<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
[_] CONFIDENTIAL, FOR USE OF THE
Check the appropriate box: COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HNC SOFTWARE INC.
----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[HNC SOFTWARE INC. LOGO]
April 15, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of HNC Software Inc. to be held at the Hyatt Regency La Jolla located at 3777
La Jolla Village Drive, San Diego, California, on Thursday, May 21, 1998, at
8:00 a.m., Pacific Time.
The matters to be acted upon at the meeting are described in detail in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
Please use this opportunity to take part in the Company's affairs by voting
on the business to come before this Meeting. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE PRIOR TO THE MEETING SO THAT YOUR
SHARES WILL BE REPRESENTED AT THE MEETING. Returning the Proxy does not
deprive you of your right to attend the Meeting and to vote your shares in
person.
We hope to see you at the Meeting.
Sincerely,
/s/ Robert L. North
Robert L. North
President and Chief Executive
Officer
<PAGE>
HNC SOFTWARE INC.
5930 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of HNC Software Inc. (the "Company") will be held at the Hyatt
Regency La Jolla located at 3777 La Jolla Village Drive, San Diego,
California, on Thursday, May 21, 1998, at 8:00 a.m., Pacific Time.
At the Meeting, you will be asked to consider and vote upon the following
matters:
1. The election of five directors of the Company, each to serve until the
next Annual Meeting of Stockholders and until his successor has been
elected and qualified or until his earlier resignation, death or
removal. The Company's Board of Directors intends to present the
following nominees for election as directors:
<TABLE>
<S> <C>
Edward K. Chandler Thomas E. Farb
Oliver D. Curme Charles H. Gaylord, Jr.
Robert L. North
</TABLE>
2. A proposal to approve an amendment to the Company's 1995 Equity
Incentive Plan increasing the number of shares of the Company's Common
Stock reserved for issuance thereunder by 1,000,000 shares.
3. A proposal to ratify the selection of Price Waterhouse LLP as the
Company's independent accountants for 1998.
4. To transact such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close
of business on March 27, 1998 are entitled to notice of and to vote at the
Meeting or any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Raymond V. Thomas
Raymond V. Thomas
Vice President, Finance and
Administration, Chief Financial
Officer and Secretary
San Diego, California
April 15, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
<PAGE>
HNC SOFTWARE INC.
5930 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
----------------
PROXY STATEMENT
----------------
April 15, 1998
The accompanying proxy is solicited on behalf of the Board of Directors of
HNC Software Inc., a Delaware corporation (the "Company" or "HNC"), for use at
the Annual Meeting of Stockholders of the Company to be held at the Hyatt
Regency La Jolla located at 3777 La Jolla Village Drive, San Diego,
California, on Thursday, May 21, 1998, at 8:00 a.m., Pacific Time (the
"Meeting"). This Proxy Statement and the accompanying form of proxy were first
mailed to stockholders on or about April 15, 1998. An annual report for the
year ended December 31, 1997 is enclosed with this Proxy Statement.
RECORD DATE; QUORUM
Only holders of record of the Company's Common Stock at the close of
business on March 27, 1998 (the "Record Date") will be entitled to vote at the
Meeting. A majority of the shares outstanding on the Record Date will
constitute a quorum for the transaction of business at the Meeting. At the
close of business on the Record Date, the Company had 24,727,776 shares of
Common Stock outstanding and entitled to vote.
VOTING RIGHTS; REQUIRED VOTE
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the Record Date. Shares of Common Stock may not be voted
cumulatively. In the event that a broker, bank, custodian, nominee or other
record holder of HNC Common Stock indicates on a proxy that it does not have
discretionary authority to vote certain shares on a particular matter (a
"broker non-vote"), then those shares will not be considered present and
entitled to vote with respect to that matter, although they will be counted in
determining whether or not a quorum is present at the Meeting.
Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Meeting and
entitled to vote on the election of directors. Proposals No. 2 and 3 require
for approval the affirmative vote of the majority of shares of Common Stock
present in person or represented by proxy at the Meeting that are voted for or
against the proposal. Abstentions and broker non-votes will not affect the
outcome of the vote. All votes will be tabulated by the inspector of elections
appointed for the Meeting who will separately tabulate, for each proposal,
affirmative and negative votes, abstentions and broker non-votes.
VOTING OF PROXIES
The proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors of HNC (the "Board") for use at the Meeting. Stockholders
are requested to complete, date and sign the accompanying proxy card and
promptly return it in the enclosed envelope or otherwise mail it to HNC. All
signed, returned proxies that are not revoked will be voted in accordance with
the instructions contained therein; however, returned signed proxies that give
no instructions as to how they should be voted on a particular proposal at the
Meeting will be counted as votes "for" such proposal (or, in the case of the
election of directors, as a vote "for" election to the Board of all the
nominees presented by the Board).
<PAGE>
In the event that sufficient votes in favor of the proposals are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies. Any such adjournment would require the affirmative vote of the
majority of the outstanding shares present in person or represented by proxy
at the Meeting.
The expenses of soliciting proxies to be voted at the Meeting will be paid
by the Company. Following the original mailing of the proxies and other
soliciting materials, the Company and/or its agents may also solicit proxies
by mail, telephone, telegraph or in person. Following the original mailing of
the proxies and other soliciting materials, the Company will request that
brokers, custodians, nominees and other record holders of the Company's Common
Stock forward copies of the proxy and other soliciting materials to persons
for whom they hold shares of Common Stock and request authority for the
exercise of proxies. In such cases, the Company, upon the request of the
record holders, will reimburse such holders for their reasonable expenses. The
Company has retained Corporate Investors Communications, an independent proxy
solicitation firm, to assist in soliciting proxies at an estimated fee of
$5,500 plus reimbursement of reasonable expenses.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to the Meeting or at the Meeting prior to the
vote pursuant to the proxy. A proxy may be revoked by a writing delivered to
the Company stating that the proxy is revoked, by a subsequent proxy that is
signed by the person who signed the earlier proxy and is presented at the
Meeting, or by attendance at the Meeting and voting in person. Please note,
however, that if a stockholder's shares are held of record by a broker, bank
or other nominee and that stockholder wishes to vote at the Meeting, the
stockholder must bring to the Meeting a letter from the broker, bank or other
nominee confirming that stockholder's beneficial ownership of the shares and
that such broker, bank or other nominee is not voting such shares.
2
<PAGE>
PROPOSAL NO. 1--ELECTION OF DIRECTORS
The Board currently consists of five directors, all of whom are nominated
for reelection at the Meeting. Each director will be elected to serve until
the next annual meeting of stockholders and until his successor is duly
elected and qualified or until such director's earlier resignation, death or
removal.
Shares represented by the accompanying proxy will be voted "for" the
election of the five nominees recommended by the Board unless the proxy is
marked in such a manner as to withhold authority so to vote. In the event that
any nominee for any reason is unable to serve or for good cause will not
serve, the proxies may be voted for such substitute nominee as the proxy
holder may determine. The Company is not aware of any nominee who will be
unable to or for good cause will not serve as a director.
DIRECTORS/NOMINEES
The names of the nominees, and certain information about them, are set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION SINCE
- ---------------- --- -------------------- --------
<S> <C> <C> <C>
Edward K. Managing Director, Graystone Venture Partners,
Chandler(1).... 40 LLC 1991
Oliver D.
Curme(2)....... 44 General Partner, Battery Ventures, L.P. 1987
Thomas F. 41 Senior Vice President and Chief Financial
Farb(1)........ Officer, Interneuron Pharmaceuticals, Inc. 1987
Charles H.
Gaylord,
Jr.(2)......... 52 Private technology investor 1995
Robert L. North. President and Chief Executive Officer, HNC
62 Software Inc. 1987
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Chandler has been a director of the Company since August 1991. Since
July 1991, he has been President of Prairie-EKC, Inc., a partner of the
general partner of PCE 1991 Limited Partnership, a venture capital firm. Since
November 1996, Mr. Chandler has also been a Managing Director of Graystone
Venture Partners, LLC, a venture capital firm. Mr. Chandler holds a Bachelor
of Arts degree in Economics from Yale University and a Masters degree in
Business Administration from Harvard University.
Mr. Curme has been a director of the Company since June 1987. Since January
1988, he has been a general partner of the general partner of Battery
Ventures, L.P., a national venture capital firm. Mr. Curme also serves as a
director of several privately held technology companies. Mr. Curme is also a
director of InfoSeek Corporation, an Internet search and navigation service
company. He holds a Bachelor of Science degree in Biochemistry from Brown
University and a Masters degree in Business Administration from Harvard
University.
Mr. Farb has been a director of the Company since November 1987. Since April
1994, he has been Senior Vice President, Chief Financial Officer and Treasurer
of Interneuron Pharmaceuticals, Inc., a publicly-held diversified
pharmaceutical company, and an officer of several of its subsidiaries. From
October 1992 to March 1994, Mr. Farb served as Vice President of Corporate
Development, Chief Financial Officer and Controller of Cytyc Corporation, a
medical device and diagnostics company. Mr. Farb also serves as a director of
Redwood Trust, Inc., a California-based publicly-held Real Estate Investment
Trust. He holds a Bachelor of Arts degree in Sociology from Harvard College.
3
<PAGE>
Mr. Gaylord has been a director of the Company since May 1995. He is
currently a private technology investor and a director of Stac Inc., a
publicly-held software company. From December 1993 to September 1994, Mr.
Gaylord served as Executive Vice President of Intuit Inc., a publicly-held
personal and small business finance software company, following Intuit's
acquisition of ChipSoft, Inc., a tax preparation software company. Prior to
that acquisition, from June 1990 to December 1993, he served first as
President and Chief Executive Officer and a director of ChipSoft and then as
Chairman of the Board of Directors and Chief Executive Officer. He holds
Bachelor of Science and Master of Science degrees in Aerospace Engineering
from Georgia Institute of Technology and a Masters degree in Business
Administration from Harvard University.
Mr. North has been President and Chief Executive Officer and a director of
the Company since June 1987. Mr. North is also a director of Peerless Systems
Corporation. Mr. North holds Bachelor of Science and Master of Science degrees
in Electrical Engineering from Stanford University.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
BOARD OF DIRECTORS. During 1997, the Board met eight times, including
telephone conference meetings, and acted by written consent three times. No
director attended fewer than 75% of the aggregate of the total number of
meetings of the Board (held during the period for which he was a director) and
the total number of meetings held by all committees of the Board on which such
director served (during the period that such director served).
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
AUDIT COMMITTEE. Messrs. Chandler and Farb are the current members of the
Audit Committee. The Audit Committee met four times during 1997. The Audit
Committee meets with the Company's independent accountants to review the
adequacy of the Company's internal control systems and financial reporting
procedures; reviews the general scope of the Company's annual audit and the
fees charged by the independent accountants; reviews and monitors the
performance of non-audit services by the Company's auditors, reviews the
fairness of any proposed transaction between the Company and any officer,
director or other affiliate of the Company (other than transactions subject to
the review of the Compensation Committee), and after such review, makes
recommendations to the full Board; and performs such further functions as may
be required by any stock exchange or over-the-counter market upon which the
Company's Common Stock may be listed.
COMPENSATION COMMITTEE. Messrs. Curme and Gaylord are the current members of
the Compensation Committee. The Compensation Committee met twice during 1997.
The Compensation Committee recommends compensation for officers and employees
of the Company, grants (or delegates authority to grant) options and stock
awards under the Company's employee benefit plans, and reviews and recommends
adoption of and amendments to stock option and employee benefit plans.
DIRECTOR COMPENSATION
The Company reimburses Board members for reasonable expenses associated with
their attendance at Board meetings. With the exception of Thomas F. Farb, who
receives a fee from the Company of $1,000 for each Board meeting he attends,
none of the members of the Board receives a fee for attending Board meetings.
Members of the Board who are not employees, consultants or independent
contractors of the Company, or any parent, subsidiary or affiliate of the
Company, are eligible to participate in the Company's 1995 Directors Stock
Option Plan (the "Directors Plan"). During 1997, Messrs. Chandler, Curme, Farb
and Gaylord were each granted an option pursuant to the Directors Plan to
purchase 10,000 shares of the Company's Common Stock at an exercise price of
$39.875 per share.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION
OF EACH OF THE NOMINATED DIRECTORS.
4
<PAGE>
PROPOSAL NO. 2--APPROVAL OF AMENDMENT TO THE 1995 EQUITY INCENTIVE PLAN
In March 1998, the Board adopted, subject to stockholder approval, an
amendment to HNC's 1995 Equity Incentive Plan (the "Incentive Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
by 1,000,000 shares. The stockholders of HNC are now being asked to approve
such amendment.
The availability of additional stock options will facilitate HNC's expansion
of its employee base. In particular, HNC's recent acquisitions of CompReview,
Practical Control Systems Technologies, Inc. and Financial Technology, Inc.
have substantially increased the number of employees who are eligible to
receive options under the Incentive Plan. Management believes that this
amendment to the Incentive Plan is in the best interests of HNC because of the
continuing need to provide options in order to attract and retain highly
qualified employees and remain competitive in the software industry, which is
currently providing employees with significant opportunities for employment
with HNC's competitors and other software companies.
Below is a summary of the principal provisions of the Incentive Plan, which
summary is qualified in its entirety by reference to the full text of the
Incentive Plan.
SUMMARY OF THE 1995 EQUITY INCENTIVE PLAN
Incentive Plan History. The Board adopted the Incentive Plan in May 1995,
and it was approved by the stockholders in May 1995. The Incentive Plan was
amended by the Board and stockholders in 1996 and again in 1997 to increase
the number of shares available for grant. The purpose of the Incentive Plan is
to offer employees and other eligible persons an opportunity to participate in
HNC's future performance through awards of stock options, restricted stock and
stock bonuses. From the inception of the Incentive Plan through December 31,
1997, options to purchase an aggregate of 3,877,764 shares of HNC Common Stock
were granted under the Incentive Plan, of which options to purchase 407,502
shares were cancelled. Options were granted under the Incentive Plan to the
Named Executive Officers (as defined in "Executive Compensation"), as follows:
Robert L. North, 140,000 shares; Lee E. Martin, 20,000 shares; Raymond V.
Thomas, 40,000 shares; and Todd W. Gutschow, 60,000 shares. During the same
period, the Company's current executive officers as a group (six persons) were
granted options under the Incentive Plan to purchase an aggregate of 470,000
shares, and options to purchase an aggregate of 3,407,764 shares were granted
to employees other than current executive officers. No options have been
granted under the Incentive Plan to any director who is not an executive
officer of the Company or to any associate of any executive officer or
director of the Company, and no person received 5% or more of the total
options granted under the Incentive Plan from the inception of the Incentive
Plan through December 31, 1997.
Number of Shares Subject to the Incentive Plan. The stock subject to
issuance under the Incentive Plan consists of shares of HNC's authorized but
unissued Common Stock. The number of shares of Common Stock currently reserved
for issuance under the Incentive Plan is the sum of (i) 3,550,000 shares (the
"Base Shares") plus (ii) any shares that were unissued and not subject to then
outstanding options under HNC's 1987 Stock Option Plan (the "Prior Plan") on
the effective date of the Incentive Plan, and any shares issuable upon
exercise of options granted under the Prior Plan that expire or become
unexercisable thereafter for any reason without having been exercised in full
(collectively, "Available Prior Plan Shares"). Available Prior Plan Shares are
no longer available for distribution under the Prior Plan but are available
for distribution under the Incentive Plan. If any option granted pursuant to
the Incentive Plan expires or terminates for any reason without being
exercised in whole or in part, then the shares released from such option will
again become available for grant and purchase under the Incentive Plan. This
number of shares is subject to proportional adjustment to reflect stock
splits, stock dividends and other similar events. This Proposal No. 2 will
increase the number of Base Shares by 1,000,000 from 3,550,000 to 4,550,000
shares.
Eligibility. Employees, officers, directors, consultants, independent
contractors and advisors of HNC (and of any of its subsidiaries and
affiliates) are eligible to receive awards under the Incentive Plan (the
"Participants"). No Participant is eligible to receive more than 500,000
shares of Common Stock in any calendar year under the Incentive Plan, other
than new employees of HNC (including directors and officers who are also new
employees) who are eligible to receive up to a maximum of 700,000 shares of
Common Stock in
5
<PAGE>
the calendar year in which they commence their employment with HNC. As of
December 31, 1997, approximately 703 persons were eligible to participate in
the Incentive Plan, 134,815 shares had been issued upon exercise of options
granted under the Incentive Plan and 3,335,447 shares were subject to
outstanding options. As of that date, 317,576 shares were available for future
option grants, after taking into account all Available Prior Plan Shares. In
addition, an aggregate of 1,390,000 shares of Common Stock have been reserved
for issuance under the Company's 1998 Stock Option Plan and the Practical
Control Systems Technologies, Inc. ("PCS") 1998 Stock Option Plan (which was
assumed by the Company in connection with the acquisition of PCS). A total of
507,750 shares are currently available for future grant under these two plans.
The closing price of HNC Common Stock on the Nasdaq National Market was
$37.375 per share on March 27, 1998, the Record Date.
Administration. The Incentive Plan is administered by the Compensation
Committee of the Board (the "Committee"), the members of which are appointed
by the Board. The Committee currently consists of Oliver D. Curme and Charles
H. Gaylord, Jr., both of whom are "non-employee directors," as defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and "outside directors," as defined pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
Subject to the terms of the Incentive Plan, the Committee determines the
persons who are to receive awards, the number of shares subject to each award
and the terms and conditions of awards. The Committee has authorized Robert L.
North, HNC's President and Chief Executive Officer, to make grants to non-
officer employees of options to purchase specified ranges of shares based on
the position and grade level for the applicable employee pursuant to
guidelines established by the Committee. The Committee also has the authority
to construe and interpret any of the provisions of the Incentive Plan or any
awards granted thereunder.
Stock Options. The Incentive Plan permits the granting of options that are
intended to qualify either as Incentive Stock Options ("ISOs") or Nonqualified
Stock Options ("NQSOs"). ISOs may be granted only to employees (including
officers and directors who are also employees) of HNC or any parent or
subsidiary of HNC. The option exercise price for each option share must be no
less than 100% of the "fair market value" (as defined in the Incentive Plan)
of a share of HNC Common Stock at the time the option is granted. In the case
of an ISO granted to a 10% stockholder, the exercise price for each ISO share
must be no less than 110% of the fair market value of a share of Common Stock
at the time the ISO is granted.
The exercise price of options granted under the Incentive Plan may be paid
as approved by the Committee at the time of grant: (1) in cash (by check); (2)
by cancellation of indebtedness of HNC to the Participant; (3) by surrender of
shares of HNC Common Stock owned by the Participant for at least six months
and having a fair market value on the date of surrender equal to the aggregate
exercise price of the option; (4) by tender of a full recourse promissory
note; (5) by waiver of compensation due to or accrued by the Participant for
services rendered; (6) by a "same-day sale" commitment from the Participant
and a National Association of Securities Dealers, Inc. ("NASD") broker; (7) by
a "margin" commitment from the Participant and a NASD broker; or (8) by any
combination of the foregoing.
Restricted Stock Awards. The Committee may grant Participants restricted
stock awards to purchase stock either in addition to, or in tandem with, other
awards under the Incentive Plan, under such terms, conditions and restrictions
as the Committee may determine. The purchase price for such awards must be no
less than 100% of the fair market value of HNC Common Stock on the date of the
award and can be paid for in any of the forms of consideration listed in items
(1) through (5) in "Stock Options" above, as are approved by the Committee at
the time of grant. To date, HNC has not granted any restricted stock awards
under the Incentive Plan.
Stock Bonus Awards. The Committee may grant Participants stock bonus awards
either in addition to, or in tandem with, other awards under the Incentive
Plan, under such terms, conditions and restrictions as the Committee may
determine. To date, HNC has not granted any stock bonus awards under the
Incentive Plan and does not intend to grant stock bonus awards from shares now
reserved or now proposed to be reserved under the Incentive Plan.
Mergers, Consolidations, Change of Control. In the event of a merger,
consolidation, dissolution or liquidation of HNC, the sale of substantially
all of the assets of HNC or any other similar corporate transaction,
6
<PAGE>
the successor corporation may assume, replace or substitute equivalent awards
in exchange for those granted under the Incentive Plan or provide
substantially similar consideration, shares or other property as was provided
to stockholders of HNC in such transaction (after taking into account
provisions of the awards). In the event that the successor corporation does
not assume or substitute the options awarded, such options will expire upon
the closing of such transaction at such time and upon such conditions as the
Board determines.
Amendment of the Incentive Plan. The Board or the Committee may at any time
terminate or amend the Incentive Plan, including amending any form of award
agreement or instrument to be executed pursuant to the Incentive Plan.
However, the Board and the Committee may not amend the Incentive Plan in any
manner that requires stockholder approval pursuant to the Code or the
regulations promulgated thereunder, or pursuant to the Exchange Act or Rule
16b-3 (or its successor) promulgated thereunder.
Term of the Incentive Plan. Unless terminated earlier as provided in the
Incentive Plan, the Incentive Plan will expire in May 2005, ten years after
the Board adopted the Incentive Plan.
Federal Income Tax Information.
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE FEDERAL INCOME TAX CONSEQUENCES TO HNC AND PARTICIPANTS UNDER THE
INCENTIVE PLAN. THE FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE AND
LOCAL TAX CONSEQUENCES FOR ANY PARTICIPANT WILL DEPEND UPON HIS OR HER
INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPANT HAS BEEN AND IS ENCOURAGED TO SEEK
THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE INCENTIVE PLAN.
Incentive Stock Options. A Participant will recognize no income upon grant
of an ISO and will incur no tax on its exercise (unless the Participant is
subject to the alternative minimum tax ("AMT") as described below). If the
Participant holds shares acquired upon exercise of an ISO (the "ISO Shares")
for more than one year after the date the option was exercised and for more
than two years after the date the option was granted, then the Participant
generally will realize capital gain or loss (rather than ordinary income or
loss) upon disposition of the ISO Shares. This gain or loss will be equal to
the difference between the amount realized upon such disposition and the
amount paid for the ISO Shares.
If the Participant disposes of ISO Shares prior to the expiration of either
of the above-described required holding periods (a "disqualifying
disposition"), then any gain realized upon such disposition, up to the
difference between the fair market value of the ISO Shares on the date of
exercise (or, if less, the amount realized on a sale of such shares) and the
option exercise price, will be treated as ordinary income to the Participant.
Any additional gain will be capital gain, taxed at a rate that depends upon
the amount of time the ISO Shares were held by the Participant.
Alternative Minimum Tax. The difference between the fair market value of the
ISO Shares on the date of exercise and the exercise price is an adjustment to
income for purposes of AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular income tax) is 26% of the portion of an individual
taxpayer's alternative minimum taxable income that would normally be taxed as
ordinary income (28% of that portion in the case of alternative minimum
taxable income in excess of $175,000). A maximum 20% AMT rate applies to the
portion of alternative minimum taxable income that would normally be taxed as
net capital gain. Alternative minimum taxable income is determined by
adjusting regular taxable income for certain items, increasing that income by
certain tax preference items (including the difference between the fair market
value of the ISO Shares on the date of exercise and the exercise price), and
reducing this amount by the applicable exemption amount ($45,000 in case of a
joint return, subject to reduction under certain circumstances). If a
disqualifying disposition of the ISO Shares occurs in the same calendar year
as exercise of the ISO, there is no AMT adjustment with respect to those ISO
Shares. Also, upon a sale of ISO Shares that is not a disqualifying
disposition, alternative minimum taxable income is reduced in the year of sale
by the excess of the fair market value of the ISO Shares at exercise over the
amount paid for the ISO Shares.
7
<PAGE>
Nonqualified Stock Options. A Participant will not recognize any taxable
income at the time an NQSO is granted. However, upon exercise of an NQSO, the
Participant must include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the Participant's exercise price. The included amount must be treated as
ordinary income by the Participant and may be subject to withholding by HNC
(either by payment in cash or withholding out of the Participant's salary).
Upon resale of the shares by the Participant, any subsequent appreciation or
depreciation in the value of the shares will be treated as capital gain or
loss.
Restricted Stock and Stock Bonus Awards. Restricted stock and stock bonus
awards will generally be subject to tax at the time of receipt, unless there
are restrictions that enable the Participant to defer tax. At the time the tax
is incurred, the tax treatment will be similar to that discussed above for
NQSOs.
Maximum Tax Rates. The maximum tax rate applicable to ordinary income is
39.6%. Long-term capital gain will be taxed at a maximum of 20%. For this
purpose, in order to receive long-term capital gain treatment, the shares must
be held for more than eighteen months. Mid-term capital gain will be taxed at
a maximum rate of 28%. For this purpose, in order to receive mid-term capital
gain treatment, the shares must be held for more than one year and not more
than eighteen months. Capital gains may be offset by capital losses and up to
$3,000 of capital losses may be offset annually against ordinary income.
Tax Treatment of HNC. HNC generally will be entitled to a deduction in
connection with the exercise of an NQSO by a Participant or the receipt of
restricted stock or stock bonuses by a Participant to the extent that the
Participant recognizes ordinary income and HNC withholds tax. HNC will be
entitled to a deduction in connection with the disposition of ISO Shares only
to the extent that the Participant recognizes ordinary income on a
disqualifying disposition of the ISO Shares.
ERISA. The Incentive Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") and is not qualified
under Section 401(a) of the Code.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT
TO THE 1995 EQUITY INCENTIVE PLAN.
PROPOSAL NO. 3--RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Company has selected Price Waterhouse LLP as its independent accountants
to perform the audit of the Company's financial statements for the fiscal year
ending December 31, 1998, and the stockholders are being asked to ratify such
selection. Price Waterhouse LLP has been engaged as the Company's independent
accountants since the year ended December 31, 1989. Representatives of Price
Waterhouse LLP will be present at the Meeting, will have the opportunity to
make a statement at the Meeting if they desire to do so, and will be available
to respond to appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF PRICE WATERHOUSE LLP.
NEW PLAN BENEFITS
The amounts of future option grants under the Incentive Plan are not
determinable because, under the terms of the Incentive Plan, such grants are
made in the discretion of the Committee or its designees. Future option
exercise prices are not determinable because they are based upon the fair
market value of HNC Common Stock on the date of grant.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of HNC Common Stock as of March 27, 1998 by: (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the Company's Common Stock; (ii) each director and nominee; (iii) each Named
Executive Officer set forth in the Summary Compensation Table below; and (iv)
all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT(1)
- ------------------------ ----------------------- ----------
<S> <C> <C>
The Capital Group Companies, Inc.(2)........ 2,562,000 10.4%
Essex Investment Management Company(3)...... 1,544,110 6.2
Robert L. Kaaren(4)......................... 1,250,280 5.1
Michael E. Munayyer, Trustee of the Michael
Munayyer Trust
dated August 11, 1995(5)................... 1,250,280 5.1
Robert L. North(6).......................... 391,694 1.6
Todd W. Gutschow(7)......................... 272,023 1.1
Edward K. Chandler(8)....................... 95,284 *
Raymond V. Thomas(9)........................ 85,083 *
Michael A. Thiemann(10)..................... 50,167 *
Charles H. Gaylord, Jr.(11)................. 40,000 *
Lee E. Martin(12)........................... 20,370 *
Oliver D. Curme(13)......................... 11,586 *
Thomas F. Farb(14).......................... 2,500 *
All executive officers and directors as a
group (10 persons)(15)..................... 975,837 3.9%
</TABLE>
- --------
* Less than 1%
(1) Based upon a total of 24,727,776 shares of Common Stock outstanding as of
March 27, 1998. Unless otherwise indicated below, the persons and
entities named in the table have sole voting and sole investment power
with respect to all shares beneficially owned, subject to community
property laws where applicable. Shares of Common Stock subject to options
that are currently exercisable or exercisable within 60 days of March 27,
1998 are deemed to be outstanding and to be beneficially owned by the
person holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Based upon a Schedule 13G dated March 9, 1998. The Capital Group
Companies, Inc. ("The Capital Group") is the parent holding company of a
group of investment management companies that hold the shares. The
Capital Group reported sole dispositive power with respect to 2,562,000
shares of Common Stock and sole voting power with respect to 230,000
shares of Common Stock. The address of the Capital Group is 333 South
Hope Street, Los Angeles, California 90071.
(3) Based upon a Schedule 13G dated January 16, 1998. Essex Investment
Management Company reported sole dispositive power with respect to
1,544,110 shares of Common Stock and sole voting power as to 1,239,360
shares of Common Stock. The address of Essex Investment Management
Company is 125 High Street, Boston, Massachusetts 02110.
(4) Dr. Kaaren is the Chairman and Chief Executive Officer of CompReview,
Inc. ("CompReview"), a wholly-owned subsidiary of the Company. The
address of Dr. Kaaren is c/o CompReview, Inc., 3200 Park Center Drive,
5th Floor, Costa Mesa, California 92626.
(5) Mr. Munayyer is the Chief Technical Officer of CompReview. The address of
Mr. Munayyer and the Michael Munayyer Trust is c/o CompReview, Inc., 3200
Park Center Drive, 5th Floor, Costa Mesa, California 92626.
9
<PAGE>
(6) Includes 29,303 shares of Common Stock held of record by the Robert L.
North & Dixie L. North Revocable Inter Vivos Trust, of which Mr. North is
a trustee. Also includes 314,557 shares of Common Stock subject to
options exercisable within 60 days of March 27, 1998. Mr. North is the
President and Chief Executive Officer and a director of HNC.
(7) Includes 239,359 shares of Common Stock held by the Todd and Mari
Gutschow Family Trust, of which Mr. Gutschow is a trustee, and 32,664
shares of Common Stock subject to options exercisable within 60 days of
March 27, 1998. Mr. Gutschow is Vice President, Technology Development of
HNC.
(8) Includes 20,000 shares of Common Stock subject to options exercisable
within 60 days of March 27, 1998. Mr. Chandler is a director of HNC.
(9) Represents 85,083 shares of Common Stock subject to options exercisable
within 60 days of March 27, 1998. Mr. Thomas is Vice President, Finance
and Administration, Chief Financial Officer and Secretary of HNC.
(10) Includes 44,167 shares of Common Stock held by the Thiemann Family Trust
dated July 1, 1996, of which Mr. Thiemann is a trustee. Mr. Thiemann is
the President of Aptex Software Inc., a partially owned subsidiary of
HNC.
(11) Represents 20,000 shares of Common Stock held of record by the Gaylord
Family Trust UTD 12/31/93, Charles H. Gaylord, Jr. and Lynn M. Gaylord
trustees, and 20,000 shares of Common Stock subject to options
exercisable within 60 days of March 27, 1998. Mr. Gaylord is a director
of HNC.
(12) Includes 8,405 shares of Common Stock subject to options exercisable
within 60 days of March 27, 1998. Mr. Martin was Vice President until
February 1998.
(13) Includes 2,500 shares of Common Stock subject to options exercisable
within 60 days of March 27, 1998. Mr. Curme is a director of HNC.
(14) Represents 2,500 shares of Common Stock subject to options exercisable
within 60 days of March 27, 1998. Mr. Farb is a director of HNC.
(15) Includes 504,804 shares of Common Stock subject to options exercisable
within 60 days of March 27, 1998, including the options described in
footnotes (6) through (11), (13) and (14).
10
<PAGE>
EXECUTIVE OFFICERS
The names, ages and positions of the Company's executive officers as of March
27, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert L. North............. 62 President and Chief Executive Officer
Raymond V. Thomas........... 55 Vice President, Finance and Administration, Chief
Financial Officer and Secretary
John Mutch.................. 41 Vice President, Marketing
Todd W. Gutschow............ 37 Vice President, Technology Development
Michael A. Thiemann......... 41 President, Aptex Software Inc.
John Buchanan............... 41 President, Retek Information Systems, Inc.
</TABLE>
Mr. North has been President and Chief Executive Officer and a director of
the Company since June 1987. Mr. North is also a director of Peerless Systems
Corporation. Mr. North holds Bachelor of Science and Master of Science degrees
in Electrical Engineering from Stanford University.
Mr. Thomas has been Vice President, Finance and Administration and Chief
Financial Officer of the Company since February 1995 and Secretary of the
Company since May 1995. From May 1993 to February 1995, he served as Executive
Vice President and Chief Financial Officer of Golden Systems, Inc., a power
supply manufacturer, and from September 1994 to February 1995 he also served
as Chief Operating Officer. From April 1991 to May 1993, Mr. Thomas served as
Senior Vice President of Finance and Administration and Chief Financial
Officer of Vitesse Semiconductor Corporation, a semiconductor manufacturer.
Mr. Thomas holds a Bachelor of Science degree in Industrial Management from
Purdue University and attended the Wharton School of Business at the
University of Pennsylvania.
Mr. Mutch joined the Company in July 1997 as Vice President, Marketing. In
April 1998, he became the Company's Senior Vice President, Corporate Marketing
and Business Development. He was a founder of MVenture Holdings, Inc., a
private equity fund that invests in start-up technology companies, and served
as a General Partner from June 1994 to July 1997. From December 1986 to June
1994, Mr. Mutch held a variety of positions with Microsoft Corporation,
including Director of Organization Marketing. He holds a Bachelor of Science
degree in Applied Economics from Cornell University and a Masters degree in
Business Administration from the University of Chicago.
Mr. Gutschow is a co-founder of the Company and has been Vice President,
Technology Development of the Company since October 1990. He was also
Secretary of the Company from January 1993 to May 1995. Mr. Gutschow holds a
Bachelor of Arts degree in Physics from Harvard University and attended the
University of California at San Diego.
Mr. Thiemann joined the Company in June 1989. He ran the Company' Aptex text
analysis division from January 1996 to September 1996 and in September 1996
was named President and Chief Executive Officer of Aptex Software Inc. From
May 1993 to January 1996, he served as Executive Vice President, Sales and
Marketing of the Company. He also served as Executive Vice President and
General Manager, Decision Systems of the Company from January 1993 to May
1993, Vice President and General Manager, Decision Systems of the Company from
February 1990 to January 1993 and Vice President, New Business Development of
the Company from June 1989 to February 1990. Mr. Thiemann holds a Bachelor of
Arts degree in Art, a Bachelor of Science degree in Electrical Engineering and
a Masters degree in Electrical Engineering from Stanford University and a
Masters degree in Business Administration from Harvard University.
Mr. Buchanan has been President of Retek Information Systems, Inc. ("Retek")
since February 1993. In November 1996, Retek became a wholly-owned subsidiary
of HNC. Mr. Buchanan holds a Bachelor of Commerce degree in Finance and
Computer Systems from the University of Otago.
11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities to HNC and its subsidiaries during each of
1995, 1996 and 1997 to (i) HNC's Chief Executive Officer and (ii) HNC's four
other most highly compensated executive officers who were serving as executive
officers at the end of 1997 (the "Named Executive Officers"). This information
includes the dollar values of base salaries and bonus awards, the number of
shares subject to stock options granted and certain other compensation, if
any, whether paid or deferred. HNC does not grant stock appreciation rights
and has no long-term compensation benefits other than stock options.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS
------------------ ---- -------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. North......... 1997 $196,008 $85,700 $4,763 70,000
President and Chief
Executive 1996 175,000 85,700 4,472 70,000
Officer 1995 174,428 64,100 1,797 100,000
Raymond V. Thomas....... 1997 129,584 42,400 729 20,000
Vice President, Finance
and 1996 125,004 42,400 438 20,000
Administration, Chief
Financial 1995 104,389 46,750 87,750(3) 110,000
Officer and Secretary
Todd W. Gutschow........ 1997 115,415 20,565 1,336 20,000
Vice President,
Technology 1996 105,415 19,875 1,323 40,000
Development 1995 115,332 20,167 62 --
Michael A. Thiemann..... 1997 151,591 114,153(2) 1,919 --
President, Aptex
Software Inc. 1996 146,667 109,170(2) 1,799 --
1995 111,351 202,823(2) 201 --
Lee E. Martin........... 1997 79,583 385,739(2) 264 10,000
Vice President, North
American Sales 1996 75,000 251,966(2) 205 10,000
1995 74,719 236,026(2) 200 --
</TABLE>
- --------
(1) Unless otherwise indicated below, represents premiums for group term life
and disability insurance.
(2) Includes commissions.
(3) Represents premiums for group term life insurance and disability insurance
in the amount of $360 and reimbursements for relocation expenses in the
amount of $87,390.
12
<PAGE>
The following table sets forth further information regarding option grants
pursuant to the Incentive Plan during 1997 to each of the Named Executive
Officers. In accordance with the rules of the Securities and Exchange
Commission (the "SEC"), the table sets forth the hypothetical gains or "option
spreads" that would exist for the options at the end of their respective ten-
year terms. These gains are based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date the option was granted to the
end of the option term.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENTAGE OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ------------------------
NAME GRANTED(1) 1997 PER SHARE DATE 5% 10%
---- ---------- ------------- -------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. North......... 70,000 3.3% $31.25 1/24/07 $ 1,375,707 $ 3,486,312
Raymond V. Thomas....... 20,000 1.0 31.25 1/24/07 393,059 996,089
Todd W. Gutschow........ 20,000 1.0 31.25 1/24/07 393,059 996,089
Michael A. Thiemann..... -- -- -- -- -- --
Lee E. Martin........... 10,000 -- 31.25 1/24/07 196,529 498,045
</TABLE>
- --------
(1) The options shown in the table were granted at fair market value, are
incentive stock options (to the extent permitted under the Code) and will
expire ten years from the date of grant, subject to earlier termination
upon termination of the optionee's employment. In February 1998, certain
of the Named Executive Officers were granted additional options to
purchase shares of Common Stock as follows: Robert L. North, 50,000
shares; Raymond V. Thomas, 20,000 shares; Todd W. Gutschow, 70,000 shares
and John Buchanan, 30,000 shares. Also in February 1998, John Mutch was
granted an option to purchase 45,000 shares. All options were granted at
fair market value and will expire ten years from the date of grant,
subject to earlier termination upon termination of the optionee's
employment.
(2) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do
not represent HNC's estimate or projection of future Common Stock prices
or values.
The following table sets forth certain information concerning the exercise
of options by each of the Named Executive Officers during 1997, including the
aggregate amount of gains on the date of exercise. In addition, the table
includes the number of shares covered by both exercisable and unexercisable
stock options as of December 31, 1997. Also reported are values of "in-the-
money" options that represent the positive spread between the respective
exercise prices of outstanding stock options and $43.00 per share, which was
the closing price of HNC's Common Stock as reported on the Nasdaq National
Market on December 31, 1997, the last day of trading for 1997.
AGGREGATE OPTION EXERCISES IN 1997 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END(1) AT YEAR-END(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(1) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. North......... 97,834 $2,834,215 280,398 154,602 $11,465,135 $2,919,615
Raymond V. Thomas....... 3,000 72,750 70,916 72,084 2,836,640 1,870,860
Todd W. Gutschow........ -- -- 23,497 41,667 544,095 616,881
Michael A. Thiemann..... 4,167 103,445 -- -- -- --
Lee E. Martin........... 1,476 49,372 7,741 19,688 258,279 349,188
</TABLE>
- --------
(1) "Value Realized" represents the fair market value of the shares of Common
Stock underlying the option on the date of exercise less the aggregate
exercise price of the option.
(2) These values, unlike the amounts set forth in the column entitled "Value
Realized", have not been, and may never be, realized and are based on the
positive spread between the respective exercise prices of outstanding
options and the closing price of HNC's Common Stock on December 31, 1997,
the last day of trading for 1997.
13
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Curme and Gaylord, neither of
whom has any interlocking relationships as defined by the SEC.
REPORT ON EXECUTIVE COMPENSATION
Final decisions regarding executive compensation and stock option grants to
executives are made by the Compensation Committee of the Board (the
"Committee"). The Committee is composed of two independent non-employee
directors, neither of whom has any interlocking relationships as defined by
the SEC. Although Mr. North and Mr. Thomas attend some of the meetings of the
Committee, they do not participate in deliberations that relate to their own
compensation.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company for all employees of the Company. The
Committee typically reviews base salary levels and target bonuses for the
Chief Executive Officer ("CEO") and other executive officers and employees of
the Company at or about the beginning of each year. The Committee administers
the Company's incentive and equity plans, including the Incentive Plan and the
Stock Purchase Plan.
The Committee's philosophy in compensating executive officers, including the
CEO, is to relate compensation directly to corporate performance. Thus, the
Company's compensation policy, which applies to executive officers and other
key employees of the Company, relates a portion of each individual's total
compensation to the Company's revenue and profit objectives as well as
individual objectives set forth at the beginning of the year. Consistent with
this policy, a designated portion of the compensation of the executive
officers of the Company is contingent on corporate performance and, in the
case of certain executive officers, is also based on the individual officer's
performance, as determined by the Committee in its discretion. Long-term
equity incentives for executive officers are effected through the granting of
stock options under the Incentive Plan. Stock options have value for the
executive only if the price of the Company's stock increases above the fair
market value on the grant date and the executive remains in the Company's
employ for the period required for the options to vest.
The base salaries, incentive compensation and stock option grants of the
executive officers are determined in part by the Committee reviewing the
American Electronics Association Executive Compensation Survey for Electronics
and Information Technology Companies (the "AEA Survey"), the Radford Executive
Compensation Report and certain other surveys of prevailing compensation
practices among high-technology companies with whom the Company competes for
executive talent, and by their evaluating such information in connection with
the Company's corporate goals. These surveys are nationally known for their
data bases of high technology company compensation practices. The AEA Survey
itself includes over 490 high technology companies. To this end, the Committee
attempts to compare the compensation of the Company's executive officers with
comparable survey positions and the compensation practices of comparable
companies to determine base salary, target bonuses and target total cash
compensation. In addition to their base salaries, the Company's executive
officers, including the CEO, are each eligible to receive cash bonuses and to
participate in the Incentive Plan.
In preparing the performance graph for this Proxy Statement, the Company
used the H&Q Technology Index ("H&Q Index") as its published line of business
index. The companies in the AEA Survey are substantially similar to the
companies contained in the H&Q Index. Nevertheless, certain of the companies
in the H&Q Index were not included in the AEA Survey and were not included in
the Company's other salary surveys because they were not determined to be
competitive with the Company for executive talent or because compensation
information was not available.
This competitive market information is reviewed by the Committee with the
Chief Executive Officer for each executive level position and within the
Committee as to the Chief Executive Officer. In addition, each
14
<PAGE>
executive officer's performance for the last year and objectives for the
subsequent year are viewed, together with such executive officer's
responsibility level and the Company's fiscal performance versus objectives
and potential performance targets for the subsequent year.
1997 EXECUTIVE COMPENSATION
BASE COMPENSATION. The foregoing information was presented to the Committee
in February 1997. The Committee reviewed the recommendations and performance
and market data outlined above and established a base salary level to be
effective February 1, 1997 for each executive officer, including the CEO.
INCENTIVE COMPENSATION. Cash bonuses are awarded to the extent that an
executive officer has achieved predetermined individual objectives and the
Company has met predetermined revenue and profit objectives set by the Board
at the beginning of the year. The CEO's subjective judgment of executives'
performance (other than his own) is taken into account in determining whether
those objectives have been satisfied. Cash bonuses to individuals are not
limited with the exception of the profit factor of such bonus, which is
limited to twice the amount of the relevant individual's target for such
profit factor. Performance is measured at the end of the year. For 1997, the
bases of target incentive compensation for executive officers were Company
revenues and profits, ranging from approximately 45% to 70% of an individual's
target incentive compensation, with the balance, if any, based on individual
objectives, depending on the individual executive. The targets and actual
bonus payments are determined by the Committee, in its discretion.
STOCK OPTIONS. Stock options are an essential element of the Company's
executive compensation package. The Committee believes that equity-based
compensation in the form of stock options links the interests of management
and stockholders by focusing employees and management on increasing
stockholder value. The actual value of such equity-based compensation depends
entirely on appreciation of the Company's stock. Approximately 100% of the
Company's full-time employees participate in the Incentive Plan.
In 1997, stock options were granted to certain executive officers to aid in
the retention of executive officers and to align their interests with those of
the stockholders. See "Executive Compensation--Option Grants in 1997." Stock
options typically have been granted to executive officers when the executive
first joins the Company, in connection with a significant change in
responsibilities and, occasionally, to achieve equity within a peer group. The
Committee may, however, grant additional stock options to executives for other
reasons. The number of shares subject to each stock option granted is within
the discretion of the Committee and is based on anticipated future
contribution and ability to impact corporate and/or business unit results,
past performance or consistency within the executive's peer group. In the
discretion of the Committee, executive officers may also be granted stock
options to provide greater incentives to continue their employment with the
Company and to strive to increase the value of the Company's Common Stock. In
1997, as part of an annual review of the stock options held by executive
officers and managers, the Committee considered these factors, as well as the
number of options held by such executive officers as of the date of grant that
remained unvested. The stock options generally become exercisable over a four-
year period and are granted at a price that is equal to the fair market value
of the Company's Common Stock on the date of grant.
For 1998, the Committee will be considering whether to grant future options
under the Incentive Plan to executive officers based on the factors described
above, with particular attention to the Company-wide management objectives and
the executive officers' success in attaining specific individual financial and
operational objectives established or to be established for 1998, to the
Company's revenue and profit expectations and to the number of options
currently held by the executive officers that remain unvested.
COMPANY PERFORMANCE AND CEO COMPENSATION. In 1997, Mr. North's base salary
increased to $195,000. Based upon the criteria set forth under the discussion
of Incentive Compensation above, the Committee awarded Mr. North incentive
compensation of $85,700 for 1997. This bonus figure represents approximately
83% of the target bonus for Mr. North for 1997. All of Mr. North's incentive
compensation was based upon obtaining and surpassing corporate operating
revenue and profit objectives and performance relative to individual goals.
These
15
<PAGE>
objectives included satisfactorily managing the Company's overall corporate
business plan, such as meeting the Company's profitability projections and the
Company's sales targets and significantly strengthening the Company's market
position. As an additional incentive to Mr. North to achieve the objectives
established by the Committee for 1997, in January 1997, the Committee
exercised its discretion and granted Mr. North a stock option to purchase
70,000 shares of the Company's Common Stock to become exercisable as to 25% of
the shares underlying such stock option for each full year following the date
of grant that Mr. North renders services to the Company. In granting the stock
option to Mr. North, the Committee reviewed Mr. North's prior outstanding
option grants, the number of options that remained unexercisable, the number
of shares Mr. North already owned as of the dates the options were granted and
the Company's performance in 1996. The Committee believes that this grant was
appropriate because it provided the proper incentives to Mr. North for 1997
and beyond and takes account of his prior significant stock holdings. The
Committee reviewed the compensation practices of comparable companies in
making these awards to Mr. North.
COMPLIANCE WITH SECTION 162(M) OF THE CODE. The Company intends to comply
with the requirements of Section 162(m) of the Code for 1997. The Incentive
Plan is already in compliance with Section 162(m) by limiting stock awards to
named executive officers. The Company does not expect cash compensation for
1998 to any of its executive officers to be in excess of $1,000,000 or
consequently affected by the requirements of Section 162(m).
COMPENSATION COMMITTEE
OLIVER D. CURME
CHARLES H. GAYLORD, JR.
16
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the SEC and shall not
be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933, as amended, or under the Exchange Act, except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed soliciting material or filed under
such Acts.
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from June 20, 1995 (the effective date of the
Company's registration statement with respect to the Company's initial public
offering) to December 31, 1997 with the cumulative total return on the Nasdaq
Stock Market--U.S. Index and the H&Q Technology Index over the same period
(assuming the investment of $100 in the Common Stock of Company and in each of
the other indices on the date of the Company's initial public offering, and
reinvestment of all dividends).
The comparisons in the graph below are based on historical data and are not
intended to forecast the possible future performance of the Company's Common
Stock.
[PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
NASDAQ STOCK
MARKET-- H&Q TECHNOLOGY
HNC SOFTWARE INC. U.S. INDEX INDEX
------------------ ---------------- ------------------
MARKET INVESTMENT INVESTMENT INVESTMENT
PRICE VALUE INDEX VALUE INDEX VALUE
------- ---------- ----- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
06/20/95................. $ 7.000 $100.00 303.8 $100.00 789.9 $100.00
06/30/95................. $10.625 $151.78 305.0 $100.38 781.8 $ 98.97
09/30/95................. $13.125 $187.49 341.7 $112.47 883.5 $111.86
12/31/95................. $23.875 $341.05 345.9 $113.84 836.8 $105.94
03/31/96................. $34.000 $485.68 362.0 $119.15 852.9 $107.98
06/30/96................. $46.250 $660.67 391.6 $128.88 913.6 $115.67
09/30/96................. $40.000 $571.39 405.5 $133.46 969.9 $122.79
12/31/96................. $31.250 $446.40 425.4 $140.02 1,040.0 $131.67
03/31/97................. $26.125 $373.19 402.4 $132.43 991.3 $125.50
06/30/97................. $38.125 $544.61 476.1 $156.70 1,193.2 $151.06
09/30/97................. $39.750 $567.82 556.7 $183.21 1,446.0 $183.07
12/31/97................. $43.000 $614.25 522.1 $171.82 1,219.3 $154.37
</TABLE>
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 1997 to the present, there are no currently proposed
transactions in which the amount involved exceeds $60,000 to which the Company
or any of its subsidiaries was (or is to be) a party and in which any
executive officer, director, 5% beneficial owner of the Company's Common Stock
or member of the immediate family of any of the foregoing persons had (or will
have) a direct or indirect material interest, except for payments set forth
under "Executive Compensation" above and the transactions described below.
In November 1997, HNC acquired CompReview in a transaction accounted for as
a pooling of interests, and issued a total of 4,885,560 shares of HNC Common
Stock to the two former shareholders of CompReview, Robert L. Kaaren, the
Chairman and Chief Executive Officer of CompReview, and the Michael Munayyer
Trust dated August 11, 1995, of which Michael E. Munayyer, the Chief Technical
Officer of CompReview is a trustee, each of whom is currently a 5% stockholder
of the Company. Each of Dr. Kaaren and Mr. Munayyer's Trust received 2,442,780
shares of HNC Common Stock in the merger, representing 9.9% of the shares of
the Company's Common Stock then issued and outstanding. In March 1998, Dr.
Kaaren and Mr. Munayyer (as Trustee of the Michael Munayyer Trust dated August
11, 1995), each sold 1,192,500 shares of Common Stock in an underwritten
public offering.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Company at its
principal executive offices no later than December 20, 1998 in order to be
included in the Company's Proxy Statement and form of proxy relating to that
meeting.
COMPLIANCE UNDER SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports
of changes in ownership with the SEC. Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors
of the Company, the Company believes that all Section 16(a) filing
requirements were met during 1997, except that Michael Thiemann did not file a
Form 4 to report one transaction which was later reported on a Form 5.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended
that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
18
<PAGE>
APPENDIX A
HNC SOFTWARE INC.
1995 EQUITY INCENTIVE PLAN
As Adopted May 4, 1995
As Amended January 11, 1996 (effective as of July 27,1995), December 6, 1996,
November 25, 1997 and May ___, 1998
1. PURPOSE. The purpose of this Plan is to provide incentives to attract,
-------
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent, Subsidiaries and
Affiliates, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 Number of Shares Available. Subject to Sections 2.2 and 18,
--------------------------
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 4,550,000/1/ Shares plus any Shares that are
made available for grant and issuance under this Plan pursuant to the
following sentence. Any Shares remaining unissued under the 1987 Stock Option
Plan adopted by HNC Software Inc., a California corporation that is the
Company's predecessor (the "PRIOR PLAN") on the Effective Date (as defined
below) and any Shares issuable upon exercise of options granted pursuant to
the Prior Plan that expire or become unexercisable for any reason without
having been exercised in full, will no longer be available for grant and
issuance under the Prior Plan, but will also be available for grant and
issuance under this Plan. Subject to Sections 2.2 and 18, Shares that: (a) are
subject to issuance upon exercise of an Option but cease to be subject to such
Option for any reason other than exercise of such Option; (b) are subject to
an Award granted hereunder but are forfeited or are repurchased by the Company
at the original issue price; or (c) are subject to an Award that otherwise
terminates without Shares being issued; will again be available for grant and
issuance in connection with future Awards under this Plan. At all times the
Company shall reserve and keep available a sufficient number of Shares as
shall be required to satisfy the requirements of all outstanding Options
granted under this Plan and all other outstanding but unvested Awards granted
under this Plan.
2.2 Adjustment of Shares. In the event that the number of outstanding
--------------------
Shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
-------- -------
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
-----------
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisors of the Company or any Parent, Subsidiary or Affiliate of the
Company; provided such consultants, contractors and advisors render bona fide
--------
services not in connection with the offer and sale of securities in a capital-
- -------------
/1/ Adjusted to reflect (i) the 2-for-1 split of the Company's capital stock
effected in April 1996; (ii) the authorization of 1,500,000 additional shares of
Common Stock for issuance under the Plan approved by the Company's stockholders
on December 6, 1996; (iii) the authorization of 750,000 additional shares of
Common Stock for issuance under the Plan approved by the Company's stockholders
on November 25, 1997; and (iv) the authorization of 1,000,000 additional shares
of Common Stock for issuance under the Plan approved by the Company's
stockholders on May ___, 1997.
-1-
<PAGE>
raising transaction. No person will be eligible to receive more than 500,000/2/
Shares in any calendar year under this Plan pursuant to the grant of Awards
hereunder, other than new employees of the Company or of a Parent, Subsidiary or
Affiliate of the Company (including new employees who are also officers and
directors of the Company or any Parent, Subsidiary or Affiliate of the Company)
who are eligible to receive up to a maximum of 700,000/3/ Shares in the calendar
year in which they commence their employment. A person may be granted more than
one Award under this Plan.
4. ADMINISTRATION.
--------------
4.1 Committee Authority. This Plan will be administered by the
-------------------
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the
Board, the Committee will have full power to implement and carry out this
Plan. Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent, Subsidiary or
Affiliate of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the Committee
--------------------
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.
4.3 Exchange Act Requirements. If two or more members of the Board
-------------------------
are Outside Directors, the Committee will be comprised of at least two (2)
members of the Board, all of whom are Outside Directors and Disinterested
Persons. During all times that the Company is subject to Section 16 of the
Exchange Act, the Company will take appropriate steps to comply with the
disinterested administration requirements of Section 16(b) of the Exchange
- --------------------
/2/ Adjusted to reflect the 2-for-1 split of the Company's capital stock
effected in April 1996.
/3/ Adjusted to reflect the 2-for-1 split of the Company's capital stock
effected in April 1996.
-2-
<PAGE>
Act, which will consist of the appointment by the Board of a Committee
consisting of not less than two (2) members of the Board, each of whom is a
Disinterested Person.
5. OPTIONS. The Committee may grant Options to eligible persons and
-------
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
--------------------
will be evidenced by an Award Agreement which will expressly identify the
Option as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such
form and contain such provisions (which need not be the same for each
Participant) as the Committee may from time to time approve, and which will
comply with and be subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the
-------------
date on which the Committee makes the determination to grant such Option,
unless otherwise specified by the Committee. The Stock Option Agreement and a
copy of this Plan will be delivered to the Participant within a reasonable
time after the granting of the Option.
5.3 Exercise Period. Options will be exercisable within the
---------------
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
-------- -------
be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who directly
----------------
or by attribution owns more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("TEN PERCENT STOCKHOLDER") will be exercisable
after the expiration of five (5) years from the date the ISO is granted. The
Committee also may provide for the exercise of Options to become exercisable
at one time or from time to time, periodically or otherwise, in such number of
Shares or percentage of Shares as the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be
--------------
determined by the Committee when the Option is granted and may be not less than
100% of the Fair Market Value of the Shares on the date of grant; provided that:
the Exercise Price of any ISO granted to a Ten Percent Shareholder will not be
less than 110% of the Fair Market Value of the Shares on the date of grant.
Payment for the Shares purchased may be made in accordance with Section 8 of
this Plan.
5.5 Method of Exercise. Options may be exercised only by
------------------
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be
the same for each Participant), stating the number of Shares being purchased,
the restrictions imposed on the Shares purchased under such Exercise
Agreement, if any, and such representations and agreements regarding
Participant's investment intent and access to information and other matters,
if any, as may be required or desirable by the Company to comply with
applicable securities laws, together with payment in full of the Exercise
Price for the number of Shares being purchased.
5.6 Termination. Notwithstanding the exercise periods set
-----------
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months
-3-
<PAGE>
after the Termination Date deemed to be an NQSO), but in any
event, no later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death
or Disability (or the Participant dies within three (3) months
after a Termination other than because of Participant's death or
disability), then Participant's Options may be exercised only to
the extent that such Options would have been exercisable by
Participant on the Termination Date and must be exercised by
Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination
Date (or such shorter or longer time period not exceeding five
(5) years as may be determined by the Committee, with any such
exercise beyond (a) three (3) months after the Termination Date
when the Termination is for any reason other than the
Participant's death or Disability, or (b) twelve (12) months
after the Termination Date when the Termination is for
Participant's death or Disability, deemed to be an NQSO), but in
any event no later than the expiration date of the Options.
5.7 Limitations on Exercise. The Committee may specify a
-----------------------
reasonable minimum number of Shares that may be purchased on any exercise of
an Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
-------------------
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year
(under this Plan or under any other incentive stock option plan of the Company
or any Affiliate, Parent or Subsidiary of the Company) will not exceed
$100,000. If the Fair Market Value of Shares on the date of grant with respect
to which ISOs are exercisable for the first time by a Participant during any
calendar year exceeds $100,000, then the Options for the first $100,000 worth
of Shares to become exercisable in such calendar year will be ISOs and the
Options for the amount in excess of $100,000 that become exercisable in that
calendar year will be NQSOs. In the event that the Code or the regulations
promulgated thereunder are amended after the Effective Date of this Plan to
provide for a different limit on the Fair Market Value of Shares permitted to
be subject to ISOs, such different limit will be automatically incorporated
herein and will apply to any Options granted after the effective date of such
amendment.
5.9 Modification, Extension or Renewal. The Committee may
----------------------------------
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not,
without the written consent of a Participant, impair any of such Participant's
rights under any Option previously granted. Any outstanding ISO that is
modified, extended, renewed or otherwise altered will be treated in accordance
with Section 424(h) of the Code. The Committee may reduce the Exercise Price
of outstanding Options without the consent of Participants affected by a
written notice to them; provided, however, that the Exercise Price may not be
-------- -------
reduced below the minimum Exercise Price that would be permitted under Section
5.4 of this Plan for Options granted on the date the action is taken to reduce
the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
-------------------
in this Plan, no term of this Plan relating to ISOs will be interpreted,
amended or altered, nor will any discretion or authority granted under this
Plan be exercised, so as to disqualify this Plan under Section 422 of the Code
or, without the consent of the Participant affected, to disqualify any ISO
under Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
----------------
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
------------------------------
Restricted Stock Award made pursuant to this Plan will be evidenced by an
Award Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT")
-4-
<PAGE>
that will be in such form (which need not be the same for each Participant) as
the Committee will from time to time approve, and will comply with and be
subject to the terms and conditions of this Plan. The offer of Restricted
Stock will be accepted by the Participant's execution and delivery of the
Restricted Stock Purchase Agreement and full payment for the Shares to the
Company within thirty (30) days from the date the Restricted Stock Purchase
Agreement is delivered to the person. If such person does not execute and
deliver the Restricted Stock Purchase Agreement along with full payment for
the Shares to the Company within thirty (30) days, then the offer will
terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
--------------
Restricted Stock Award will be determined by the Committee and will be at least
100% of the Fair Market Value of the Shares on the date the Restricted Stock
Award is granted. Payment of the Purchase Price may be made in accordance with
Section 8 of this Plan.
6.3 Restrictions. Restricted Stock Awards will be subject to such
------------
restrictions (if any) as the Committee may impose. The Committee may provide
for the lapse of such restrictions in installments and may accelerate or waive
such restrictions, in whole or part, based on length of service, performance or
such other factors or criteria as the Committee may determine.
7. STOCK BONUSES
-------------
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
-----------------------
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may be
awarded for past services already rendered to the Company, or any Parent,
Subsidiary or Affiliate of the Company (provided that the Participant pays the
Company the par value of the Shares awarded by such Stock Bonus in cash)
pursuant to an Award Agreement (the "STOCK BONUS AGREEMENT") that will be in
such form (which need not be the same for each Participant) as the Committee
will from time to time approve, and will comply with and be subject to the terms
and conditions of this Plan. A Stock Bonus may be awarded upon satisfaction of
such performance goals as are set out in advance in the Participant's individual
Award Agreement (the "PERFORMANCE STOCK BONUS AGREEMENT") that will be in such
form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. Stock Bonuses may vary from Participant to Participant
and between groups of Participants, and may be based upon the achievement of the
Company, Parent, Subsidiary or Affiliate and/or individual performance factors
or upon such other criteria as the Committee may determine.
7.2 Terms of Stock Bonuses. The Committee will determine the number
----------------------
of Shares to be awarded to the Participant and whether such Shares will be
Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee will determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "PERFORMANCE PERIOD") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be paid
---------------
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Committee may determine. Payment may be made in the form of cash,
whole Shares, including Restricted Stock, or a combination thereof, either in a
lump sum payment or in installments, all as the Committee will determine.
-5-
<PAGE>
7.4 Termination During Performance Period. If a Participant is
-------------------------------------
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee will
determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
---------------------------
8.1 Payment. Payment for Shares purchased pursuant to this Plan may
-------
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares); or (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are
-------- -------
not employees or directors of the Company will not be entitled to
purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares; provided,
--------
further, that the portion of the Purchase Price equal to the par
-------
value of the Shares, if any, must be paid in cash;
(d) by waiver of compensation due or accrued to the Participant for
services rendered; provided, further, that the portion of the
-------- -------
Purchase Price equal to the par value of the Shares, if any, must
be paid in cash;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant
and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD DEALER") whereby
the Participant irrevocably elects to exercise the Option
and to sell a portion of the Shares so purchased to pay for
the Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
(2) through a "margin" commitment from the Participant and a
NASD Dealer whereby the Participant irrevocably elects to
exercise the Option and to pledge the Shares so purchased to
the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant
---------------
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
-----------------
-6-
<PAGE>
9.1 Withholding Generally. Whenever Shares are to be issued
---------------------
in satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
-----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "TAX DATE"). All elections by a Participant to have Shares withheld for
this purpose will be made in writing in a form acceptable to the Committee and
will be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, then except as provided below, the election will be
irrevocable as to the particular Shares as to which the election
is made;
(c) all elections will be subject to the consent or disapproval of
the Committee;
(d) if the Participant is an Insider and if the Company is subject to
Section 16(b) of the Exchange Act: (1) the election may not be
made within six (6) months of the date of grant of the Award,
except as otherwise permitted by SEC Rule 16b-3(e) under the
Exchange Act, and (2) either (A) the election to use stock
withholding must be irrevocably made at least six (6) months
prior to the Tax Date (although such election may be revoked at
any time at least six (6) months prior to the Tax Date) or (B)
the exercise of the Option or election to use stock withholding
must be made in the ten (10) day period beginning on the third
day following the release of the Company's quarterly or annual
summary statement of sales or earnings; and
(e) in the event that the Tax Date is deferred until six (6) months
after the delivery of Shares under Section 83(b) of the Code, the
Participant will receive the full number of Shares with respect
to which the exercise occurs, but such Participant will be
unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
-----------------------------
10.1 Voting and Dividends. No Participant will have any of the
--------------------
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
--------
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
-------- -------
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's original Purchase Price pursuant to Section
12.
10.2 Financial Statements. The Company will provide financial
--------------------
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
-------- -------
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
-7-
<PAGE>
11. TRANSFERABILITY. Awards granted under this Plan, and any
---------------
interest therein, will not be transferable or assignable by Participant, and may
not be made subject to execution, attachment or similar process, otherwise than
by will or by the laws of descent and distribution or as consistent with the
specific Plan and Award Agreement provisions relating thereto. During the
lifetime of the Participant an Award will be exercisable only by the
Participant, and any elections with respect to an Award, may be made only by the
Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement (a)
a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at: (A) with respect to Shares that are "Vested" (as defined in
the Award Agreement), the higher of: (l) Participant's original Purchase Price,
or (2) the Fair Market Value of such Shares on Participant's Termination Date,
provided, that such right of repurchase (i) must be exercised as to all such
- --------
"Vested" Shares unless a Participant consents to the Company's repurchase of
only a portion of such "Vested" Shares and (ii) terminates when the Company's
securities become publicly traded; or (B) with respect to Shares that are not
"Vested" (as defined in the Award Agreement), at the Participant's original
Purchase Price, provided, that the right to repurchase at the original Purchase
Price lapses at the rate of at least 20% per year over five (5) years from the
date the Shares were purchased (or from the date of grant of options in the case
of Shares obtained pursuant to a Stock Option Agreement and Stock Option
Exercise Agreement), and if the right to repurchase is assignable, the assignee
must pay the Company, upon assignment of the right to repurchase, cash equal to
the excess of the Fair Market Value of the Shares over the original Purchase
Price.
13. CERTIFICATES. All certificates for Shares or other securities
------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
-------- -------
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
-----------------------------
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will
----------------------------------------------
not be effective unless such Award is in compliance with all applicable federal
and state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system
-8-
<PAGE>
upon which the Shares may then be listed or quoted, as they are in effect on
the date of grant of the Award and also on the date of exercise or other
issuance. Notwithstanding any other provision in this Plan, the Company will
have no obligation to issue or deliver certificates for Shares under this Plan
prior to: (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and/or (b) completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register
the Shares with the SEC or to effect compliance with the registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
-----------------------
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Participant's employment or other relationship at any
time, with or without cause.
18. CORPORATE TRANSACTIONS.
----------------------
18.1 Assumption or Replacement of Awards by Successor. In the event
------------------------------------------------
of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
----- ----
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company (other than any stockholder
which merges (or which owns or controls another corporation which merges) with
the Company in such merger) cease to own their shares or other equity interests
in the Company, (d) the sale of substantially all of the assets of the Company,
or (e) any other transaction which qualifies as a "corporate transaction" under
Section 424(a) of the Code wherein the stockholders of the Company give up all
of their equity interest in the Company (except for the acquisition, sale or
------
transfer of all or substantially all of the outstanding shares of the Company
from or by the stockholders of the Company), any or all outstanding Awards may
be assumed, converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
stockholders (after taking into account the existing provisions of the Awards).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the Participant. In the
event such successor corporation (if any) refuses to assume or substitute
Options, as provided above, pursuant to a transaction described in this
Subsection 18.1, such Options will expire on such transaction at such time and
on such conditions as the Board will determine.
18.2 Other Treatment of Awards. Subject to any greater rights
-------------------------
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.3 Assumption of Awards by the Company. The Company, from time to
-----------------------------------
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
- -------
upon exercise of any such option will
-9-
<PAGE>
be adjusted appropriately pursuant to Section 424(a) of the Code). In the
event the Company elects to grant a new Option rather than assuming an
existing option, such new Option may be granted with a similarly adjusted
Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become
---------------------------------
effective on the date on which the registration statement filed by the Company
with the SEC under the Securities Act registering the initial public offering of
the Company's Common Stock is declared effective by the SEC (the "EFFECTIVE
DATE"); provided, however, that if the Effective Date does not occur on or
-------- -------
before December 31, 1995, this Plan will terminate as of December 31, 1995
having never become effective. This Plan shall be approved by the stockholders
of the Company (excluding Shares issued pursuant to this Plan), consistent with
applicable laws, within twelve (12) months before or after the date this Plan is
adopted by the Board. Upon the Effective Date, the Board may grant Awards
pursuant to this Plan; provided, however, that: (a) no Option may be exercised
-------- -------
prior to initial stockholder approval of this Plan; (b) no Option granted
pursuant to an increase in the number of Shares subject to this Plan approved by
the Board will be exercised prior to the time such increase has been approved by
the stockholders of the Company; and (c) in the event that stockholder approval
of such increase is not obtained within the time period provided herein, all
Awards granted hereunder will be canceled, any Shares issued pursuant to any
Award will be canceled, and any purchase of Shares hereunder will be rescinded.
So long as the Company is subject to Section 16(b) of the Exchange Act, the
Company will comply with the requirements of Rule 16b-3 (or its successor), as
amended, with respect to stockholder approval.
20. TERM OF PLAN. Unless earlier terminated as provided herein, this
------------
Plan will terminate ten (10) years from the date this Plan is adopted by the
Board or, if earlier, the date of stockholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
--------------------------------
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
-------- -------
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or (if the Company is subject
to the Exchange Act or Section 16(b) of the Exchange Act) pursuant to the
Exchange Act or Rule 16b-3 (or its successor), as amended, thereunder,
respectively.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
--------------------------
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have
-----------
the following meanings:
"AFFILIATE" means any corporation that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
-10-
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no such committee is appointed, the Board.
"COMPANY" means HNC Software Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"DISINTERESTED PERSON" means a director who has not, during the
period that person is a member of the Committee and for one year prior to
commencing service as a member of the Committee, been granted or awarded
equity securities pursuant to this Plan or any other plan of the Company or
any Parent, Subsidiary or Affiliate of the Company, except in accordance with
the requirements set forth in Rule 16b-3(c)(2)(i) (and any successor
regulation thereto) as promulgated by the SEC under Section 16(b) of the
Exchange Act, as such rule is amended from time to time and as interpreted by
the SEC.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination (if such day is a trading day) as reported
in The Wall Street Journal, and, if such date of determination is
-----------------------
not a trading day, then on the last trading day prior to the date
of determination;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the last
trading day prior to the date of determination on the principal
national securities exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the last trading day prior to the date of
determination as reported in The Wall Street Journal; or
-----------------------
(d) if none of the foregoing is applicable, by the Committee in good
faith.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"OUTSIDE DIRECTOR" means any director who is not; (a) a current
employee of the Company or any Parent, Subsidiary or Affiliate of the Company;
(b) a former employee of the Company or any Parent, Subsidiary or Affiliate of
the Company who is receiving compensation for prior services (other than
benefits under a tax-qualified pension plan); (c) a current or former officer
of the Company or any Parent, Subsidiary or Affiliate of the Company; or (d)
currently receiving compensation for personal services in any capacity, other
than as a director, from the Company or any Parent, Subsidiary or Affiliate of
the Company; provided, however, that at such time as the term "Outside
-----------------
Director", as used in Section 162(m) of the Code is defined in regulations
promulgated
-11-
<PAGE>
under Section 162(m) of the Code, "Outside Director" will have the meaning set
forth in such regulations, as amended from time to time and as interpreted by
the Internal Revenue Service.
"OPTION" means an award of an option to purchase Shares pursuant to
Section 5.
"PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if at the time of the granting of
an Award under this Plan, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this Plan.
"PLAN" means this HNC Software Inc. 1995 Equity Incentive Plan, as
amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to Section
6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, director, consultant, independent contractor or
advisor to the Company or a Parent, Subsidiary or Affiliate of the Company,
except in the case of sick leave, military leave, or any other leave of absence
- ------
approved by the Committee, provided that such leave is for a period of not more
than ninety (90) days, or reinstatement upon the expiration of such leave is
guaranteed by contract or statute. The Committee will have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "TERMINATION
DATE").
-12-
<PAGE>
1409-PS-98
<PAGE>
DETACH HERE
PROXY
HNC SOFTWARE INC.
Annual Meeting of Stockholders - May 21 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert L. North and Raymond V. Thomas, or
either of them, as proxies each with full power to appoint his substitute, and
hereby authorizes them to represent and to vote all the shares of stock of HNC
Software Inc. which the undersigned is entitled to vote, as specified on the
reverse side of this card, at the Annual Meeting of Stockholders of HNC
Software Inc. (the "Meeting") to be held on May 21, 1998 at 8:00 a.m., P.D.T.,
at the Hyatt Regency La Jolla in San Diego, California, and at any adjournment
or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY
RELATES WILL BE VOTED AS SPECIFIED AND, IF NO SPECIFICATION IS MADE, WILL BE
VOTED FOR ALL NOMINEES FOR DIRECTORS IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3,
AND THIS PROXY AUTHORIZES THE ABOVE DESIGNATED PROXIES TO VOTE IN THEIR
DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF TO THE EXTENT AUTHORIZED BY RULE 14a-
4(c) PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
SEE REVERSE SEE REVERSE
SIDE (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) SIDE
<PAGE>
DETACH HERE
[X] Please mark votes as in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of Directors
Nominees: Edward K. Chandler, Oliver D. Curme, Thomas E. Farb, Charles H.
Gaylord, Jr. And Robert L. North.
[ ] For All Nominees [ ] Withheld From All Nominees
[ ] _________________________
(Instruction: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided above.)
2. To ratify the amendment to HNC's 1995 Equity Incentive Plan to Increase the
number of shares of Common Stock reserved for issuance thereunder by
1,000,000 shares.
[ ] For [ ] Against [ ] Abstain
3. To ratify the selection of Price Waterhouse LLP as the Company's independent
auditors for the year ending December 31, 1998.
[ ] For [ ] Against [ ] Abstain
4. To transact such other business as may properly come before the Meeting and
any adjournment or postponement thereof.
Please sign exactly as your name(s) appear(s) on this Proxy. If shares of stock
stand of record in the names of two or more persons or in the name of husband
and wife, whether as joint tenants or otherwise, both or all of such persons
should sign this Proxy. If shares of stock are held of record by a corporation,
this Proxy should be executed by the president or vice president and the
secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute this Proxy for a deceased stockholder should give their
full title. Please date this Proxy.
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
Signature:______________ Date: ________ Signature:______________ Date: ________
