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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON April 23, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HNC SOFTWARE INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0248788
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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5930 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
(619) 546-8877
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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RAYMOND V. THOMAS
CHIEF FINANCIAL OFFICER
HNC SOFTWARE INC.
5930 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
(619) 546-8877
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
KENNETH A. LINHARES, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94306
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Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement, for a period of
time commencing on the effective date of this Registration Statement and ending
on April 7, 1999, or until the earlier sale of all shares registered hereunder.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]__________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]_________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]_________________
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$0.001................ 539,479 $39.0625 $21,073,398.44 $6,216.65
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457(c) under the Securities Act, based on
the average of the high and low prices of the Common Stock on the Nasdaq
National Market on April 17, 1998.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
SUBJECT TO COMPLETION - April 23, 1998
539,479 SHARES
HNC SOFTWARE INC.
COMMON STOCK
($0.001 PAR VALUE)
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All of the 539,579 shares of Common Stock, $0.001 par value ("Common
Stock") of HNC Software Inc. ("HNC" or the "Company") offered hereby (the
"Shares") are being sold by the stockholders of the Company named herein under
"Selling Stockholders" and may be offered for sale from time to time by and for
the account of such stockholders (collectively, the "Selling Stockholders") as
more fully described herein. The Company will not receive any proceeds from the
sale of Shares offered hereby by the Selling Stockholders. See "Use of
Proceeds," "Selling Stockholders" and "Plan of Distribution." The Shares are
being offered on a continuous basis pursuant to Rule 415 under the Securities
Act of 1933, as amended (the "Securities Act"), during a period of time
commencing on the effective date of the Registration Statement of which this
Prospectus forms a part and ending on April 7, 1999.
The Common Stock is listed on the Nasdaq National Market under the
symbol "HNCS." The shares of Common Stock offered hereby will be sold from time
to time at then prevailing market prices, at prices related to prevailing market
prices or at negotiated prices. On April 22, 1998, the closing price per share
of the Common Stock on the Nasdaq National Market was $41.375.
The Company originally issued 142,862 shares of the Common Stock offered
hereby in a merger transaction that occurred on March 31, 1998 (the "PCS
Merger") pursuant to which the Company acquired all of the outstanding shares of
Practical Control Systems Technologies, Inc., an Ohio corporation, and 396,617
shares of the Common Stock offered hereby in a merger transaction that occurred
as of April 7, 1998 (the "FTI Merger") pursuant to which the Company acquired
all of the outstanding shares of Financial Technology, Inc., an Illinois
corporation (collectively, the "Mergers"). The Selling Stockholders, directly,
through agents designated from time to time, or through dealers or underwriters
also to be designated, may sell the Shares, jointly or severally, from time to
time on terms to be determined at the time of sale. To the extent required, the
specific Shares to be sold, the public offering price, the names of any such
agent, dealer or underwriter and any applicable commission or discount will be
set forth in an accompanying supplement to this Prospectus (a "Prospectus
Supplement."). See "Selling Stockholders" and "Plan of Distribution." Each of
the Selling Stockholders, individually, reserves the sole right to accept or
reject, in whole or in part, any proposed purchase of the Shares to be made in
the manner set forth above.
The distribution of the Shares by the Selling Stockholders may be
effected from time to time in one or more transactions in the over-the-counter
market, in the Nasdaq National Market or in privately negotiated transactions
directly with the purchasers, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices. Any
underwriters, dealers or agents that participate in the distribution of the
Shares may be deemed to be "underwriters" within the meaning of Section 2(11) of
the Securities Act, and any profit on the sale of the Shares by them and any
discounts, concessions or commissions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. See "Plan of Distribution" for indemnification arrangements
between the Company and the Selling Stockholders.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" COMMENCING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
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PROCEEDS TO
PRICE TO THE UNDERWRITING PROCEEDS TO SELLING
PUBLIC(1) DISCOUNT COMPANY STOCKHOLDERS(1)
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<S> <C> <C> <C> <C>
PER SHARE...............see text above none none see text above
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TOTAL...................see text above none none see text above
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(1) The shares of common stock offered hereby will be sold from time to time
at the then-prevailing market prices, at prices relating to prevailing
market prices or at negotiated prices. The Company will pay expenses of
registration estimated at $20,000.
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AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048; and at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60601-2511. Copies of such material can also be obtained from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission also maintains a Web site (located at http://www.sec.gov) that
contains reports, proxy statements and other information regarding the Company.
The Company's Common Stock is quoted on the Nasdaq National Market, and
reports, proxy statements and other information concerning the Company may be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W. Washington,
D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to the Company and
the Common Stock offered hereby, reference is made to the Registration Statement
and the exhibits filed therewith or incorporated therein by reference.
Statements in this Prospectus about any contract or other document are not
necessarily complete, and in each instance in which a copy of such contract is
filed with, or incorporated by reference in, the Registration Statement as an
exhibit, reference is made to such copy, and each such statement shall be deemed
qualified in all respects by such reference. A copy of the Registration
Statement (and exhibits thereto) may be inspected, without charge, at the
offices of the Commission in Washington, D.C. and copies of all or any part of
the Registration Statement may be obtained from the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon the payment of the fees prescribed by the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the
Company are hereby incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K pursuant to Section
13(a) or 15(d) of the Exchange Act for the year ended December
31, 1997, as amended.
(b) The Company's Current Report on Form 8-K filed on April 22, 1998.
(c) The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed on May 26,
1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering covered by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein (solely with respect to statements
incorporated by reference herein from a document that was filed prior to the
date of this Prospectus), or in any other subsequently filed document which also
is or is deemed to be incorporated by reference herein, modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the documents that have been incorporated by reference in this
Prospectus (other than exhibits to such documents that are not specifically
incorporated by reference into such documents). Requests for such copies should
be directed to Raymond V. Thomas, Chief Financial Officer, HNC Software Inc.,
5930 Cornerstone Court West, San Diego, California 92121-3728; telephone number
(619) 546-8877.
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<PAGE> 5
THE COMPANY
HNC develops, markets and supports predictive software solutions for
leading service industries. These predictive software solutions employ
proprietary neural-network predictive decision engines, profiles, traditional
statistical modeling, business models, expert rules and context vectors to
convert existing data and business experiences into meaningful recommendations
and actions. Just as manufacturing organizations have implemented manufacturing
resource planning software to automate routine transactions, leading service
industries such as the healthcare/insurance, financial services and retail
industries are using predictive software solutions to improve profitability,
competitiveness and customer satisfaction.
The Company's objective is to be the leading supplier of predictive
software solutions by leveraging its core computational intelligence technology
across a series of product lines targeted at specific service industries. In the
healthcare/insurance industry, the Company's products are used to automate
workers' compensation bill review and loss reserving, detect and prevent
workers' compensation fraud and increase workers' compensation payor and
provider effectiveness. In the financial services industry, the Company's
products are used to detect and prevent credit card fraud, manage the
profitability of credit card portfolios and automate lending decisions and
residential property valuations. In the retail industry, the Company's products
address inventory control, merchandise management, demand forecasting and
private label credit card fraud. The Company markets most of its predictive
software solutions as an ongoing service that includes software licenses,
decision model updates, application consulting and on-line or on-site support
and maintenance.
The Company was founded in 1986 under the laws of California and was
reincorporated in June 1995 under the laws of Delaware. The Company's principal
executive offices are located at 5930 Cornerstone Court West, San Diego,
California 92121-3728, and its telephone number is (619) 546-8877. In this
Prospectus, the term "HNC" or the "Company" refers to HNC Software Inc., a
Delaware corporation, unless the context otherwise requires.
RISK FACTORS
This Prospectus (including without limitation the following Risk
Factors) contains forward-looking statements (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) regarding the Company
and its business, financial condition, results of operations and prospects.
Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions or variations of such words are intended to
identify forward-looking statements, but are not the exclusive means of
identifying forward-looking statements in this Prospectus. Additionally,
statements concerning future matters such as the development of new products,
enhancements or technologies, possible changes in legislation and other
statements regarding matters that are not historical are forward-looking
statements.
Although forward-looking statements in this Prospectus reflect the good
faith judgment of the Company's management, such statements can only be based on
facts and factors currently known by the Company. Consequently, forward-looking
statements are inherently subject to risks and uncertainties, and actual results
and outcomes may differ materially from the results and outcomes discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences in results and outcomes include without limitation those discussed
below and in any documents that are incorporated into this Prospectus by
reference. Readers are urged not to place undue reliance on these
forward-looking statements, which speak only as of the date of this Prospectus.
The Company undertakes no obligation to revise or update any forward-looking
statements in order to reflect any event or circumstance that may arise after
the date of this Prospectus. Readers are urged to carefully review and consider
the various disclosures made by the Company in this Prospectus and in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, as
amended, filed with the Commission, which attempts to advise interested parties
of the risks and factors that may affect the Company's business, financial
condition and results of operations and prospects.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The Company's revenues and
operating results have varied significantly in the past and may do so in the
future. Because the Company's expense levels are based in part on its
expectations regarding future revenues and in the short term are fixed to a
large extent, the Company may be unable to adjust its spending in time to
compensate for any unexpected revenue shortfall. Factors affecting operating
results include market acceptance of the Company's products; the relatively
large size and small number of customer orders that may be received during a
given period; customer cancellation of long-term contracts yielding recurring
revenues or customers' ceasing their use of Company products for which the
Company's fees are usage based; the length of the Company's sale cycle; the
Company's ability to develop, introduce and market new products and product
enhancements; the timing of new
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product announcements and introductions by the Company and its competitors;
changes in the mix of distribution channels; changes in the level of operating
expenses; the Company's ability to achieve progress on percentage-of-completion
contracts; the Company's success in completing certain pilot installations for
contracted fees; competitive conditions in the industry; domestic and
international economic conditions; and market conditions in the Company's
targeted markets. In addition, as a result of recently issued guidance on
software revenue recognition, license agreements entered into during a quarter
may not meet the Company's revenue recognition criteria. Therefore, even if the
Company meets or exceeds its forecast of aggregate licensing and other
contracting activity, it is possible that the Company's revenues would not meet
expectations. Furthermore, the Company's operating results may be affected by
factors unique to certain of its product lines. For example, the Company derives
a substantial and increasing portion of its revenues from its retail products,
which are generally priced as "perpetual" license transactions in which the
Company receives a one-time license fee. The Company recognizes these fees as
revenue upon delivery of the software and acceptance by the customer. Thus,
failure to complete a perpetual license transaction during a fiscal quarter
would have a disproportionate adverse impact on the Company's operating results
for that quarter.
The Company expects fluctuations in its operating results to continue
for the foreseeable future. Accordingly, the Company believes that
period-to-period comparisons of its financial results should not be relied upon
as an indication of future performance. The Company may not be able to maintain
profitability on a quarterly or annual basis in the future. Due to all of the
foregoing factors, it is possible that in some future quarter the Company's
operating results will be below the expectations of public market analysts and
investors. In that event, the price of the Company's Common Stock would likely
be materially adversely affected.
LENGTHY AND UNPREDICTABLE SALES CYCLE. Due in part to the
mission-critical nature of certain of the Company's applications, potential
customers perceive high risk in connection with adoption of the Company's
products. As a result, customers have been cautious in making decisions to
acquire the Company's products. In addition, because the purchase of the
Company's products typically involves a significant commitment of capital and
may involve shifts by the customer to a new software and/or hardware platform,
delays in completing sales can arise while customers complete their internal
procedures to approve large capital expenditures and test and accept new
technologies that affect key operations. For these and other reasons, the sales
cycle associated with the purchase of the Company's products is typically
lengthy, unpredictable and subject to a number of significant risks over which
the Company has little or no control, including customers' budgetary constraints
and internal acceptance reviews. The sales cycle associated with the licensing
of the Company's products can typically range from 60 days to 18 months. As a
result of the length of the sales cycle and the typical size of customers'
orders, the Company's ability to forecast the timing and amount of specific
sales is limited. A lost or delayed sale could have a material adverse effect on
the Company's business, financial condition and results of operations.
ACQUISITIONS. Between August 1996 and April 1998, the Company acquired
five businesses. In August 1996, the Company acquired Risk Data Corporation
("Risk Data"), a company that develops, markets and supports proprietary
software decision products for use in the insurance industry. In November 1996,
the Company acquired Retek Distribution Corporation, now named Retek Information
Systems, Inc. ("Retek"), a company that develops, markets and supports
management decision software products for retailers and their vendors. In
November 1997, the Company acquired CompReview, Inc. ("CompReview"), a company
that develops, markets and supports a software product and related services
designed to assist in the management and containment of the medical costs of
workers' compensation and automobile accident medical claims. In March 1998, the
Company acquired Practical Control Systems Technologies, Inc. ("PCS"), a company
that develops, markets and supports fully integrated distribution software
products that address the distribution needs of the retail, manufacturing and
wholesale industries. In April 1998, the Company acquired Financial Technology,
Inc. ("FTI"), a company that develops and markets profitability measurement and
analysis and other software products and related support services to financial
institutions. The Company believes that its future growth depends, in part, upon
the success of these and possible future acquisitions. There can be no assurance
that the Company will successfully identify, acquire on favorable terms or
integrate such businesses, products, services or technologies. The Company may
in the future face increased competition for acquisition opportunities, which
may inhibit the Company's ability to consummate suitable acquisitions and
increase the costs of completing such acquisitions. The acquisitions of Risk
Data, Retek, CompReview, PCS and FTI, as well as other potential future
acquisitions, will require the Company to successfully manage and integrate such
acquired businesses, which may be located in diverse geographic locations.
Acquiring other businesses also requires the Company to successfully develop and
market products to new industries and markets with which the Company may not be
familiar. It also requires the Company to coordinate (and possibly change) the
diverse operating structures, policies and practices of the acquired companies
and to integrate the employees of the acquired companies into the Company's
organization and culture. Failure of the Company to successfully integrate and
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manage acquired businesses, to retain their employees, and to successfully
address new industries and markets associated with such acquired business, would
have a material adverse effect on the Company's business, financial condition
and results of operations. The acquisitions of Risk Data, Retek and CompReview
have been accounted for as poolings of interests. The acquisitions of PCS and
FTI are accounted for as purchases. The acquisition of PCS resulted in an
accounting charge of approximately $3.9 million in the quarter ended March 31,
1998. The acquisition of FTI, which was completed in the second quarter of 1998,
as well as any other future acquisitions that may be accounted for as purchases,
may result in charges that adversely affect the Company's earnings. Additional
acquisitions may also involve the issuance of shares of the Company's stock to
owners of acquired businesses, resulting in dilution in the percentage of the
Company's stock owned by other stockholders.
RISKS ASSOCIATED WITH MANAGING GROWTH. In recent years, the Company has
experienced changes in its operations that have placed significant demands on
the Company's administrative, operational and financial resources. The growth in
the Company's customer base and expansion of its product functionality, together
with its acquisition of other businesses and their employees, have challenged
and are expected to continue to challenge the Company's management and
operations, including its sales, marketing, customer support, research and
development and finance and administrative operations. The Company's future
performance will depend in part on its ability to successfully manage change,
both in its domestic and international operations, and to adapt its operational
and financial control systems, if necessary, to respond to changes in its
business and to facilitate the integration of acquired businesses with the
Company's operations. The failure of the Company's management to effectively
respond to and mange growth could have a material adverse effect on the
Company's business, financial condition and results of operations.
DEPENDENCE ON EMERGING TECHNOLOGIES AND MARKETS. The market for
predictive software solutions is still emerging. The rate at which businesses
have adopted the Company's products has varied significantly by market and by
product within each market, and the Company expects to continue to experience
such variations with respect to its target markets and products in the future.
The Company has introduced products for the healthcare/insurance, financial
services and retail markets. The Company has recently announced several new
products, including PMAdvisor, VeriComp, SelectCast, SelectResponse and
SelectResource. To date, none of these products has achieved any significant
degree of market acceptance, and there can be no assurance that such products
will ever be widely accepted. Although businesses in the Company's target
markets have recognized the advantages of using predictive software solutions to
automate the decision-making process, many have developed decision automation
systems internally rather than licensing them from outside vendors. There can be
no assurance that the markets for the Company's products will continue to
develop or that the Company's products will be widely accepted, if at all. If
the markets for the Company's new or existing products fail to develop, or
develop more slowly than anticipated, the Company's sales would be negatively
impacted, which would have a material adverse effect on the Company's business,
financial condition and results of operations.
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE AND DELAYS IN DEVELOPING NEW
PRODUCTS. The market for the Company's predictive software solutions for service
industries is characterized by rapidly changing technology and improvements in
computer hardware, network operating systems, programming tools, programming
languages, operating systems and database technology. The Company's success will
depend upon its ability to continue to develop and maintain competitive
technologies, enhance its current products and develop, in a timely and
cost-effective manner, new products that meet changing market conditions,
including evolving customer needs, new competitive product offerings, emerging
industry standards and changing technology. For example, the rapid growth of the
Internet environment creates new opportunities, risks and uncertainties for
businesses, such as the Company, which develop software solutions that now may
have to be designed to operate in Internet, intranet and other on-line
environments. The Company may not be able to develop and market, on a timely
basis, or at all, product enhancements or new products that respond to changing
technologies. The Company has previously experienced significant delays in the
development and introduction of new products and product enhancements, primarily
due to difficulties with model development, which has in the past required
multiple iterations, as well as difficulties with acquiring data and adapting to
particular operating environments. The length of these delays has varied
depending upon the size and scope of the project and the nature of the problems
encountered. Any significant delay in the completion of new products, or the
failure of such products, if and when installed, to achieve any significant
degree of market acceptance, would have a material adverse effect on the
Company's business, financial condition and results of operations. Any failure
by the Company to anticipate or to respond adequately to changing technologies,
or any significant delays in product development or introduction, could cause
customers to delay or decide against purchases of the Company's products and
would have a material adverse effect on the Company's business, financial
condition and results of operations.
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PRODUCT CONCENTRATION. The Company currently has one product or product
line in each of its three target markets that accounts for a majority of the
Company's total revenues from that market. These products in the aggregate
accounted for 60.0%, 59.1% and 57.9% of the Company's total revenues in 1995,
1996 and 1997, respectively. In the healthcare/insurance market, the Company's
revenues from its CRLink product accounted for 29.8%, 24.6% and 23.0% of the
Company's total revenues in 1995, 1996 and 1997, respectively, and are expected
to account for a substantial portion of the Company's total revenues for the
foreseeable future. Continued market acceptance of CRLink will be affected by
future product enhancements and competition. Decline in demand for, or use of,
CRLink, whether as a result of competition, simplification of state workers'
compensation fee schedules, changes in the overall payment system or regulatory
structure for workers' compensation claims, technological change, an inability
to obtain or use state fee schedule or claims data, saturation of market demand,
industry consolidation or otherwise, could result in decreased revenues from
CRLink, which could have a material adverse effect on the Company's business,
financial condition and results of operations. Further, revenues from the Retek
Merchandising System ("RMS"), a retail management product, accounted for 2.2%,
13.6% and 18.9% of the Company's total revenues in 1995, 1996 and 1997,
respectively, and are expected to continue to account for a substantial portion
of the Company's revenues in the foreseeable future. Continued market acceptance
of RMS will be affected by the quality and timely introduction of future product
enhancements and competition. Decline in demand for, or use of, RMS as a result
of continued entry into the retail inventory management market by vendors that
may have significantly greater resources and a broader customer base than the
Company could result in decreased revenues from RMS, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, decline in demand for RMS, as a result of technological
change, saturation of market demand, industry consolidation or otherwise would
have a material adverse effect on the Company's business, financial condition
and results of operations. Revenues from the Company's Falcon product line for
credit card fraud detection for financial institutions accounted for 28.0%,
20.9% and 16.0% of the Company's total revenues in 1995, 1996 and 1997,
respectively, and are expected to continue to account for a substantial portion
of the Company's total revenues in the foreseeable future. Continued market
acceptance of the Falcon product line will be affected by the quality and timely
introduction of future product enhancements and competition. In addition, it is
possible that patterns of credit card fraud may change in a manner that the
Falcon product line would not detect and that other methods of credit card fraud
prevention may reduce customers' needs for the Falcon product line. As a result
of increasing saturation of market demand for the Falcon product line, the
Company may also need to rely increasingly on international sales to maintain or
increase Falcon revenue levels. Furthermore, Falcon customers are banks and
related financial institutions. Accordingly, the Company's future success
depends upon the capital expenditure budgets of such customers and the continued
demand by such customers for Falcon products. The financial services industry
tends to be cyclical in nature, which may result in variations in demand for the
Company's products. In addition, there has been and continues to be
consolidation in the financial services industry, which in some cases has
lengthened the sales cycle and may lead to reduced demand for the Company's
products. Decline in demand for, or use of, Falcon, whether as a result of
competition, technological change, change in fraud patterns, the cyclical nature
of the financial service industry, saturation of market demand, fluctuations in
interest rates, industry consolidation, reduction in capital spending or
otherwise, could have a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON DATA. The development, installation and support of the
Company's credit card fraud control and profitability management, loan
underwriting, home valuation and certain healthcare/insurance products require
periodic model updates. The Company must develop or obtain a reliable source of
sufficient amounts of current and statistically relevant data to analyze
transactions and update its models. For example, in the electronic payments
market, the data required by the Company are collected privately and maintained
in proprietary databases. As a result, the Company and its Falcon and ProfitMax
customers enter into agreements pursuant to which customers agree to provide the
data the Company requires to analyze transactions, report results and build new
fraud detection and profitability models. For its AREAS home valuation product,
the Company obtains data from commercial databases on available terms and
conditions. Many of the Company's healthcare/insurance products use historical
workers' compensation claims data obtained from customers. CRLink also uses data
from state workers' compensation fee schedules adopted by state regulatory
agencies, and certain third parties have asserted copyright interests in such
data. In most cases, such data must be periodically updated and refreshed to
enable the Company's predictive software products to continue to work
effectively. In addition, the development of new and enhanced products also
depends to a significant extent on the availability of sufficient amounts of
statistically relevant data to enable the Company to develop models. For
example, to expand the geographic coverage of its AREAS product, the Company
would be required to develop or obtain data on home sales in each county for
which AREAS is marketed. There can be no assurance that the Company will be able
to continue to obtain adequate amounts of statistically relevant data on a
timely basis, in the required formats or on reasonable terms and conditions,
whether from customers or commercial suppliers. Any such failure by the Company
to obtain required data when it is needed, for a reasonable price and on
reasonable terms, could have a significant negative impact on existing product
performance, new
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<PAGE> 9
product development and product pricing which could in turn have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION. The market for predictive software solutions for service
industries is intensely competitive and subject to rapid change. Competitors,
many of which have substantially greater financial resources than the Company,
vary in size and in the scope of the products and services they offer. The
Company encounters competition from a number of sources, including (i) other
application software companies, (ii) management information systems departments
of customers and potential customers, including financial institutions,
insurance companies and retailers, (iii) third-party professional services
organizations, including without limitation, consulting divisions of public
accounting firms, (iv) hardware suppliers that bundle or develop complementary
software, (v) network and service providers that seek to enhance their
value-added services, (vi) neutral-network tool suppliers and (vii) managed care
organizations. In the healthcare/insurance market, the Company has experienced
competition primarily from National Council on Compensation Insurance ("NCCI"),
Corporate Systems and CSC Incorporated. In the workers' compensation and medical
cost administration market, the Company has experienced competition from
MediCode, Inc. ("MediCode"), Medata, Inc. and Embassy Software with regard to
software licensing, and Intracorp and Corvel Corporation in the service bureau
operations market. Additionally, the Company has faced competition from
Automatic Data Processing, Inc. ("ADP") in the automobile accident medical
claims market. In the financial services market, the Company has experienced
competition from Fair, Isaac & Co., Inc., Cogensys (a subsidiary of Policy
Management Systems Corporation), Federal National Mortgage Association ("Fannie
Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac"), International
Business Machines Corporation ("IBM"), Nestor, Inc., NeuralTech Inc., Neuralware
Inc., PMI Mortgage Services Co., VISA International and others. In the retail
market, the Company has experienced competition from JDA Software Group, Inc.,
SAP AG, PeopleSoft, Inc., IBM, Manugistics Group, Inc. and others. The Company
expects to experience additional competition from other established and emerging
companies, as well as other technologies. For example, the Company's Falcon
product competes against other methods of preventing credit card fraud, such as
card activation programs, credit cards that contain the cardholder's photograph,
smart cards and other card authorization techniques. Increased competition,
whether from other products or new technologies, could result in price
reductions, fewer customer orders, reduced gross margins and loss of market
share, any of which could materially adversely affect the Company's business,
financial condition and results of operations.
The Company believes that most of its products are currently priced at a
premium when compared to its competitors' products. The market for the Company's
products is highly competitive, and the Company expects that it will face
increasing pricing pressures from its current competitors and new market
entrants. In particular, increased competition could reduce or eliminate such
premiums and cause further price reductions. In addition, such competition could
adversely affect the Company's ability to obtain new long-term contracts and
renewals of existing long-term contracts on terms favorable to the Company. Any
reduction in the price of the Company's products could materially adversely
affect the Company's business, financial condition and results of operations.
Some of the Company's current, and many of the Company's potential
competitors have significantly greater financial, technical, marketing and other
resources than the Company. As a result, they may be able to respond more
quickly to new or emerging technologies and changes in customer requirements or
to devote greater resources to the development, promotion and sale of their
products than the Company. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address the needs of
the Company's prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly gain
significant market share. Also, the Company relies upon its customers to provide
data, expertise and other support for the ongoing updating of the Company's
models. The Company's customers, most of which have significantly greater
financial and marketing resources than the Company, may compete with the Company
in the future or otherwise discontinue their relationships with or support of
the Company. There can be no assurance that the Company will be able to compete
successfully against current and future competitors or that competitive
pressures faced by the Company will not materially adversely affect its
business, financial condition and results of operations.
RISKS ASSOCIATED WITH RECRUITING AND RETAINING QUALIFIED PERSONNEL. The
Company's success depends to a significant degree upon the continued service of
members of the Company's senior management and other key research, development,
sales and marketing personnel. Accordingly, the loss of any of the Company's
senior management or key research, development, sales or marketing personnel
could have a material adverse effect on the Company's business, financial
condition and results of operations. Only a small number of employees have
employment agreements with the Company, and there can be no assurance that such
agreements will result in the retention of these employees for any
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<PAGE> 10
significant period of time. In addition, the untimely loss of a member of the
management team or a key employee of a business acquired by the Company could
have a material adverse effect on the Company's business, financial condition
and results of operations, particularly if such loss occurred before the Company
has had adequate time to familiarize itself with the operating details of that
business. In the past, the Company has experienced difficulty in recruiting a
sufficient number of qualified sales and technical employees. In addition,
competitors may attempt to recruit the Company's key employees. There can be no
assurance that the Company will be successful in attracting, assimilating and
retaining such personnel. The failure to attract, assimilate and retain key
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations.
CUSTOMER CONCENTRATION. Product licenses to First Data Resources, Inc.
("First Data"), the largest provider of credit card charge receipt processing
services to banks, accounted for 8.7%, 8.6% and 7.6% of the Company's total
revenues in 1995, 1996 and 1997, respectively. The Company has licensed First
Data to provide its customers with access to the Company's ProfitMax product
pursuant to a license agreement entered into in January 1996 (the "ProfitMax
Contract"). The Company's revenues under the ProfitMax Contract represented
approximately one-quarter of the Company's revenues from First Data in 1997. In
late January 1998, First Data asserted that certain restrictive covenants under
the ProfitMax Contract violated certain intellectual property laws. First Data
also asserted that the existence of such restrictions made the ProfitMax
Contract at least temporarily unenforceable and that First Data is therefore not
obligated to pay the Company license fees due under the ProfitMax Contract. The
Company disputed First Data's claim, released and waived the above-mentioned
restrictive covenants in the ProfitMax Contract and gave First Data written
notice that the Company intended to terminate the ProfitMax Contract pursuant to
its terms unless First Data cured its failure to pay the delinquent license fees
in a timely manner. Currently, First Data and the Company are working to resolve
their dispute regarding the ProfitMax Contract by negotiating a new agreement;
however, there can be no assurance that such an agreement will be reached or
that the terms of such an agreement would be as favorable to HNC as its existing
contractual arrangements with First Data. If no such agreement can be reached
and First Data maintains it current position, it is possible that litigation or
arbitration could ensue, which would likely result in a loss of anticipated
revenue to the Company under the ProfitMax Contract and possibly other
agreements between the Company and First Data, which could have a material
adverse effect on the Company's business, financial condition and results of
operation.
RISKS ASSOCIATED WITH INTERNATIONAL SALES. In 1995, 1996 and 1997,
international operations and export sales (including sales in Canada)
represented 12.6%, 17.7% and 16.8% of the Company's total revenues,
respectively. The Company intends to continue to expand its operations outside
the United States and to enter additional international markets, including by
adding sales and support offices in Europe and Japan, which will require
significant management attention and financial resources. For certain more
mature products, such as Falcon, the Company may need to increase international
sales in order to continue to expand the product's customer base. The Company
has committed and continues to commit significant time and development resources
to customizing certain of its products for selected international markets and to
developing international sales and support channels. There can be no assurance
that the Company's efforts to develop products, databases and models for
targeted international markets or to develop additional international sales and
support channels will be successful. The failure of such efforts, which can
entail considerable expense, could have a material adverse effect on the
Company's business, financial condition and results of operations.
International sales are subject to additional inherent risks, including
longer payments cycles, unexpected changes in regulatory requirements, import
and export restrictions and tariffs, difficulties in staffing and managing
foreign operations, the burdens of complying with a variety of foreign laws,
greater difficulty or delay in accounts receivable collection, potentially
adverse tax consequences and political and economic instability. The Company's
international sales are currently denominated predominately in United States
dollars and a small portion are denominated in British pounds sterling. An
increase in the value of the United States dollar relative to foreign currencies
could make the Company's products more expensive, and therefore potentially less
competitive, in foreign markets. In the future, to the extent that Company's
international sales are denominated in local currencies, foreign currency
translations may contribute to significant fluctuations in the Company's
business, financial condition and results of operations. If for any reason
exchange or price controls or other restrictions on foreign currencies are
imposed, the Company's business, financial condition and results of operations
could be materially adversely affected.
RISKS ASSOCIATED WITH CHANGING REGULATORY ENVIRONMENT. The Company's
customers are subject to a number of government regulations and certain other
industry standards with which the Company's products must comply. For example,
the Company's financial services products are affected by Regulation B
promulgated under the Equal Credit Opportunity Act, by regulations governing the
extension of credit to consumers and by Regulation E promulgated under the
Electronic Fund Transfers Act governing the transfer of funds from and to
consumer deposit accounts, as well as VISA
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<PAGE> 11
and MasterCard electronic payment standards. In the mortgage services market,
the Company's products are affected by regulations such as Fannie Mae and
Freddie Mac regulations for conforming loans, Uniform Standards of Professional
Appraisal Practice and appraisal standards for federally insured institutions
under the Financial Institutions Reform, Recovery and Enforcement Act. In
addition, recent regulatory initiatives have restricted the availability of bank
and credit bureau data, reflecting a consumer privacy trend that could limit the
Company's ability to obtain or use certain credit-related information. It is
also possible that insurance-related regulations may in the future apply to the
Company's healthcare/insurance products. In many states, including California,
there have been periodic legislative efforts to reform workers' compensation
laws in order to reduce the cost of workers' compensation insurance and to curb
abuses of the workers' compensation system, and such changes, if adopted, might
adversely affect the Company's healthcare/insurance business. In addition, if
state-mandated workers' compensation laws or regulations or state workers'
compensation fee schedules are simplified, such changes would diminish the need
for, and the benefit provided by, the CRLink product. Changes in workers'
compensation laws or regulations could also adversely affect the Company's
healthcare/insurance products by making them obsolete, or by requiring extensive
changes in these products to reflect new workers' compensation rules. To the
extent that the Company sells new products targeted to markets that include
regulated industries and businesses, the Company's products will need to comply
with these additional regulations. Any failure of the Company's products to
comply with existing or new regulations and standards could result in legal
action against the Company or its customers by regulatory authorities or by
third parties, including actions seeking civil or criminal penalties,
injunctions against the Company's use of data or civil damages, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company may also be liable to its
customers for failure of its products to comply with such regulatory
requirements. Furthermore, changes to these regulations and standards or the
adoption of new regulations or standards that affect the Company's products
could affect the performance of such products and have a material adverse effect
on the Company's business, financial condition and results of operations.
PROTECTION OF INTELLECTUAL PROPERTY. The Company relies on a combination
of patent, copyright, trademark and trade secret laws and confidentiality
procedures to protect its proprietary rights. The Company currently owns seven
issued United States patents and has four United States patent applications
pending. The Company has applied for additional patents for its Falcon
technology in Canada, Europe and Japan and for its MIRA product in Australia,
Canada and Europe. There can be no assurance that patents will be issued with
respect to pending or future patent applications or that the Company's patents
will be upheld as valid or will prevent the development of competitive products.
The Company seeks to protect its software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. As part of its confidentiality procedures, the Company generally
enters into invention assignment and proprietary information agreements with its
employees and independent contractors and nondisclosure agreements with its
distributors, corporate partners and licensees, and limits access to and
distribution of its software, documentation and other proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise to obtain and use the Company's products or technology without
authorization, or to develop similar technology independently. In addition, to
ensure that customers will not be adversely affected by an interruption in the
Company's business, the Company places source code for certain of its products
into escrow, which may increase the likelihood of misappropriation or other
misuse of the Company's intellectual property. Moreover, effective protection of
intellectual property rights may be unavailable or limited in certain foreign
countries in which the Company has done and may do business. Also, the Company
has developed technologies under research projects conducted under agreements
with various United States Government agencies or subcontractors to such
agencies. Although the Company has acquired certain commercial rights to such
technologies, the United States Government typically retains ownership of
certain intellectual property rights and licenses in the technologies developed
by the Company under such contracts, and in some cases can terminate the
Company's rights in such technologies if the Company fails to commercialize them
on a timely basis. In addition, under certain United States Government
contracts, the results of the Company's research may be made public by the
government, which could limit the Company's competitive advantage with respect
to future products based on such research.
INFRINGEMENT OF PROPRIETARY RIGHTS. In the past, the Company has
received communications from third parties asserting that the Company trademarks
infringed such other parties' trademarks, none of which has resulted in
litigation or losses to the Company. Given the Company's ongoing efforts to
develop and market new technologies and products, the Company may receive
communications from third parties asserting that the Company's products
infringe, or may infringe, their intellectual property rights. If as a result of
any such claims the Company were precluded from using certain technologies or
intellectual property rights, licenses to such disputed third-party technology
or intellectual property rights might not be available on reasonable commercial
terms, if at all. Furthermore, the Company may initiate claims or litigation
against third parties for infringement of the Company's proprietary rights or to
establish the validity of the Company's proprietary rights. Litigation, either
as plaintiff or defendant, could result in significant expense to the
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<PAGE> 12
Company and divert the efforts of the Company's technical and management
personnel from productive tasks, whether or not such litigation is resolved in
favor of the Company. In the event of an adverse ruling in any such litigation,
the Company might be required to pay substantial damages, discontinue the use
and sale of infringing products, expend significant resources to develop
non-infringing technology or obtain licenses to infringing technology, and the
court might invalidate the Company's patents, trademarks or other proprietary
rights. In the event of a successful claim against the Company and the failure
of the Company to develop or license a substitute technology, the Company's
business, financial condition and results of operations would be materially and
adversely affected. As the number of software products increases and the
functionality of these products further overlaps, the Company believes that
software developers may become increasingly subject to infringement claims. Any
such claims, with or without merit, can be time consuming and expensive to
defend and could materially and adversely affect the Company's business,
financial condition and results of operations.
RISK OF PRODUCT DEFECTS AND PRODUCT LIABILITY. Software products as
complex as those offered by the Company often contain undetected errors or
failures when first introduced or as new versions are released. In addition, to
the extent that the Company may have to develop new products that operate in new
environments, such as the Internet, the possibility for program errors and
failures may increase due to factors such as the use of new technologies or the
need for more rapid product development that is characteristic of the Internet
market. Despite pre-release testing by the Company and by current and potential
customers, there still may be errors in new products, even after commencement of
commercial shipments. The occurrence of such errors could result in delay in, or
failure to achieve, market acceptance of the Company's products, which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Although the Company's license agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential product
liability claims, it is possible that such limitation of liability provisions
may not be effective as a result of existing or future laws or unfavorable
judicial decisions. Because the Company's products are used in business-critical
applications, any errors or failures in such products may give rise to
substantial product liability claims, which could have a material adverse effect
on the Company's business, financial condition and results of operations.
VOLATILITY OF COMMON STOCK PRICE. The Company's Common Stock has
experienced significant price volatility and such volatility may recur in the
future. Factors such as announcements of the introduction of new products by the
Company or its competitors, acquisitions of businesses or products by the
Company, quarter-to-quarter variations in the Company's operating results and
the gain or loss of significant orders, as well as market conditions in the
technology and emerging growth company sectors, may have a significant impact on
the market price of the Company's Common Stock. Further, the stock market has
experienced extreme volatility that has particularly affected the market prices
of securities of many technology companies and that often has been unrelated or
disproportionate to the operating performance of such companies. These market
fluctuations may adversely affect the price of the Common Stock. The trading
prices of many technology companies' stocks, including the Company's Common
Stock, reflect price/earnings ratios substantially above historical norms. The
trading price of the Company's Common Stock may not remain at or near its
current level.
YEAR 2000 COMPLIANCE. Many currently installed computer systems and
software products are coded to accept only two digit entries in the date code
field. These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and/or software used by many companies may need
to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. The Company believes that the purchasing
patterns of customers and potential customers may be affected by Year 2000
issues as companies expend significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase software products such as those offered
by the Company, which could result in a material adverse effect on the Company's
business, financial condition and results of operations.
FACTORS INHIBITING TAKEOVER. The Board of Directors is authorized to
issue up to 4,000,000 shares of Preferred Stock and to determine the price,
rights, preferences, privileges and restrictions, including voting rights, of
those shares without any further vote or action by the stockholders. The rights
of the holders of Common Stock will be subject to , and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. The Company
has no current plans to issue shares of Preferred Stock. In
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<PAGE> 13
addition, Section 203 of the Delaware General Corporation Law restricts certain
business combinations with any "interested stockholder" as defined by such
statute. The statute may have the effect of delaying, deferring or preventing a
change in control of the Company.
MATERIAL CHANGES
On February 26, 1998, the Company issued and sold an aggregate of $90
million principal amount of 4.75% Convertible Subordinated Notes Due 2003 (the
"Notes") in a public offering. In addition, the Company issued and sold 20,000
shares of its Common Stock and certain stockholders of the Company sold a total
of 2,395,000 shares of the Company's Common Stock. The net proceeds to the
Company from the issuance and sale of the Notes are approximately $87.2 million.
The net proceeds to the Company from the issuance and sale of the shares of
Common Stock are not material. The Company did not receive any proceeds from the
sale of Common Stock by existing stockholders. The Notes are convertible into
Common Stock at any time before the close of business on March 1, 2003, unless
previously redeemed or repurchased, at a conversion price of $44.85 per share
(equivalent to a conversion rate of approximately 22.30 shares per $1,000
principal amount of Notes), subject to adjustment in certain circumstances.
SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
April 17, 1998 by each Selling Stockholder. Each Selling Stockholder was
formerly either a stockholder of PCS who acquired the Shares in the PCS Merger
(a "PCS Selling Stockholder") or a stockholder of FTI who acquired the Shares in
the FTI Merger (an "FTI Selling Stockholder"). Except as described below, no
Selling Stockholder has had any position, office or other material relationship
with the Company within the past three years. The following table assumes that
each Selling Stockholder sells all of the Shares held by such Selling
Stockholder in this offering. However, the Company is unable to determine the
exact number of Shares that will actually be sold or when or if such sales will
occur.
Certain assignees of the Selling Stockholders, if any, who acquire
Shares of Common Stock from a Selling Stockholder and satisfy certain conditions
are entitled to the same registration rights as the Selling Stockholders. If any
such assignee wishes to sell shares hereunder, this Prospectus will be amended
or supplemented to name such assignee as a Selling Stockholder.
The Selling Stockholders have advised the Company that each of them is
the beneficial owner (within the meaning of such term in Rule 13d-3 promulgated
under the Exchange Act) of their respective Shares being offered hereby.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OWNED AFTER
OFFERING(1) SHARES OFFERING(1)
------------------ -------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
PCS SELLING STOCKHOLDERS:
Arthur S. DeMoss Foundation........ 2,252 * 2,252 -- --
David H. Cook(2)...................103,443 * 103,443 -- --
Thomas G. Glaser................... 1,126 * 1,126 -- --
Glaser Capital Partners, Ltd....... 2,252 * 2,252 -- --
Greenspring Ventures Ltd. 16,896 * 16,896 -- --
Partnership........................
Jayell Capital, Inc................ 3,379 * 3,379 -- --
Richard Knock...................... 3,379 * 3,379 -- --
Richard A. Mahoney................. 4,505 * 4,505 -- --
Ruthanne McGuire................... 563 * 563 -- --
James O. Newman.................... 1,126 * 1,126 -- --
Paul L. Newman..................... 563 * 563 -- --
Del Osburn......................... 1,126 * 1,126 -- --
Jerry Ruyan........................ 2,252 * 2,252 -- --
FTI SELLING STOCKHOLDERS:
Paul P. Koziarz(3)................. 23,797 * 23,797 -- --
Thomas R. Snow(4).................. 15,864 * 15,864 -- --
J. Michael Thompson(5).............356,956 1.4% 356,956 -- --
</TABLE>
- ------------
* Less than 1%.
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(1) Based upon a total of 25,388,306 shares of Common Stock outstanding as
of April 17, 1998.
(2) Mr. Cook is the President and Chief Executive Officer of PCS.
(3) Mr. Koziarz is President of FTI.
(4) Mr. Snow is Senior Vice President of FTI.
(5) Mr. Thompson is the Chief Executive Officer, Secretary and Treasurer of
FTI.
USE OF PROCEEDS
The proceeds from the sale of the Shares offered hereby will be solely
for the account of the Selling Stockholders. Accordingly, the Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Stockholders.
PLAN OF DISTRIBUTION
In connection with the Mergers, each PCS Selling Stockholder entered
into a Registration Rights Agreement (the "PCS Registration Rights Agreement")
with the Company and each FTI Selling Stockholder entered into a Registration
Rights Agreement (the "FTI Registration Rights Agreement") with the Company
(collectively, the "Registration Rights Agreements"). The Registration Statement
of which this Prospectus forms a part has been filed pursuant to such
Registration Rights Agreements. To the Company's knowledge, no Selling
Stockholder has entered into any agreement, arrangement or understanding with
any particular broker or market maker with respect to the Shares offered hereby,
nor does the Company know the identity of the brokers or market makers that will
participate in the offering.
The Shares may be offered and sold from time to time by the Selling
Stockholders or by pledgees, donees, transferees and other successors in
interest. The Selling Stockholders will act independently of the Company in
making decisions with respect to the timing, manner and size of each sale. Such
sales may be made over the Nasdaq National Market or otherwise, at then
prevailing market prices, at prices related to prevailing market prices or at
negotiated prices. The Shares may be sold by one or more of the following: (a) a
block trade in which the broker-dealer engaged by the Selling Stockholder will
attempt to sell the Shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by the
broker-dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; and (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. The Company has been
advised by the Selling Stockholders that they have not, as of the date hereof,
entered into any arrangement with a broker-dealer for the sale of Shares through
a block trade, special offering, or secondary distribution of a purchase by a
broker-dealer. In effecting sales, broker-dealers engaged by the Selling
Stockholders may arrange for other broker-dealers to participate. Broker-dealers
will receive commissions or discounts from the Selling Stockholders in amounts
to be negotiated immediately prior to the sale.
In connection with distributions of the Shares or otherwise, the Selling
Stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares covered hereby in the course of hedging the positions they assume
with Selling Stockholders. The Selling Stockholders may also sell shares short
and redeliver the Shares to close out such short positions. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the Shares
covered hereby, which the broker-dealer may resell or otherwise transfer
pursuant to this Prospectus. A Selling Stockholder may also loan or pledge the
Shares covered hereby to a broker-dealer and the broker-dealer may sell the
Shares so loaned or, upon a default, the broker-dealer may effect sales of the
pledged Shares pursuant to this Prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders in amounts to be
negotiated in connection with the sale. Such broker-dealers and any other
participating broker-dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act. The Selling Stockholders have agreed with
the Company in the Registration Rights Agreement not to sell any of the Shares
pursuant to this Prospectus in an underwritten offering without the Company's
prior written consent. In addition, any Shares covered by this Prospectus which
qualify for sale pursuant to Rule 144 or Rule 145 under the Securities Act may
be sold under Rule 144 or Rule 145 rather than pursuant to this Prospectus.
All costs, expenses and fees in connection with the registration of the
Shares will be borne by the Company. Commissions and discounts, if any,
attributable to the sales of the Shares will be borne by the Selling
Stockholders. The Selling Stockholders may agree to indemnify any broker-dealer
or agent that participates in transactions involving sales of the Shares against
certain liabilities, including liabilities arising under the Securities Act.
Under the Registration Rights
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<PAGE> 15
Agreements, the Company and the Selling Stockholders have agreed to indemnify
each other and certain other persons against certain liabilities in connection
with the offering of the Shares, including liabilities arising under the
Securities Act, and, in the case of the former PCS stockholders, to contribute
to payments required to be made in respect thereof.
The Selling Stockholders have advised the Company that, during such time
as they may be engaged in a distribution of the Shares, they will comply with
Regulation M under the Exchange Act and, in connection therewith, the Selling
Stockholders have agreed not to engage in any stabilization activity in
connection with any securities of the Company, to furnish copies of this
Prospectus to each broker-dealer through which the Shares of Common Stock
included herein may be offered, and not to bid for or purchase any securities of
the Company or attempt to induce any person to purchase any securities of the
Company except as permitted under the Exchange Act. The Selling Stockholders
have also agreed to inform the Company and broker-dealers through whom sales may
be made hereunder when the distribution of the Shares is completed. Regulation M
prohibits participants in a distribution from bidding for or purchasing for an
account in which the participant has a beneficial interest, any of the
securities that are the subject of the distribution and governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
The PCS Registration Rights Agreement provides that the Registration
Statement of which this Prospectus forms a part (the "Registration Statement")
will remain effective for a period commencing on the effective date of such
Registration Statement and ending on March 31, 1999 (such period being
hereinafter called the "PCS Effectiveness Period"). Prior to any sale of Shares
pursuant to the Registration Statement, a PCS Selling Stockholder or PCS Selling
Stockholders who own at least 20% of the then outstanding PCS Shares must submit
a written notice to the Company of such Selling Stockholder's or Stockholders'
intention to sell at least 5% of the then outstanding PCS Shares (a "Notice of
Resale"). The Company must, within seven business days after receiving a Notice
of Resale, either notify the Selling Stockholder whether it believes this
Prospectus is current (with the Company using the notice period to supplement
this Prospectus or make an appropriate filing under the Exchange Act to update
this Prospectus) or whether it believes this Prospectus should be amended prior
to use in connection with such sale (with the Company to then amend the
Registration Statement as soon as practicable). Once the Company has, pursuant
to such Notice of Resale, notified the Selling Stockholders that this Prospectus
is available for use, the Selling Stockholders who made the request will have 30
consecutive calendar days (a "Permitted Window") within which to sell Shares
pursuant to this Prospectus. Pursuant to the Registration Rights Agreement,
there will be a maximum of three Permitted Windows for the Selling Stockholders
during the Effectiveness Period and there will be at least a 30-day interval
between any two Permitted Windows. Under certain circumstances, no more than
twice during the Effectiveness Period (as such may be extended as a result of a
postponement described below), the Company is permitted to postpone the
commencement of a Permitted Window for up to 60 days after receipt of a Notice
of Resale; provided, however, that if the Company so postpones a Permitted
Window, the Effectiveness Period shall be extended by a period of time equal to
the period of postponement and provided further, that if the Company postpones a
Permitted Window and the Selling Stockholders withdraw their Notice of Resale,
then such withdrawal shall not count as a Permitted Window. The PCS Selling
Stockholders, collectively, may not sell pursuant to this Prospectus, during any
calendar quarter, an amount of Common Stock which, in the aggregate, exceeds 2%
of the outstanding shares of the Company's Common Stock, as indicated in the
Company's then most recent published report, without the Company's consent. The
foregoing provisions and restrictions may be modified or waived by the agreement
of the Company and the PCS Selling Stockholders.
The FTI Registration Rights Agreement provides that the Registration
Statement of which this Prospectus forms a part (the "Registration Statement")
will remain effective for a period commencing on the effective date of such
Registration Statement and ending on April 7, 1999 (such period being
hereinafter called the "FTI Effectiveness Period"). Prior to any sale of FTI
Shares pursuant to the Registration Statement, an FTI Selling Stockholder or FTI
Selling Stockholders holding at least a majority of the FTI Shares then
outstanding must submit a written notice to the Company of such Selling
Stockholder's intention to sell Shares and such Selling Stockholder's intended
plan of distribution of such Shares (a "Notice of Resale"). The Company must,
within seven business days after receiving a Notice of Resale, either notify the
Selling Stockholder whether it believes this Prospectus is current (with the
Company using the notice period to supplement this Prospectus or make an
appropriate filing under the Exchange Act to update this Prospectus) or whether
it believes this Prospectus should be amended prior to use in connection with
such sale (with the Company to then amend the Registration Statement as soon as
practicable). Once the Company has, pursuant to such Notice of Resale, notified
the Selling Stockholders that this Prospectus is available for use, the Selling
Stockholders who made the request will have 20 consecutive calendar days (a
"Permitted Window") within which to sell Shares pursuant to this Prospectus.
Pursuant to the Registration Rights Agreement, there will be a maximum of two
Permitted Windows for the Selling Stockholders during the Effectiveness Period
and there will be at least a 60-day interval between any two Permitted Windows.
Under certain circumstances, no more than twice during the Effectiveness Period
(as such may be extended as a result of a postponement
14
<PAGE> 16
described below), the Company is permitted to postpone the commencement of a
Permitted Window for up to 60 days after receipt of a Notice of Resale;
provided, however, that the two authorized 60-day postponements of Permitted
Windows may not be consecutive, and provided further, that if the Company so
postpones a Permitted Window, the Effectiveness Period shall be extended by a
period of time equal to the period of postponement and provided further, that if
the Company postpones a Permitted Window and the Selling Stockholders withdraw
their Notice of Resale, then such withdrawal shall not count as a Permitted
Window. The FTI Selling Stockholders, collectively, may not sell pursuant to
this Prospectus, during any calendar quarter, an amount of Common Stock which,
in the aggregate, exceeds 1% of the outstanding shares of the Company's Common
Stock, as indicated in the Company's then most recent published report, without
the Company's consent. The foregoing provisions and restrictions may be modified
or waived by the agreement of the Company and the FTI Selling Stockholders.
This offering will terminate as to each PCS Selling Stockholder on the
earlier of (a) the termination of the PCS Effectiveness Period during which the
Company is required to maintain the effectiveness of the Registration Statement,
(b) the Company having already effected the three Permitted Windows, (c) with
respect to a particular Selling Stockholder, the date upon which all Shares
proposed to be sold by such Selling Stockholder may be sold in a three month
period without registration under the Securities Act pursuant to Rule 144 or
otherwise or (d) the date on which all Shares offered hereby have been sold by
the Selling Stockholders. There can be no assurance that any of the Selling
Stockholders will sell any or all of the Shares offered hereby.
This offering will terminate as to each FTI Selling Stockholder on the
earlier of (a) the termination of the FTI Effectiveness Period during which the
Company is required to maintain the effectiveness of the Registration Statement,
(b) the Company having already effected the two Permitted Windows, (c) with
respect to a particular Selling Stockholder, the date upon which all Shares
proposed to be sold by such Selling Stockholder may be sold in a three month
period without registration under the Securities Act pursuant to Rule 144 or
otherwise or (d) the date on which all Shares offered hereby have been sold by
the Selling Stockholders. There can be no assurance that any of the Selling
Stockholders will sell any or all of the Shares offered hereby.
Pursuant to an Escrow Agreement between the Company and the PCS Selling
Stockholders, a total of 14,286 of the Shares will be held in an escrow until
March 31, 1999 in order to secure certain indemnification obligations of the PCS
Selling Stockholders to the Company under the Agreement and Plan of
Reorganization for the PCS Merger.
Pursuant to an Escrow Agreement between the Company and the FTI Selling
Stockholders, a total of 97,390 of the Shares will be held in an escrow until
April 7, 1999 in order to secure certain indemnification obligations of the FTI
Selling Stockholders to the Company under the Agreement and Plan of
Reorganization for the FTI Merger. Shares held in escrow may not be sold or
transferred without the Company's consent.
Upon the occurrence of any of the following events, this Prospectus will
be amended to include additional disclosure before offers and sales of the
Shares are made: (a) to the extent the Shares are sold at a fixed price or at a
price other than the prevailing market price, such price would be set forth in
the Prospectus, (b) if the Shares are sold in block transactions and the
purchaser acting in the capacity of an underwriter wishes to resell, such
arrangements would be described in the Prospectus, (c) if a Selling Stockholder
sells to a broker-dealer acting in the capacity as an underwriter, such
broker-dealer will be identified in the Prospectus and (d) if the compensation
paid to broker-dealers is other than usual and customary discounts, concessions
or commissions, disclosure of the terms of the transaction would be included in
the Prospectus.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California 94306. Members of the firm of Fenwick & West LLP
own an aggregate of 3,314 shares of Common Stock of the Company.
15
<PAGE> 17
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER, DEALER OR AGENT. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SUCH SECURITIES BY ANYONE IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------------
TABLE OF CONTENTS
--------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information ..................................................... 3
Incorporation of Certain Documents by
Reference ............................................................... 3
The Company ............................................................... 4
Risk Factors .............................................................. 4
Material Changes .......................................................... 12
Selling Stockholders ...................................................... 12
Use of Proceeds ........................................................... 13
Plan of Distribution ...................................................... 13
Legal Matters ............................................................. 15
</TABLE>
539,479 SHARES
HNC SOFTWARE INC.
COMMON STOCK
------------
PROSPECTUS
------------
April __, 1998
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be paid by the Registrant in connection with this
offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 6,217
Accounting fees and expenses................................ 4,000
Legal fees and expenses..................................... 7,500
Miscellaneous............................................... 2,283
-------
Total................................................... $20,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation includes a provision that eliminates
the personal liability of its directors to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability: (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law; or (iv) for any transaction
from which the director derived an improper personal benefit. In addition, as
permitted by Section 145 of the Delaware General Corporation Law, the Bylaws of
the Registrant provide that: (i) the Registrant is required to indemnify its
directors and officers, as well as directors and officers of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise when they are serving in such capacities at the request of the
Registrant, to the fullest extent permitted by the Delaware General Corporation
Law; (ii) the Registrant may, in its discretion, indemnify other officers,
employees and agents as set forth in the Delaware General Corporation Law; (iii)
upon receipt of an undertaking to repay such advances if indemnification is
determined to be unavailable, the Registrant is required to advance expenses, as
incurred, to its directors and officers to the fullest extent permitted by the
Delaware General Corporation Law in connection with a proceeding (except that
the Registrant is not required to advance expenses to a person against whom it
brings a claim for breach of the duty of loyalty, failure to act in good faith,
intentional misconduct, knowing violation of law or deriving an improper
personal benefit); (iv) the rights conferred in the Bylaws are not exclusive and
the Registrant is authorized to enter into indemnification agreements with its
directors, officers and employees and agents; (v) the Registrant may not
retroactively amend the Bylaw provisions in a way that adversely affects the
indemnification provided thereunder.
The Registrant's policy is to enter into indemnity agreements with each
of its directors and officers. The indemnity agreements provide that directors
and officers will be indemnified and held harmless against all expenses
(including attorneys' fees), judgments, fines, ERISA excise taxes or penalties
and settlement amounts paid or reasonably incurred by them in any action, suit
or proceeding, including any derivative action by or in the right of the
Registrant, on account of their services as a director or officer of the
Registrant or as directors or officers of any other corporation, partnership or
enterprise when they are serving in such capacities at the request of the
Registrant; except that no indemnity is provided in a derivative action in which
such director or officer is finally adjudged by a court to be liable to the
Registrant due to willful misconduct in the performance of his or her duty to
the Registrant, unless the court determines that such director or officer is
entitled to indemnification. The Registrant will not be obligated pursuant to
the agreements to indemnify or advance expenses to an indemnified party with
respect to proceedings or claims (i) initiated voluntarily by the indemnified
party and not by way of defense, except with respect to a proceeding authorized
by the Board of Directors and successful proceedings brought to enforce a right
to indemnification and/or advancement of expenses under the indemnity
agreements; (ii) for any amounts paid in settlement of a proceeding unless the
Registrant consents to such settlement; (iii) on account of any suit in which
judgment is rendered against the indemnified party for an accounting of profits
made from the purchase or sale by the indemnified party of securities of the
Registrant pursuant to the provisions of Section 16(b) of the Exchange Act and
related laws and regulations; (iv) on account of conduct by an indemnified party
that is finally adjudged to have been in bad faith or conduct that the
indemnified party did not reasonably believe to be in, or not opposed to, the
best interests of the Registrant; (v) on account of any criminal action or
proceeding arising out of conduct that the indemnified party had reasonable
cause to believe was unlawful; or (vi) if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful.
II-1
<PAGE> 19
The indemnity agreement requires a director or officer to reimburse the
Registrant for expenses advanced only if and to the extent it is ultimately
determined that the director or executive officer is not entitled, under
Delaware law, the Registrant's Certificate of Incorporation, the Registrant's
Bylaws, his or her indemnity agreement or otherwise to be indemnified for such
expenses. The indemnity agreement provides that it is not exclusive of any
rights a director or executive officer may have under the Certificate of
Incorporation, the Bylaws, other agreements, any majority-in-interest vote of
the stockholders or vote of disinterested directors, Delaware law, or otherwise.
The indemnification provision in the Bylaws, and the indemnity
agreements entered into between the Registrant and its directors and officers,
may be sufficiently broad to permit indemnification of the Registrant's
directors and officers for liabilities arising under the Securities Act.
The indemnity agreements require the Registrant to maintain director and
officer liability insurance to the extent readily available. The Registrant
currently carries a director and officer insurance policy.
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by reference
herein from filings with the Commission:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
2.01 -- Agreement and Plan of Reorganization dated as of July 19, 1996 by and among the
Registrant, HNC Merger Corp. and Risk Data Corporation, as amended.
(Incorporated by reference to Exhibit Number 2.01 of Registrant's Current Report
on Form 8-K filed on September 12, 1996, as amended (the "Risk Data 8-K").)
2.02 -- Agreement of Merger dated August 30, 1996 by and between HNC Merger Corp. and
Risk Data Corporation. (Incorporated by reference to Exhibit Number 2.02 to the
Risk Data 8-K.)
2.03 -- Exchange Agreement dated as of October 25, 1996 by and among the Registrant,
Retek Distribution Corporation and the shareholders of Retek Distribution
Corporation. (Incorporated by reference to Exhibit Number 2.01 to Registrant's
Current Report on Form 8-K filed on December 12, 1996 (the "Retek 8-K").)
2.04 -- Form of Option Exchange Agreement between the Registrant and each person who held
outstanding options to purchase shares of Retek Distribution Corporation on
November 29, 1996. (Incorporated by reference to Exhibit Number 2.02 to the
Retek 8-K.)
2.05 -- Agreement and Plan of Reorganization dated July 14, 1997 by and among the
Registrant, FW1 Acquisition Corp., CompReview, Inc., Robert L. Kaaren and
Michael E. Munayyer, a.k.a. Michael Munayyer, Trustee of the Michael Munayyer
Trust dated August 11, 1995. (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.) (Incorporated by reference to Exhibit Number 2.01 to
Registrant's Current Report on Form 8-K filed on December 15, 1997 (the
"CompReview 8-K).)
2.06 -- Agreement of Merger dated as of November 28, 1997 by and
between FW1 Acquisition Corp. and CompReview, Inc.
(Incorporated by reference to Exhibit Number 2.02 to the
CompReview 8-K.)
2.07 -- Agreement and Plan of Reorganization dated April 6, 1998 by and among the
Registrant, FW2 Merger Corp., Financial Technology, Inc. and for purposes of
Sections 3, 6 and 11 only, J. Michael Thompson, Paul P. Koziarz and Thomas R.
Snow. (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.)
(Incorporated by reference to Exhibit Number 2.01 to Registrant's Current Report
on Form 8-K filed on April 22, 1998 (the "FTI 8-K").)
3(i).01 -- Registrant's Restated Certificate of Incorporation filed
with the Secretary of State of Delaware on June 13, 1996.
(Incorporated by reference to Exhibit Number 3(i).04 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996 (the "Second Quarter 1996 10-Q").)
3(ii).02 -- Registrant's Bylaws, as amended. (Incorporated by
reference to Exhibit Number 3(ii).05 to the Second Quarter
1996 10-Q.)
4.01 -- Form of Specimen Certificate for Registrant's Common
Stock. (Incorporated by reference to Exhibit Number 4.01 to
Registrant's Form S-1 Registration Statement, as amended
(File No. 33-91932) (the "IPO S-1").)
4.02 -- Registration Rights Agreement dated as of August 30, 1996
among the Company and the former stockholders of Risk Data
Corporation. (Incorporated by reference to Exhibit Number
4.01 to the Risk Data 8-K.)
4.03 -- Registration Rights Agreement dated as of October 25, 1996
among the Registrant and the former
</TABLE>
II-2
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
stockholders of Retek Distribution Corporation. (Incorporated by
reference to Exhibit Number 4.01 to the Retek 8-K.)
4.04 -- Amendment No. 1 to Registration Rights Agreement dated February 24, 1997 by and
among the Registrant and the former stockholders of Retek Distribution
Corporation. (Incorporated by reference to Exhibit Number 4.06 to Registrant's
Annual Report on Form 10-K, as amended, for the year ended December 31, 1996.)
4.05 -- Registration Rights Agreement dated as of November 28,
1997 by and among the Registrant and the former stockholders
of CompReview, Inc. (Incorporated by reference to Exhibit
Number 4.01 to the CompReview 8-K.)
4.06* -- Registration Rights Agreement dated as of March 31, 1998
by and among Registrant and the former shareholders of
Practical Control Systems Technologies, Inc.
4.07 -- Registration Rights Agreement dated as of April 6, 1998 by
and among Registrant and the former shareholders of Financial
Technology, Inc. (Incorporated by reference to Exhibit Number
4.01 to the FTI 8-K.)
5.01* -- Opinion of Fenwick & West LLP.
23.01* -- Consent of Price Waterhouse LLP, Independent Accountants.
23.02* -- Consent of Fenwick & West LLP (included in Exhibit 5.01).
24.01* -- Power of Attorney (see page II-5).
</TABLE>
- -----------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act
II-3
<PAGE> 21
of 1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on April 22, 1998.
HNC SOFTWARE INC.
By: /s/ Raymond V. Thomas
------------------------------------
Raymond V. Thomas
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Robert L. North and Raymond V. Thomas,
and each of them, his attorneys-in-fact and agents, each with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
<S> <C> <C>
/s/ Robert L. North President, Chief Executive April 22, 1998
- --------------------------------------------- Officer and Director
Robert L. North
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
/s/ Raymond V. Thomas Vice President, Finance and April 22, 1998
- --------------------------------------------- Administration, Chief Financial
Raymond V. Thomas
ADDITIONAL DIRECTORS:
/s/ Edward K. Chandler Director April 22, 1998
- ---------------------------------------------
Edward K. Chandler
/s/ Oliver D. Curme Director April 22, 1998
- ---------------------------------------------
Oliver D. Curme
/s/ Thomas F. Farb Director April 22, 1998
- ---------------------------------------------
Thomas F. Farb
/s/ Charles H. Gaylord, Jr. Director April 22, 1998
- ---------------------------------------------
Charles H. Gaylord, Jr.
</TABLE>
II-5
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
2.01 -- Agreement and Plan of Reorganization dated as of July 19,
1996 by and among the Registrant, HNC Merger Corp. and Risk Data
Corporation, as amended. (Incorporated by reference to Exhibit
Number 2.01 of Registrant's Current Report on Form 8-K filed on
September 12, 1996, as amended (the "Risk Data 8-K").)
2.02 -- Agreement of Merger dated August 30, 1996 by and between HNC
Merger Corp. and Risk Data Corporation. (Incorporated by
reference to Exhibit Number 2.02 to the Risk Data 8-K.)
2.03 -- Exchange Agreement dated as of October 25, 1996 by and among
the Registrant, Retek Distribution Corporation and the
shareholders of Retek Distribution Corporation. (Incorporated by
reference to Exhibit Number 2.01 to Registrant's Current Report
on Form 8-K filed on December 12, 1996 (the "Retek 8-K").)
2.04 -- Form of Option Exchange Agreement between the Registrant and
each person who held outstanding options to purchase shares of
Retek Distribution Corporation on November 29, 1996.
(Incorporated by reference to Exhibit Number 2.02 to the Retek
8-K.)
2.05 -- Agreement and Plan of Reorganization dated July 14, 1997 by
and among the Registrant, FW1 Acquisition Corp., CompReview,
Inc., Robert L. Kaaren and Michael E. Munayyer, a.k.a. Michael
Munayyer, Trustee of the Michael Munayyer Trust dated August 11,
1995. (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.) (Incorporated by reference to
Exhibit Number 2.01 to Registrant's Current Report on Form 8-K
filed on December 15, 1997 (the "CompReview 8-K").)
2.06 -- Agreement of Merger dated as of November 28, 1997 by and
between FW1 Acquisition Corp. and CompReview, Inc. (Incorporated
by reference to Exhibit Number 2.02 to the CompReview 8-K.)
2.07 -- Agreement and Plan of Reorganization dated April 6, 1998 by
and among the Registrant, FW2 Merger Corp., Financial
Technology, Inc. and for purposes of Sections 3, 6 and 11 only,
J. Michael Thompson, Paul P. Koziarz and Thomas R. Snow.
(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.) (Incorporated by reference to Exhibit
Number 2.01 to Registrant's Current Report on Form 8-K filed on
April 22, 1998 (the "FTI 8-K").)
3(i).01 -- Registrant's Restated Certificate of Incorporation filed with
the Secretary of State of Delaware on June 13, 1996.
(Incorporated by reference to Exhibit Number 3(i).04 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 (the "Second Quarter 1996 10-Q").)
3(ii).02 -- Registrant's Bylaws, as amended. (Incorporated by reference
to Exhibit Number 3(ii).05 to the Second Quarter 1996 10-Q.)
4.01 -- Form of Specimen Certificate for Registrant's Common Stock.
(Incorporated by reference to Exhibit Number 4.01 to
Registrant's Form S-1 Registration Statement, as amended (File
No. 33-91932) (the "IPO S-1").)
4.02 -- Registration Rights Agreement dated as of August 30, 1996
among the Company and the former stockholders of Risk Data
Corporation. (Incorporated by reference to Exhibit Number 4.01
to the Risk Data 8-K.)
4.03 -- Registration Rights Agreement dated as of October 25, 1996
among the Registrant and the former stockholders of Retek
Distribution Corporation. (Incorporated by reference to Exhibit
Number 4.01 to the Retek 8-K.)
4.04 -- Amendment No. 1 to Registration Rights Agreement dated
February 24, 1997 by and among the Registrant and the former
stockholders of Retek Distribution Corporation. (Incorporated by
reference to Exhibit Number 4.06 to Registrant's Annual Report
on Form 10-K, as amended, for the year ended December 31, 1996.)
4.05 -- Registration Rights Agreement dated as of November 28, 1997
by and among the Registrant and the former stockholders of
CompReview, Inc. (Incorporated by reference to Exhibit Number
4.01 to the CompReview 8-K.)
4.06* -- Registration Rights Agreement dated as of March 31, 1998 by
and among Registrant and the former shareholders of Practical
Control Systems Technologies, Inc.
4.07 -- Registration Rights Agreement dated as of April 6, 1998 by
and among Registrant and the former shareholders of Financial
Technology, Inc. (Incorporated by reference to Exhibit Number
4.01 to the FTI 8-K.)
5.01* -- Opinion of Fenwick & West LLP.
23.01* -- Consent of Price Waterhouse LLP, Independent Accountants.
23.02* -- Consent of Fenwick & West LLP (included in Exhibit 5.01).
24.01* -- Power of Attorney (see page II-5).
</TABLE>
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* Filed herewith.
<PAGE> 1
EXHIBIT 4.06
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of March 31, 1998 (the "EFFECTIVE DATE") by and between HNC
SOFTWARE INC., a Delaware corporation ("HNC"), and 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) were all of the stockholders of PRACTICAL CONTROL
SYSTEMS TECHNOLOGIES, INC., an Ohio corporation ("PCS").
R E C I T A L S
A. PCS, HNC and FW1 Acquisition Corp., a Delaware corporation that is a
wholly-owned subsidiary of HNC ("SUB") and David H. Cook, a principal
stockholder of PCS, have entered into an Agreement and Plan of Reorganization
dated as of January 30, 1998 (the "PLAN"). Pursuant to the Plan, Sub is to be
merged with and into PCS in a statutory merger (the "MERGER"), with PCS to be
the surviving corporation of the Merger and thus to become a wholly-owned
subsidiary of HNC. The date on which the Merger becomes effective shall be the
Effective Date of this Agreement.
B. As a condition precedent to the consummation of the Merger, the Plan
provides that the Stockholders shall be granted certain Form S-3 registration
rights with respect to the shares of HNC Common Stock that are issued to them in
connection with the Merger pursuant to Section 2.1.2 of the Plan, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the facts stated in the foregoing
recitals and the mutual promises hereinafter set forth, the parties hereto agree
as follows:
1. REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) 1933 Act. The term "1933 ACT" means the U.S. Securities Act
of 1933, as amended, or any successor law.
(b) 1934 Act. The term "1934 ACT" means the U.S. Securities
Exchange Act of 1934, as amended, or any successor law.
(c) Registration. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
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 to the Stockholders in
the Merger pursuant to Section 2.1.2 of the Plan upon the conversion of the
outstanding shares of PCS Common Stock that are owned and held by the
Stockholders immediately prior to the Effective Time; and (ii) any shares of HNC
Common Stock that may be issued as a dividend or other distribution
<PAGE> 2
(including without limitation 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, shares of HNC Common Stock described in
clause (i) of this Section 1.1(d) or in this clause (ii); excluding in all
cases, however, from the definition of "Registrable Securities" any such shares
that are: (w) registered under the 1933 Act other than pursuant to a
registration statement filed pursuant to this Agreement; (x) sold by a person in
a transaction in which rights under this Agreement with respect to such shares
are not assigned in accordance with the terms of this Agreement; (y) sold
pursuant to a registration statement filed pursuant to this Agreement; or (z)
sold pursuant to Rule 144 promulgated under the 1933 Act or otherwise sold to
the public. Only shares of HNC Common Stock shall be Registrable Securities.
Except as provided in clause (ii) of the first sentence of this Section 1.1(d),
without limitation, the term "Registrable Securities" does not include: (i) any
shares of HNC Common Stock that were not issued in connection with the Merger;
or (ii) any shares of HNC Common Stock that are 1998 Earn-Out Shares or 1999
Earn-Out Shares issued pursuant to Section 2.1.4 of the Plan.
(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 a Form S-3 registration
statement under the 1933 Act, as such is in effect on the Effective Date, or any
successor form of registration statement 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.
(h) Rule 415. The term "RULE 415" means Rule 415 under the 1933
Act, as such Rule may be amended from time to time, or any similar or successor
rule or regulation hereafter adopted by the SEC.
(i) Terms from Plan. Capitalized terms used in this Agreement but
not defined in this Section 1 or elsewhere in this Agreement shall have the same
meanings given to such terms in the Plan.
1.2 FORM S-3 SHELF REGISTRATION.
(a) Filing and Registration Period. Within fifteen (15) business
days after the Effective Time of the Merger, and consistent with the
requirements of applicable law, HNC shall prepare and file with the SEC a
registration statement on Form S-3 for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the then outstanding Registrable
Securities (the "SHELF REGISTRATION"). HNC shall use its reasonable good faith
efforts to have such Shelf Registration declared effective as soon as
practicable after its filing and to keep the Shelf Registration continuously
effective under the 1933 Act for a continuous period of time (such period of
time being hereinafter called the "REGISTRATION PERIOD") commencing on the date
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<PAGE> 3
the Shelf Registration is declared effective under the 1933 Act by the SEC (the
"DATE OF EFFECTIVENESS") and ending on the date that is the first (1st)
anniversary of the Effective Time of the Merger. HNC shall have no duty or
obligation to keep the Shelf Registration (or any Subsequent Registration, as
defined below) effective after the expiration of the Registration Period.
Accordingly, the Stockholders acknowledge that the Registrable Securities will
not be registered under the 1933 Act beginning one (1) year after the Effective
Time of the Merger.
(b) Subsequent Registration. If the Shelf Registration is filed
with the SEC and becomes effective under the 1933 Act, and the Shelf
Registration or a Subsequent Registration (as defined below) thereafter ceases
to be effective for any reason at any time during the Registration Period, then
HNC shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall, within thirty (30)
days of such cessation of effectiveness, file an amendment to the Shelf
Registration seeking to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" registration statement
pursuant to Rule 415 covering all of the then outstanding Registrable Securities
(a "SUBSEQUENT REGISTRATION"). If a Subsequent Registration is filed, HNC shall
use its best efforts to cause the Subsequent Registration to be declared
effective as soon as practicable after such filing and to keep such registration
statement continuously effective until the end of the Registration Period.
(c) Supplements and Amendments. Subject to the provisions of
Section 1.2(g), during the Registration Period HNC shall supplement and amend
the Shelf Registration if, as and when required by the 1933 Act, the rules and
regulations promulgated thereunder or the rules, regulations or instructions
applicable to the registration form used by HNC for such Shelf Registration.
(d) Timing and Manner of Sales. Any sale of Registrable
Securities pursuant to a Shelf Registration or a Subsequent Registration under
this Section 1.2 may be made only during a "Permitted Window" (as defined in
Section 1.2(g) below). In addition, any sale of Registrable Securities pursuant
to a Shelf Registration or a Subsequent Registration under this Section 1.2 may
only be made in accordance with the method or methods of distribution of such
Registrable Securities that are described in the registration statement for the
Shelf Registration (or Subsequent Registration, as applicable) and permitted by
such form of registration statement, which methods of distribution will be
specified by the Holders in their Notice of Resale (as defined below). A Holder
may also sell Registrable Securities in a bona fide private offering if the
selling Holder provides HNC with a written opinion of counsel, satisfactory to
counsel to HNC, that such offer and sale is an exempt transaction under the 1933
Act and applicable state securities laws, complies with all requirements for
such exemption(s) and is not made with use of the prospectus for the Shelf
Registration (or Subsequent Registration, if applicable). Each Holder agrees
that it will not sell any Registrable Securities in any manner that would breach
or violate any agreement between such Holder and any third party.
(e) Trading Limits; No Underwritings. During any calendar quarter
during the Registration Period, the Holders, collectively, may not sell an
amount of Registrable Securities that, in the aggregate, exceeds two percent
(2%) of the outstanding shares of HNC
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<PAGE> 4
Common Stock (as indicated in HNC's then most recent published report) without
HNC's prior written consent. No sale of Registrable Securities under any Shelf
Registration (or Subsequent Registration) effected pursuant to this Section 1.2
may be effected pursuant to any underwritten offering without HNC's prior
written consent, which may be withheld in its sole and absolute discretion.
(f) Notice of Resale. Before any Holder may make any sale,
transfer or other disposition of any Registrable Securities under the Shelf
Registration (or a Subsequent Registration) during the Registration Period, a
Holder or Holders who own at least twenty percent (20%) of the then outstanding
Registrable Securities must first give written notice to HNC (a "NOTICE OF
RESALE") of such Holder's or Holders' present intention to so sell, transfer or
otherwise dispose of some or all of such Holder's or Holders' Registrable
Securities, and the number of Registrable Securities such Holder proposes to so
sell, transfer or otherwise dispose of. In addition, a Notice of Resale shall
contain the information required to be included therein under Section 1.2(d) and
Section 1.2(g).
(g) Permitted Window; Sale Procedures.
(i) A "PERMITTED WINDOW" is a period of thirty (30)
consecutive calendar days commencing upon HNC's written notification to the
Stockholders in response to a Notice of Resale that the prospectus contained in
the Form S-3 registration statement filed pursuant to Section 1.2 of this
Agreement is available to be used for resales of Registrable Securities pursuant
to the Shelf Registration (or a Subsequent Registration, as applicable).
(ii) Before a Holder can make a sale of any Registrable
Securities, and in order to cause a Permitted Window to commence, a Holder or
Holders who own(s) at least twenty percent (20%) of the then outstanding
Registrable Securities must first give HNC a Notice of Resale indicating such
Holder's or Holders' intention to sell at least five percent (5%) of the then
outstanding Registrable Securities pursuant to the Shelf Registration (or
Subsequent Registration, as applicable).
(iii) Upon receipt of such Notice of Resale (unless a
certificate of the President or the Chief Financial Officer of HNC is delivered
as provided in Section 1.3(b) below), HNC will give written notice to all
Holders as soon as practicable, but in no event more than seven (7) business
days after HNC's receipt of such Notice of Resale that either: (A) the
prospectus contained in the registration statement for the Shelf Registration
(or Subsequent Registration, if applicable) is current (it being acknowledged
that it may be necessary for HNC during this period to supplement the prospectus
or make an appropriate filing under the 1934 Act so as to cause the prospectus
to become current) and that (as applicable) (1) the Permitted Window will
commence on the date of such notice by HNC or (2) HNC is required under the 1933
Act and the regulations thereunder to amend the registration statement for the
Shelf Registration (or Subsequent Registration, as applicable) in order to cause
the prospectus to be current. In the event that HNC determines that an amendment
to the registration statement is necessary as provided above, it will file and
cause such amendment to become effective as soon
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<PAGE> 5
as practicable; whereupon it will notify the Holders that the Permitted Window
will then commence.
(iv) There will be no more than three (3) Permitted
Windows during the Registration Period and there will be at least a 30-day
interval between any two (2) Permitted Windows. HNC shall not be obligated to
keep the registration statement for the Shelf Registration (or any Subsequent
Registration) current during any period other than a Permitted Window. If,
pursuant to Section 1.3(b), HNC defers a Permitted Window, and the Holders
withdraw their Notice of Resale, then such withdrawal shall not count as a
Permitted Window. The Holders may elect to withdraw a request for registration
pursuant to a Notice of Resale; provided however, that if HNC has commenced
preparation of any supplement or amendment to the registration statement or any
part thereof in response to such Notice of Resale prior to receiving written
notice from the Holders' of the withdrawal of their request for registration,
then the Holders who originally gave HNC such Notice of Resale will promptly
reimburse HNC for its actual costs and expenses incurred in preparing and/or
filing such supplement and/or amendment.
(h) Trading Window Compliance. The Holders acknowledge that HNC
maintains an Insider Trading Compliance Program and an Insider Trading Policy,
as such may be amended (the "HNC TRADING POLICY") and that the HNC Trading
Policy requires that those directors, officers, employees and other persons whom
HNC determines to be "Access Personnel" or otherwise subject to the "trading
window" and pre-clearance requirements of the HNC Trading Policy (and members of
their immediate families and households) are permitted to effect trades in HNC
securities: (i) only during those specified time periods ("TRADING WINDOWS") in
which such persons are permitted to make sales, purchases or other trades in
HNC's securities under the "trading window" provisions of the HNC Trading
Policy; and (ii) only after pre-clearance of such sales, purchases or other
trades with HNC's Insider Trading Compliance Officer. If a Holder is or becomes
subject to the "trading window" and/or "pre-clearance" provisions of the HNC
Trading Policy described above, then, notwithstanding anything herein to the
contrary, such Holder may sell, transfer and dispose of Registrable Securities
only during those trading windows during which such HNC Access Personnel are
permitted to effect trades in HNC stock under the HNC Trading Policy and only
after pre-clearing such trades with HNC's Insider Trading Compliance Officer as
provided in the HNC Trading Policy.
1.3 LIMITATIONS. Notwithstanding the provisions of Section 1.2 above,
HNC shall not be obligated to effect any registration, qualification or
compliance of Registrable Securities pursuant to Section 1.2 of this Agreement,
and the Holders shall not be entitled to sell Registrable Securities pursuant to
any registration statement filed under Section 1.2 of this Agreement, as
applicable:
(a) if Form S-3 is not then available for such offering by the
Holders;
(b) if HNC shall furnish to the Holders a certificate signed by
the President or Chief Financial Officer of HNC stating that, in the good faith
judgment of the Board of Directors
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<PAGE> 6
of HNC, it would be seriously detrimental to HNC and its stockholders for such
Permitted Window to be in effect at such time, due, for example, 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
Shelf Registration (or Subsequent Registration, as applicable), 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 stockholders, in which event HNC will have the right to defer a
Permitted Window for a period of not more than sixty (60) days after receipt of
a Notice of Resale from the Holder or Holders pursuant to this Section 1.3(b);
provided, however, that HNC may so postpone a Permitted Window no more than
twice during the Registration Period; and provided further, that if HNC so
postpones a Permitted Window, then notwithstanding the last sentence of Section
1.2(a), the Registration Period of the Shelf Registration shall be extended by a
period of time equal to the period of postponement (subject to the provisions of
Sections 1.4 and 1.10 below); and provided further, that if HNC defers a
Permitted Window as provided herein and the Holders withdraw their Notice of
Resale, then such withdrawal shall not count as a Permitted Window;
(c) if HNC is acquired and its Common Stock ceases to be publicly
traded;
(d) 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; or
(e) 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).
1.4 SHARES OTHERWISE ELIGIBLE FOR RESALE. Notwithstanding anything
herein to the contrary, HNC shall not be obligated to effect or continue to keep
effective any such registration, registration statement, qualification or
compliance with respect to the 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 the Registrable
Securities then held by such Holder 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 promulgated under the 1933 Act (or successor provisions),
or otherwise;
(b) if legal counsel to HNC shall deliver a written opinion to
HNC, its transfer agent and the Holders, in form and substance reasonably
acceptable to HNC, to the effect that all the Registrable Securities then held
by such Holder 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
promulgated under the 1933 Act, or otherwise; or
(c) after expiration or termination of the Registration Period.
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<PAGE> 7
1.5 EXPENSES. HNC shall pay all expenses incurred in connection with any
registration effected by HNC pursuant to this Agreement (excluding brokers'
discounts and commissions), including without limitation all filing,
registration and qualification, printers', legal and accounting fees.
1.6 OBLIGATIONS OF HNC. Subject to Sections 1.2, 1.3 and 1.4 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) furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus (and amendments or supplements thereto), 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;
(b) 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 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 unless HNC is already so qualified or
subject to service of process, respectively, in such jurisdiction; and
(c) promptly 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
known to PCS' Chief Executive Officer 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.
1.7 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 and
plan of distribution of such Registrable Securities as shall be required to
timely effect the registration of their Registrable Securities.
1.8 DELAY OF REGISTRATION. No Holder will have any right to obtain or
seek an injunction restraining or otherwise delaying any registration that is
the subject of this Agreement as the result of any controversy that might arise
with respect to the interpretation or implementation of this Agreement.
1.9 INDEMNIFICATION.
(a) By HNC. To the extent permitted by law, HNC will indemnify,
defend and hold harmless each Holder against any losses, claims, damages, or
liabilities (joint or several) to which such Holder may become subject under the
1933 Act, the 1934 Act or other U.S. federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in
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<PAGE> 8
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 a registration statement filed by HNC pursuant to
this Agreement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto;
(ii) the omission or alleged omission to state in such
registration statement, preliminary prospectus or final prospectus or any
amendments or supplements thereto, 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 HNC of the
1933 Act, the 1934 Act, any U.S. federal or state securities law or any rule or
regulation promulgated under the 1933 Act, the 1934 Act or any U.S. federal or
state securities law in connection with the offering covered by such
registration statement;
provided however, that the indemnity agreement contained in this subsection
1.9(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 written
consent of HNC (which consent shall not be unreasonably withheld), nor shall HNC
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.
(b) By Selling Holders. To the extent permitted by law, each
selling Holder will indemnify and hold harmless HNC, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls HNC within the meaning of the 1933 Act, any underwriter and any
other Holder selling securities under such registration statement, against any
losses, claims, damages or liabilities (joint or several) to which HNC or any
such director, officer, controlling person, underwriter or other such 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 indemnify
and reimburse HNC or any such director, officer, controlling person, underwriter
or other Holder for any reasonable attorneys' fees and other expenses reasonably
incurred by HNC or any such director, officer, controlling person, underwriter
or other Holder in connection with investigating or defending any such loss,
claim, damage, liability or action, as incurred; provided, however, that the
indemnity agreement contained in this subsection 1.9(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 indemnifying Holder,
which consent shall not be unreasonably withheld; and provided further that the
total amounts payable in indemnity by a Holder under this subsection 1.9(b) in
respect of
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<PAGE> 9
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 1.9 of notice of the commencement of any action (including any
governmental action) against such indemnified party, such indemnified party
will, if a claim for indemnification or contribution in respect thereof is to be
made against any indemnifying party under this Section 1.9, deliver to the
indemnifying party a written notice of the commencement thereof and, if the
indemnifying party is HNC, HNC shall have the right and obligation to control
the defense of such action, and if HNC fails to defend such action it shall
indemnify and reimburse the Selling Holders for any reasonable attorneys' fees
and other expenses reasonably incurred by them in connection with investigating
or defending such action; provided, however, that: (i) HNC shall also have the
right, at its option, to assume and control the defense of any action with
respect to which HNC or any person entitled to be indemnified by the Selling
Holders under Section 1.9(b) is entitled to indemnification from the Selling
Holders; (ii) the indemnified party or parties shall have the right to
participate at its own expense in the defense of such action and (but only to
the extent agreed in writing with HNC and any other indemnifying party similarly
noticed) to assume the defense thereof with counsel mutually satisfactory to the
parties; and (iii) an indemnified party shall have the right to retain its own
counsel, with the fees and expenses of such counsel 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 an actual or
potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure of an
indemnified party to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to the
ability of the indemnifying party to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.9, but the omission so to deliver written notice to the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party otherwise than under this Section 1.9.
(d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agree-ments of HNC and the 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 or supplemented prospectus on file with
the SEC and effective at the time the sale of Registrable Securities under such
registration statement occurs (the "AMENDED PROSPECTUS"), such indemnity
agreement shall not inure to the benefit of any person if a copy of the Amended
Prospectus was furnished to the indemnified party and was not furnished to the
person asserting the loss, liability, claim or damage in the action giving rise
to indemnity claims under this Section 1.9, 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 makes a claim for
indemnification pursuant to this Section 1.9 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
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<PAGE> 10
indemnification may not be enforced in such case notwithstanding the fact that
this Section 1.9 provides for indemnification in such case, or (ii) contribution
under the 1933 Act may be required on the part of any such selling Holder in
circumstances for which indemnification of such selling Holder is provided under
this Section 1.9; then, and in each such case, HNC 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 thereof represented by the percentage that
the public offering price of the Registrable Securities offered and sold by such
Holder under the registration statement bears to the public offering price of
all securities offered and sold under such registration statement, and HNC and
each of the other selling Holders will each be responsible for that percentage
of the remaining portion thereof that is equal to the percentage that the public
offering price of the securities or Registrable Securities offered or sold by
HNC or such Holder, as applicable, under the registration statement bears to the
public offering price of all of the securities offered and sold under such
registration statement; 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 HNC and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement pursuant to this Agreement, and
otherwise.
1.10 DURATION AND TERMINATION OF HNC'S OBLIGATIONS. HNC will have no
obligations pursuant to Section 1.2 of this Agreement with respect to any Notice
of Resale or other request or requests for registration (or inclusion in a
registration) made by any Holder or to maintain or continue to keep effective
any registration or registration statement pursuant hereto: (a) after the
expiration or termination of the Registration Period; (b) if HNC has already
effected three (3) Permitted Windows pursuant to this Agreement; (c) with
respect to a particular Holder 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
promulgated under the 1933 Act or otherwise; or (d) if all Registrable
Securities have been registered and sold pursuant to a registration effected
pursuant to this Agreement and/or have been transferred in transactions in which
registration rights hereunder have not been assigned in accordance with this
Agreement.
1.11 ACKNOWLEDGMENT OF OTHER AGREEMENTS. The Holders acknowledge that
they have been informed by HNC that other stockholders of HNC currently hold
certain Form S-3 and other registration rights that may enable such other
stockholders to sell shares of HNC during one or more Permitted Windows or at
other times (thus potentially adversely affecting the receptivity of the market
to the sale of the Registrable Securities pursuant to a registration effected
pursuant to this Agreement) and that certain stockholders hold "piggyback
registration rights" that may allow them to participate in a registration
effected pursuant to this Agreement. If after the date of this Agreement and
prior to expiration of the Registration Period, HNC enters
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<PAGE> 11
into an agreement pursuant to which HNC grants registration rights to a third
party or parties that may be exercised during the Registration Period, then,
within thirty (30) days after it enters into such agreement, HNC will notify the
Holders of the grant of such registration rights and their general terms.
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) (if applicable) 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 null and void and without effect. Subject to the foregoing restrictions, 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 ASSIGNEES" for purposes of this Section 2: (a) a trust whose
beneficiaries consist solely of a Holder and such Holder's immediate family; (b)
the personal representative (such as an executor of a Holder's will), custodian
or conservator of a Holder, in the case of the death, bankruptcy or adjudication
of incompetency of that Holder; (c) partners of a Holder that is a partnership;
or (d) immediate family members of a Holder.
3. GENERAL PROVISIONS
3.1 NOTICES. Unless otherwise provided herein, 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 (a) when personally served or when delivered by facsimile (to
the facsimile number of the person to whom the notice is given), (b) the first
business day following the date of deposit with a nationally recognized
overnight courier service or (c) on the earlier of actual receipt or the third
(3rd) business day following the date on which the notice is deposited in the
United States mail, via first class certified or registered mail, postage
prepaid, addressed as follows:
(i) if to HNC, at 5930 Cornerstone Court West, San Diego, CA
92121-3278, Attention: President; Telecopier: (619) 452-3220; and
(ii) if to a Holder, at such Holder'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.
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<PAGE> 12
3.2 ENTIRE AGREEMENT. This Agreement constitutes and contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersede 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 who own a majority of all the Registrable Securities
then outstanding. Any amendment or waiver effected in accordance with this
Section 3.3 shall be binding upon each Holder, each permitted successor or
assignee of each Holder and HNC.
3.4 GOVERNING LAW. This Agreement will be governed by and construed
exclusively in accordance with the internal laws of the State of California,
United States of America, 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 permitted 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.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK]
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<PAGE> 13
3.9 EFFECTIVENESS OF AGREEMENT. Regardless of when signed, this
Agreement will not become effective or binding unless and until the Effective
Time of the Merger.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the Effective Date.
HNC SOFTWARE INC. THE STOCKHOLDERS
By: Name:
----------------------------- ----------------------------------
Title: By:
-------------------------- ------------------------------------
Title:
---------------------------------
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
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<PAGE> 14
EXHIBIT A TO REGISTRATION RIGHTS AGREEMENT
<TABLE>
<CAPTION>
REGISTERED NAME NUMBER OF SHARES ADDRESS
--------------- ---------------- -------
<S> <C> <C>
ARTHUR S. DEMOSS 2,252
FOUNDATION Attn: Carolyn Chadwick
Joseph Decosimo and Company, LLP, CPA's
1100 Tallan Building
Chattanooga, TN 37402-2512
DAVID H. COOK 89,157 c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Tram Phi, Esq.
THOMAS H. GLASER 1,126 c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Tram Phi, Esq.
GLASER CAPITAL PARTNERS, LTD. 2,252 c/o Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Tram Phi, Esq.
GREENSPRING VENTURES 16,896 c/o JS Investments, LLC
LIMITED PARTNERSHIP Attn: Bruce Sholk
3635 Old Court Road
Suite 207
Baltimore, MD 21208
JAYELL CAPITAL, INC. 3,379 Attn: Mike Kruke
11601 East Charter Oak Drive
Scottsdale, AZ 85259
RICHARD KNOCK 3,379 10730 Omaha Trace
Union, Kentucky 41091
RICHARD A. MAHONEY 4,505 c/o MedPlus, Inc.
8805 Governors Hill
Suite 100
Cincinnati, OH 45249
RUTHANNE MCGUIRE 563 P. O. Box 12578
Cincinnati, OH 45212
JAMES O. NEWMAN 1,126 2101 Ross Avenue
Cincinnati, OH 45212
</TABLE>
-14-
<PAGE> 15
<TABLE>
<CAPTION>
REGISTERED NAME NUMBER OF SHARES ADDRESS
--------------- ---------------- -------
<S> <C> <C>
PAUL L. NEWMAN 563 117 Raynham Road
Merion Station, PA 19066
DEL OSBURN 1,126 c/o International Transit, Inc.
5711 Richard Street, Suite 4
Jacksonville, FL 32216-5956
JERRY L. RUYAN 2,252 8730 Red Fox Lane
Cincinnati, OH 45243
</TABLE>
-15-
<PAGE> 1
EXHIBIT 5.01
April 21, 1998
HNC Software Inc.
5930 Cornerstone Court West
San Diego, California 92121-3728
Gentlemen/Ladies:
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement") to be filed by you with the Securities and
Exchange Commission (the "Commission") on or about April 23, 1998 in connection
with the registration under the Securities Act of 1933, as amended, of an
aggregate of 539,479 shares of the Common Stock (the "Common Stock") of HNC
Software Inc., a Delaware corporation (the "Company"), all of which shares are
presently issued and outstanding and will be sold by certain selling
stockholders named in the Registration Statement (the "Selling Stockholders").
In rendering this opinion, we have examined the following:
(1) your registration statement on Form S-1 (File Number 33-91932)
filed with and declared effective by the Commission on June 20,
1995, together with the Exhibits filed as a part thereof;
(2) your registration statement on Form 8-A filed with the
Commission on May 26, 1995, together with the order of
effectiveness issued by the Commission therefor on June 20,
1995;
(3) the Registration Statement, together with the Exhibits filed as
a part thereof;
(4) the Prospectus prepared in connection with the Registration
Statement;
(5) the Restated Certificate of Incorporation of the Company filed
with the Delaware Secretary of State on June 13, 1996, as
certified by the Delaware Secretary of State on June 13, 1996;
(6) the Bylaws of the Company, as amended, filed as an Exhibit with
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996 filed with the Commission on August 13,
1996;
(7) the actions by written consent of the Board of Directors of the
Company that are contained in your minute books, that you have
provided to us (including without limitation (a) the unanimous
written consent of the Company's Board of Directors dated
January 15, 1998, approving the merger agreements with Practical
Control Systems Technologies, Inc. ("PCS Agreements"), the
related merger and the issuance of the HNC shares to PCS
shareholders upon consummation of the merger, (b) the unanimous
written consent of the Company's Board of Directors dated March
20, 1998 approving the first amendment to the PCS Agreements and
(c) the unanimous written consent of the Company's Board of
Directors dated March 20, 1998, approving the merger agreements
with Financial Technology, Inc. ("FTI Agreements"), the related
merger and the issuance of the HNC shares to FTI shareholders
upon consummation of the merger);
(8) the Agreement and Plan of Reorganization dated January 30, 1998
among the Company, Practical Control Systems Technologies, Inc.,
an Ohio corporation ("PCS"), FW1 Acquisition Corp., a Delaware
corporation ("FW1") and with respect to certain portions of the
Agreement, David H. Cook, an individual and principal
stockholder of PCS;
(9) the Certificate of Merger of PCS and FW1, dated March 31, 1998,
filed with and certified by the Ohio Secretary of State on March
31, 1998 and the Certificate of Merger of FW1 and PCS, dated
March 31, 1998, filed with and certified by the Delaware
Secretary of State on March 31, 1998;
(10) the Agreement and Plan of Reorganization dated April 6, 1998
among the Company, Financial Technology, Inc., an Illinois
corporation ("FTI"), FW2 Merger Corp., a Delaware corporation
("FW2") and, with respect to certain portions of the Agreement,
all the shareholders of FTI;
(11) The Articles of Merger of FTI and FW2, dated April 6, 1998,
filed with and certified by the Illinois Secretary of State on
April 7, 1998 and the Certificate of Merger of FW2 and FTI dated
April 6, 1998, filed with and certified by the Delaware
Secretary of State on April 7, 1998;
<PAGE> 2
(12) a Management Certificate addressed to us and dated of even date
herewith executed by the Company containing the fully diluted
capitalization schedule for the Company as of April 17, 1998 and
other certain factual and other representations.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, the genuineness of all signatures on
original documents, the authenticity of all documents submitted to us as
originals, the conformity to originals of all documents submitted to us as
copies, the legal capacity of all natural persons executing the same, the lack
of any undisclosed terminations, modifications, waivers or amendments to any
documents reviewed by us and the due execution and delivery of all documents
where due execution and delivery are prerequisites to the effectiveness thereof.
As to matters of fact relevant to this opinion, we have relied solely
upon our examination of the documents referred to above and have assumed the
current accuracy and completeness of the information obtained from records
included in the documents referred to above. We have made no independent
investigation or other attempt to verify the accuracy of any of such information
or to determine the existence or non-existence of any other factual matters;
however, we are not aware of any facts that would lead us to believe that the
opinion expressed herein is not accurate.
Based upon the foregoing, it is our opinion that the 539,479 shares of
Common Stock to be sold by the Selling Stockholders pursuant to the Registration
Statement are validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us, if any, in the
Registration Statement, the Prospectus constituting a part thereof and any
amendments thereto.
This opinion speaks only as of its date and is intended solely for the
your use as an exhibit to the Registration Statement for the purpose of the
above issuance of securities and is not to be relied upon for any other purpose.
Very truly yours,
FENWICK & WEST LLP
/s/ FENWICK & WEST LLP
--------------------------------------
2
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 29, 1998, except as to Note 11 which is as of February 13, 1998,
appearing on page 36 of HNC Software Inc.'s Annual Report on Form 10-K, as
amended, for the year ended December 31, 1997. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 62 of such Annual Report on Form 10-K, as amended.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Diego, California
April 20, 1998
