determined by multiplying the number of shares of RDC Common Stock subject to
such RDC Option immediately prior to the Effective Time by the Option Conversion
Number, at an exercise price per share of HNC Common Stock equal to the exercise
price per share of RDC Common Stock that was in effect for such RDC Option
immediately prior to the Effective Time divided by the Option Conversion Number;
provided, however, that if the foregoing calculation would result in an assumed
and converted RDC Option being converted into an HNC Option that, after
aggregating all the shares of HNC Common Stock issuable upon the exercise of
such HNC Option, would be exercisable for a fraction of a share of HNC Common
Stock, then the number of shares of HNC Common Stock subject to such HNC Option
shall be rounded down to the nearest whole number of shares of HNC Common Stock.
The terms, exercisability, vesting schedule, status as an "incentive stock
option" under Section 422 of the Code (if applicable) or a nonqualified stock
option, and all other terms and conditions of RDC Options (including but not
limited to the terms and conditions applicable to options granted under the RDC
Option Plan by virtue of the RDC Option Plan) shall (except as otherwise
provided in the terms of such RDC Options), to the extent permitted by law and
otherwise reasonably practicable, be unchanged and continue in effect after the
Merger. Continuous employment with
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RDC shall be credited to the optionee for purposes of determining the vesting of
the number of shares of an HNC Common Stock subject to exercise under the HNC
Option issued upon conversion of an RDC Option.
2.2.2 Registration. HNC shall use its best efforts to
cause the shares of HNC Common Stock issuable upon exercise of the HNC Options
that are issued upon the conversion of RDC Options under Section 2.2.1 to be
registered on a registration statement (or to be issued pursuant to a
then-effective registration statement) on Form S-8 (or successor form)
promulgated by the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "1933 ACT"), as soon as reasonably
practicable after the Effective Time, and no later than 60 days after the
Effective Time, and shall use its best efforts to maintain the effectiveness of
such registration statement or registration statements for so long as such HNC
Options remain outstanding and HNC Common Stock is registered under the
Securities Exchange Act of 1934, as amended (the "1934 ACT").
2.3 Adjustments for Capital Changes. Notwithstanding the
provisions of Section 2.1.2 or Section 2.2, if at any time after the Agreement
Date and prior to the Effective Time, HNC or RDC recapitalizes, either through a
subdivision (or stock split) of any of its outstanding shares into a greater
number of shares, or a combination (or reverse stock split) of any of its
outstanding shares into a lesser number of shares, or reorganizes, reclassifies
or otherwise changes its outstanding shares into the same or a different number
of shares of other classes (other than through a subdivision or combination of
shares provided for in the previous clause), or declares a dividend on its
outstanding shares payable in shares or securities convertible into shares of
HNC Common Stock (a "CAPITAL CHANGE"), then the HNC Price Per Share, the HNC
Closing Average Price Per Share, the Common Conversion Number, the Series A
Conversion Number, the Series B Conversion Number and the Option Conversion
Number and the number of shares of HNC Common Stock constituting the HNC Merger
Shares will be adjusted appropriately so as to maintain the proportionate
interests of the stockholders of RDC and the stockholders of HNC contemplated
hereby (and, indirectly, the holders of the RDC Options) so as to maintain the
proportional interests of the holders of RDC Stock and RDC Options contemplated
by this Agreement.
2.4 Escrow Agreement. At the Closing (as that term is defined
in Section 7.1) of the Merger, HNC shall withhold eight and three-quarters
percent (8.75%) of the shares of HNC Common Stock to be issued to the RDC
Stockholders in accordance with Section 2.1.2 (rounded down to the nearest whole
number of shares to be issued to each RDC Stockholder) (the "ESCROW SHARES") and
will deliver certificates representing such Escrow Shares to State Street Bank
and Trust Company or a similar institution, as escrow agent (the "ESCROW
AGENT"), to be held by the Escrow Agent as security for the RDC Stockholders'
indemnification obligations under Section 11 and pursuant to the provisions of
an escrow agreement (the "ESCROW AGREEMENT") in substantially the form of
Exhibit 2.4. The Escrow Shares will be represented by a certificate or
certificates issued in the names of the RDC Stockholders in proportion to their
respective interests therein and will be held by the Escrow Agent during that
time period (the "ESCROW PERIOD") beginning on the Closing Date and ending on
the earlier to
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<PAGE> 9
occur of (a) the date on which HNC has first received final audited financial
statements together with a report thereon from HNC's independent auditors
covering the combined results of HNC and RDC or (b) twelve (12) months after the
Closing Date (as that term is defined in Section 7.1). By their approval of the
Merger, the RDC Stockholders shall be conclusively deemed to have consented to,
approved and agreed to be personally bound by: (i) the indemnification
provisions of Section 11; (ii) the Escrow Agreement; and (iii) the appointment
of Mark S. Hammond and James Berglund as the representatives of the RDC
Stockholders (together, the "REPRESENTATIVE") under the Escrow Agreement and as
the attorneys-in-fact and agents for and on behalf of each RDC Stockholder as
provided in the Escrow Agreement, and the taking by the Representative of any
and all actions and the making of any decisions required or permitted to be
taken by Representative under the Escrow Agreement (including, without
limitation, the exercise of the power to: (i) authorize delivery to HNC of
Escrow Shares in satisfaction of claims by HNC or any other Indemnified Person
(as defined herein); (ii) agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims; (iii) arbitrate, resolve,
settle or compromise any claim for indemnity made pursuant to Section 11; and
take all actions necessary in the judgment of the Representative for the
accomplishment of the foregoing). The Representative will have unlimited
authority and power to act on behalf of each RDC Stockholder with respect to the
Escrow Agreement and the disposition, settlement or other handling of all claims
governed by the Escrow Agreement, and all rights or obligations arising under
the Escrow Agreement so long as all RDC Stockholders are treated in the same
manner. The RDC Stockholders will be bound by all actions taken by the
Representative in connection with the Escrow Agreement, and HNC will be entitled
to rely on any action or decision of the Representative. In performing the
functions specified in this Agreement and the Escrow Agreement, the
Representative will not be liable to the RDC Stockholders in the absence of
gross negligence or willful misconduct. Any out-of-pocket costs and expenses
reasonably incurred by the Representative in connection with actions taken
pursuant to the terms of the Escrow Agreement will be paid by the RDC
Stockholders to the Representative in proportion to their percentage interests
in the Escrow Shares.
2.5 Effects of the Merger. At and upon the Effective Time: (a)
the separate existence of Sub will cease and Sub will be merged with and into
RDC, and RDC will be the surviving corporation of the Merger (the "SURVIVING
CORPORATION") pursuant to the terms of this Agreement and the Agreement of
Merger; (b) the Restated Articles of Incorporation of RDC shall be amended to
read as set forth in Exhibit 2.5A attached hereto and shall be the Articles of
Incorporation of the Surviving Corporation; (c) the Bylaws of RDC attached as
Exhibit 2.5B hereto shall be the Bylaws of the Surviving Corporation; (d) each
share of RDC Stock that is outstanding immediately prior to the Effective Time
and each RDC Option outstanding immediately prior to the Effective Time shall be
converted into HNC Common Stock or an HNC Option, respectively, as provided in
this Section 2; (e) each share of Sub Common Stock that is outstanding
immediately prior to the Effective Time shall be converted into one (1) share of
RDC Common Stock as provided in Section 2.1.1; (f) the officers of the Surviving
Corporation shall be those persons who are the officers of RDC immediately prior
to the Effective Time; (g) the directors of the Surviving Corporation shall be
Robert L. North, Raymond V. Thomas and Mark
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<PAGE> 10
S. Hammond; and (h) the Merger shall, from and after the Effective Time, have
all of the effects provided by applicable law.
2.6 Further Assurances. RDC and each of the RDC Stockholders
agree that if, at any time before or after the Effective Time, HNC considers or
is advised that any further instruments, deeds, assignments or assurances are
reasonably necessary or desirable to consummate the Merger or to carry out the
purposes of this Agreement at or after the Effective Time, then HNC, the
Surviving Corporation and their respective officers and directors may, and each
RDC Stockholder shall, execute and deliver all such proper deeds, assignments,
instruments and assurances and do all other things necessary or desirable to
consummate the Merger and to carry out the purposes of this Agreement, in the
name of RDC or otherwise.
2.7 Fairness Hearing. The issuance of the shares of HNC Common
Stock and HNC Options to be issued in the Merger is intended to be qualified by
a permit (the "PERMIT") to be issued under Sections 25121 and 25142 of the
California Corporate Securities Law of 1968, as amended (the "CALIFORNIA LAW"),
after a fairness hearing (the "FAIRNESS HEARING") before the California
Commissioner of Corporations pursuant to Section 25142 of the California Law,
with the intent that the issuance of such shares and HNC Options will, to the
extent permitted by applicable law, thereby be exempt under Section 3(a)(10) of
the 1933 Act from the registration requirements of the 1933 Act. As promptly as
practicable after the date of this Agreement, HNC (with RDC's cooperation) will
prepare and file with the California Department of Corporations (the
"DEPARTMENT") an application for qualification of the shares of HNC Common Stock
and HNC Options to be issued in the Merger, and an application for a Fairness
Hearing (collectively, the "PERMIT APPLICATION"), together with any information
or proxy statement included therein (the "INFORMATION STATEMENT"), and any other
documents required by the California Law in connection with the Merger. HNC and
RDC will use their best efforts to have the Permit issued under the California
Law as promptly as practicable after such filing. HNC and RDC shall also take
any action required to be taken under any applicable state securities or "blue
sky" laws in connection with the issuance of the shares of HNC Common Stock in
the Merger. RDC shall timely furnish to HNC all information concerning RDC
(including but not limited to all information concerning RDC's financial
condition, officers, directors, shareholders and other security holders (if
any)) as may be reasonably requested in connection with any action contemplated
by this Section . RDC shall cause at least one executive officer of RDC and
RDC's legal counsel to attend the Fairness Hearing.
2.8 Tax-Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended (the "CODE") by virtue of the provisions of Section
368(a)(2)(E) of the Code. The parties believe that the value of the HNC Common
Stock to be issued to the RDC stockholders in the Merger is equal, in each
instance, to the value of the RDC Stock to be surrendered in exchange therefor.
Except for cash to be paid in lieu of fractional shares, no consideration that
could constitute "other property" within the meaning of Section 356 of the Code
is being paid by HNC for the RDC Stock in the Merger. In addition, HNC
represents now, and as of the Closing Date, that it presently intends to
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continue RDC's historic business or use a significant portion of RDC's business
assets in a business. At the Closing (as that term is defined in Section 7.1),
officers of RDC and HNC shall execute and deliver an officers' certificate in
the form of Exhibit 2.8. The provisions and representations contained or
referred to in this Section 2.8 and Exhibit 2.8 shall survive until the
expiration of the applicable statute of limitations. Notwithstanding anything to
the contrary set forth herein, HNC makes no representations or warranty to RDC
or to any stockholder of RDC regarding the tax treatment of the Merger or
whether the Merger will qualify as a tax-free plan of reorganization under the
Code.
2.9 Pooling of Interests. The parties acknowledge that, as a
material inducement to HNC to enter into this Agreement and consummate the
Merger, the Merger is intended to qualify as a "pooling of interests" for
accounting purposes.
2.10 S-3 Registration Rights. Effective upon the Effective
Time, each RDC Stockholder who receives shares of HNC Common Stock in the Merger
pursuant to Section 2.1.2 hereof shall be granted the registration rights on
Form S-3 under the 1933 Act on the terms, and subject to the conditions and
limitations of the Registration Rights Agreement attached hereto as Exhibit
2.10.
3. REPRESENTATIONS AND WARRANTIES OF RDC
RDC hereby represents and warrants to HNC that, except as set
forth in a letter addressed to HNC dated the Agreement Date and delivered by RDC
to HNC concurrently herewith (the "RDC DISCLOSURE LETTER"), each of the
following representations and statements in this Section 3 are true and correct.
3.1 Organization and Good Standing. RDC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified to transact business as a foreign corporation in
each jurisdiction in which its failure to be so qualified could reasonably be
expected to have a Material Adverse Effect. As used in this Agreement, the term
"MATERIAL ADVERSE EFFECT" when used with reference to RDC, means any event,
change or effect that is (or will with the passage of time be) materially
adverse to RDC's condition (financial or otherwise), properties, assets,
liabilities, business, operations, results of operations or prospects.
3.2 Power, Authorization and Validity.
3.2.1 RDC has the right, power, legal capacity and
authority to enter into, execute, deliver and perform its obligations under this
Agreement and all RDC Ancillary Agreements and RDC has all requisite corporate
power and authority to consummate the Merger. The execution, delivery and
performance by RDC of this Agreement and each of the RDC Ancillary Agreements
have been duly and validly approved and authorized by all necessary corporate
action on the part of RDC's Board of Directors.
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<PAGE> 12
3.2.2 No filing, authorization, consent, approval or
order, governmental or otherwise, is necessary or required to be made or
obtained by RDC to enable RDC to lawfully enter into, and to perform its
obligations under, this Agreement and the RDC Ancillary Agreements, except for
(a) the filing of the Agreement of Merger (or the Certificate of Merger) with
the Delaware Secretary of State, (b) the filing of the Agreement of Merger (and
related officers' certificates) with the California Secretary of State, and (c)
the filing of appropriate documents with the relevant authorities of other
states in which RDC is qualified to do business, if any.
3.2.3 This Agreement and the RDC Ancillary Agreements
are, or when executed by RDC will be, valid and binding obligations of RDC,
enforceable in accordance with their respective terms, except as to the effect,
if any, of (a) applicable bankruptcy and other similar laws affecting the rights
of creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.3 Capitalization of RDC.
(a) Outstanding Stock. The authorized capital stock
of RDC consists entirely of (i) 10,000,000 shares of Common Stock, no par value
per share, of which a total of 1,164,408 shares are issued and outstanding and
(ii) 1,877,281 shares of Preferred Stock, no par value per share, consisting of
1,362,831 shares designated as Series A Preferred Stock, of which 1,355,831
shares are issued and outstanding, and 514,450 shares designated as RDC Series B
Preferred Stock, of which 464,450 shares are issued and outstanding, and no
other shares of the capital stock of RDC are authorized, issued or outstanding.
No fractional shares of RDC Common Stock or RDC Preferred Stock are issued or
outstanding. Each share of RDC Series A Preferred Stock now is, and at the
Closing will be, convertible into one (1) share of RDC Common Stock and each
share of RDC Series B Preferred Stock now is, and at the Closing will be,
convertible into 1.00154 shares of RDC Common Stock. All issued and outstanding
shares of RDC Stock have been duly authorized and validly issued, are fully paid
and nonassessable, are not subject to any claim, lien, preemptive right, or
right of rescission, and have been offered, issued, sold and delivered by RDC in
compliance with all registration or qualification requirements (or applicable
exemptions therefrom) of all applicable federal and state securities laws. A
list of all holders of RDC Stock, and the number, class and series (if
applicable) of all shares of RDC Stock owned by each such holder has been
delivered by RDC to HNC herewith as Exhibit 3.3.1.
(b) No Options, Warrants or Rights. Except for (a)
RDC Options to purchase a total of 430,000 shares of RDC Common Stock which are
outstanding on the Agreement Date (of which 183,000 were granted under the RDC
Option Plan and 247,000 were granted other than under the RDC Option Plan); (b)
a warrant to purchase up to 7,000 shares of RDC Series A Preferred Stock held by
Silicon Valley Bank (the "SVB WARRANT"); and (c) a warrant to purchase up to
9,174 shares of RDC Series B Preferred Stock held by LINC Capital Management
(the "LINC WARRANT"); there are no options, warrants, convertible or other
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securities, calls, commitments, conversion privileges, preemptive rights or
other rights or agreements outstanding to purchase or otherwise acquire (whether
directly or indirectly) any shares of RDC's authorized but unissued capital
stock or any securities convertible into or exchangeable for any shares of RDC's
capital stock or obligating RDC to grant, issue, extend, or enter into any such
option, warrant, convertible or other security, call, commitment, conversion
privilege, preemptive right or other right or agreement, and there is no
liability for any dividends accrued but unpaid. No person or entity holds or has
any option, warrant or other right to acquire any issued and outstanding shares
of the capital stock of RDC from any holder of shares of the capital stock of
RDC. A total of 485,000 shares of RDC Common Stock are reserved for issuance
under the RDC Option Plan, of which 164,408 shares have been issued and are
outstanding as of the Agreement Date, 183,000 shares are issuable upon the
exercise of options granted under the RDC Option Plan that are outstanding on
the Agreement Date and 137,592 shares are reserved for future issuance under the
RDC Option Plan but have not been issued and are not reserved for issuance under
outstanding options. Of the options for 247,000 shares of RDC Common Stock
granted other than under the RDC Option Plan, no shares have been issued or are
outstanding as of the Agreement Date. A list of all holders of RDC Options and
the number of RDC Options held by each such person is set forth in Exhibit
3.3.2. During the two (2) year period immediately prior to the Agreement Date,
except as may be expressly required by the terms of the RDC Option Plan, RDC has
not authorized, or taken any action to authorize, the acceleration of the time
during which any holder of any option, warrant or other right to purchase or
acquire any share of capital stock of RDC may exercise such option, warrant or
right. The RDC Option Plan has been duly and validly approved by RDC's
shareholders.
(c) No Voting Arrangements or Registration Rights.
There are no voting agreements, voting trusts, rights of first refusal or other
restrictions (other than normal restrictions on transfer under applicable
federal and state securities laws) applicable to any of RDC's outstanding
securities or to the conversion of any shares of RDC Stock in the Merger. RDC is
not under any obligation to register under the 1933 Act any of its presently
outstanding securities or any securities that may be subsequently issued.
3.4 Subsidiaries. RDC does not have any subsidiaries or any
interest, direct or indirect, in any corporation, partnership, limited liability
company, joint venture or other business entity.
3.5 No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement nor any RDC Ancillary Agreement, nor the
consummation of the transactions contemplated hereby, will conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach, impairment or violation of: (i) any provision of the Articles of
Incorporation or Bylaws of RDC as currently in effect; (ii) any federal, state,
local or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to RDC or its assets or properties; or (iii) any material instrument,
agreement, contract, letter of intent or commitment to which RDC is a party or
by which RDC or its assets or properties are bound. The consummation of the
Merger by RDC will not require the consent of any third party other than the
approval of RDC's stockholders.
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3.6 Litigation. There is no action, suit, arbitration,
mediation, proceeding, claim or investigation pending against RDC (or against
any officer, director, employee or agent of RDC in their capacity as such or
relating to their employment, services or relationship with RDC) before any
court, administrative agency or arbitrator that, if determined adversely to RDC
(or any such officer, director, employee or agent) may reasonably be expected to
have a Material Adverse Effect on RDC, nor, to the best of RDC's knowledge, has
any such action, suit, proceeding, arbitration, mediation, claim or
investigation been threatened. There is no basis for any person, firm,
corporation or other entity, to assert a claim against RDC or HNC based upon:
(a) RDC's entering into this Agreement or consummating the Merger; (b)
ownership, rights to ownership, or options, warrants or other rights to acquire
ownership, of any shares of the capital stock of RDC; or (c) any rights as a RDC
stockholder, including any option, warrant or preemptive rights or rights to
notice or to vote. There is no judgment, decree, injunction, rule or order of
any governmental entity or agency, court or arbitrator outstanding against RDC.
3.7 Taxes. RDC has timely filed all federal, state, local and
foreign tax returns required to be filed, has timely paid all taxes required to
be paid in respect of all periods for which returns have been filed, has
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the periods subsequent to the periods covered by the most recent
applicable tax returns, has made all necessary estimated tax payments, and has
no material liability for taxes in excess of the amount so paid or accruals or
reserves so established. RDC is not delinquent in the payment of any tax or in
the filing of any tax returns, and no deficiencies for any tax have been
threatened, claimed, proposed or assessed. RDC has not received any notification
that any material issues have been raised (and are currently pending) by the
Internal Revenue Service or any other taxing authority (including but not
limited to any sales or use tax authority) regarding RDC and no tax return of
RDC has ever been audited by the Internal Revenue Service or any state taxing
agency or authority. No tax liens have been filed against any assets of RDC. RDC
is not a "personal holding company" within the meaning of Section 542 of the
Code.
For the purposes of this Section , the terms "TAX"
and "TAXES" include all federal, state, local and foreign income, alternative or
add-on minimum income, gains, franchise, excise, property, sales, use,
employment, license, payroll, ad valorem, payroll, stamp, occupation, recording,
value added or transfer taxes, governmental charges, fees, customs duties,
levies or assessments (whether payable directly or by withholding), and, with
respect to such taxes, any estimated tax, interest and penalties or additions to
tax and interest on such penalties and additions to tax.
3.8 RDC Financial Statements. RDC has delivered to HNC as
Exhibit 3.8: (i) RDC's audited balance sheet as of December 31, 1995 and audited
statement of operations, statement of cash flows and statement of shareholders'
equity for the year ended December 31, 1995, and (ii) RDC's unaudited balance
sheet as of May 31, 1996 (the "BALANCE SHEET"), and RDC's unaudited statement of
operations for the five (5) month period ended May 31, 1996, and RDC's audited
income statements and statements of cash flows for each of the years in the
two-year period ended August 31, 1994 (all such financial statements of RDC are
hereinafter
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collectively referred to as the "RDC FINANCIAL STATEMENTS"). The RDC Financial
Statements (a) are in accordance with the books and records of RDC, (b) fairly
present the financial condition of RDC at the dates therein indicated and the
results of operations for the periods therein specified and (c) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis with prior periods. RDC has no material debt, liability or
obligation of any nature, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, except for (i) those shown on the Balance
Sheet, and (ii) those that may have been incurred after May 31, 1996, the date
of the Balance Sheet (the "BALANCE SHEET DATE") in the ordinary course of RDC's
business consistent with past practice, and that are not material in amount,
either individually or collectively. All reserves established by RDC and set
forth in the Balance Sheet are reasonably adequate. At the Balance Sheet Date,
there were no material loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) which are not adequately provided for in the
Balance Sheet as required by said Statement No. 5.
3.9 Title to Properties. RDC has good and marketable title to
all of its assets (including but not limited to those shown on the Balance
Sheet), free and clear of all liens, mortgages, security interests, claims,
charges, restrictions or encumbrances. All machinery, vehicles, equipment and
other tangible personal property included in such assets and properties are in
good condition and repair, normal wear and tear excepted, and all leases of real
or personal property to which RDC is a party are fully effective and afford RDC
peaceful and undisturbed possession of the real or personal property that is the
subject of the lease. RDC is not in violation of any zoning, building, safety or
environmental ordinance, regulation or requirement or other law or regulation
applicable to the operation of owned or leased properties (the violation of
which would have a material adverse effect on its business), nor has RDC
received any notice of violation with which it has not complied. RDC does not
own any real property.
3.10 Absence of Certain Changes. Since the Balance Sheet Date,
there has not been with respect to RDC any:
(a) material adverse change in the condition
(financial or otherwise), properties, assets, liabilities, businesses,
operations, results of operations or the prospects of RDC;
(b) amendments or changes in the Articles of
Incorporation or Bylaws of RDC;
(c) (i) incurrence, creation or assumption by RDC of
any mortgage, security interest, pledge, lien or other encumbrance on any of the
assets or properties of RDC; (ii) any material obligation or liability or any
indebtedness for borrowed money; or (iii) issuance or sale of any debt or equity
securities of RDC or any options or other rights to acquire from RDC, directly
or indirectly, any debt or equity securities of RDC;
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(d) payment or discharge of a lien or liability
thereof which lien was not either shown on the Balance Sheet or incurred in the
ordinary course of business after the Balance Sheet Date;
(e) purchase, license, sale or other disposition, or
any agreement or other arrangement for the purchase, license, sale or other
disposition, of any of the assets, properties or goodwill of RDC other than in
the ordinary course of business;
(f) damage, destruction or loss, whether or not
covered by insurance, having (or likely with the passage of time to have) a
Material Adverse Effect on RDC;
(g) declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the capital
stock of RDC, any split, combination or recapitalization of the capital stock of
RDC or any direct or indirect redemption, purchase or other acquisition of the
capital stock of RDC or any change in any rights, preferences, privileges or
restrictions of any outstanding security of RDC;
(h) change or increase in the compensation payable or
to become payable to any of the officers or employees of RDC, or any bonus or
pension, insurance or other benefit payment or arrangement (including without
limitation stock awards, stock appreciation rights or stock option grants) made
to or with any of such officers, employees or agents except in connection with
normal employee salary or performance reviews or otherwise in the ordinary
course of business consistent with RDC's past practice;
(i) change with respect to the management,
supervisory or other key personnel of RDC;
(j) obligation or liability incurred by RDC to any of
its officers, directors or stockholders except normal compensation and expense
allowances payable to officers in the ordinary course of business consistent
with RDC's past practice;
(k) making of any loan, advance or capital
contribution to, or any investment in, any officer, director or stockholder of
RDC;
(l) entering into, amendment of, relinquishment,
termination or non-renewal by RDC of any contract, lease, transaction,
commitment or other right or obligation other than in the ordinary course of
business or any written or oral indication or assertion by the other party
thereto of problems with RDC's services or performance under such contract,
lease, transaction, commitment or other right or obligation or its desire to so
amend, relinquish, terminate or not renew any such contract, lease, transaction,
commitment or other right or obligation;
(m) material change in the manner in which RDC
extends discounts or credits to customers or otherwise deals with its customers;
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(n) entering into by RDC of any transaction, contract
or agreement or the conduct of business or operations other than in the ordinary
course of business consistent with past practices;
(o) any transfer or grant of a right under any RDC IP
Rights (as defined in Section 3.13 below), other than those transferred or
granted in the ordinary course of RDC's business consistent with RDC's past
practice; or
(p) any agreement or arrangement made by RDC to take
any action which, if taken prior to the date of this Agreement, would have made
any representation or warranty of RDC and the RDC Stockholders set forth in this
Agreement untrue or incorrect as of the date when made.
3.11 Contracts and Commitments. Exhibit 3.11 sets forth a list
of each of the following written or oral contracts, agreements, commitments or
other instruments to which RDC is a party or to which it or any of its assets or
properties is bound:
(a) consulting or similar agreement under which RDC
provides any advice or services to a customer of RDC;
(b) continuing contract for the future purchase,
sale, license, provision or manufacture of products, material, supplies,
equipment or services requiring payment to or from RDC in an amount in excess of
$25,000 per annum which is not terminable on 120 days' or less notice without
cost or other liability to RDC or in which RDC has granted or received
manufacturing rights, most favored customer pricing provisions or exclusive
marketing rights relating to any product or services, group of products or
services or territory;
(c) contract providing for the development of
software for RDC, or the license of software to RDC, which software is used or
incorporated in any products currently distributed by RDC or services currently
provided by RDC or is contemplated to be used or incorporated in any products to
be distributed or services to be provided by RDC (other than software generally
available to the public at a per copy license fee of less than $1,000 per copy);
(d) joint venture or partnership contract or
agreement or other agreement which has involved or is reasonably expected to
involve a sharing of profits or losses in excess of $25,000 per annum with any
other party;
(e) contract or commitment for the employment of any
officer, employee or consultant of RDC or any other type of contract or
understanding with any officer, employee or consultant of RDC which is not
immediately terminable by RDC without cost or other liability;
(f) indenture, mortgage, trust deed, promissory note,
loan agreement, guarantee or other agreement or commitment for the borrowing of
money, for a line of credit or
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for a leasing transaction of a type required to be capitalized in accordance
with Statement of Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board;
(g) lease or other agreement under which RDC is
lessee of or holds or operates any items of tangible personal property or real
property owned by any third party and under which payments to such third party
exceed $15,000 per annum;
(h) agreement or arrangement for the sale of any
assets, properties, services or rights having a value in excess of $10,000,
other than in the ordinary course of business consistent with past practice;
(i) agreement which restricts RDC from engaging in
any aspect of its business or competing in any line of business in any
geographic area;
(j) RDC IP Rights Agreement (as defined in Section
3.13 below);
(k) any agreement relating to the sale, issuance,
grant, exercise, award, purchase, repurchase or redemption of any shares of
capital stock or other securities of RDC or any options, warrants or other
rights to purchase or otherwise acquire any such shares of stock, other
securities or options, warrants or other rights therefor; or
(l) contract with or commitment to any labor union;
(m) any other agreement, contract, commitment or
instrument that is material to the business of RDC or that involves a commitment
by RDC in excess of $50,000.
A copy of each agreement or document required by this Section
to be listed on Exhibit 3.11 (collectively, the "RDC MATERIAL AGREEMENTS") has
been delivered to HNC's counsel. No consent or approval of any third party is
required to ensure that, following the Effective Time, any RDC Material
Agreement shall continue to be in full force and effect without any breach or
violation thereof caused by virtue of the Merger or by any other transaction
called for by this Agreement.
3.12 No Default. RDC is not in breach or default in under any
RDC Material Agreement. RDC is not a party to any contract, agreement or
arrangement which has had, or could reasonably be expected to have, a Material
Adverse Effect on RDC. RDC does not have any material liability for
renegotiation of government contracts or subcontracts, if any.
3.13 Intellectual Property.
3.13.1 RDC owns, or has the right to use, sell or
license all material Intellectual Property Rights (as defined below) necessary
or required for the conduct of its business as presently conducted (such
Intellectual Property Rights being hereinafter collectively
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referred to as the "RDC IP RIGHTS"), and such rights to use, sell or license are
sufficient for such conduct of its business.
3.13.2 The execution, delivery and performance of
this Agreement, the Agreement of Merger and the consummation of the Merger and
the other transactions contemplated hereby will not constitute a material breach
of or default under any instrument, contract, license or other agreement
governing any RDC IP Right (the "RDC IP RIGHTS AGREEMENTS"), will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination,
of any RDC IP Right or materially impair the right of RDC or the Surviving
Corporation to use, sell or license any RDC IP Right or portion thereof (except
where such breach, forfeiture or termination would not have a Material Adverse
Effect on RDC or the Surviving Corporation). There are no royalties, honoraria,
fees or other payments payable by RDC to any person by reason of the ownership,
use, license, sale or disposition of the RDC IP Rights.
3.13.3 Neither the manufacture, marketing, license,
sale, furnishing or intended use of any product or service currently licensed,
utilized, sold, provided or furnished by RDC or currently under development by
RDC violates any license or agreement between RDC and any third party or
infringes any Intellectual Property Right of any other party; and there is no
pending or, to the best knowledge of RDC, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any RDC IP Right nor, to the best knowledge of RDC, is there any basis for any
such claim, nor has RDC received any notice asserting that any RDC IP Right or
the proposed use, sale, license or disposition thereof conflicts or will
conflict with the rights of any other party, nor, to the best knowledge of RDC,
is there any basis for any such assertion. To the best knowledge of RDC, no
employee of RDC is in violation of any term of any employment contract, patent
disclosure agreement, noncompetition agreement, non-solicitation agreement or
any other contract or agreement, or any restrictive covenant relating to the
right of any such employee to be employed thereby, or to use trade secrets or
proprietary information of others, and the employment of such employees does not
subject RDC to any liability.
3.13.4 RDC has taken reasonable and practicable steps
designed to protect, preserve and maintain the secrecy and confidentiality of
all material RDC IP Rights and all RDC's proprietary rights therein. All
officers, employees and consultants of RDC having access to proprietary
information have executed and delivered to RDC an agreement regarding the
protection of such proprietary information and the assignment of inventions to
RDC; and copies of the form of all such agreements have been delivered to HNC's
counsel.
3.13.5 Exhibit 3.13 contains a list of all RDC IP
Rights and all worldwide applications, registrations, filings and other formal
actions made or taken pursuant to federal, state and foreign laws by RDC to
secure, perfect or protect its interest in RDC IP Rights, including, without
limitation, all patents, patent applications, copyrights (whether or not
registered), copyright applications, trademarks and service marks (whether or
not registered) and trademark and service mark applications.
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3.13.6 As used herein, the term "INTELLECTUAL
PROPERTY RIGHTS" means, collectively, all worldwide industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade dress rights, trade
names, service marks, service mark applications, copyrights, copyright
applications, mask work rights, franchises, licenses, inventions, trade secrets,
know-how, customer lists, proprietary processes and formulae, software source
and object code, algorithms, architecture, structure, display screens, layouts,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records.
3.14 Compliance with Laws. RDC has complied, and is now and at
the Closing Date will be in compliance, in all material respects, with all
applicable federal, state, local or foreign laws, ordinances, regulations, and
rules, and all orders, writs, injunctions, awards, judgments, and decrees
applicable to it or to its assets, properties, and business. RDC holds all
permits, licenses and approvals from, and has made all filings with, third
parties, including government agencies and authorities, that are necessary in
connection with its present business.
3.15 Certain Transactions and Agreements. None of the
officers, directors, employees or shareholders of RDC, nor any member of their
immediate families, has any direct or indirect ownership interest in any firm or
corporation that competes with, or does business with, or has any contractual
arrangement with RDC (except with respect to any interest in less than one
percent (1%) of the stock of any corporation whose stock is publicly traded);
provided, that the foregoing representation is not made with respect to the
following directors and shareholders of RDC: James Berglund, Robert Finzi,
Enterprise Partners, Enterprise Partners II, L.P., Enterprise Partners II
Associates, L.P., Sprout Capital VI, L.P., Sprout Growth, Ltd or DLJ Capital
Corp. None of said officers, directors, employees or shareholders or any member
of their immediate families, is directly or indirectly interested in any
contract or informal arrangement with RDC, except for normal compensation for
services as an officer, director or employee thereof that have been disclosed to
HNC and except for agreements related to the purchase of RDC Stock by, or the
grant of RDC Options to, such persons. None of said officers, directors,
employees or shareholders or family members has any interest in any property,
real or personal, tangible or intangible (including but not limited to any RDC
IP Rights or any other Intellectual Property Rights) that is used in or that
pertains to the business of RDC, except for the normal rights of a stockholder.
3.16 Employees, ERISA and Other Compliance.
3.16.1 RDC is in compliance in all material respects
with all applicable laws, agreements and contracts relating to employment,
employment practices, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters. A list of all
employees, officers and consultants of RDC and their current compensation is set
forth on Exhibit 3.16.1, which has been delivered to HNC. RDC does not have any
employment contracts or consulting agreements currently in effect that are not
terminable at will
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(other than agreements with the sole purpose of providing for the
confidentiality of proprietary information or assignment of inventions).
3.16.2 RDC (i) has never been and is not now subject
to a union organizing effort, (ii) is not subject to any collective bargaining
agreement with respect to any of its employees, (iii) is not subject to any
other contract, written or oral, with any trade or labor union, employees'
association or similar organization and (iv) does not have any current labor
disputes. RDC has good labor relations, and has no knowledge of any facts
indicating that the consummation of the transactions contemplated hereby will
have a material adverse effect on such labor relations, and has no knowledge
that any of its key employees intends to leave its employ.
3.16.3 RDC has no pension plan which constitutes, or
has since the enactment of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") constituted, a "multiemployer plan" as defined in Section
3(37) of ERISA. No RDC pension plans are subject to Title IV of ERISA.
3.16.4 Exhibit 3.16.4 lists each employment,
severance or other similar contract, arrangement or policy, each "employee
benefit plan" as defined in Section 3(3) of ERISA and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, severance benefits,
disability benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits for
employees, consultants or directors which is entered into, maintained or
contributed to by RDC and covers any employee or former employee of RDC. Such
contracts, plans and arrangements as are described in this Section 3.16.4 are
hereinafter collectively referred to as the "RDC BENEFIT ARRANGEMENTS." Each RDC
Benefit Arrangement has been maintained in compliance in all material respects
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations that are applicable to such RDC Benefit
Arrangement. RDC has delivered to HNC or its counsel a complete and correct copy
or description of each RDC Benefit Arrangement.
3.16.5 There has been no amendment to, written
interpretation or announcement (whether or not written) by RDC relating to, or
change in employee participation or coverage under, any RDC Benefit Arrangement
that would increase materially the expense of maintaining such RDC Benefit
Arrangement above the level of the expense incurred in respect thereof for RDC's
fiscal year ended December 31, 1995.
3.16.6 The group health plans (as defined in Section
4980B(g) of the Code) that benefit employees of RDC are in compliance, in all
material respects, with the continuation coverage requirements of Section 4980B
of the Code as such requirements affect RDC and its employees. As of the Closing
Date, there will be no material outstanding, uncorrected violations under the
Consolidation Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
with respect to any of the RDC Benefit Arrangements, covered
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employees, or qualified beneficiaries that could result in a Material Adverse
Effect on RDC, or in a material adverse effect on the business, operations or
financial condition of HNC as its successor.
3.16.7 No benefit payable or which may become payable
by RDC pursuant to any RDC Benefit Arrangement or as a result of or arising
under this Agreement or the Agreement of Merger shall constitute an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code) which is
subject to the imposition of an excise Tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the Code. RDC is not
a party to any (a) agreement (other than as described in (b) below) with any
executive officer or other key employee thereof (i) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving RDC in the nature of any of the transactions
contemplated by this Agreement and the Agreement of Merger, (ii) providing any
term of employment or compensation guarantee, or (iii) providing severance
benefits or other benefits after the termination of employment of such employee
regardless of the reason for such termination of employment, or (b) agreement or
plan, including, without limitation, any stock option plan, stock appreciation
rights plan or stock purchase plan, any of the benefits of which will be
materially increased, or the vesting of benefits of which will be materially
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement and the Agreement of Merger or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement and the Agreement of Merger.
3.17 Corporate Documents. RDC has made available to HNC for
examination all documents and information listed in the RDC Disclosure Letter or
other Exhibits called for by this Agreement which have been requested by HNC's
legal counsel, including, without limitation, the following: (a) copies of RDC's
Articles of Incorporation and Bylaws as currently in effect; (b) RDC's Minute
Book containing all records of all proceedings, consents, actions, and meetings
of RDC's stockholders, board of directors and any committees thereof; (c) RDC's
stock ledger and journal reflecting all stock issuances and transfers; (d) all
permits, orders, and consents issued by any regulatory agency with respect to
RDC, or any securities of RDC, and all applications for such permits, orders,
and consents; and (e) all agreements of RDC required to be listed in Exhibit
3.11.
3.18 No Brokers. Neither RDC nor any affiliate of RDC is
obligated for the payment of any fees or expenses of any investment banker,
broker or finder in connection with the origin, negotiation or execution of this
Agreement or the Agreement of Merger or in connection with any transaction
contemplated hereby or thereby.
3.19 Books and Records.
3.19.1 The books, records and accounts of RDC (a) are
in all material respects true, complete and correct, (b) have been maintained in
accordance with good business practices on a basis consistent with prior years,
(c) are stated in reasonable detail and accurately
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and fairly reflect the transactions and dispositions of the assets of RDC, and
(d) accurately and fairly reflect the basis for the RDC Financial Statements.
3.19.2 RDC has devised and maintains a system of
internal accounting controls sufficient to provide reasonable assurances that:
(a) transactions are executed in accordance with management's general or
specific authorization; (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements, and
(ii) to maintain accountability for assets; and (c) the amount recorded for
assets on the books and records of RDC is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.20 Insurance. RDC maintains, and at all times during the
prior three years has maintained, fire and casualty, general liability, business
interruption, product liability, errors and omissions, and sprinkler and water
damage insurance in amounts which RDC believes to be reasonably prudent and
customary for similarly sized and similarly situated businesses.
3.21 Environmental Matters.
3.21.1 During the period that RDC has leased or owned
its respective properties or owned or operated any facilities, there have been
no disposals, releases or threatened releases of Hazardous Materials (as defined
below) on, from or under such properties or facilities that resulted from any
act or omission of RDC or any of its employees, agents or invitees. RDC has no
knowledge of any presence, disposals, releases or threatened releases of
Hazardous Materials on, from or under any of such properties or facilities,
which may have occurred prior to RDC having taken possession of any of such
properties or facilities. For the purposes of this Agreement, the terms
"DISPOSAL," "RELEASE," and "THREATENED RELEASE" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA").
For the purposes of this Agreement "HAZARDOUS MATERIALS" shall mean any
hazardous or toxic substance, material or waste which is or becomes prior to the
Closing regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous materials," "toxic substance" or
"hazardous chemical" under (a) CERCLA; (b) any similar federal, state or local
law; or (c) regulations promulgated under any of the above laws or statutes.
3.21.2 None of the properties or facilities of RDC is
in violation of any federal, state or local law, ordinance, regulation or order
relating to industrial hygiene or to the environmental conditions on, under or
about such properties or facilities, including, but not limited to, soil and
ground water condition. During the time that RDC has owned or leased its
properties and facilities, neither RDC nor, to RDC's knowledge, any third party,
has used, generated, manufactured or stored on, under or about such properties
or facilities or transported to or from such properties or facilities any
Hazardous Materials, other than RDC's lawful use of standard office supplies
customarily used in office environments that contain legally permitted amounts
of Hazardous Materials.
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3.21.3 During the time that RDC has owned or leased
its properties and facilities, there has been no litigation brought or
threatened against RDC, or, to the best knowledge of RDC, against any lessor or
owner of real property leased by RDC or any settlement reached by RDC with, any
party or parties alleging the presence, disposal, release or threatened release
of any Hazardous Materials on, from or under any of such properties or
facilities.
3.22 Disclosure. Neither this Agreement, its exhibits and
schedules, nor any of the certificates or documents to be delivered by RDC to
HNC under this Agreement, taken together, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF HNC
HNC hereby represents and warrants, that, except as set forth
in a letter addressed to RDC dated the Agreement Date and delivered by HNC to
RDC concurrently herewith (the "HNC DISCLOSURE LETTER"), each of the following
representations and statements in this Section 4 are true and correct:
4.1 Organization and Good Standing. HNC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as proposed to
be conducted. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and will have the corporate
power and authority to own, operate and lease its properties and to carry on its
business as proposed to be conducted.
4.2 Power, Authorization and Validity.
4.2.1 HNC has the right, power and authority to enter
into, execute and perform its obligations under this Agreement and the HNC
Ancillary Agreements. The execution, delivery and performance of this Agreement
and the HNC Ancillary Agreements by HNC have been duly and validly approved and
authorized by HNC's Board of Directors. Sub has the right, power and authority
to execute, deliver and perform its obligations under this Agreement, and upon
approval of the Merger and the Agreement of Merger by Sub's sole stockholder,
Sub will have the right, power and authority to execute, deliver and perform the
Agreement of Merger and all other Sub Ancillary Agreements. The execution,
delivery and performance of this Agreement, the Agreement of Merger and all
other Sub Ancillary Agreements by Sub have been duly and validly approved and
authorized by Sub's Board of Directors.
4.2.2 No filing, authorization, consent, approval or
order, governmental or otherwise, is necessary or required to enable HNC to
enter into, and to perform its obligations under, this Agreement and the HNC
Ancillary Agreements, except for (a) the filing of the
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Agreement of Merger (or the Certificate of Merger) with the Delaware Secretary
of State, (b) the filing of the Agreement of Merger (and related officers'
certificates) with the California Secretary of State, (c) the filing of
appropriate documents with the relevant authorities of other states in which HNC
is qualified to do business, if any, and (d) the filing of the Permit
Application with the Department and the issuance of the Permit, and such other
filings, if any, as may be required to comply with federal and state securities
laws. No filing, authorization, consent, approval or order, governmental or
otherwise, is necessary or required to enable Sub to enter into, and to perform
its obligations under, this Agreement and the Sub Ancillary Agreements, except
for (a) the filing of the Agreement of Merger (or the Certificate of Merger)
with the Delaware Secretary of State, (b) the filing of the Agreement of Merger
(and related officers' certificates) with the California Secretary of State, (c)
the filing of appropriate documents with the relevant authorities of other
states in which Sub is qualified to do business, if any, and (d) such filings as
may be required to comply with federal and state securities laws.
4.2.3 This Agreement and the HNC Ancillary Agreements
are, or when executed by HNC will be, valid and binding obligations of HNC,
enforceable in accordance with their respective terms, except as to the effect,
if any, of (a) applicable bankruptcy and other similar laws affecting the rights
of creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies. This Agreement and the Sub
Ancillary Agreements are, or when executed by Sub will be, valid and binding
obligations of Sub, enforceable in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies.
4.3 Capital Structure.
4.3.1 Stock. The authorized capital stock of HNC
consists of 50,000,000 shares of HNC Common Stock, $0.001 par value per share,
and 4,000,000 shares of Preferred Stock, $0.001 par value per share (the "HNC
PREFERRED STOCK"). At the close of business on July 18, 1996, 15,464,607 shares
of HNC Common Stock were issued and outstanding. No shares of HNC Preferred
Stock are issued or outstanding. All outstanding shares of HNC Common Stock are
validly issued, fully paid and nonassessable and not subject to preemptive
rights. As of the date hereof, the authorized capital stock of Sub consists of
1,000 shares of Common Stock, $0.001 par value per share, of which 100 shares
are validly issued, fully paid and nonassessable and owned by HNC.
4.3.2 Options. A total of 2,050,000 shares of HNC
Common Stock are currently reserved for issuance under HNC's 1987 Stock Option
Plan, HNC's 1995 Equity Incentive Plan, HNC's 1995 Directors Stock Option Plan
and HNC's 1995 Employee Stock Purchase Plan, of which, as of July 19, 1996,
1,176,893 shares had been previously issued and were outstanding.
4.3.3 No Other Commitments. Except for the HNC stock
options (whether granted or ungranted) described in Section 4.3.2 above and
rights of HNC employees to subscribe for shares of HNC Common Stock under the
HNC 1995 Employee Stock Purchase
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Plan, as of the Agreement Date, there are no options, warrants, convertible or
other securities, calls, commitments, conversion privileges or preemptive or
other rights or agreements of any character to which HNC is a party or by which
HNC is bound obligating HNC to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock of HNC or securities convertible
into or exchangeable for shares of capital stock of HNC, or obligating HNC to
grant, extend or enter into any such option, warrant, call, right, commitment,
conversion right or agreement.
4.4 No Violation of Material Agreements. Neither the execution
and delivery of this Agreement nor any HNC Ancillary Agreement, nor the
consummation of the transactions contemplated hereby, will conflict with, or
(with or without notice or lapse of time, or both) result in: (a) a termination,
breach, impairment or violation of (i) any provision of the Certificate of
Incorporation or Bylaws of HNC, as currently in effect or (ii) any federal,
state, local or foreign judgment, writ, decree, order, statute, rule or
regulation to which HNC or its assets or properties is subject; or (b) a
termination, or a material breach, impairment or violation, of any material
instrument or contract to which HNC is a party or by which HNC or its properties
are bound. HNC is not required to obtain the consent of any third party to
consummate the Merger, except for (i) the Permit from the Department and (ii)
Silicon Valley Bank.
4.5 Disclosure. HNC has made available to RDC a disclosure
package consisting of HNC's Prospectus dated December 14, 1995 covering the
public offering of 1,500,000 shares of HNC Common Stock and all Forms 10-Q and
10-K filed by HNC with the SEC on or before the Agreement Date (the "HNC
DISCLOSURE PACKAGE"). As of their respective filing dates, documents filed by
HNC with the SEC and included in the HNC Disclosure Package complied in all
material respects with the requirements of the 1933 Act or the 1934 Act, as the
case may be. The HNC Disclosure Package, this Agreement, the exhibits and
schedules hereto, and any certificates or documents to be delivered to RDC
pursuant to this Agreement, when taken together, do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading.
4.6 Validity of Shares. The shares of HNC Common Stock to be
issued pursuant to the Merger shall, when issued: (a) be duly authorized,
validly issued, fully paid and nonassessable and free of liens and encumbrances
created by HNC, and (b) assuming the Permit is issued by the Department
following, and pursuant to, the Fairness Hearing so as to qualify for the
exemption from registration afforded by Section 3(a)(10) of the 1933 Act, be
free and clear of any transfer restrictions, liens and encumbrances except for
applicable securities law restrictions on transfer under Rule 145(d) promulgated
under the 1933 Act, under applicable "blue sky" state securities laws and under
any RDC Affiliate Agreement to be executed pursuant to this Agreement.
4.7 HNC Financial Statements. The financial statements of HNC
included in the HNC Disclosure Package (the "HNC FINANCIAL STATEMENTS") comply
as to form in all material respects with applicable accounting requirements and
with the published rules and
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regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles consistently applied (except as
may be permitted in the notes thereto or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) and fairly present the consolidated
financial position of HNC at the dates thereof and the consolidated results of
its operations and changes in financial position for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring audit
adjustments). There has been no change in HNC accounting policies or estimates
except as described in the HNC Financial Statements.
4.8 No Material Adverse Change. Since the date of HNC's Report
on Form 10-Q for its fiscal quarter ended March 31, 1996, there has not been any
event or occurrence which would have a material adverse effect on business,
operations or financial condition of HNC and its subsidiary, taken as a whole.
4.9 No Violation of Existing Agreements. Neither HNC nor any
subsidiary of HNC is, or has received notice that it would be with the passage
of time, (i) in violation of any provision of the Certificate of Incorporation
or Bylaws of HNC (or of any such subsidiary of HNC); or (ii) in default or
violation of any material term, condition or provision of (A) any material
judgment, decree, order, injunction or stipulation applicable to HNC (or any
subsidiary of HNC) or (B) any material agreement, note, mortgage, indenture,
contract, lease or instrument, permit, concession, franchise or license filed as
an exhibit to a document filed with the SEC and included in the HNC Disclosure
Package, which default or violation would have a material adverse effect on the
business, operations or financial condition of HNC and its subsidiary, taken as
a whole.
5. RDC COVENANTS
During the period from the Agreement Date until the earlier to
occur of (i) the Effective Time or (ii) the termination of this Agreement in
accordance with Section 10, RDC covenants and agrees with HNC as follows:
5.1 Advice of Changes. RDC will promptly advise HNC in writing
(a) of any event occurring subsequent to the date of this Agreement that would
render any representation or warranty of RDC contained in Section 3 of this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect and (b) of any material adverse
change in RDC's business, results of operations or financial condition. RDC
shall deliver to HNC within fifteen (15) days after the end of each monthly
accounting period ending after the Agreement Date and before the Closing Date,
an unaudited balance sheet and statement of operations, which financial
statements shall be prepared in the ordinary course of business, in accordance
with RDC's books and records and generally accepted accounting principles and
shall fairly present the financial position of RDC as of their respective dates
and the results of RDC's operations for the periods then ended.
5.2 Maintenance of Business. RDC will carry on and preserve
its business and its relationships with customers, suppliers, employees and
others in substantially the same
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manner as it has prior to the date hereof. If RDC becomes aware of a material
deterioration in the relationship with any customer, supplier or key employee,
it will promptly bring such information to the attention of HNC in writing and,
if requested by HNC, will exert its best efforts to restore the relationship.
5.3 Conduct of Business. RDC will continue to conduct its
business and maintain its business relationships in the ordinary and usual
course and will not, without the prior written consent of the Chief Executive
Officer of HNC:
(a) borrow or lend any money other than advances to
employees for travel and expenses that are incurred in the ordinary course of
RDC's business consistent with RDC's past practice;
(b) enter into any transaction or agreement not in
the ordinary course of RDC's business consistent with RDC's past practice;
(c) encumber or permit to be encumbered any of its
assets;
(d) sell, transfer or dispose of any of its assets
except in the ordinary course of RDC's business consistent with RDC's past
practice;
(e) enter into any material lease or contract for the
purchase or sale of any property, whether real or personal, tangible or
intangible;
(f) pay any bonus, increased salary or special
remuneration to any officer, employee or consultant (except for normal salary
increases consistent with past practices not to exceed 5% of such officer's,
employee's or consultant's base annual compensation, except pursuant to existing
arrangements previously disclosed to and approved in writing by HNC) or enter
into any new employment or consulting agreement with any such person;
(g) change any of its accounting methods;
(h) declare, set aside or pay any cash or stock
dividend or other distribution in respect of capital stock, redeem, repurchase
or otherwise acquire any of its capital stock or other securities, pay or
distribute any cash or property to any RDC stockholder or securityholder or make
any other cash payment to any shareholder or securityholders of RDC that is
unusual, extraordinary, or not made in the ordinary course of RDC's business
consistent with RDC's past practice;
(i) amend or terminate any contract, agreement or
license to which it is a party except those amended or terminated in the
ordinary course of RDC's business, consistent with RDC's past practice, and
which are not material in amount or effect;
(j) guarantee or act as a surety for any obligation
of any third party;
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(k) waive or release any material right or claim
except in the ordinary course of business, consistent with past practice or
agree to any audit assessment by any tax authority or file any federal or state
income or franchise tax return unless copies of such returns have been delivered
to HNC for its review prior to filing;
(l) issue, sell, create or authorize any shares of
its capital stock of any class or series or any other of its securities, or
issue, grant or create any warrants, obligations, subscriptions, options,
convertible securities, or other commitments to issue shares of its capital
stock or securities ultimately exchangeable for, or convertible into, shares of
its capital stock; provided, however, that notwithstanding the foregoing RDC
may: (1) issue shares of RDC Common Stock issuable upon the exercise of RDC
Options that are outstanding on the Agreement Date in accordance with their
terms as now in effect; and (2) issue up to 7,000 shares of RDC Series A
Preferred Stock upon exercise of the SVB Warrant in accordance with its terms
and up to 9,174 shares of RDC Series B Preferred Stock upon exercise of the LINC
Warrant in accordance with its terms;
(m) subdivide or split or combine or reverse split
the outstanding shares of its capital stock of any class or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or affecting any other of its securities;
(n) merge, consolidate or reorganize with, or
acquire, any entity or enter into any negotiations, discussions or agreement for
such purpose;
(o) amend its Articles of Incorporation or Bylaws;
(p) license any of its technology or intellectual
property except in the ordinary course of business consistent with past
practice;
(q) change any insurance coverage or issue any
certificates of insurance;
(r) agree to any audit assessment by any tax
authority or file any federal or state income or franchise tax return unless
copies of such returns have first been delivered to HNC for its review prior to
filing; or
(s) modify or change the exercise or conversion
rights or exercise or purchase prices of any RDC Stock, RDC Options, warrants or
other RDC securities, or accelerate or otherwise modify the (i) the right to
exercise any option, warrant or other right to purchase any RDC stock or other
securities or (ii) the vesting or release of any shares of RDC capital stock or
other securities of RDC from any repurchase options or rights of refusal held by
RDC or any other party or any other restrictions unless such
accelerations/modifications are expressly required and mandated by the terms of
a formal written agreement or plan that was entered into prior to the execution
of the Plan by HNC and RDC.
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(t) purchase or otherwise acquire, or sell or
otherwise dispose of: (i) any shares of HNC Common Stock or other HNC securities
or (ii) any securities whose value is derived from or determined with reference
to, in whole or in part, the value of HNC stock or other HNC securities.
(u) agree to do any of the things described in the
preceding clauses 5.3(a) through 5.3(t).
5.4 Stockholder Approval. RDC will hold a special meeting of
its stockholders or will solicit the written consent of its stockholders (such
RDC stockholders' meeting or the solicitation of the written consent of the
shareholders of RDC is hereinafter referred to as the "RDC STOCKHOLDER VOTE") at
the earliest practicable date after the conclusion of the Fairness Hearing by
the Department to submit this Agreement, the Agreement of Merger, the Merger and
related matters for the consideration and approval of the stockholders of RDC,
which approval will be recommended by RDC's Board of Directors. Such meeting or
action by written consent will be called, held and conducted, and any proxies or
written consents will be solicited, in compliance with RDC's Bylaws and with
applicable California law.
5.5 Preparation of Permit Application, Hearing Request and
Hearing Notice. As promptly as practicable after the Agreement Date, RDC shall
cooperate with HNC to prepare and file with the Commissioner the Permit
Application, Hearing Request and Hearing Notice, Information Statement and any
other documents required by the California Law in connection with the Permit
Application and the Merger. RDC will be solely responsible for any statement,
information or omission in the Permit Application (and the exhibits thereto)
relating to it or its affiliates. RDC will not provide or publish to its
stockholders any material concerning it or its affiliates that violates the 1933
Act or Securities Exchange Act of 1934, as amended, with respect to the
transactions contemplated hereby. RDC will use its best efforts to cooperate
with HNC to have the Permit declared effective under the California Law as
promptly as practicable after such filing. RDC shall cause at least one
executive officer of RDC and RDC's legal counsel to attend the Fairness Hearing.
5.6 Regulatory Approvals. RDC will promptly execute and file,
or join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent of
any governmental body, federal, state, local or foreign, which may be reasonably
required, or which HNC may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. RDC will use
its best efforts to obtain, and to cooperate with HNC to promptly obtain, all
such authorizations, approvals and consents.
5.7 Necessary Consents. RDC will use its best efforts to
obtain such written consents and take such other actions as may be necessary or
appropriate in addition to those set forth in Sections 5.5 and 5.6 to allow the
consummation of the transactions contemplated hereby and to allow HNC to carry
on RDC's business after the Effective Time.
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5.8 Litigation. RDC will notify HNC in writing promptly after
learning of any material action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration panel, board or
governmental agency, initiated by or against it, or known by it to be threatened
against it.
5.9 No Other Negotiations. From the Agreement Date until the
earlier of termination of this Agreement in accordance with Section 10 or
consummation of the Merger, RDC will not, and will not authorize, encourage or
permit any officer, director, employee, stockholder or affiliate of RDC, or any
other person, on its or their behalf to, directly or indirectly, solicit or
encourage any offer from any party or consider any inquiries or proposals
received from any other party, participate in any negotiations regarding, or
furnish to any person any information with respect to, or otherwise cooperate
with, facilitate or encourage any effort or attempt by any person (other than
HNC), concerning any agreement or transaction regarding the possible disposition
of all or any substantial portion of RDC's business, assets or capital stock by
merger, consolidation, sale of assets, sale of stock, tender offer or any other
form of business combination ("ALTERNATIVE TRANSACTION"). RDC will promptly
notify HNC orally and in writing of any such inquiries or proposals. In
addition, RDC shall not execute, enter into or become bound by (a) any letter of
intent or agreement or commitment between RDC and any third party that is
related to an Alternative Transaction or (b) any agreement or commitment between
RDC and a third party providing for an Alternative Transaction.
5.10 Access to Information. Until the Closing, RDC will allow
HNC and its agents reasonable access to the files, books, records and offices of
RDC, including, without limitation, any and all information relating to RDC's
taxes, commitments, contracts, leases, licenses, and real, personal and
intangible property and financial condition, subject to the terms of the Mutual
Nondisclosure Agreement between RDC and HNC dated as of May 31, 1996 (the
"CONFIDENTIALITY AGREEMENT"). RDC will cause its accountants to cooperate with
HNC and its agents in making available all financial information reasonably
requested, including without limitation the right to examine all working papers
pertaining to all financial statements prepared or audited by such accountants.
5.11 Satisfaction of Conditions Precedent. RDC will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Section 9, and RDC will use its best efforts to cause the
transactions contemplated by this Agreement to be consummated; and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby. In particular, RDC
will use its best efforts to cause the Merger to become effective in accordance
with this Agreement by August 30, 1996.
5.12 RDC Affiliates Agreement. Concurrently with the execution
of this Agreement, RDC shall deliver to HNC a letter identifying all RDC's
directors, executive officers, ten percent or greater shareholders (and
affiliates of such persons who are RDC stockholders) and all persons or entities
who are "affiliates" of RDC within the meaning of Rule 145 or Rule 405 under the
1933 Act at the time this Agreement is executed ("RDC AFFILIATES").
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RDC will use its best efforts to cause each RDC Affiliate to execute and deliver
to HNC, as promptly as practicable after RDC's signing of this Agreement, an
Affiliates Agreement in substantially the form of Exhibit 5.12 (the "RDC
AFFILIATE AGREEMENT"). In addition, RDC shall use its best efforts to cause each
person or entity who may become a RDC Affiliate after the Agreement Date and
before the Effective Time to execute and deliver a RDC Affiliate Agreement to
HNC promptly after such person or entity becomes a RDC Affiliate.
5.13 Blue Sky Laws. RDC shall use its best efforts to assist
HNC to the extent necessary to comply with the securities and Blue Sky laws of
all jurisdictions which are applicable in connection with the Merger.
5.14 Pooling. Following the Agreement Date, RDC shall not take
any action if, prior to taking such action, RDC has been informed by HNC or its
accountants that, in the opinion of HNC's accountants, taking such action may
preclude HNC from accounting for the Merger as a "pooling of interests" for
accounting purposes and HNC or its accountants promptly give RDC a writing that
states in reasonable detail the action that HNC or its accountants request RDC
not to take. RDC shall cooperate with HNC to cause the business combination to
be effected by the Merger to be accounted for as a pooling of interests for
accounting purposes.
5.15 Certain Investments, Agreements. RDC does not own, and
shall not make any purchase or other acquisition of, or investment in, any
shares of HNC Common Stock or other securities of HNC. RDC shall not enter into
any agreement with any holders of HNC shares calling for either RDC or HNC to
retire or reacquire all or part of the HNC shares to be issued pursuant to the
Merger. RDC shall not enter into any financial arrangements for the benefit of
any RDC shareholder which, in effect, would negate the exchange of equity
securities contemplated under this Agreement, including without limitation, any
loan or other financial arrangement at abnormally low interest rates, or any
guarantee of loans secured by HNC shares to be issued pursuant to the Merger.
5.16 RDC Dissenting Shares. As promptly as practicable after
the date of the RDC Shareholder Vote and prior to the Closing Date, RDC shall
furnish HNC with the name and address of each holder (or potential holder) of
any RDC Dissenting Shares (if any) and the number of RDC Dissenting Shares (or
potential RDC Dissenting Shares) owned by each such holder.
5.17 Termination of Registration and Voting Rights. All
registration rights agreements and voting agreements applicable to or affecting
any outstanding shares or other securities of RDC shall be duly terminated and
canceled by no later than the Effective Time.
5.18 Invention Assignment and Confidentiality Agreements. RDC
shall obtain from each employee and consultant of RDC who has had access to any
software, technology or copyrightable, patentable or other proprietary works
owned or developed by RDC, or to any other confidential or proprietary
information of RDC or its clients, an invention assignment and
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confidentiality agreement in a form reasonably acceptable to HNC duly executed
by such employee or consultant and delivered to RDC.
5.19 Non-Competition and Employment Agreements. RDC shall use
its best efforts to cause each of the RDC employees referred to in Section 9.11
and 9.12, respectively, to execute and deliver to HNC at the Closing a
Non-Competition Agreement in the form attached hereto as Exhibit 9.11 (the
"NON-COMPETITION AGREEMENT") and an Employment Agreement in the form attached
hereto as Exhibit 9.12 (the "EMPLOYMENT AGREEMENT"), respectively.
5.20 Closing of Merger. RDC shall not refuse to effect the
Merger if, on or before the Closing Date, all the conditions precedent to RDC's
obligations to effect the Merger under Section 8 hereof have been satisfied or
waived by RDC.
5.21 Subsequent Amendment of Disclosure Letter. RDC shall have
the right, prior to the Closing, to deliver to HNC a written amendment or
amendments to the applicable sections of the RDC Disclosure Letter that
discloses only RDC Permitted Matters (as defined below), unless HNC otherwise
consents in writing. "RDC PERMITTED MATTERS" means facts, events, transactions
or other matters involving RDC that arose or occurred on or before the Agreement
Date other than any facts, events, transactions, actions or other matters that:
(a) have, or are likely to have (whether individually or in the aggregate) a
Material Adverse Effect on RDC; (b) involve or relate to any claim, suit,
demand, litigation, arbitration or similar dispute involving RDC or any its
officers, directors, employees, agents, shareholders or contractors (including
without limitation any claim challenging the validity of this Agreement,
asserting that RDC's entering into this Agreement or consummating the Merger
would breach or violate any agreement or commitment of RDC or attempting to
enjoin the Merger); (c) concern any debt, obligation or liability of RDC in the
amount of $100,000 or more that arose or existed on or before the Agreement Date
or that arose or was incurred after the Agreement Date other than in the
ordinary course of RDC's business consistent with RDC's past practices; (d)
involve the loss or impairment of any RDC IP Right or the infringement by RDC or
any of its officers, employees, agents or contractors of any intellectual
property right of any third party; or (f) involve the disclosure of any material
agreement of RDC that was in effect on or before the Agreement Date. To the
extent that any such amendment to the RDC Disclosure Letter discloses an RDC
Permitted Matter, such amendment shall be accepted by HNC and the relevant
Section of the RDC Disclosure Letter shall be amended accordingly. If any such
amendment to the RDC Disclosure Letter discloses a matter other than an RDC
Permitted Matter, such amendment may be rejected by HNC, in which event (i) RDC
may terminate this Agreement by giving HNC five (5) days' advance written notice
of termination, unless HNC agrees to accept such amendment within such five (5)
day period; or (ii) HNC may terminate this Agreement by giving RDC five (5)
days' advance written notice of termination. Notwithstanding the foregoing, RDC
hereby represents and warrants that it has used all reasonable efforts to have
accurately completed the RDC Disclosure Letter delivered to HNC prior to
execution of this Agreement.
6. HNC COVENANTS
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During the period from the Agreement Date until the earlier to
occur of (i) the Effective Time or (ii) the termination of this Agreement in
accordance with Section 10, HNC covenants and agrees as follows:
6.1 Advice of Changes. HNC will promptly advise RDC in writing
(a) of any event occurring subsequent to the date of this Agreement that would
render any representation or warranty of HNC contained in this Agreement, if
made on or as of the date of such event or the Closing Date, untrue or
inaccurate in any material respect and (b) of any material adverse change in
HNC's business, results of operations or financial condition.
6.2 Regulatory Approvals. HNC will execute and file, or join
in the execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which RDC may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement in accordance
with the terms of this Agreement. HNC will use its best efforts to obtain all
such authorizations, approvals and consents.
6.3 Satisfaction of Conditions Precedent. HNC will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Section 8, and HNC will use its best efforts to cause the
transactions contemplated by this Agreement to be consummated in accordance with
the terms of this Agreement, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
contemplated hereby. In particular, HNC will use its best efforts to cause the
Merger to become effective in accordance with this Agreement by August 30, 1996.
6.4 Preparation of Permit Application, Hearing Request and
Hearing Notice. As promptly as reasonably practicable after the date hereof,
HNC, with RDC's assistance, shall prepare and file with the Department the
Permit Application, a request for a Fairness Hearing and any other documents
required by the California Law in connection with such Permit Application. HNC
will be solely responsible for any statement, information or omission in the
Permit Application (and the exhibits thereto) relating to HNC or its affiliates.
HNC, with RDC's assistance, shall participate in the Fairness Hearing and use
its best efforts to have the Permit declared effective under the California Law
as promptly as practicable after such filing. HNC shall cause at least one
officer of HNC and HNC's legal counsel to attend the Fairness Hearing.
6.5 Blue Sky Laws. HNC shall take such steps as may be
necessary to comply with the securities and Blue Sky laws of all jurisdictions
which are applicable in connection with the Merger.
6.6 Nasdaq National Market Listing. HNC shall cause the shares
of HNC Common Stock issuable to the RDC Stockholders in the Merger, including
shares of HNC
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Common Stock issuable upon exercise of HNC Options to be authorized for listing
on the Nasdaq National Market, subject to official notice of issuance.
6.7 Subsequent Amendment of Disclosure Letter. HNC shall have
the right, prior to the Closing, to deliver to RDC a written amendment or
amendments to the applicable sections of the HNC Disclosure Letter that
discloses only HNC Permitted Matters (as defined below), unless RDC otherwise
consents in writing. "HNC PERMITTED MATTERS" means facts, events, transactions
or other matters involving HNC that arose or occurred on or before the Agreement
Date other than any facts, events, transactions, actions or other matters that
have, or are likely to have (whether individually or in the aggregate) a
material adverse effect on HNC's business and financial condition, taken as a
whole. To the extent that any such amendment to the HNC Disclosure Letter
discloses an HNC Permitted Matter, such amendment shall be accepted by RDC and
the relevant Section of the HNC Disclosure Letter shall be amended accordingly.
If any such amendment to the HNC Disclosure Letter discloses a matter other than
an HNC Permitted Matter, such amendment may be rejected by RDC, in which event
(i) HNC may terminate this Agreement by giving RDC five (5) days advance written
notice of termination, unless RDC agrees to accept such amendment within such
five (5) day period; or (ii) RDC may terminate this Agreement by giving HNC five
(5) days' advance written notice of termination. Notwithstanding the foregoing,
HNC hereby represents and warrants that it has used all reasonable efforts to
have accurately completed the HNC Disclosure Letter delivered to RDC prior to
execution of this Agreement.
6.8 Continuation of E&O Insurance. If the Merger is
successfully consummated pursuant to this Agreement, HNC agrees that, during the
Escrow Period, HNC will maintain in effect RDC's errors and omissions insurance
policies that are in effect immediately prior to the Effective Time or will
amend HNC's existing errors' and omissions insurance policies so as to provide
coverage under such HNC insurance policies that will apply to the activities and
operations of RDC that occurred prior to the Effective Time.
6.9 SVB Guarantees. If the Merger is successfully consummated
pursuant to this Agreement, HNC will use reasonable efforts to cause Silicon
Valley Bank ("SVB") to release any guarantees of indebtedness of RDC to SVB
("SVB GUARANTEES") that may have been given by RDC directors, officers,
employees or shareholders (the "GUARANTORS") prior to the Agreement Date;
provided, however, that the foregoing covenant shall not obligate HNC to cause
any indebtedness of RDC to SVB to be prepaid, or to accept any adverse
modification in the terms and conditions of the loan agreements and related
agreements governing such indebtedness of RDC to SVB. In addition, if the Merger
is successfully consummated, HNC shall indemnify each Guarantor against all sums
actually paid by such Guarantor to SVB after the Effective Time pursuant to an
SVB Guarantee.
6.10 Employee Benefits. As soon as practicable after the
Agreement Date, HNC and RDC shall confer and work in good faith to agree upon a
plan that has as its primary purpose the transition of RDC employees to HNC
employee benefits plans in a manner that results in minimal disruption to the
continuing operations of RDC. HNC will use reasonable, good faith efforts to
consolidate RDC's existing 401(K) savings plan into HNC's comparable
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401(K) savings plan as soon as legally permitted and reasonably practicable;
provided that HNC need not do so if its counsel shall advice HNC that HNC or the
trustees or administrators of HNC's 401(K) Savings Plan may incur liability for,
or by reason of, such consolidation of RDC's 401(K) savings plan with HNC's
401(K) savings plan.
7. CLOSING MATTERS
7.1 The Closing. Subject to termination of this Agreement as
provided in Section 10 below, the closing of the transactions for consummation
of the Merger (the "CLOSING") will take place at the offices of Fenwick & West
LLP, Two Palo Alto Square, Palo Alto, California 94306 at 10:00 a.m., Pacific
Standard Time on August 30, 1996 or the earliest date practicable thereafter
that HNC and RDC agree after which the satisfaction or waiver of the conditions
to Closing set forth in Sections 8 and 9 hereof have been satisfied and/or
waived in accordance with this Agreement (the "CLOSING DATE"). Concurrently with
the Closing, the Agreement of Merger (or a Certificate of Merger) shall be filed
with the Delaware Secretary of State, and the Agreement of Merger (and related
officers' certificates) will be filed with the California Secretary of State.
7.2 Exchange of Certificates.
7.2.1 At the Closing, each holder of shares of RDC
Stock will surrender the certificate(s) for such shares (each an "RDC
CERTIFICATE"), duly endorsed as requested by HNC, to HNC for cancellation.
Promptly after the Effective Time and receipt of such RDC Certificates, HNC will
issue to each tendering holder of an RDC Certificate a certificate for the
number of shares of HNC Common Stock to which such holder is entitled pursuant
to Section 2.1.2 hereof (less the Escrow Shares to be placed in escrow pursuant
to Section 2.4 and the Escrow Agreement) and will pay by check to each tendering
holder cash in lieu of fractional shares in the amount payable to such holder in
accordance with Section 2.1.4 hereof. At the Closing, HNC will deliver the
certificates representing the Escrow Shares to the Escrow Agent pursuant to the
Escrow Agreement.
7.2.2 No dividends or distributions payable to
holders of record of HNC Common Stock after the Effective Time, or cash payable
in lieu of fractional shares, will be paid to the holder of any unsurrendered
RDC Certificate until the holder of such unsurrendered RDC Certificate
surrenders such RDC Certificate to HNC as provided above. Subject to the effect,
if any, of applicable escheat and other laws, following surrender of any RDC
Certificate, there will be delivered to the person entitled thereto, without
interest, the amount of any dividends and distributions therefor paid with
respect to HNC Common Stock so withheld as of any date subsequent to the
Effective Time and prior to such date of delivery.
7.2.3 After the Effective Time there will be no
further registration of transfers on the stock transfer books of RDC or its
transfer agent of the RDC Stock that was outstanding immediately prior to the
Effective Time. If, after the Effective Time, RDC
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Certificates are presented for any reason, they will be canceled and exchanged
as provided in this Section 7.2.
7.2.4 Until RDC Certificates representing RDC Stock
outstanding prior to the Merger are surrendered pursuant to Section 7.2.1 above,
such RDC Certificates will be deemed, for all purposes, to evidence ownership of
the number of shares of HNC Common Stock into which the RDC Stock will have been
converted pursuant to Section 2.1.2.
8. CONDITIONS TO OBLIGATIONS OF RDC
RDC's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by RDC, but only in a writing signed by RDC):
8.1 Accuracy of Representations and Warranties. The
representations and warranties of HNC set forth in Section 4 (as qualified by
the HNC Disclosure Letter) shall be true and accurate in every material respect
on and as of the Closing with the same force and effect as if they had been made
at the Closing, and RDC shall have received a certificate to such effect
executed by HNC's President or Chief Financial Officer.
8.2 Covenants. HNC shall have performed and complied in all
material respects with all of its covenants contained in Section 6 on or before
the Closing, and RDC shall have received a certificate to such effect signed by
HNC's President or Chief Financial Officer.
8.3 Compliance with Law; No Legal Restraints. There shall not
be any outstanding or threatened, or enacted or adopted, any order, decree,
temporary, preliminary or permanent injunction, legislative enactment, statute,
regulation, action, proceeding or any judgment or ruling by any court,
arbitrator, governmental agency, authority or entity, or any other fact or
circumstance, that, directly or indirectly, challenges, threatens, prohibits,
enjoins, restrains, suspends, delays, conditions or renders illegal or imposes
limitations on (or is likely to result in a challenge, threat to, or a
prohibition, injunction, restraint, suspension, delay or illegality of, or to
impose limitations on): (i) the Merger or any other transaction contemplated by
this Agreement; (ii) HNC's payment for, or acquisition or purchase of, some or
all of the shares of RDC Common Stock or any material part of the assets of RDC.
8.4 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action by any regulatory authority having jurisdiction
over the parties and the actions herein proposed to be taken, as may be required
to lawfully consummate the Merger, including but not limited to requirements
under applicable federal and state securities laws.
8.5 Permit. The Department shall have issued the Permit with
respect to the Merger after the holding of the Fairness Hearing and the shares
of HNC Common Stock and the HNC Options issuable in the Merger will be issuable
pursuant to the exemption provided by Section 3(a)(10) of the 1933 Act.
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8.6 Opinion of HNC's Counsel. RDC shall have received from
counsel to HNC, an opinion substantially in the form of Exhibit 8.6.
8.7 Documents. RDC shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably deemed
necessary by RDC's legal counsel for RDC to lawfully consummate the transactions
contemplated hereby.
8.8 No Litigation. No litigation or proceeding shall be
threatened or pending for the purpose or with the probable effect of enjoining
or preventing the consummation of any of the transactions contemplated by this
Agreement, or which could be reasonably expected to have a material adverse
effect on the present or future operations or financial condition of HNC.
8.9 Requisite Approvals. The principal terms of this Agreement
and the Agreement of Merger shall have been approved and adopted by HNC's Board
of Directors in accordance with applicable law and HNC's Certificate of
Incorporation and Bylaws. The principal terms of the Agreement of Merger shall
have been approved and adopted by Sub's Board of Directors and sole stockholder
in accordance with applicable law and Sub's Certificate of Incorporation and
Bylaws. HNC shall have received all third party consents necessary for HNC to
consummate the Merger and the transactions contemplated hereby without a
material breach of any material agreement to which HNC is a party or is bound
that HNC has filed with the Securities and Exchange Commission, or the violation
of any law, where such breach of a material agreement or violation of law would
have a material adverse effect on HNC's business.
8.10 Tax Opinion. RDC and the RDC Stockholders shall have
received the opinion of Brobeck, Phleger & Harrison, LLP stating, in the form
and substance reasonably acceptable to RDC, subject to the assumptions and
qualifications stated in such opinion, that the Merger constitutes a
reorganization within the meaning of Section 368(a) of the Code and (i) no gain
or loss will be recognized by RDC Stockholders who exchange all of the shares of
RDC Stock solely for HNC Common Stock pursuant to the Merger, (ii) the aggregate
basis of the HNC Common Stock received by RDC Stockholders who exchange all of
their shares of RDC Stock solely for HNC Common Stock will be the same as the
aggregate basis of the shares of RDC Stock surrendered in exchange therefor, and
(iii) the holding period of the HNC Common Stock received in such exchange will
include the period during which the shares of RDC Stock exchanged therefor were
held, provided such shares of the RDC Stock were held as a capital asset
immediately prior to the Effective Time. For purposes of rendering such opinion,
counsel shall be entitled to rely on reasonable assumptions and representations
as to factual matters to be provided by HNC, RDC and certain RDC Stockholders
pertinent to such opinion, including, without limitation, the existence of a
valid business purpose, and sufficient continuity of interest and business
activities following the Merger, and each party shall use its respective best
efforts to provide and cause its shareholders to provide such representations.
9. CONDITIONS TO OBLIGATIONS OF HNC
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The obligations of HNC hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by HNC, but only in a writing
signed by HNC):
9.1 Accuracy of Representations and Warranties. The
representations and warranties of RDC set forth in Section 3 (as qualified by
the RDC Disclosure Letter) shall be true and accurate in every material respect
on and as of the Closing with the same force and effect as if they had been made
at the Closing, and HNC shall have received a certificate to such effect
executed by RDC's President and Chief Financial Officer.
9.2 Covenants. RDC shall have performed and complied in all
material respects with all of its covenants contained in Section 5 on or before
the Closing, and HNC shall have received a certificate to such effect signed by
RDC's President and Chief Financial officer.
9.3 Compliance with Law; No Legal Restraints. There shall not
be any outstanding or threatened, or enacted or adopted, any order, decree,
temporary, preliminary or permanent injunction, legislative enactment, statute,
regulation, action, proceeding or any judgment or ruling by any court,
arbitrator, governmental agency, authority or entity, or any other fact or
circumstance, that, directly or indirectly, challenges, threatens, prohibits,
enjoins, restrains, suspends, delays, conditions, or renders illegal or imposes
limitations on (or is likely to result in a challenge, threat to, or a
prohibition, injunction, restraint, suspension, delay or illegality of, or to
impose limitations on): (i) the Merger or any other transaction contemplated by
this Agreement; (ii) HNC's payment for, or acquisition or purchase of, some or
all of the shares of RDC Common Stock or any material part of the assets of RDC;
(iii) HNC's ownership or operation of all or any material portion of the
business or assets of RDC; or (iv) HNC's ability to exercise full rights of
ownership with respect to the Surviving Corporation or its shares, including but
not limited to restrictions on HNC's ability to vote the shares of the Surviving
Corporation.
9.4 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Merger by any
governmental or regulatory authority having jurisdiction over either of the
parties and the actions herein proposed to be taken, including but not limited
to requirements under applicable federal and state securities laws.
9.5 Opinion of RDC's Counsel. HNC shall have received from
counsel to RDC, an opinion substantially in the form of Exhibit 9.5.
9.6 Consents. HNC shall have received duly executed copies of
all material third-party consents, approvals, assignments, waivers,
authorizations or other certificates contemplated by this Agreement or the RDC
Disclosure Letter or reasonably deemed necessary by HNC's legal counsel to
provide for the continuation in full force and effect of any and all material
contracts, agreements and leases of RDC and the preservation of RDC's IP Rights
and other assets and properties and for HNC to consummate the transactions
contemplated hereby in
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form and substance reasonably satisfactory to HNC, except for such thereof as
HNC and RDC shall have agreed in writing shall not be obtained.
9.7 No Litigation. No litigation or proceeding shall be
threatened or pending for the purpose or with the probable effect of enjoining
or preventing the consummation of any of the transactions contemplated by this
Agreement, or which could be reasonably expected to have a material adverse
effect on the present or future operations or financial condition of RDC or
which asserts that RDC's or HNC's negotiations regarding this Agreement, HNC's
or RDC's entering into this Agreement or RDC's or HNC's consummation of the
Merger or other transactions contemplated hereby, breaches or violates any
agreement or commitment of RDC or constitutes tortious conduct on the part of
HNC or RDC.
9.8 Requisite Approvals. The principal terms of this Agreement
and the Agreement of Merger shall have been approved and adopted, as required by
applicable law and RDC's Articles of Incorporation and Bylaws, by (a) RDC's
Board of Directors and (b) the valid and affirmative vote of outstanding shares
of RDC Common Stock and any other RDC securities (if any) entitled to vote
thereon representing not less than ninety-eight percent (98%) of the voting
power of all issued and outstanding RDC Stock and other RDC voting securities
(if any).
9.9 Limits on Dissenting Shares. The shares of RDC Stock with
respect to which any RDC Stockholder shall be eligible to exercise or perfect
any statutory appraisal rights of dissenting shareholders under applicable law
shall not exceed that number (and class or series) of shares of RDC Stock that,
but for the exercise of such statutory appraisal rights, would be entitled to
receive two percent (2%) or more of the total number of shares of HNC Common
Stock that would be issuable in the Merger upon the conversion of all shares of
RDC Stock that are issued and outstanding immediately prior to the Effective
Time.
9.10 Affiliate Agreements. Each RDC Affiliate who is to
receive HNC Common Stock in the Merger shall have executed and delivered a RDC
Affiliate Agreement to HNC in accordance with Section 5.12.
9.11 Non-Competition Agreement. HNC shall have received from
Mark S. Hammond, a fully executed copy of a Non-Competition Agreement in the
form of Exhibit 9.11.
9.12 Employment Agreement. HNC shall have received from Mark
S. Hammond, a fully executed copy of an Employment Agreement in the form of
Exhibit 9.12.
9.13 Escrow Agreement. HNC shall have received a fully
executed copy of the Escrow Agreement in the form of Exhibit 2.4 executed by the
Escrow Agent, the Representative and each of the RDC Stockholders.
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9.14 Permit. The Department shall have issued the Permit with
respect to the Merger after the holding of the Fairness Hearing and the shares
of HNC Common Stock and HNC Options issuable in the Merger will be issuable
pursuant to the exemption provided by Section 3(a)(10) of the Securities Act.
9.15 No HNC Stockholder Vote. The number of shares of HNC
Common Stock that HNC must issue pursuant to this Agreement shall not exceed the
number of shares of HNC Common Stock that would require HNC to seek the approval
of the Merger by its stockholders under applicable law or the applicable bylaws,
rules or regulations of the National Association of Securities Dealers, the
Nasdaq Stock Market or any other stock exchange on which HNC Common Stock is
traded.
9.16 Resignation of Directors. The directors of RDC in office
immediately prior to the Effective Time of the Merger shall have resigned as
directors of the Surviving Corporation effective as of the Effective Time.
9.17 No Material Adverse Change. There shall not have been any
material adverse change in the financial condition, properties, assets,
liabilities, business, results of operations or operations of RDC and its
subsidiaries, taken as a whole.
9.18 Pooling Opinions. HNC shall have been advised in writing,
as of the Effective Time, by Price Waterhouse LLP that, in accordance with
generally accepted accounting principles, the Merger qualifies to be treated as
a "pooling of interests" for accounting purposes, and RDC shall have been
advised in writing, as of the Effective Time, by Ernst & Young, LLP that, in
accordance with generally accepted accounting principles, RDC is eligible to
participate in a transaction that qualifies as a "pooling of interests" for
accounting purposes.
9.19 Exercise of Warrants. All RDC Derivative Securities, if
any (including but not limited to the SVB Warrant and the LINC Warrant) shall
have been exercised in full and thereby converted into shares of RDC Stock in
accordance with their current terms and conditions, so that neither the SVB
Warrant, the LINC Warrant nor any other RDC Derivative Securities shall be
outstanding immediately prior to the Effective Time.
10. TERMINATION OF AGREEMENT
10.1 Prior to Closing.
10.1.1 This Agreement may be terminated at any time
prior to the Effective Time by the mutual written consent of HNC and RDC.
10.1.2 Unless otherwise agreed by the parties hereto,
this Agreement will be automatically terminated at any time prior to the
Effective Timer without the need for action by any party hereto if all
conditions to the parties' obligation to effect the Closing set forth in
Sections 8 and 9 have not been satisfied or waived by the appropriate party on
or before October 31, 1996 (the "TERMINATION DATE").
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10.1.3 Either party may terminate this Agreement at
any time prior to the Closing if the other party has committed a material breach
of (a) any of its representations and warranties under Section 3 or 4 of this
Agreement, as applicable; or (b) any of its covenants under Sections 5 or 6 of
this Agreement, as applicable, and has not cured such material breach prior to
the earlier of (i) the Closing or (ii) thirty (30) days after the party seeking
to terminate this Agreement has given the other party written notice of its
intention to terminate this Agreement pursuant to this Section 10.1.3.
10.1.4 RDC or HNC may terminate this Agreement in
accordance with the termination provisions of Section 5.21 or Section 6.7, as
applicable.
10.2 At the Closing. At the Closing, this Agreement may be
terminated and abandoned:
10.2.1 By HNC, if any of the conditions precedent to
HNC's obligations set forth in Section 9 above have not been fulfilled or waived
on or prior to the Termination Date;
10.2.2 By RDC, if any of the conditions precedent to
RDC's obligations set forth in Section 8 above have not been fulfilled or waived
on or prior to the Termination Date;
10.2.3 By RDC, if the HNC Closing Average Price Per
Share is less than eighty percent (80%) of the HNC Price Per Share; provided
that if RDC does not affirmatively exercise this right of termination at the
Closing, then this Agreement shall remain in effect, the parties shall be
obligated to complete the Closing and consummate the Merger and the HNC Closing
Average Price Per Share shall be eighty percent (80%) of the HNC Price Per
Share.
Any termination of this Agreement under this Section
10.2 will be effective by the delivery of notice of the terminating party to the
other party hereto.
10.3 No Liability. Any termination of this Agreement in
accordance with this Section 10 will be without further obligation or liability
upon any party in favor of the other party hereto other than the obligations
provided in the Confidentiality Agreement; provided, however, that nothing
herein will limit the obligation of RDC and HNC to use their best efforts to
cause the Merger to be consummated, as set forth in Sections 5.11 and 6.3
hereof, respectively.
11. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS
11.1 Survival of Representations. All representations,
warranties and covenants of RDC and the RDC Stockholders contained in this
Agreement will remain operative and in full force and effect, regardless of any
investigation made by or on behalf of HNC, until that date (the
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"ESCROW RELEASE DATE") which is the earlier of (i) the termination of this
Agreement or (ii) the earlier of (A) first (1st) anniversary of the Closing Date
and (B) the date on which HNC has received audited financial statements together
with a report thereon from HNC's independent auditors covering the combined
results of HNC and RDC, whereupon such representations, warranties and covenants
will expire (except for covenants that by their terms survive for a longer
period).
11.2 Agreement to Indemnify. The RDC Stockholders shall
jointly and severally indemnify and hold harmless HNC and the Surviving
Corporation and their respective officers, directors, agents, stockholders and
employees, and each person, if any, who controls or may control HNC or the
Surviving Corporation within the meaning of the Securities Act (each hereinafter
referred to individually as an "INDEMNIFIED PERSON" and collectively as
"INDEMNIFIED PERSONS") from and against any and all claims, demands, suits,
actions, causes of actions, losses, costs, demonstrable damages, liabilities and
expenses including, without limitation, reasonable attorneys' fees, other
professionals' and experts' reasonable fees and court or arbitration costs
(hereinafter collectively referred to as "DAMAGES") incurred and arising out of
any inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by RDC in this Agreement
or in the RDC Disclosure Letter or any certificate delivered by or on behalf of
RDC pursuant hereto, (if such inaccuracy, misrepresentation, breach or default
existed at the Closing Date). Any claim of indemnity made by an Indemnified
Person under this Section 11.2 must be raised in a writing delivered to the
Escrow Agent by no later than the Escrow Release Date. As used herein, the term
"Damages" shall not include any overhead costs of HNC personnel and the amount
of Damages incurred by any Indemnified Person shall be reduced by the amount of
any insurance proceeds actually received by such Indemnified Person on account
of such Damages and the amount of any direct tax savings actually recognized by
such Indemnified Person that are directly attributable to such Damages, but
shall include any reasonable costs or expenses incurred by such Indemnified
Person to recover such insurance proceeds or to obtain such tax savings. The
Indemnified Persons shall use reasonable efforts to mitigate their Damages.
11.3 Limitation. Notwithstanding anything herein to the
contrary, in seeking indemnification for Damages under Section 11.2, the
Indemnified Persons shall exercise their remedies with respect to the Escrow
Shares and any other assets deposited in escrow pursuant to the Escrow
Agreement. Except for fraudulent conduct or willful misconduct: (i) no RDC
Stockholder shall have any liability to an Indemnified Person under Section 11.2
of this Agreement except to the extent of such RDC Stockholder's portion of the
Escrow Shares and any other assets deposited under the Escrow Agreement and (ii)
the remedies set forth in this Section 11.3 shall be the exclusive remedies of
HNC and the other Indemnified Persons under Section 11.2 of this Agreement
against any RDC Stockholder for any inaccuracy, misrepresentation, breach of, or
default in, any of the representations, warranties or covenants given or made by
RDC in this Agreement or in any certificate, document or instrument delivered by
or on behalf of RDC pursuant hereto. In addition, the indemnification provided
for in Section 11.2 shall not apply unless and until the aggregate Damages for
which one or more Indemnified Persons seeks indemnification hereunder exceeds an
aggregate of Two Hundred Seventy-Five Thousand Dollars ($275,000) (the
"BASKET"), in which event the RDC Stockholders shall, subject to the
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foregoing limitations, be liable to indemnify the Indemnified Persons for all
Damages in excess of the Basket. The limitations on the indemnification
obligations set forth in this Section 11.3 shall not be applicable to Damages
resulting from fraudulent conduct or willful misconduct.
11.4 Notice. Promptly after HNC becomes aware of the existence
of any potential claim by an Indemnified Person for indemnity from the RDC
Stockholders under Section 11.2, HNC will notify the RDC Stockholders of such
potential claim in accordance with the Escrow Agreement and will, to the extent
that it can reasonably do so without impairing its ability to adequately defend
and respond to any such claim, permit the RDC Stockholders to assist HNC in the
defense of such claim and will cooperate with the RDC Stockholders in obtaining
copies of any records or other information which is relevant to the defense of
such claim. Failure of HNC to give such notice shall not affect any rights or
remedies of an Indemnified Party hereunder with respect to indemnification for
Damages except to the extent the RDC Stockholders are materially prejudiced
thereby. Prior to the settlement of any claim for which HNC seeks indemnity from
a RDC Stockholder, HNC will provide the RDC Stockholders with the terms of the
proposed settlement and a reasonable opportunity to comment on such terms in
accordance with the Escrow Agreement.
12. MISCELLANEOUS
12.1 Governing Law. The internal laws of the State of
California (irrespective of its choice of law principles) will govern the
validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
12.2 Assignment; Binding Upon Successors and Assigns. Neither
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will constitute one
and the same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
both parties reflected hereon as signatories.
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<PAGE> 45
12.5 Other Remedies. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
12.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. The Agreement may be amended by the parties hereto at any
time before or after approval of the stockholders of RDC, but, after such
approval, no amendment will be made which by applicable law requires the further
approval of the stockholders of RDC without obtaining such further approval. At
any time prior to the Effective Time, each of RDC and HNC, by action taken by
its Board of Directors, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other; (ii)
waive any inaccuracies in the representations and warranties made to it
contained herein or in any document delivered pursuant hereto; and (iii) waive
compliance with any of the agreements or conditions for its benefit contained
herein. No such waiver or extension shall be effective unless signed in writing
by the party against whom such waiver or extension is asserted. The failure of
any party to enforce any of the provisions hereof will not be construed to be a
waiver of the right of such party thereafter to enforce such provisions.
12.7 Expenses. Each party will bear its respective expenses
and legal fees incurred with respect to this Agreement, and the transactions
contemplated hereby.
12.8 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
12.9 Notices. All notices and other communications required or
permitted under this Agreement will be in writing and will be either hand
delivered in person, sent by telecopier, sent by certified or registered first
class mail, postage pre-paid, or sent by nationally recognized express courier
service. Such notices and other communications will be effective upon receipt if
hand delivered or sent by telecopier, five (5) days after mailing if sent by
mail, and one (l) day after dispatch if sent by express courier, to the
following addresses, or such other addresses as any party may notify the other
parties in accordance with this Section :
(i) If to HNC:
HNC Software Inc.
5930 Cornerstone Court West
San Diego, CA 92121
Attention: President
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Fax Number: (619) 452-3220
with a copy to:
Fenwick & West, LLP
Two Palo Alto Square, Suite 800
Palo Alto, CA 94306
Attention: Kenneth A. Linhares
Fax Number: (415) 857-0361
(ii) If to RDC:
Risk Data Corporation
111 Pacifica, Third Floor
Irvine, CA 92718-3304
Attention: President
Fax Number: (714) 753-8020
with a copy to:
Craig S. Andrews, Esq.
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 92101
Fax Number: (619) 234-3848
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 12.9.
12.10 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section or an exhibit will mean a Section in, or exhibit to, this Agreement
unless otherwise explicitly set forth. The titles and headings herein are for
reference purposes only and will not in any manner limit the construction of
this Agreement which will be considered as a whole.
12.11 No Joint Venture. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
any of the parties hereto. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No party will
have the power to control the activities and operations of any other and their
status is, and at all times will continue to be, that of independent contractors
with respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
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12.12 Further Assurances. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
12.13 Absence of Third Party Beneficiary Rights. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, partner or any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
12.14 Public Announcement. Upon execution of this Agreement,
HNC and RDC will issue a press release approved by both parties announcing the
Merger. Thereafter, HNC may issue such press releases, and make such other
disclosures regarding the Merger, as it determines are required under applicable
securities laws or regulatory rules. Prior to the publication of such press
release (unless this Agreement has been terminated, neither party shall make any
public announcement relating to this Agreement or the transactions contemplated
hereby and RDC shall use its reasonable efforts to prevent any trading in HNC
Common Stock by its officers, directors, employees, stockholders and agents.
12.15 Confidentiality. RDC and HNC each confirm that they have
entered into the Confidentiality Agreement and that they are each bound by, and
will abide by, the provisions of such Confidentiality Agreement (except that HNC
will cease to be bound by the Confidentiality Agreement after the Merger becomes
effective). If this Agreement is terminated, all copies of documents containing
confidential information of a disclosing party shall be returned by the
receiving party to the disclosing party or be destroyed, as provided in the
Confidentiality Agreement.
12.16 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto other than the
Confidentiality Agreement. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
HNC SOFTWARE INC. RISK DATA CORPORATION
By: /s/ Robert L. North By: /s/ Mark S. Hammond
-------------------------- -------------------------
President President
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HNC MERGER CORP.
By: /s/ Robert L. North
---------------------------
President
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LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Agreement of Merger (1)
Exhibit 2.4 Escrow Agreement
Exhibit 2.5A Restated Articles of Incorporation of Surviving Corporation (2)
Exhibit 2.5B Bylaws of Surviving Corporation (2)
Exhibit 2.8 Certificate of Officer of RDC (2)
Exhibit 2.10 Registration Rights Agreement (1)
Exhibit 3.3.1 RDC Stockholders (2)
Exhibit 3.3.2 RDC Option Holders (2)
Exhibit 3.8 RDC Financial Statements (2)
Exhibit 3.11 Agreements of RDC (2)
Exhibit 3.13 RDC IP Rights (2)
Exhibit 3.16.1 List of RDC Employees, Officers and Consultants (2)
Exhibit 3.16.4 RDC Benefit Arrangements (2)
Exhibit 5.12 RDC Affiliates Agreement (2)
Exhibit 8.6 Matters to be Covered in the Opinion of Fenwick & West, LLP Counsel to HNC Software
Inc. (2)
Exhibit 9.5 Matters to be Covered in the Opinion of Brobeck, Phleger & Harrison, LLP, Counsel for
RDC (2)
Exhibit 9.11 Non-Competition Agreement (2)
Exhibit 9.12 Employment Agreement (2)
</TABLE>
- -----------------------------------------------------------------------
(1) Filed separately as an exhibit to the Company's Form 8-K.
(2) Pursuant to Item 601(b)(2) of Regulation S-K, this schedule has been
omitted but will be furnished supplementally to the Commission upon request.
<PAGE> 50
EXHIBIT 2.4
ESCROW AGREEMENT
<PAGE> 51
AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
This Amendment to Agreement and Plan of Reorganization (this "Amendment")
is made and entered into as of August 30, 1996 between HNC Software Inc., a
Delaware corporation ("HNC"), HNC Merger Corp., a Delaware corporation that is a
wholly-owned subsidiary of HNC ("Sub") and Risk Data Corporation, a California
corporation ("RDC").
R E C I T A L S
A. HNC, Sub and RDC are parties to an Agreement and Plan of Reorganization
dated July 19, 1996 (the "Plan") pursuant to which Sub is to be merged with and
into RDC in a statutory merger (the "Merger") pursuant to an Agreement of Merger
to be entered into between RDC and Sub (the "Agreement of Merger").
B. It was the intent of the Plan (as expressed in Section 2.1.5 of the
Plan) that the shares of RDC's Common Stock, Series A Preferred Stock and Series
B Preferred Stock receive shares of HNC Common Stock in the merger in accordance
with the merger liquidation preferences of RDC's Articles of Incorporation,
which call for certain preferential allocations of merger consideration to the
various series and classes of RDC Stock, following which such Articles of
Incorporation provide that the outstanding shares of RDC Stock shall participate
in receiving remaining merger consideration on an as-converted into RDC Common
Stock basis. Each outstanding share of RDC Series A Preferred Stock is currently
convertible into one (1) share of RDC Common Stock and each outstanding share of
RDC Series B Preferred Stock is currently convertible into 1.00154 shares of RDC
Common Stock.
C. The parties have discovered that the Plan inadvertently failed to
reflect this intent in the definition of the term "Series B Conversion Number",
by not reflecting the greater than 1-to-1 conversion rate at which RDC Series B
Preferred Stock is convertible into Common Stock. The parties have also
determined that it would be more equitable and accurate to determine the
"Participation Number," the "Series A Conversion Number", the "Series B
Conversion Number", and the "Option Conversion Number" (as those terms are
defined in the Plan) without limiting the determination of such numbers to the
fourth decimal place. Accordingly, the parties have determined that correcting
the inadvertent technical omission in the definition of "Series B Conversion
Number" and not limiting the above computations to the fourth decimal place will
not have any material affect on the allocation among the holders of RDC Stock of
the shares of HNC Common Stock issued in the Merger and that such changes to the
Plan do not constitute a change in any of the principal terms of the Merger. The
parties therefore desire to make this Amendment to fulfill the expressed intent
of the Plan and the parties thereto as set forth in Section 2.1.5 thereof.
NOW THEREFORE, the parties hereby agree as follows:
1. AMENDMENTS. The following Sections of the Plan are hereby amended as
follows:
(a) The last sentence of Section 1.17 (regarding the "Participation
Number") is hereby amended by deleting therefrom the words: ", such quotient
being rounded to the fourth decimal place."
(b) Sections 1.19, 1.20, 1.21 and 1.22 of the Plan are hereby amended to
read in their entirety as follows:
1.19 "SERIES A CONVERSION NUMBER" means the number of shares of HNC Common
Stock equal to the sum of (a) $1.66 divided by the HNC Closing Average
Price Per Share, plus (b) the
<PAGE> 52
product obtained by multiplying the Participation Number by the number
of shares of RDC Common Stock into which one (1) share of RDC Series A
Preferred Stock is convertible immediately prior to the Effective Time
(which is currently one (1) share of RDC Common Stock).
1.20 "SERIES B CONVERSION NUMBER" means the number of shares of HNC Common
Stock equal to the sum of (a) $8.72 divided by the HNC Closing Average
Price Per Share, plus (b) the product obtained by multiplying the
Participation Number by the number of shares of RDC Common Stock into
which one (1) share of RDC Series B Preferred Stock is convertible
immediately prior to the Effective Time (which is currently 1.00154 shares
of RDC Common Stock).
1.21 "COMMON CONVERSION NUMBER" means the number of shares of HNC Common
Stock equal to the sum of (a) $0.55 divided by the HNC Closing Average
Price Per Share, plus (b) the Participation Number.
1.22 "OPTION CONVERSION NUMBER" means the number of shares of HNC Common
Stock obtained by dividing the Option Pool Shares (as defined below) by
the total number of shares of RDC Common Stock that are subject to all RDC
Options that are issued and outstanding immediately prior to the Effective
Time (without regard to whether the right to exercise such RDC Options has
or has not vested). "OPTION POOL SHARES" means the number of shares of HNC
Common Stock equal to the quotient obtained by dividing (a) the Option
Amount, by (b) the HNC Closing Average Price Per Share.
(c) The Agreement of Merger shall also be amended to reflect the
foregoing amendments.
2. EFFECT OF AMENDMENT. This Amendment shall be effective and binding on
all parties hereto and on the securityholders of Risk Data Corporation.
3. COUNTERPARTS. This Amendment may be executed in any number of counterparts,
each of which will be an original as regards any party whose signature appears
thereon and all of which together will constitute one and the same instrument.
This Amendment will become binding when one or more counterparts hereof,
individually or taken together, will bear the signatures of all parties
reflected hereon as signatories.
IN WITNESS WHEREOF, the parties have executed and entered into this
Amendment effective as of August 30, 1996.
HNC SOFTWARE INC. RISK DATA CORPORATION
By: /s/ Raymond V. Thomas By: /s/ Mark S. Hammond
----------------------------- -----------------------------------
Chief Financial Officer President
HNC MERGER CORP.
By: /s/ Raymond V. Thomas
-----------------------------
Chief Financial Officer
2
<PAGE> 53
ESCROW AGREEMENT
This Escrow Agreement (this "AGREEMENT") is made and entered into as of
August 30, 1996 (the "EFFECTIVE DATE"), by and among HNC SOFTWARE INC., a
Delaware corporation ("HNC"), the persons and entities listed on Exhibit A
hereto (collectively, the "STOCKHOLDERS" and each individually, a "STOCKHOLDER")
who immediately prior to the Effective Time of the Merger (as defined below) are
the shareholders of RISK DATA CORPORATION, a California corporation ("RDC"),
Mark S. Hammond and James H. Berglund, as the representatives and agents of the
Stockholders (collectively, "REPRESENTATIVE") and State Street Bank and Trust
Company of California, N.A., as Escrow Agent (the "ESCROW AGENT").
A. RDC, HNC and HNC Merger Corp., a Delaware corporation that is a
wholly-owned subsidiary of HNC ("SUB") have entered into an Agreement and Plan
of Reorganization (the "PLAN") dated as of July 19, 1996, as amended, pursuant
to which Sub shall be merged with and into RDC in a reverse triangular merger
(the "MERGER"), with RDC to be the surviving corporation of the Merger. The
capitalized terms used in this Agreement and not otherwise defined herein shall
have the meanings given them in the Plan, a copy of which is attached hereto as
Exhibit C and incorporated herein by this reference.
B. Section 2.4 of the Plan provides for shares equaling eight and
three-quarters percent (8.75%) of the shares of HNC Common Stock that are issued
in the Merger to the RDC Stockholders in accordance with Section 2.1.2 of the
Plan (the "ESCROW SHARES") to be deducted from the shares of HNC Common Stock
issued to the RDC Stockholders in the Merger and to be placed in an escrow
account (the "ESCROW ACCOUNT") to secure certain indemnification obligations of
the RDC Stockholders to HNC and other Indemnified Persons (as defined in
Section 11.2 of the Plan) under Section 11 of the Plan on the terms and
conditions set forth herein. The Escrow Shares required to be deposited in the
Escrow Account pursuant to this Agreement are shown on Exhibit A attached
hereto.
C. The parties hereto desire to establish the terms and conditions
pursuant to which the Escrow Shares shall be deposited, held in, and disbursed
from the Escrow Account.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Escrow and Indemnification
(a) RDC Stockholders; Damages. As used herein, the term "RDC
STOCKHOLDERS" shall have the meaning given to such term in Section 1.11 of the
Plan, as such meaning is defined for purposes of Section 2.4 and Section 11 of
the Plan. As used herein, the term "DAMAGES" means "Damages" as defined in
Section 11.2 of the Plan.
<PAGE> 54
(b) Escrow of Shares. Promptly after the Effective Time, HNC
or its transfer agent shall deposit the Escrow Shares deducted from the shares
issued to the RDC Stockholders in the Merger with the Escrow Agent, accompanied
by written notice making reference to this Agreement and identifying the shares
so deposited as the Escrow Shares. The Escrow Agent shall hold the Escrow Shares
in escrow as collateral for the indemnification obligations of the Stockholders
under Section 11 of the Plan until the Escrow Agent is required to release such
Escrow Shares pursuant to the terms of this Agreement. The Escrow Shares shall
include "ADDITIONAL ESCROW SHARES" as that term is defined in Section 2(b) of
this Agreement. The Escrow Agent agrees to accept delivery of the Escrow Shares
and to hold such Escrow Shares in escrow subject to the terms and conditions of
this Agreement.
(c) Indemnification. HNC and the other Indemnified Persons are
indemnified pursuant to the terms of Section 11.2 of the Plan (which terms are
incorporated herein by reference) from and against any Damages (as defined in
Section 11.2 of the Plan), subject to the limitations set forth in Section 11 of
the Plan and herein. The Escrow Shares shall be security for these indemnity
obligations, subject to the limitations, and in the manner provided, in Section
11 of the Plan and in this Agreement. Mark S. Hammond and James H. Berglund
shall jointly act as Representative of the Stockholders for purposes of this
Agreement, and each is duly authorized to be such Representative and may bind
the Stockholders as provided herein. As provided in Section 6 hereof, all
actions of the Representative shall be made unanimously by both persons who are
appointed to act as the Representative. For purposes of this Agreement,
references to HNC in this Agreement shall include all other Indemnified Persons,
as applicable.
(d) Notice of Claim. As used herein, the term "CLAIM" means a
claim for indemnification under Section 11 of the Plan made by HNC or any other
Indemnified Person. HNC shall give written notice of a Claim (a "NOTICE OF
CLAIM") to the Representative and the Escrow Agent as promptly as reasonably
practicable after either:
(i) HNC's discovery of any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants made or given by RDC in the Plan, in the RDC Disclosure
Letter or in any certificate delivered by or on behalf of RDC pursuant to the
Plan on which such Claim is based; or
(ii) HNC's receipt of verbal or written notice of a
demand, suit, arbitration, proceeding or other claim brought by a third party
that is based upon, or includes, assertions that would, if true, constitute an
inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants made or given by RDC in the Plan, in
the RDC Disclosure Letter or in any certificate delivered by or on behalf of RDC
pursuant to the Plan on which such Claim is based (a "THIRD PARTY CLAIM");
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<PAGE> 55
HNC will not give a Notice of Claim with respect to a Claim involving a
potential third Party Claim that has not yet been made or threatened, unless HNC
has a reasonable expectation that either: (i) such potential Third-Party Claim
will be made; or (ii) a third party has reasonable grounds for making such
potential Third-Party Claim. HNC will make Claims only as permitted by Section
11 of the Plan. HNC may give a Notice of Claim at any time prior to the close of
the Escrow Period (as defined below). As used herein, the term "ESCROW PERIOD"
means that time period beginning on the Effective Date of this Agreement and
ending on the earlier to occur of (a) the date on which HNC has first received
final audited financial statements together with a report thereon from HNC's
independent auditors covering the combined results of HNC and RDC (the
"FINANCIAL STATEMENT RECEIPT DATE") or (b) twelve (12) months after the
Effective Date of this Agreement. HNC will promptly give Escrow Agent and the
Representative notice of the occurrence of the Financial Statement Receipt Date
if such date occurs prior to twelve (12) months after the Effective Date.
(e) Third Party Claims. Within fifteen (15) days of delivery
of a Notice of Claim involving a Third-Party Claim, the Representative may, at
the sole expense of the Stockholders, elect to take all necessary steps to
vigorously defend and contest any pending Third-Party Claim provided the
Representative employs reputable legal counsel reasonably acceptable to HNC in
doing so. HNC shall have the right to participate at its own expense in the
defense and prosecution of all proceedings related to such Third-Party Claim. If
the Representative does not promptly make such election to defend or contest the
Claim, then HNC, at its option (i) shall be free to handle and control the
prosecution or defense of any such Third-Party Claim in a reasonable manner,
(ii) may take all reasonably necessary steps to contest the Third-Party Claim or
to prosecute such Third-Party Claim to conclusion or settlement satisfactory to
HNC, (iii) shall notify the Representative of the progress of any such Claim,
(iv) shall permit the Representative, at the sole cost of the Representative and
the RDC Stockholders, to participate in such prosecution or defense, and (v)
shall provide the Representative with reasonable access to all relevant
information and documentation relating to the Third-Party Claim and HNC's
prosecution or defense thereof. In any case, the party not in control of the
defense or prosecution of the Third Party Claim shall cooperate with the other
party in the conduct of the prosecution or defense of such Third-Party Claim.
Neither party shall compromise or settle any Third-Party Claim without the
written consent of either HNC (if the Representative controls and defends the
Third-Party Claim) or the Representative (if HNC controls and defends the
Third-Party Claim), such consent not to be unreasonably withheld.
(f) Limitation on Liability. The maximum liability of each
Stockholder for any Damages under Section 11.2 of the Plan (other than for
fraudulent or willful misconduct) shall be the loss and forfeiture of the number
of Escrow Shares set forth next to such Holder's name on Exhibit A. Payments for
finally determined Claims shall be deducted from the Escrow Shares of each
Holder in proportion to their respective percentage interests in the Escrow
Shares set forth on Exhibit A. Exhibit A sets forth the maximum number of shares
each Holder initially deposited into Escrow hereunder.
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<PAGE> 56
2. DEPOSIT OF ESCROW SHARES; RELEASE FROM ESCROW.
(a) Delivery of Escrow Shares. On the Effective Date or as
soon thereafter as is reasonably practicable: (i) the Escrow Shares allocable to
each Stockholder as shown on Exhibit A (the "INITIAL ESCROW SHARES") shall be
delivered by HNC's transfer agent to the Escrow Agent in the form of duly
authorized stock certificates issued in the respective names of the holders
thereof; and (ii) each of the Stockholders shall deliver to the Escrow Agent two
(2) duly endorsed stock powers in the form of Exhibit B attached hereto
regarding such Initial Escrow Shares. Each Stockholder agrees to execute and
deliver to the Escrow Agent such additional stock powers relating to the Escrow
Shares as may be necessary, in the Escrow Agent's opinion, to carry out its
responsibilities under this Agreement. In the event HNC issues any Additional
Escrow Shares (as defined below), HNC shall instruct its transfer agent to
deliver such Additional Escrow Shares to the Escrow Agent, and each Stockholder
shall deliver endorsed stock powers for such Stockholder's Additional Escrow
Shares to the Escrow Agent, in the same manner as the Initial Escrow Shares and
stock powers therefor were delivered to the Escrow Agent hereunder.
(b) Dividends, Voting and Rights of Ownership. Except for
dividends paid in shares of HNC stock declared with respect to the Escrow Shares
("ADDITIONAL ESCROW SHARES"), any cash dividends, dividends payable in
securities or other distributions of any kind made in respect of the Escrow
Shares shall be distributed currently by HNC to each Stockholder. The
Stockholder shall have the right to vote the Escrow Shares deposited in the
Escrow Account for the account of such Stockholder so long as such Escrow Shares
are held in escrow, and HNC shall take all reasonable steps necessary to allow
the exercise of such rights. While the Escrow Shares remain in the Escrow
Agent's possession pursuant to this Agreement and have not been cancelled as
provided herein, the Stockholder shall retain and shall be able to exercise
voting rights to such Escrow Shares and all other incidents of ownership of said
Escrow Shares that are not inconsistent with the terms and conditions of this
Agreement.
(c) Distributions to Stockholders. Upon the expiration of the
Escrow Period (the "FINAL RELEASE DATE"), the Escrow Agent shall release from
escrow to each Stockholder such Stockholder's Escrow Shares as set forth in
Exhibit A, plus that portion of all Additional Escrow Shares (if any) related to
such Stockholder's Escrow Shares, minus any of such Stockholder's Escrow Shares
previously delivered to HNC or owed to HNC in accordance with Section 4 hereof
in satisfaction of Claims by HNC.
(d) Release of Shares. The Escrow Shares shall be held by the
Escrow Agent until such Escrow Shares are required to be released pursuant to
either Section 2(c), or applicable provisions of Section 4, and the Escrow Agent
shall deliver to the Stockholders or to HNC, as applicable hereunder, the
requisite number of Escrow Shares to be released on such applicable date as is
called for by this Agreement. Such delivery shall be in the form of stock
certificate(s) registered in the name of such Stockholders or HNC, as applicable
hereunder.
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<PAGE> 57
Escrow Agent shall coordinate with HNC's transfer agent (currently Boston
EquiServ) who shall cause such stock certificates to be registered in the
appropriate names as determined by the Escrow Agent in accordance with this
Agreement. HNC shall give the Escrow Agent prompt written notice of the name and
address of any new transfer agent for HNC's Common Stock. HNC and the
Representative undertake to deliver a prompt written notice to Escrow Agent
identifying the number of Escrow Shares to be released to the Stockholders
and/or HNC, as applicable. Escrow Shares released to the Stockholders shall be
released to them in proportion to their respective interests as set forth in
Exhibit A. Escrow Agent shall use good faith efforts (with HNC's assistance) to
have such stock certificates in its possession by delivery from HNC's transfer
agent no later than three (3) business days prior to the day on which Escrow
Agent is to deliver such certificates to the Stockholders. Cash shall be paid in
lieu of fractions of Escrow Shares in an amount equal to the HNC Closing Average
Price Per Share multiplied by the applicable fraction of an Escrow Share. Within
five (5) business days after written request from the Representative, HNC shall
submit to the Escrow Agent and the Representative a certified schedule of the
cash amounts payable for fractional shares (if any) and shall deposit with the
Escrow Agent sufficient funds to pay such cash amounts for fractional shares.
(e) No Encumbrance. No Escrow Shares or any beneficial
interest therein may be pledged, encumbered, sold, assigned or transferred,
including by operation of law, by a Stockholder or be taken or reached by any
legal or equitable process in satisfaction of any debt or other liability of the
Stockholder, prior to the delivery to such Stockholder of the Escrow Shares by
the Escrow Agent. The Escrow Agent shall have no responsibility for determining
or enforcing compliance with this Section 2(e), except that the Escrow Agent
shall retain possession of the stock certificates evidencing the Escrow Shares
as required by this Agreement.
(f) Power to Transfer Escrow Shares. The Escrow Agent is
hereby granted the power to effect any transfer of Escrow Shares contemplated by
this Agreement. HNC shall cooperate with the Escrow Agent in causing HNC's
transfer agent to promptly issue stock certificates to effect such transfers.
3. NOTICE OF CLAIM.
(a) Each Notice of Claim by HNC pursuant to Section 1(d)
hereof, whether or not the Claim described in such Notice of Claim would be
included in the Basket (as defined in the Plan), shall be in writing and shall
contain the following information to the extent it is reasonably available to
HNC:
(1) HNC's good faith estimate of the reasonably
foreseeable maximum amount of the alleged Damages (which amount may, without
limitation, be the amount of damages claimed by a third party plaintiff in an
action brought against HNC or RDC based on alleged facts, which if true, would
give rise to Damages); and
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(2) A brief description in reasonable detail of the
facts, circumstances or events giving rise to the alleged Damages based on HNC's
good faith belief thereof, including, without limitation, the identity and
address of any third-party claimant (to the extent reasonably available to HNC)
and copies of any formal demand or complaint.
(b) The Escrow Agent shall not transfer any of the Escrow
Shares held in the Escrow Account to HNC pursuant to a Notice of Claim until
such Notice of Claim has been resolved in accordance with Section 4 below.
4. RESOLUTION OF NOTICE OF CLAIM AND TRANSFER OF ESCROW
SHARES. Any Notice of Claim received by the Representative and the Escrow
Agent pursuant to Section 3 above shall be resolved as follows:
(a) Uncontested Claims. If, within 30 calendar days after the
Notice of Claim containing a statement of claimed Damages is deemed to have been
delivered by HNC to the Representative and the Escrow Agent pursuant to Section
7 hereof, the Representative has not contested such Notice of Claim in writing
to the Escrow Agent as provided in Section 4(b) and the Escrow Agent has not
received written confirmation from HNC that the Representative has paid in full
the amount demanded in such Notice of Claim, then the Escrow Agent shall: (i)
immediately release from escrow and transfer to HNC for cancellation that number
of Escrow Shares having a value (determined pursuant to Section 4(d) hereof)
equal to the amount of Damages specified in the Notice of Claim, which
transferred and forfeited Escrow Shares shall be taken from and forfeited by
each of the Stockholders in proportion to their respective percentage interest
in the Escrow Shares as set forth on Exhibit A; and (ii) notify the
Representative in writing of such transfer of Escrow Shares as promptly as
reasonably practicable.
(A) Contested Claims. In the event that the Representative
delivers written notice contesting all, or a portion of, a Notice of Claim to
HNC and the Escrow Agent (a "CONTESTED CLAIM") and such written notice is
deemed, under the provisions of Section 7 hereof, to have been delivered to HNC
and the Escrow Agent within the 30-day period described in Section 4(a) above,
then such Contested Claim shall be resolved prior to the expiration of the
Escrow Period (as defined in Section 2.4 of the Plan) by either (i) the mutual
written agreement between HNC and the Representative or (ii) in the absence of
such mutual written agreement, by binding arbitration as provided herein. Any
portion of the Notice of Claim that is not contested shall be resolved as an
uncontested claim as set forth in Section 4(a) above. The final decision of the
arbitrator shall be furnished to the Escrow Agent, the Representative and HNC in
writing and shall constitute a conclusive determination of the issue in
question, binding upon the Stockholders, the Representative and HNC and shall
include an affirmative statement to such effect. After notice that the Notice of
Claim is contested by the Representative, the Escrow Agent shall continue to
hold Escrow Shares in the Escrow Account until the Escrow Shares are required to
be released under the terms of this Agreement.
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(1) Arbitration. Any Contested Claim shall be
settled by binding arbitration in San Diego, California, and, except as herein
specifically stated, in accordance with the commercial arbitration rules of the
American Arbitration Association ("AAA RULES") then in effect. However, in all
events, these arbitration provisions shall govern over any conflicting rules
which may now or hereafter be contained in the AAA Rules. Judgment upon the
award rendered by the arbitrator may be entered in any court having competent
jurisdiction.
(2) Compensation of Arbitrator. Any such
arbitration shall be conducted before a single arbitrator who shall be
compensated for his or her services at a rate to be determined by the parties or
by the American Arbitration Association, but based upon reasonable hourly or
daily consulting rates for the arbitrator in the event the parties are not able
to agree upon his or her rate of compensation.
(3) Selection of Arbitrator. The American
Arbitration Association shall have the authority to select an arbitrator from a
list of arbitrators who are lawyers experienced in the representation of
software companies; provided, however, that such arbitrator cannot be the
current or former legal counsel to any interested party, provided further that
each of HNC, on the one hand, or the Representative, on the other hand, shall
have the opportunity to promptly make such reasonable objection to any of the
arbitrators listed as such party may wish and that the American Arbitration
Association shall select the arbitrator from the list of arbitrators as to whom
neither HNC nor the Representative makes any such objection. Neither HNC nor the
Representative may object to any arbitrator for the purpose of delaying the
arbitration. In the event that the foregoing procedure is not followed, HNC, on
the one hand, or the Representative, on the other hand, shall each choose one
person from the list of arbitrators provided by the American Arbitration
Association (provided that such person does not have a conflict of interest or
relationship with any interested party), and the two persons so selected shall
select from the list provided by the American Arbitration Association the person
who shall act as the arbitrator.
(4) Payment of Costs. HNC and the Stockholders
shall bear the expense of deposits and advances required by the arbitrator in
equal proportions, but either party may advance such amounts, subject to
recovery as an addition or offset to any award. The arbitrator shall award to
the prevailing party, as determined by the arbitrator, all costs, fees and
expenses related to the arbitration, including reasonable fees and expenses of
attorneys, accountants and other professionals incurred by the prevailing party.
If such an award would result in manifest injustice, however, the arbitrator may
apportion such costs, fees and expenses between the parties as such arbitrator
deems just and equitable.
(5) Burden of Proof. For any Claim submitted to
arbitration, the burden of proof shall be as it would be if the claim were
litigated in a judicial proceeding governed by California law exclusively.
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(6) Award. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator shall render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and shall deliver such documents to each party to this
Agreement along with a signed copy of the award.
(7) Timing. The Representative, HNC and the
arbitrator shall conclude each arbitration pursuant to this Section 4 promptly
and prior to the expiration of the Escrow Period (as defined in Section 2.4 of
the Plan).
(8) Terms of Arbitration. The arbitrator chosen in
accordance with these provisions shall not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement or the Plan.
(9) Exclusive Remedy. Except as specifically
otherwise provided in this Agreement or the Plan, arbitration shall be the sole
and exclusive remedy of the parties for any Claim made pursuant to Section 11 of
the Plan and this Agreement.
(10) Release of Escrow Shares Pursuant to
Arbitration Award. Upon the arbitrator's issuance of a final award in such
arbitration, the arbitrator shall immediately deliver a copy of such final award
to the Representative, HNC and the Escrow Agent. Upon its receipt of a copy of
the final arbitration award, the Escrow Agent shall first permit the
Representative the opportunity to pay such award to HNC in full in cash within
seven (7) days after the Escrow Agent's receipt of a copy of such final
arbitration award, and if the Escrow Agent does not receive written confirmation
from HNC that such award has been paid in full in cash to HNC prior to the
expiration of such seven (7) day period, then Escrow Agent will (i) immediately
release from escrow and transfer to HNC for cancellation that number of Escrow
Shares having a value (determined pursuant to Section 4(d) hereof) equal to the
amount of Damages (if any) awarded by such final arbitration award, which
transferred and forfeited Escrow Shares shall be taken from each of the
Stockholders in proportion to their respective percentage interest in the Escrow
Shares as set forth on Exhibit A, and (ii) notify the Representative in writing
of such transfer of Escrow Shares as promptly as reasonably practicable.
(c) Settled Claims. If a Claim (including a Contested Claim)
is settled by a written settlement agreement executed by the Representative and
HNC, then the Representative and HNC shall promptly deliver such executed
settlement agreement to the Escrow Agent together with written instructions
executed by both HNC and the Representative to the Escrow Agent ("SETTLEMENT
INSTRUCTIONS") which shall, in accordance with and subject to the terms of the
written settlement agreement, instruct the Escrow Agent either: (i) to release a
stated number of Escrow Shares to HNC pursuant to such settlement agreement;
and/or (ii) that HNC has been paid in cash the full amount required by the
settlement agreement and that no action need be taken by the Escrow Agent with
respect to such Claim. Upon its receipt of such settlement agreement and
Settlement Instructions instructing the Escrow Agent to release Escrow
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Shares to HNC, the Escrow Agent shall (i) immediately release from escrow and
transfer to HNC for cancellation that number of Escrow Shares having a value
(determined pursuant to Section 4(d) hereof) equal to the amount of Damages that
HNC and the Representative have agreed that HNC has suffered in such settlement
agreement and Settlement Instructions, which transferred and forfeited Escrow
Shares shall be taken from each of the Stockholders in proportion to their
respective percentage interest in the Escrow Shares as set forth on Exhibit A,
and (ii) notify the Representative in writing of such transfer of Escrow Shares
as promptly as reasonably practicable.
(d) Determination of Amount of Claims. Any amount of Damages
owed to HNC hereunder, determined pursuant to Section 4(a), 4(b) or 4(c) above,
and not paid in cash by the Representative in accordance with the above
provisions of this Section 4, shall be immediately payable to HNC out of the
Escrow Shares then held by the Escrow Agent, and shall be forfeited and taken
from the Stockholders on a pro rata basis according to each Stockholder's
respective percentage interest in the Escrow Shares as set forth on Exhibit A.
For purposes of this Agreement, Escrow Shares shall be deemed to have a per
share value equal to the HNC Closing Average Price Per Share (as defined in the
Plan) of $28.5048 per share (as adjusted to reflect any Capital Change of the
type described in Section 2.3 of the Plan, whether occurring prior to, at or
after the Effective Time). Thus, the number of Escrow Shares to be released from
escrow and transferred to HNC in satisfaction of a Claim for Damages (whether an
Uncontested Claim, a Contested Claim or a Settled Claim) and not paid in cash as
provided above shall be the amount of such Damages divided by the HNC Closing
Average Price Per Share (as adjusted to reflect any Capital Change of the type
described in Section 2.3 of the Plan). HNC shall promptly give the Escrow Agent
and the Representative notice of the occurrence of any Capital Change and the
impact thereof on the HNC Closing Average Price Per Share.
(e) No Exhaustion of Remedies. HNC need not exhaust any other
remedies that may be available to it but shall proceed directly in accordance
with the provisions of this Agreement. HNC may institute Claims against the
Escrow Shares and in satisfaction thereof may recover Escrow Shares, in
accordance with the terms of this Agreement, without making any other Claims
directly against the Stockholders and without rescinding or attempting to
rescind the transactions consummated pursuant to the Plan. The assertion of any
single Claim for indemnification hereunder shall not bar HNC from asserting any
other Claims hereunder.
5. LIMITATION OF ESCROW AGENT'S LIABILITY.
(a) The Escrow Agent shall incur no liability with respect to
any action taken or suffered by it in reliance upon any notice, direction,
instruction, consent, statement or other document believed by it to be genuine
and duly authorized, nor for any other action or inaction, except its own
willful misconduct or gross negligence. The Escrow Agent shall have no duty to
inquire into or investigate the validity, accuracy or content of any document
delivered to it. The Escrow Agent shall not be responsible for the validity or
sufficiency of this Agreement. In all questions arising under this Agreement,
the Escrow Agent may rely on the advice or
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opinion of counsel, and for anything done, omitted or suffered in good faith by
the Escrow Agent based on such advice, the Escrow Agent shall not be liable to
anyone. The Escrow Agent shall not be required to take any action hereunder
involving any expense unless the payment of such expense is made or provided for
in a manner satisfactory to it. The Escrow Agent shall have no duties or
responsibilities other than those expressly set forth in this Agreement and the
implied duty of good faith and fair dealing.
(b) In the event conflicting demands are made or conflicting
notices are served upon the Escrow Agent with respect to the Escrow Account, the
Escrow Agent shall have the absolute right, at the Escrow Agent's election, to
do either or both of the following: (i) resign so a successor can be appointed
pursuant to Section 10 hereof; (ii) file a suit in interpleader and obtain an
order from a court of competent jurisdiction requiring the parties to interplead
and litigate in such court their several claims and rights among themselves; or
(iii) give written notice to the other parties that it has received conflicting
instructions from HNC and the Representative and is refraining from taking
action until it receives instructions consented to in writing by both HNC and
the Representative. In the event an interpleader suit as described in clause
(ii) above is brought, the Escrow Agent shall thereby be fully released and
discharged from all further obligations imposed upon it under this Agreement
with respect to the matters that are the subject of such interpleader suit, and
HNC shall pay the Escrow Agent all costs, expenses and reasonable attorneys'
fees expended or incurred by the Escrow Agent pursuant to the exercise of Escrow
Agent's rights under this Section 5 (such costs, fees and expenses shall be
treated as extraordinary fees and expenses for the purposes of Section 9
hereof). HNC shall be entitled to reimbursement from the Stockholders of any
extraordinary fees and expenses of Escrow Agent in the event HNC prevails in
such dispute pursuant to Section 9 hereof.
(c) Each party to this Agreement other than the Escrow Agent
(each an "INDEMNIFYING PARTY" and together the "INDEMNIFYING PARTIES"), hereby
jointly and severally covenants and agrees to reimburse, indemnify and hold
harmless Escrow Agent, Escrow Agent's officers, directors, employees, counsel
and agents (severally and collectively, "ESCROW AGENT"), from and against any
loss, damage, liability or loss suffered, incurred by, or asserted against
Escrow Agent (including amounts paid in settlement of any action, suit,
proceeding, or claim brought or threatened to be brought and including
reasonable expenses of legal counsel) arising out of, in connection with or
based upon, any act or omission by Escrow Agent (not involving gross negligence
or willful misconduct on Escrow Agent's part) relating in any way to this
Agreement or Escrow Agent's services hereunder. The aggregate liability of the
Stockholders under this indemnity shall be limited to the Escrow Shares then in
escrow hereunder. Anything in this Agreement to the contrary notwithstanding, in
no event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action. Any Indemnifying Party who
reimburses or indemnifies the Escrow Agent pursuant to this Section 5(c) shall
have a right to seek contribution from any and all other Indemnifying Parties.
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(d) Each Indemnifying Party may participate at its own expense
in the defense of any claim or action that may be asserted against Escrow Agent,
and if the Indemnifying Parties so elect, the Indemnifying Parties may assume
the defense of such claim or action; provided, however, that if there exists a
conflict of interest that would make it inappropriate, in the sole discretion of
the Escrow Agent, for the same counsel to represent both Escrow Agent and the
Indemnifying Parties, Escrow Agent's retention of separate counsel shall be
reimbursable as herein above provided. Escrow Agent's right to indemnification
hereunder shall survive Escrow Agent's resignation or removal as Escrow Agent
and shall survive the termination of this Agreement by lapse of time or
otherwise.
(e) The Escrow Agent shall notify each Indemnifying Party by
letter, or by telephone or telecopy confirmed by letter, of any receipt by
Escrow Agent of a written assertion of a claim against Escrow Agent, or any
action commenced against Escrow Agent, for which indemnification is required
under Section 5(d), within ten (10) days after Escrow Agent's receipt of written
notice of such claim. The Indemnifying Parties will be relieved of their
indemnification obligations under this Section 5 if Escrow Agent fails to timely
give such notice and such failure adversely affects the Indemnifying Parties'
ability to defend such claim. However, Escrow Agent's failure to so notify each
Indemnifying Party shall not operate in any manner whatsoever to relieve an
Indemnifying Party from any liability that it may have otherwise than on account
of this Section 5.
(f) The Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys and shall be entitled to consult with its
counsel, including in-house counsel, as to any questions or matters arising
hereunder and the reasonable, good faith written opinion of such counsel shall
be full and complete authorization and protection to Escrow Agent in respect of
any act or omission by Escrow Agent undertaken in good faith and in accordance
with the opinion of such counsel. The Escrow Agent shall have no liability for
the conduct of any outside attorneys, accountants or other similar professionals
it retains. Nothing in this Agreement shall be deemed to impose upon Escrow
Agent any duty to qualify to do business or to act as a fiduciary or otherwise
in any jurisdiction other than the State of California.
6. STOCKHOLDERS' REPRESENTATIVE. For purposes of this Agreement, the
Stockholders hereby consent to the appointment of the Representative (and any
replacement hereunder), as representative of the Stockholders, and as the agents
and attorneys-in-fact for and on behalf of each Stockholder, and, subject to the
express limitations set forth below, the taking by the Representative of any and
all actions and the making of any decisions required or permitted to be taken by
the Representative under this Agreement, including, without limitation, the
exercise of the power to (i) authorize delivery to HNC of the Escrow Shares, or
any portion thereof, in satisfaction of Claims, (ii) agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such Claims, (iii)
take all action necessary in connection with the waiver of any
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<PAGE> 64
condition to the obligations of the Stockholders under this Agreement, (iv) the
waiver of any right of the Stockholders, (v) give and receive all notices
required to be given under this Agreement, (vi) resolve any Claims and (vii)
take all actions necessary in the judgment of the Representative for the
accomplishment of the foregoing and all of the other terms, conditions and
limitations of this Agreement. All actions of the Representative shall be made
unanimously by both Representatives. The Representative shall have unlimited
authority and power to act on behalf of each Stockholder with respect to this
Agreement and the disposition, settlement or other handling of all Claims,
rights or obligations arising under this Agreement so long as all Stockholders
are treated in the same manner. The Stockholders shall be bound by all actions
taken by the Representative in connection with this Agreement. HNC shall be
entitled to rely on any action or decision of the Representative, and no
Stockholder shall have any cause of action against the Representative for any
action taken, decision made or instruction given by the Representative under
this Agreement, except for fraud or willful breach of this Agreement by the
Representative. In performing the functions specified in this Agreement, the
Representative shall not be liable to the Stockholders in the absence of gross
negligence or willful misconduct. In the event either Representative dies,
becomes unable to perform the responsibilities hereunder or resigns from such
position, a substitute representative shall be appointed by the holders of a
majority of the Escrow Shares. The Representative may resign from such position,
effective upon a new representative being appointed in writing by Stockholders
who beneficially own a majority of the Escrow Shares. The Representative shall
not be entitled to receive any compensation from HNC or the Stockholders in
connection with this Agreement. Any out-of-pocket costs and expenses reasonably
incurred by the Representative in connection with actions taken pursuant to the
terms of this Agreement shall be paid by the Stockholders to the Representative
in proportion to their percentage interests in the Escrow Shares set forth on
Exhibit A. HNC agrees that, in acting as co-Representative hereunder and
performing his obligations as a co-Representative hereunder, Mark S. Hammond
shall not be deemed to have violated any fiduciary or similar duties that Mr.
Hammond may owe to HNC by virtue of his position(s) with HNC or its
subsidiaries. The provisions of this Section are independent and severable,
shall constitute an irrevocable power of attorney, coupled with an interest and
surviving death, granted by each Stockholder to the Representative and shall be
binding upon the executors, heirs, legal representatives and successors of each
Stockholder and any references in this Agreement to a Stockholder shall mean the
successor to the Stockholders' rights hereunder, whether pursuant to
testamentary disposition, the laws of descent and distribution or otherwise.
7. NOTICES. All notices, instructions and other communications
required or permitted to be given hereunder or necessary or convenient in
connection herewith must be in writing and shall be deemed delivered (i) when
personally served or when delivered by telex or facsimile (to the telex or
facsimile number of the person to whom the notice is given), (ii) the first
business day following the date of deposit with an overnight courier service or
(iii) on the earlier of actual receipt or the third business day following the
date on which the notice is deposited in the United States mail, first class
certified, postage prepaid, addressed as follows:
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<PAGE> 65
If to the Escrow Agent: State Street Bank and Trust Company of California, N.A.
725 So. Figueroa Street, Suite 3100
Los Angeles, CA 90017
Attn: Corporate Trust Department
Telecopier: (213) 362-7357
If to HNC: HNC Software Inc.
5930 Cornerstone Court West
San Diego, CA 92121
Attention: President
Telecopier: (619) 452-3220
With a copy to: Fenwick & West LLP
Two Palo Alto Square, Suite 800
Palo Alto, California 94306 USA
Attention: Kenneth A. Linhares
Telecopier: (415) 857-0361
If to Representative: Mark S. Hammond
c/o Risk Data Corporation
111 Pacifica, Third Floor
Irvine, CA 92718-3304
Telecopier: (714) 753-8020
With a copy to: Craig Andrews, Esq.
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 92101
Telecopier: (619) 234-3848
or to such other address as HNC, the Representative or the Escrow Agent, as the
case may be, designates in a writing delivered to each of the other parties
hereto.
8. GENERAL.
(a) Governing Law; Assigns. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of California
without regard to conflicts of law principles and shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.
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<PAGE> 66
(A) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except as otherwise provided in the
Plan, this Agreement constitutes the entire understanding and agreement of the
parties with respect to the subject matter of this Agreement and supersedes all
prior agreements or understandings, written or oral, between the parties with
respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or
of any breach of any provision of this Agreement shall be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) Tax Identification Numbers. If applicable, each party
hereto, other than the Escrow Agent, shall provide the Escrow Agent with its Tax
Identification Number (TIN) as assigned by the Internal Revenue Service prior to
the execution of this Agreement.
9. COMPENSATION AND EXPENSES OF ESCROW AGENT. All fees and expenses
of the Escrow Agent incurred in the ordinary course of performing its
responsibilities hereunder shall be paid by HNC upon receipt of a written
invoice by Escrow Agent. Any extraordinary fees and expenses, including without
limitation any fees or expenses (including the fees or expenses of outside
counsel to the Escrow Agent) incurred by the Escrow Agent in connection with a
dispute over the distribution of Escrow Shares or the validity of a Notice of
Claim, shall be paid by HNC upon receipt of a written invoice by Escrow Agent;
provided, however, that notwithstanding the foregoing, the Stockholders shall be
liable for any extraordinary fees and expenses of the Escrow Agent arising in
connection with a dispute hereunder, in the event HNC prevails in such dispute
up to the value of the Escrow Shares. The Escrow Agent shall have no duty to
solicit any payments which may be due it hereunder.
10. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
notice of its resignation to the parties to this Agreement, specifying a date
not less than thirty (30) days following such notice date of when such
resignation shall take effect. HNC shall designate a successor Escrow Agent
prior to the expiration of such thirty (30) day period by giving written notice
to the Escrow Agent and the Representative. HNC may appoint a successor Escrow
Agent without the consent of the Representative so long as such successor is a
bank which, together with its parent, has assets of at least $50 million, and
may appoint any other successor Escrow Agent with the consent of the
Representative, which shall not be unreasonably withheld. If no successor escrow
agent is named by HNC, the Escrow Agent may apply to a court of competent
jurisdiction for the
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<PAGE> 67
appointment of a successor Escrow Agent. The Escrow Agent shall promptly
transfer the Escrow Shares to such designated successor.
11. LIMITATION OF RESPONSIBILITY. The Escrow Agent's duties are
limited to those set forth in this Agreement, and Escrow Agent, acting as such
under this Agreement, is not charged with knowledge of or any duties or
responsibilities under any other document or agreement, including without
limitation the Plan. Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys. Nothing in this Escrow Agreement shall be
deemed to impose upon the Escrow Agent any duty to qualify to do business or to
act as a fiduciary or otherwise in any jurisdiction other than the State of
California. Escrow Agent shall not be responsible for and shall not be under a
duty to examine into or pass upon the validity, binding effect, execution or
sufficiency of this Escrow Agreement or of any agreement amendatory or
supplemental hereto. In no event shall the Escrow Agent have any duty or
obligation to determine or enforce compliance with the requirements of any
agreement or instrument other than this Agreement (including without limitation
the Plan).
12. FORCE MAJEURE. Neither HNC nor the Stockholders nor Escrow Agent
shall be responsible for delays or failures in performance resulting from acts
beyond its control. Such acts shall include but not be limited to acts of God,
strikes, lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire, communication line failures, computer
viruses, power failures, earthquakes or other disasters.
13. REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties hereto agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction shall likewise be admissible in evidence.
14. AMENDMENT. This Agreement may be amended by the written
agreement of HNC, the Escrow Agent and the Representative, provided that, if the
Escrow Agent does not agree to an amendment agreed upon by HNC and the
Representative, the Escrow Agent shall resign and HNC shall appoint a successor
Escrow Agent in accordance with Section 10 above. No amendment of the Plan shall
increase Escrow Agent's responsibilities or liability hereunder without Escrow
Agent's written agreement.
15. TERMS DEFINED IN PLAN. The capitalized terms used in this
Agreement and defined in the Plan are set forth in the Plan, a copy of which
is attached hereto as Exhibit C.
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<PAGE> 68
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
HNC SOFTWARE INC. REPRESENTATIVE
By: /s/ RAYMOND V. THOMAS /s/ MARK S. HAMMOND
---------------------------------- ----------------------------------------
Chief Financial Officer /s/ JAMES H. BERGLUND
----------------------------------------
ESCROW AGENT STOCKHOLDERS
STATE STREET BANK AND TRUST /s/ SANG-GYU CHOI
COMPANY OF CALIFORNIA, N.A. ----------------------------------------
By: /s/ JEANIE MAR
---------------------------------- DLJ CAPITAL CORPORATION
Authorized Signatory By: /s/ ROBERT FINZI
----------------------------------------
Attorney-In-Fact
/s/ SEAN M. DOWNS
----------------------------------------
ENTERPRISE PARTNERS
By: /s/ JAMES H. BERGLUND
-------------------------------------
General Partner
ENTERPRISE PARTNERS II, L.P.
By: /s/ JAMES H. BERGLUND
-------------------------------------
General Partner
ENTERPRISE PARTNERS II, ASSOCIATES, L.P.
By: /s/ JAMES H. BERGLUND
-------------------------------------
General Partner
/s/ DAYLEN J. GILLESPIE
----------------------------------------
/s/ MARK S. HAMMOND
----------------------------------------
HUFFMAN FAMILY TRUST
created May 26, 1995
By: /s/ JOHN D. HUFFMAN
-------------------------------------
Trustee
/s/ MICHAEL L. LEONARD
----------------------------------------
LINC CAPITAL MANAGEMENT
By: /s/ MARK K. ZIMMERMAN
-------------------------------------
Vice President
<PAGE> 69
SILICON VALLEY BANCSHARES
By: /s/ DAVID JAQUES
-------------------------------------
Senior Vice President
SPROUT CAPITAL VI, L.P.
By: /s/ ROBERT FINZI
-------------------------------------
Attorney-In-Fact
SPROUT GROWTH, LTD.
By: /s/ ROBERT FINZI
-------------------------------------
Attorney-In-Fact
U.S. TRUST COMPANY OF CALIFORNIA,
TRUSTEE OF THE DEBORAH L. HAMMOND
CHARITABLE REMAINDER UNITRUST
By: /s/ JILL A. PLETCHER
-------------------------------------
Vice President
U.S. TRUST COMPANY OF CALIFORNIA,
TRUSTEE OF THE MARK S. HAMMOND
CHARITABLE REMAINDER UNITRUST
By: /s/ JILL A. PLETCHER
-------------------------------------
Vice President
<PAGE> 70
EXHIBIT A
STOCKHOLDER ESCROW SHARES PERCENTAGE
- ----------- ------------- ----------
Miroslav Aniz 52 8.75%
Sang-Gyu Choi 152 8.75%
DLJ Capital Corporation 4,398 8.75%
Sean M. Downs 5,074 8.75%
Enterprise Partners 20,191 8.75%
Enterprise Partners II, L.P. 41,531 8.75%
Enterprise Partners II Associates, 4,169 8.75%
L.P.
Daylen J. Gillespie 66 8.75%
Mark S. Hammond 45,492 8.75%
John Donald Huffman and Anne Byron 2,283 8.75%
Huffman, Trustees, or Successor in
Trust of the Huffman Family Trust
Created May 26, 1995
Michael L. Leonard 766 8.75%
LINC Capital Management 904 8.75%
Silicon Valley Bancshares 379 8.75%
Sprout Capital VI, L.P. 27,775 8.75%
Sprout Growth, Ltd. 2,113 8.75%
U.S. Trust Company of California, 5,074 8.75%
Trustee of the Deborah Lynn
Hammond Charitable Remainder
Unitrust
U.S. Trust Company of California, 5,074 8.75%
Trustee of the Mark S. Hammond
Charitable Remainder Unitrust
A-1
<PAGE> 71
EXHIBIT B
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
In connection with the Agreement and Plan of Reorganization (the "PLAN")
dated as of July 19, 1996, by and among HNC Software Inc., a Delaware
corporation ("HNC"), HNC Merger Corp., a Delaware corporation that is a
wholly-owned subsidiary of HNC and Risk Data Corporation, a California
corporation ("RDC"), the undersigned is receiving shares of HNC Common Stock in
respect of the shares of RDC Stock held by the undersigned prior to the Merger.
FOR VALUE RECEIVED, and pursuant to the Plan and that certain Escrow
Agreement dated as of ___________, 1996 executed in connection therewith (the
"ESCROW AGREEMENT"), the undersigned hereby assigns and transfers unto
___________________________, as Escrow Agent (the "AGENT") pursuant to the Plan
and the Escrow Agreement, ________ shares (the "SHARES") of the Common Stock of
HNC.
The undersigned hereby irrevocably appoints the Agent, as
attorney-in-fact, with full power of substitution and re-substitution, to hold
such Shares in escrow and to transfer such shares on the books of HNC solely to
the extent provided in the Escrow Agreement.
Dated: _____________, 1996.
___________________________________
B-1
<PAGE> 72
EXHIBIT C
AGREEMENT AND PLAN OF REORGANIZATION DATED JULY 19, 1996
C-1
<PAGE> 1
EXHIBIT 2.02
Agreement of Merger dated as of August 30, 1996 by and between
HNC Merger Corp. and Risk Data Corporation
<PAGE> 2
AGREEMENT OF MERGER
OF
HNC MERGER CORP.
AND
RISK DATA CORPORATION
This Agreement of Merger (this "AGREEMENT") is entered into as of August
30, 1996 by and between HNC Merger Corp., a Delaware corporation ("SUB") that is
a wholly-owned subsidiary of HNC Software Inc. a Delaware corporation ("HNC"),
and Risk Data Corporation ("RDC"), a California corporation.
R E C I T A L S
A. HNC, Sub and RDC have entered into an Agreement and Plan of
Reorganization, dated as of July 19, 1996, as amended (the "PLAN"), providing
for certain representations, warranties and agreements in connection with the
transactions contemplated hereby, and for the merger of Sub with and into RDC in
accordance with the Delaware General Corporation Law (the "DELAWARE LAW") and
the General Corporation Law of California (the "CALIFORNIA LAW").
B. The Boards of Directors of HNC, Sub and RDC, respectively, have
determined it to be advisable and in the respective interests of HNC, Sub and
RDC and their respective stockholders that Sub be merged with and into RDC in
accordance with the Plan (the "MERGER") so that RDC will be the surviving
corporation of the Merger.
C. The Plan, this Agreement and the Merger have been approved by HNC as
the sole stockholder of Sub and by the stockholders of RDC.
NOW, THEREFORE, Sub and RDC hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms will have the meanings set forth below:
1.1 The "EFFECTIVE TIME" means the date on which the Merger becomes
legally effective under the laws of the States of California and Delaware as a
result of the filing with the Delaware Secretary of State of this Agreement or,
in lieu thereof at HNC's option, a Certificate of Merger (the "CERTIFICATE OF
MERGER"), conforming to the requirements of Section 252 of the Delaware General
Corporation Law, and the filing with the California Secretary of State of the
Agreement of Merger (and related officers' certificates).
1.2 "HNC COMMON STOCK" means HNC's Common Stock, $0.001 par value
per share.
<PAGE> 3
1.3 "HNC PRICE PER SHARE" means $35.631 per share of HNC Common
Stock.
1.4 "HNC CLOSING AVERAGE PRICE PER SHARE" means the average of the
closing prices per share of HNC Common Stock as quoted on the Nasdaq National
Market (or such other exchange or quotation system on which HNC Common Stock is
then traded or quoted) and reported in The Wall Street Journal for the ten (10)
trading days immediately preceding (but not including) the date of this
Agreement; provided, however, that notwithstanding the foregoing, the HNC
Closing Average Price Per Share shall in no event be greater than the HNC Price
Per Share nor less than eighty percent (80%) of the HNC Price Per Share.
1.5 "RDC COMMON STOCK" means RDC's Common Stock, no par value per
share. "RDC SERIES A PREFERRED STOCK" means RDC's Series A Preferred Stock, no
par value per share. "RDC SERIES B PREFERRED STOCK" means RDC's Series B
Preferred Stock, no par value per share. "RDC PREFERRED STOCK" means the RDC
Series A Preferred Stock and RDC Series B Preferred Stock, collectively. "RDC
STOCK" means RDC Common Stock and RDC Preferred Stock, collectively.
1.6 "RDC OPTIONS" means, collectively: (i) options to purchase RDC
Common Stock granted by RDC to RDC employees under RDC's 1992 Stock Option Plan
(the "RDC OPTION PLAN"); and (ii) options to purchase an aggregate of 247,000
shares of RDC Common Stock granted to certain employees and/or consultants of
RDC in March 1990.
1.7 "RDC DERIVATIVE SECURITIES" means, collectively: (a) any
warrant, option, right or other security that entitles the holder thereof to
purchase or otherwise acquire any shares of the capital stock of RDC
(collectively, "RDC STOCK RIGHTS"); (b) any note, evidence of indebtedness,
stock or other security of RDC that is convertible into or exchangeable for any
shares of the capital stock of RDC or any RDC Stock Rights ("RDC CONVERTIBLE
SECURITY"); and (c) any warrant, option, right, note, evidence of indebtedness,
stock or other security that entitles the holder thereof to purchase or
otherwise acquire any RDC Stock Rights or any RDC Convertible Security;
provided, however, that the term "RDC Derivative Securities" does not include
any RDC Options, any outstanding shares of RDC Series A Preferred Stock or any
outstanding shares of RDC Series B Preferred Stock.
1.8 "RDC FULLY DILUTED NUMBER" means that number of shares of RDC
Common Stock that is equal to the sum of: (a) the total number of shares of RDC
Common Stock that are issued and outstanding immediately prior to the Effective
Time; plus (b) the total number of shares of RDC Common Stock, if any, that as
of immediately prior to the Effective Time are issuable upon the conversion of
all shares of RDC Series A Preferred Stock and all shares of RDC Series B
Preferred Stock that are issued and outstanding immediately prior to the
Effective Time; plus (c) the total number of shares of RDC Common Stock that,
immediately prior to the Effective Time, are directly or indirectly ultimately
issuable by RDC upon the exercise, conversion or exchange of all RDC Derivative
Securities (if any) that are issued and outstanding immediately prior to the
Effective Time. The number of shares of RDC Common Stock subject
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<PAGE> 4
to RDC Options that are issued and outstanding immediately prior to the
Effective Time shall not be included in the RDC Fully Diluted Number.
1.9 "RDC STOCKHOLDERS" means those persons who, immediately prior to
the Effective Time, hold the shares of RDC Stock that are outstanding
immediately prior to the Effective Time; provided, however, that for purposes of
Section 2.4 of this Agreement, the term "RDC Stockholders" means only those RDC
Stockholders (as defined above in this Section 1.9) who are issued shares of HNC
Common Stock in the Merger.
1.10 "RDC DISSENTING SHARES" means any shares of RDC Stock that are
outstanding immediately prior to the Effective Time which qualify fully as
"dissenting shares" within the meaning of Section 1300(b) of the California
Corporations Code and with respect to which dissenter's rights to require the
purchase of such dissenting shares for cash at their fair market value in
accordance with Chapter 13 of the California Corporations Code have (in
connection with the Merger) been duly and properly exercised and perfected.
1.11 "SERIES A PREFERENCE AMOUNT" means the dollar amount equal to
the product obtained by multiplying (a) $1.66 by (b) the number of shares of RDC
Series A Preferred Stock that are issued and outstanding immediately prior to
the Effective Time.
1.12 "SERIES B PREFERENCE AMOUNT" means the dollar amount equal to
the product obtained by multiplying (a) $8.72 by (b) the number of shares of RDC
Series B Preferred Stock that are issued and outstanding immediately prior to
the Effective Time.
1.13 "COMMON AMOUNT" means the dollar amount equal to the product
obtained by multiplying (a) $0.55 by (b) the number of shares of RDC Common
Stock that are issued and outstanding immediately prior to the Effective Time.
1.14 "REMAINDER AMOUNT" means the dollar amount (if positive) equal
to Sixty-One Million Dollars ($61,000,000) minus the sum of the sum of the
Series A Preference Amount, the Series B Preference Amount and the Common
Amount.
1.15 "OPTION AMOUNT" means the dollar amount equal to "X" in the
following formula, where for purposes of such formula: (a) "O" is the total
number of shares of RDC Common Stock that are subject to all RDC Options that
are issued and outstanding immediately prior to the Effective Time (without
regard to whether the right to exercise such RDC Options has or has not vested);
(b) "R" is the Remainder Amount; and (c) "S" is the RDC Fully Diluted Number:
O (R + 0.55S)
X = --------------
O + S
1.16 "PARTICIPATION AMOUNT" means the dollar amount equal to the
Remainder Amount minus the Option Amount. The "PARTICIPATION SHARES" means the
number of shares of HNC Common Stock obtained by dividing the Participation
Amount by the HNC Closing Average Price Per Share. The "PARTICIPATION NUMBER"
means the number of shares of HNC Common Stock obtained by dividing the
Participation Shares by the RDC Fully Diluted Number.
-3-
<PAGE> 5
1.17 "HNC MERGER SHARES" means that number of shares of HNC Common
Stock, as presently constituted, that will be issued under this Agreement upon
the conversion of the shares of RDC Common Stock, RDC Series A Preferred Stock
and RDC Series B Preferred Stock that are issued and outstanding immediately
prior to the Effective Time and is equal to the quotient obtained by dividing
(i) the sum of the Series A Preference Amount, the Series B Preference Amount,
the Common Amount and the Participation Amount by (ii) the HNC Closing Average
Price Per Share; provided, however, that the number of HNC Merger Shares shall
not exceed the number of shares of HNC Common Stock equal to the quotient
obtained by dividing (a) Sixty-One Million Dollars ($61,000,000) minus the
Option Amount, by (b) the HNC Closing Average Price Per Share.
1.18 "SERIES A CONVERSION NUMBER" means the number of shares of HNC
Common Stock equal to the sum of (a) $1.66 divided by the HNC Closing Average
Price Per Share, plus (b) the product obtained by multiplying the Participation
Number by the number of shares of RDC Common Stock into which one (1) share of
RDC Series A Preferred Stock is convertible immediately prior to the Effective
Time (currently one (1) share of RDC Common Stock).
1.19 "SERIES B CONVERSION NUMBER" means the number of shares of HNC
Common Stock equal to the sum of (a) $8.72 divided by the HNC Closing Average
Price Per Share, plus (b) the product obtained by multiplying the Participation
Number by the number of shares of RDC Common Stock into which one (1) share of
RDC Series B Preferred Stock is convertible immediately prior to the Effective
Time (currently 1.00154 shares of RDC Common Stock).
1.20 "COMMON CONVERSION NUMBER" means the number of shares of HNC
Common Stock equal to the sum of (a) $0.55 divided by the HNC Closing Average
Price Per Share, plus (b) the Participation Number.
1.21 "OPTION CONVERSION NUMBER" means the number of shares of HNC
Common Stock obtained by dividing the Option Pool Shares (as defined below) by
the total number of shares of RDC Common Stock that are subject to all RDC
Options that are issued and outstanding immediately prior to the Effective Time
(without regard to whether the right to exercise such RDC Options has or has not
vested). "OPTION POOL SHARES" means the number of shares of HNC Common Stock
equal to the quotient obtained by dividing (a) the Option Amount, by (b) the HNC
Closing Average Price Per Share.
2. THE MERGER
2.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Sub will be merged with and into RDC pursuant
to the Plan and this Agreement and in accordance with applicable provisions of
the laws of the State of California and the State of Delaware as follows:
2.1.1 Conversion of Sub Stock. At the Effective Time, each
share of Common Stock of Sub that is issued and outstanding immediately prior to
the Effective Time
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<PAGE> 6
shall, by virtue of the Merger and without the need for any further action on
the part of the holder thereof, be converted into and become one (1) share of
RDC Common Stock that is issued and outstanding immediately after the Effective
Time, and the shares of RDC Common Stock into which the shares of Sub Common
Stock are so converted shall be the only shares of RDC Stock that are issued and
outstanding immediately after the Effective Time.
2.1.2 Conversion of RDC Stock. At the Effective Time, each
share of RDC Common Stock, each share of RDC Series A Preferred Stock and each
share of RDC Series B Preferred Stock that is issued and outstanding immediately
prior to the Effective Time (other than any RDC Dissenting Shares as provided in
Section 2.1.3 of this Agreement) will, by virtue of the Merger, and without the
need for any further action on the part of the holder thereof, be converted as
follows:
(a) RDC Common Stock. Each share of RDC Common
Stock that is issued and outstanding immediately prior to the Effective Time
shall be converted into a number of shares of HNC Common Stock equal to the
Common Conversion Number, subject to the provisions of Section 2.1.4 of this
Agreement regarding the elimination of fractional shares;
(b) RDC Series A Preferred Stock. Each share of
RDC Series A Preferred Stock that is issued and outstanding immediately prior to
the Effective Time shall be converted into a number of shares of HNC Common
Stock equal to the Series A Conversion Number, subject to the provisions of
Section 2.1.4 of this Agreement regarding the elimination of fractional shares;
and
(c) RDC Series B Preferred Stock. Each share of
RDC Series B Preferred Stock that is issued and outstanding immediately prior to
the Effective Time shall be converted into a number of shares of HNC Common
Stock equal to the Series B Conversion Number, subject to the provisions of
Section 2.1.4 of this Agreement regarding the elimination of fractional shares.
2.1.3 RDC Dissenting Shares. Holders of RDC Dissenting Shares
(if any) shall be entitled to their appraisal rights under Chapter 13 of the
California Corporations Code with respect to such RDC Dissenting Shares and such
RDC Dissenting Shares shall not be converted into shares of HNC Common Stock in
the Merger; provided, however, that nothing in this Section 2.1.3 is intended to
remove, waive, alter or affect Sections 9.8 and 9.9 of the Plan, or any
provision of the Plan relating to RDC Dissenting Shares. Shares of RDC Stock as
to which dissenting shareholders' rights of appraisal under the California
Corporations Code have not been properly perfected shall, when such dissenting
shareholders' rights can no longer be legally exercised under the California
Corporations Code, be converted into HNC Common Stock as provided in Section
2.1.2.
2.1.4 Fractional Shares. No fractional shares of HNC Common
Stock shall be issued in connection with the Merger. In lieu thereof, each
holder of RDC Stock who would otherwise be entitled to receive a fraction of a
share of HNC Common Stock under Section 2.1.2 of this Agreement, after
aggregating all shares of HNC Common Stock to be received by such holder, shall
instead receive from HNC, within twenty (20) business days after
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<PAGE> 7
the Effective Time, an amount of cash equal to the HNC Closing Average Price Per
Share (as adjusted to reflect any Capital Change (as defined below) of HNC)
multiplied by the fraction of a share of HNC Common Stock to which such holder
would otherwise be entitled to receive.
2.2 Assumption and Conversion of RDC Options. Each RDC Option that
is outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and at the Effective Time and without the need for any further action on
the part of any holder thereof, be assumed by HNC and converted into an option
(an "HNC OPTION") to purchase that number of shares of HNC Common Stock
determined by multiplying the number of shares of RDC Common Stock subject to
such RDC Option immediately prior to the Effective Time by the Option Conversion
Number, at an exercise price per share of HNC Common Stock equal to the exercise
price per share of RDC Common Stock that was in effect for such RDC Option
immediately prior to the Effective Time divided by the Option Conversion Number;
provided, however, that if the foregoing calculation would result in an assumed
and converted RDC Option being converted into an HNC Option that, after
aggregating all the shares of HNC Common Stock issuable upon the exercise of
such HNC Option, would be exercisable for a fraction of a share of HNC Common
Stock, then the number of shares of HNC Common Stock subject to such HNC Option
shall be rounded down to the nearest whole number of shares of HNC Common Stock.
The terms, exercisability, vesting schedule, status as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986, as amended (if
applicable) or a nonqualified stock option, and all other terms and conditions
of RDC Options (including but not limited to the terms and conditions applicable
to options granted under the RDC Option Plan by virtue of the RDC Option Plan)
shall (except as otherwise provided in the terms of such RDC Options), to the
extent permitted by law and otherwise reasonably practicable, be unchanged and
continue in effect after the Merger. Continuous employment with RDC shall be
credited to the optionee for purposes of determining the vesting of the number
of shares of an HNC Common Stock subject to exercise under the HNC Option issued
upon conversion of an RDC Option.
2.3 Adjustments for Capital Changes. Notwithstanding the provisions
of Section 2.1.2 or Section 2.2 of this Agreement, if at any time prior to the
Effective Time, HNC or RDC recapitalizes, either through a subdivision (or stock
split) of any of its outstanding shares into a greater number of shares, or a
combination (or reverse stock split) of any of its outstanding shares into a
lesser number of shares, or reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares of other
classes (other than through a subdivision or combination of shares provided for
in the previous clause), or declares a dividend on its outstanding shares
payable in shares or securities convertible into shares of HNC Common Stock (a
"CAPITAL CHANGE"), then the HNC Price Per Share, the HNC Closing Average Price
Per Share, the Common Conversion Number, the Series A Conversion Number, the
Series B Conversion Number and the Option Conversion Number and the number of
shares of HNC Common Stock constituting the HNC Merger Shares will be adjusted
appropriately so as to maintain the proportionate interests of the stockholders
of RDC and the stockholders of HNC contemplated hereby (and, indirectly, the
holders of the RDC Options) so as to maintain the proportional interests of the
holders of RDC Stock and RDC Options contemplated by this Agreement.
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<PAGE> 8
2.4 Escrow Agreement. HNC shall withhold eight and three-quarters
percent (8.75%) of the shares of HNC Common Stock to be issued to the RDC
Stockholders in accordance with Section 2.1.2 of this Agreement (rounded down to
the nearest whole number of shares to be issued to each RDC Stockholder) (the
"ESCROW SHARES") and will deliver certificates representing such Escrow Shares
to State Street Bank and Trust Company or a similar institution, as escrow agent
(the "ESCROW AGENT"), to be held by the Escrow Agent as security for the RDC
Stockholders' indemnification obligations under Section 11 of the Plan and
pursuant to the provisions of an escrow agreement (the "ESCROW AGREEMENT"). The
Escrow Shares will be represented by a certificate or certificates issued in the
names of the RDC Stockholders in proportion to their respective interests
therein and will be held by the Escrow Agent during that time period (the
"ESCROW PERIOD") beginning on the Closing Date (as defined in Section 7.1 of the
Plan) and ending on the earlier to occur of (a) the date on which HNC has first
received final audited financial statements together with a report thereon from
HNC's independent auditors covering the combined results of HNC and RDC or (b)
twelve (12) months after the Closing Date (as that term is defined in Section
7.1 of the Plan).
2.5 Effects of the Merger. At and upon the Effective Time: (a) the
separate existence of Sub will cease and Sub will be merged with and into RDC,
and RDC will be the surviving corporation of the Merger (the "SURVIVING
CORPORATION") pursuant to the terms of this Agreement; (b) the Restated Articles
of Incorporation of RDC shall be amended to read as set forth in Exhibit A
attached hereto and shall be the Articles of Incorporation of the Surviving
Corporation; (c) each share of RDC Stock that is outstanding immediately prior
to the Effective Time and each RDC Option that is outstanding immediately prior
to the Effective Time shall be converted into HNC Common Stock or an HNC Option,
respectively, as provided in this Section 2; (d) each share of Sub Common Stock
that is outstanding immediately prior to the Effective Time shall be converted
into one (1) share of RDC Common Stock as provided in Section 2.1.1 hereof; (e)
the officers of the Surviving Corporation shall be those persons who are the
officers of RDC immediately prior to the Effective Time; and (f) the Merger
shall, from and after the Effective Time, have all of the effects provided by
applicable law.
3. EXCHANGE OF CERTIFICATES
3.1 At or before the Effective Time, each holder of shares of RDC
Stock will surrender the certificate(s) for such shares (each an "RDC
CERTIFICATE"), duly endorsed as requested by HNC, to HNC for cancellation.
Promptly after the Effective Time and receipt of such RDC Certificates, HNC will
issue to each tendering holder of an RDC Certificate a certificate for the
number of shares of HNC Common Stock to which such holder is entitled pursuant
to Section 2.1.2 hereof (less the Escrow Shares to be placed in escrow pursuant
to Section 2.4 hereof and the Escrow Agreement) and will pay by check to each
tendering holder cash in lieu of fractional shares in the amount payable to such
holder in accordance with Section 2.1.4 hereof. At the Closing (as defined in
the Plan), HNC will deliver the certificates representing the Escrow Shares to
the Escrow Agent pursuant to the Escrow Agreement.
3.2 No dividends or distributions payable to holders of record of
HNC Common Stock after the Effective Time, or cash payable in lieu of fractional
shares, will be paid to the holder of any unsurrendered RDC
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<PAGE> 9
Certificate until the holder of such unsurrendered RDC Certificate surrenders
such RDC Certificate to HNC as provided above. Subject to the effect, if any, of
applicable escheat and other laws, following surrender of any RDC Certificate,
there will be delivered to the person entitled thereto, without interest, the
amount of any dividends and distributions therefor paid with respect to HNC
Common Stock so withheld as of any date subsequent to the Effective Time and
prior to such date of delivery.
3.3 After the Effective Time, there will be no further registration
of transfers on the stock transfer books of RDC or its transfer agent of the RDC
Stock that was outstanding immediately prior to the Effective Time. If, after
the Effective Time, RDC Certificates are presented for any reason, they will be
canceled and exchanged as provided in this Section 3.
3.4 Until RDC Certificates representing RDC Stock outstanding prior
to the Merger are surrendered pursuant to Section 3.1 above, such RDC
Certificates will be deemed, for all purposes, to evidence ownership of the
number of shares of HNC Common Stock into which the RDC Stock will have been
converted pursuant to Section 2.1.2 of this Agreement.
4. TERMINATION AND AMENDMENT
4.1 Agreement Subject to Termination by Mutual Consent.
Notwithstanding the approval of this Agreement by the stockholders of Sub and
RDC, this Agreement may be terminated at any time prior to the Effective Time by
the mutual written agreement of Sub and RDC.
4.2 Agreement Subject to Termination on Termination of Plan.
Notwithstanding the approval of this Agreement by the stockholders of Sub and
RDC, this Agreement will terminate forthwith in the event that the Plan is
terminated in accordance with its terms prior to the Effective Time.
4.3 Effect of Termination. In the event of the termination of this
Agreement as provided above, this Agreement will forthwith become void and there
will be no liability on the part of either Sub or RDC or their respective
officers and directors, except as otherwise provided in the Plan.
4.4 Amendment. This Agreement may be amended by the parties hereto
at any time before or after approval by the stockholders of either Sub or RDC,
but, after such approval, no amendment will be made which by applicable law
requires the further approval of stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of Sub and RDC.
5. MISCELLANEOUS
5.1 Plan. The Plan and this Agreement are intended to be
construed together in order to effectuate their purposes.
5.2 Assignment; Binding Upon Successors and Assigns. Neither party
hereto may assign or delegate any of its rights or obligations under this
Agreement without the prior
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<PAGE> 10
written consent of the other party hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
5.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
(irrespective of its choice of law principles).
5.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
RISK DATA CORPORATION HNC MERGER CORP.
By: /s/ Mark S. Hammond By: /s/ Robert L. North
-------------------------------- -------------------------------
President and Chief Executive President and Chief Executive
Officer Officer
By: /s/ Ken Saunders By: /s/ Raymond V. Thomas
-------------------------------- -------------------------------
Chief Financial Officer Chief Financial Officer and
Secretary
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<PAGE> 12
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
ARTICLE I
The name of the corporation is Risk Data Corporation.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Unless applicable law otherwise provides, any amendment, repeal or modification
of this Article III shall not adversely affect any right of any director under
this Article III that existed at or prior to the time of such amendment, repeal
or modification.
ARTICLE IV
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, by agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code. Unless applicable law otherwise provides, any amendment,
repeal or modification of any provision of this Article IV shall not adversely
affect any contract or other right to indemnification of any agent of the
corporation that existed at or prior to the time of such amendment, repeal or
modification.
ARTICLE V
The corporation is authorized to issue only one class of shares of stock,
which shall be designated "Common Stock" and which shall have no par value. The
total number of shares of Common Stock the corporation is authorized to issue is
1,000.
<PAGE> 1
EXHIBIT 4.01
Registration Rights Agreement dated as of August 30, 1996 by and among the
Company and the former shareholders of Risk Data Corporation.
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of August 30, 1996, by and between HNC SOFTWARE INC., a Delaware
corporation ("HNC"), and the persons and entities listed on Exhibit A hereto
(collectively, the "SHAREHOLDERS" and each individually, a "SHAREHOLDER") who
immediately prior to the Effective Time of the Merger (as defined below) are the
shareholders of RISK DATA CORPORATION, a California corporation ("RDC").
A. RDC, HNC and HNC Merger Corp., a Delaware corporation that is a
wholly-owned subsidiary of HNC ("SUB"), have entered into an Agreement and Plan
of Reorganization (the "PLAN") dated as of July 19, 1996, as amended, pursuant
to which Sub shall be merged with and into RDC in a reverse triangular merger
(the "MERGER"), with RDC to be the surviving corporation of the Merger. The
capitalized terms used in this Agreement and not otherwise defined herein shall
have the meanings given them in the Plan.
B. As a condition precedent to the consummation of the Merger, Section
2.10 of the Plan provides that the Shareholders shall be granted Form S-3
registration rights with respect to the shares of HNC Common Stock that are
issued to the Shareholders in the Merger, subject to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. REGISTRATIONS RIGHTS.
1.1 CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) 1933 Act. The term "1933 ACT" means the Securities Act
of 1933, as amended, or any successor law.
(b) 1934 Act. The term "1934 ACT" means the Securities
Exchange Act of 1934, as amended, or any successor law.
(c) Registration. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to the registration effected by preparing and filing a Form
S-3 registration statement in compliance with the 1933 Act, and the declaration
or ordering of effectiveness of such registration statement.
(d) Registrable Securities. The term "REGISTRABLE SECURITIES"
means: (i) the shares of HNC Common Stock that are issued pursuant to Section
2.1.2 of the Plan upon the conversion in the Merger of shares of RDC Stock that
are issued and outstanding immediately prior to the Effective Time; and (ii) any
shares of HNC Common Stock that may be issued as a dividend or other
distribution (including shares of HNC Common Stock issued in a subdivision and
split of HNC's outstanding Common Stock) with respect to, or in exchange for or
in replacement of, all
<PAGE> 3
such shares of HNC Common Stock described in clause (i) of this Section 1.1(d)
that have been issued by HNC; excluding in all cases, however, any such shares
that are (i) registered under the 1933 Act, (ii) sold by a person in a
transaction in which rights under this Agreement are not assigned in accordance
with the terms of this Agreement or (iii) are sold to the public or sold
pursuant to Rule 144 promulgated under the 1933 Act. Only shares of HNC Common
Stock shall be Registrable Securities. The term "Registrable Securities" does
not include any shares of HNC Common Stock issued or issuable upon the exercise
of HNC Options issued upon the conversion of outstanding RDC Options in the
Merger pursuant to Section 2.2 of the Plan or any other HNC Options issued by
HNC to any Shareholder.
(e) Holder. The term "HOLDER" means the original holder of any
Registrable Securities or any assignee of record of any Registrable Securities
to whom rights under this Agreement have been duly assigned in accordance with
the provisions of this Agreement.
(f) SEC. The term "SEC" or "COMMISSION" means the U.S.
Securities and Exchange Commission.
(g) Form S-3. The term "FORM S-3" means such registration
statement form under the 1933 Act as in effect on the Agreement Date of the Plan
or any successor registration statement form under the 1933 Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by HNC with the SEC.
1.2. FORM S-3 REGISTRATION RIGHTS. Subject to the terms and
conditions of this Agreement, at any time (a) after such time as HNC has
publicly released a report including the combined financial results of HNC and
RDC for a period of at least thirty (30) days of post-Merger combined operations
of HNC and RDC and (b) before the second anniversary of the Effective Time,
Holders of at least thirty percent (30%) of the then outstanding Registrable
Securities may request HNC in writing to effect a registration on Form S-3 under
the 1933 Act covering the resale by such Holders of any or all of the
Registrable Securities, and any related qualification or compliance with respect
to all or a part of such Registrable Securities that are issued and outstanding
and then owned by such Holders. Upon receipt of such request, HNC will:
(a) promptly give written notice of the proposed registration
(the "REGISTRATION NOTICE") and the Holder's or Holders' request therefor, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) file a registration statement on Form S-3 for the resale
of such Registrable Securities as provided above within thirty (30) days after
receipt of such request for registration from the Holders and, as soon as
practicable, effect such registration on Form S-3 (and all such qualifications
and compliances as may be so requested) as would permit or facilitate the sale
and distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with all or a portion of
the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request of such Holders given to HNC
within fifteen (15) days after receipt of the Registration Notice from HNC;
provided, however, that, notwithstanding the foregoing:
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<PAGE> 4
(i) HNC shall not be obligated to file more than two
(2) such registration statements pursuant to this Agreement;
(ii) HNC shall not be obligated to effect any such
registration, qualification or compliance of Registrable Securities pursuant to
this Agreement:
(A) if Form S-3 is not then available for such
offering by the Holders;
(B) if the Holders' request for registration of
Registrable Securities is received by HNC earlier than such time as HNC
has publicly released a report including the combined financial results of
HNC and RDC for a period of at least thirty (30) days of post-Merger
combined operations of HNC and RDC, or later than twelve (12) months after
the Effective Time;
(C) if the Holders propose to sell Registrable
Securities in such registration at an aggregate price to the public of
less than $2,000,000;
(D) if HNC shall furnish to the Holders a
certificate signed by the President of HNC stating that, in the good faith
judgment of the Board of Directors of HNC, it would be seriously
detrimental to HNC and its shareholders for such Form S-3 registration to
be effected at such time due to the existence of a material development or
potential material development involving HNC which HNC would be obligated
to disclose in the prospectus contained in the Form S-3 registration
statement, which disclosure would, in the good faith judgment of the Board
of Directors of HNC, be premature or otherwise inadvisable at such time or
would have a material adverse affect upon HNC and its shareholders, in
which event HNC will have the right to defer the filing of the Form S-3
registration statement for a period of not more than 90 days after receipt
of the request of the Holder or Holders for the registration of
Registrable Securities pursuant to this Section 1.2;
(E) if HNC is acquired and its Common Stock
ceases to be publicly traded and in such acquisition of HNC the Holders
receive, in exchange for the Registrable Securities then held by them,
cash and/or securities that are registered under the 1933 Act or that may
be traded without restriction on transfer imposed by the 1933 Act, other
than the restrictions on transfer under paragraphs (e), (f) and (g) of
Rule 144 promulgated under the 1933 Act, as such Rule is in effect on the
Agreement Date;
(F) in any particular jurisdiction in which HNC
would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration,
qualification or compliance, unless HNC is already subject to service of
process in such jurisdiction;
(G) if the SEC refuses to declare such
registration effective due to the participation of any particular Holder
in such registration (unless such Holder withdraws all such Holder's
Registrable Securities from such registration statement); or
(H) if HNC has effected two (2) registrations
pursuant to this Agreement.
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<PAGE> 5
(iii) HNC shall not be obligated to effect any such
registration, qualification or compliance of Registrable Securities held by any
particular Holder:
(A) if HNC or its legal counsel shall have
received a "no-action" letter or similar written confirmation from the SEC
that all Registrable Securities originally issued to such Holder in the
Merger may be resold by such Holder within a three (3) month period
without registration under the 1933 Act pursuant to the provisions of Rule
144 or Rule 145(d) promulgated under the 1933 Act, or otherwise; or
(B) if legal counsel to HNC shall deliver a
written opinion to HNC, its transfer agent and the Holders that all the
Registrable Securities originally issued to such Holder in the Merger may
be resold by such Holder within a three (3) month period without
registration under the 1933 Act pursuant to the provisions of Rule 144 or
Rule 145(d) promulgated under the 1933 Act, or otherwise.
(c) Expenses. Subject to the foregoing, HNC shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered pursuant to this Agreement as soon as
practicable after receipt of the request or requests of the Holders for such
registration. HNC shall pay all expenses incurred in connection with the
registration requested pursuant to this Agreement (excluding underwriters' or
brokers' discounts and commissions), including without limitation all filing,
registration and qualification, printers' and accounting fees.
1.3. OBLIGATIONS OF HNC. Subject to Section 1.2 above, when required
to effect the registration of any Registrable Securities under the terms of this
Agreement, HNC will, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement on
Form S-3 with respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of all of the Registrable Securities registered thereunder, keep the
registration statement for such registration effective for not more than thirty
(30) consecutive days;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement during its period of effectiveness;
(c) furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by them;
(d) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as will be reasonably requested by the
Holders, provided that HNC will not be required in connection
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<PAGE> 6
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such state or jurisdiction; and
(e) notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
1.4. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of HNC to take any action pursuant to this Agreement that the
selling Holders will furnish to HNC such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such Registrable Securities as shall be required to timely effect the
registration of their Registrable Securities.
1.5. DELAY OF REGISTRATION. No Holder will have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
1.6. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 1.2 of this Agreement:
(a) By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as defined in the 1933 Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the 1933 Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, the l934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of
a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to
make the statements therein not misleading; or
(iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any federal or state securities
law or any rule or regulation promulgated under the 1933 Act,
the 1934 Act or any federal or state securities law in
connection with the offering covered by such registration
statement;
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<PAGE> 7
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this subsection 1.6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the 1933 Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder within the meaning of the 1933 Act or the 1934
Act, against any losses, claims, damages or liabilities (joint or several) to
which the Company or any such director, officer, controlling person, underwriter
or other such Holder, partner or director, officer or controlling person of such
other Holder may become subject under the 1933 Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection 1.6(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; and provided further that the total amounts payable in indemnity by a
Holder under this subsection 1.6(b) in respect of any Violation shall not exceed
the net proceeds received by such Holder in the registered offering out of which
such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party
under this Section 1.6 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve
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<PAGE> 8
such indemnifying party of any liability to the indemnified party under this
Section 1.6, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.6.
(d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the 1933 Act.
(e) Contribution. In order to provide for just and equitable
contribution to joint liability under the 1933 Act in any case in which either
(i) any Holder exercising rights under this Agreement, or any controlling person
of any such Holder, makes a claim for indemnification pursuant to this Section
1.6 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 1.6 provides
for indemnification in such case, or (ii) contribution under the 1933 Act may be
required on the part of any such selling Holder or any such controlling person
in circumstances for which indemnification is provided under this Section 1.6;
then, and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such Holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
that, in any such case, (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and Holders under
this Section 1.6 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
1.7. DURATION AND TERMINATION OF HNC'S OBLIGATIONS. HNC will have no
obligations pursuant to Section 1.2 of this Agreement with respect to any
request or requests for registration (or inclusion in a registration) made by
any Holder: (a) on a date that is more than two (2) years after the Effective
Time; (b) if HNC has already effected two (2) registrations pursuant to this
Agreement; (c) if, in the opinion of counsel to HNC, all such Registrable
Securities proposed to be sold by such Holder may be sold in a three (3) month
period without registration under the 1933 Act pursuant to Rule 144 or Rule
145(d) promulgated under the 1933 Act or otherwise; or (d) if all Registrable
Securities have been registered and sold pursuant to registrations effected
pursuant to this Agreement.
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<PAGE> 9
1.8. OTHER AGREEMENTS. The Holders acknowledge and agree that they
have been informed by HNC that other shareholders of HNC currently hold certain
registration rights that would entitle such shareholders to participate in a
registration effected by the Holders under this Agreement, thus potentially
diminishing the number of Registrable Securities that the Shareholders may be
able to register and sell pursuant to a registration effected under this
Agreement.
2. ASSIGNMENT. Notwithstanding anything herein to the contrary, the rights
of a Holder under this Agreement may be assigned only with HNC's express prior
written consent, which may be withheld in HNC's sole discretion; provided,
however, that the rights of a Holder under this Agreement may be assigned
without HNC's express prior written consent: (a) to a Permitted Assignee (as
defined below); or (b) by will or by the laws of intestacy, descent or
distribution, provided that the assignee agrees in writing to be bound by all
the obligations of the Holders under this Agreement. Any attempt to assign any
rights of a Holder under this Agreement without HNC's express prior written
consent in a situation in which such consent is required by this Section shall
be void and without effect. Subject to the foregoing, all rights, covenants and
agreements in this Agreement by or on behalf of the parties hereto will bind and
inure to the benefit of the respective permitted successors and assigns of the
parties hereto. Each of the following parties are "PERMITTED TRANSFEREES" for
purposes of this Section : (a) the personal representative, custodian or
conservator of a Holder, in the case of the death, bankruptcy or adjudication of
incompetency of that Holder; (b) any partner of such Holder; (c) a trustee of a
trust for the primary benefit of the Shareholders and their children (a
"PERMITTED TRUST"); or (d) any beneficiary of any Permitted Trust.
3. GENERAL PROVISIONS
3.1 NOTICES. Unless otherwise provided, all notices, instructions and
other communications required or permitted to be given hereunder or necessary or
convenient in connection herewith must be in writing and shall be deemed
delivered (i) when personally served or when delivered by telex or facsimile (to
the telex or facsimile number of the person to whom the notice is given), (ii)
the first business day following the date of deposit with an overnight courier
service or (iii) on the earlier of actual receipt or the third business day
following the date on which the notice is deposited in the United States mail,
first class certified, postage prepaid, addressed as follows: (a) if to the
Company, at 5930 Cornerstone Court West, San Diego, CA 92121, Attention:
President, Telecopier: (619) 452-3220; and (b) if to a Shareholder, at such
Shareholder's respective address as set forth on Exhibit A hereto. Any party
hereto (and such party's permitted assigns) may by notice so given change its
address for future notices hereunder.
3.2 ENTIRE AGREEMENT. This Agreement and the provisions of Section
2.10 of the Plan constitute and contain the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
3.3 AMENDMENT OF RIGHTS. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of HNC and Holders of a majority of all Registrable Securities
then outstanding. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Holder, each permitted successor or
assignee of such Holder and HNC.
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<PAGE> 10
3.4 GOVERNING LAW. This Agreement will be governed by and construed
exclusively in accordance with the internal laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California, excluding that body of law relating to
conflict of laws and choice of law.
3.5 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, then such provision(s) will be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and will be enforceable in
accordance with its terms.
3.6 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express
or implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns, any rights or remedies under or by reason of
this Agreement.
3.7 CAPTIONS. The headings and captions to sections of this
Agreement have been inserted for identification and reference purposes only and
will not be used to construe or interpret this Agreement.
3.8 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
HNC SOFTWARE INC. THE SHAREHOLDERS
By: /s/ RAYMOND V. THOMAS /s/ SANG-GYU CHOI
----------------------------- ----------------------------------------
Chief Financial Officer
DLJ CAPITAL CORPORATION
By: /s/ Robert Finzi
-------------------------------------
Attorney-In-Fact
/s/ SEAN M. DOWNS
----------------------------------------
ENTERPRISE PARTNERS
By: /s/ James H. Berglund
-------------------------------------
General Partner
ENTERPRISE PARTNERS II, L.P.
By: /s/ James H. Berglund
-------------------------------------
General Partner
ENTERPRISE PARTNERS II, ASSOCIATES, L.P.
By: /s/ James H. Berglund
-------------------------------------
General Partner
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<PAGE> 11
/s/ DAYLEN J. GILLESPIE
----------------------------------------
/s/ MARK S. HAMMOND
----------------------------------------
HUFFMAN FAMILY TRUST
created May 26, 1995
By: /s/ John D. Huffman
-------------------------------------
Trustee
/s/ MICHAEL L. LEONARD
----------------------------------------
LINC CAPITAL MANAGEMENT
By: /s/ Mark K. Zimmerman
-------------------------------------
Vice President
SILICON VALLEY BANCSHARES
By: /s/ David Jaques
-------------------------------------
Senior Vice President
SPROUT CAPITAL VI, L.P.
By: /s/ Robert Finzi
-------------------------------------
Attorney-In-Fact
SPROUT GROWTH, LTD.
By: /s/ Robert Finzi
-------------------------------------
Attorney-In-Fact
U.S. TRUST COMPANY OF CALIFORNIA,
TRUSTEE OF THE DEBORAH L. HAMMOND
CHARITABLE REMAINDER UNITRUST
By: /s/ Jill A. Pletcher
-------------------------------------
Vice President
U.S. TRUST COMPANY OF CALIFORNIA,
TRUSTEE OF THE MARK S. HAMMOND
CHARITABLE REMAINDER UNITRUST
By: /s/ Jill A. Pletcher
-------------------------------------
Vice President
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<PAGE> 12
EXHIBIT A
LIST OF SHAREHOLDERS
NUMBER OF SHARES OF HNC
NAME AND ADDRESS OF SHAREHOLDER COMMON STOCK HELD
Miroslav Aniz 602
Sang-Gyu Choi 1,739
81 Seafare
Laguna Niguel, CA 92677
DLJ Capital Corporation 50,268
3000 Sand Hill Road
Building 4, #270
Menlo Park, CA 94025
Sean M. Downs 57,998
26681 White Oaks Drive
Laguna Hills, CA 92653
Enterprise Partners 230,759
7979 Ivanhoe
LaJolla, CA 92037
Enterprise Partners II, L.P. 474,641
7979 Ivanhoe Avenue
Suite 550
La Jolla, CA 92037
Enterprise Partners II Associates, L.P. 47,656
7979 Ivanhoe
La Jolla, CA 92037
Daylen J. Gillespie 756
4362 Margarita
Irvine, CA 92714
Mark S. Hammond 519,917
31655 Sea Shadows Way
Laguna Niguel, CA 92677
John Donald Huffman and Anne Byron 26,099
Huffman, Trustees, or Successor in
Trust of the Huffman Family Trust
Created May 26, 1995
26771 Anadale Drive
Laguna Hills, CA 92653
Michael L. Leonard 8,760
2443 Shields Avenue
La Crescenta, CA 91214
<PAGE> 13
NUMBER OF SHARES OF HNC
NAME AND ADDRESS OF SHAREHOLDER COMMON STOCK HELD
LINC Capital Management 10,340
303 E. Wacker Road
Chicago, IL 60601
Silicon Valley Bancshares 4,332
18875 MacArthur Blvd.
Suite 100
Irvine, CA 92715
Sprout Capital VI, L.P. 317,438
3000 Sand Hill Road
Building 4, #270
Menlo Park, CA 94025
Sprout Growth, Ltd. 24,155
3000 Sand Hill Road
Building 4, #270
Menlo Park, CA 94025
U.S. Trust Company of California, 57,998
Trustee of the Deborah Lynn Hammond
Charitable Remainder Unitrust
c/o U.S. Trust Company of California
600 Anton Blvd., Suite 150
Costa Mesa, CA 92626
U.S. Trust Company of California, 57,998
Trustee of the Mark S. Hammond
Charitable Remainder Unitrust
c/o U.S. Trust Company of California
600 Anton Blvd., Suite 150
Costa Mesa, CA 92626
