<PAGE> 1
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 [ ]
Check the appropriate box:
[ ] CONFIDENTIAL, FOR USE OF
THE 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
<PAGE> 2
[LOGO OF HNC SOFTWARE INC.]
HNC SOFTWARE INC.
October 5, 1998
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
HNC Software Inc. (the "Company") to be held at the Embassy Suites Hotel located
at 4550 La Jolla Village Drive, San Diego, California, on Friday, November 20,
1998, at 9:30 a.m., Pacific Time.
The only matter to be acted upon at the meeting is a proposal to increase
the number of shares of the Company's Common Stock authorized for issuance under
the Company's 1995 Equity Incentive Plan by 700,000 shares, and is described in
detail in the accompanying Notice of Special 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> 3
HNC SOFTWARE INC.
5930 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of HNC Software Inc. (the "Company") will be held at the Embassy
Suites Hotel located at 4550 La Jolla Village Drive, San Diego, California, on
Friday, November 20, 1998, at 9:30 a.m., Pacific Time, for the purpose of
considering 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 700,000 shares.
The foregoing item of business is more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on September 30, 1998
are entitled to notice of and to vote at the Meeting or any adjournment or
postponement thereof. A complete list of stockholders entitled to vote at the
Meeting shall be open to examination of any stockholder, for any purpose
relevant to the Meeting, at the Company's offices at 5930 Cornerstone Court
West, San Diego, California, during the Company's ordinary business hours for 10
days prior to the Meeting.
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
October 5, 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> 4
HNC SOFTWARE INC.
5930 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
------------------------
PROXY STATEMENT
------------------------
OCTOBER 5, 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 Special Meeting of Stockholders of the Company to be held at the Embassy
Suites Hotel located at 4550 La Jolla Village Drive, San Diego, California, on
Friday, November 20, 1998, at 9:30 a.m., Pacific Time (the "Meeting"). This
Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on or about October 9, 1998.
RECORD DATE; QUORUM; OUTSTANDING SHARES
Only holders of record of the Company's Common Stock at the close of
business on September 30, 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 25,804,508 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. In the event that a broker, bank, custodian,
nominee or other record holder of the Company's 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.
The proposal to amend the Company's 1995 Equity Incentive Plan to authorize
the issuance of an additional 700,000 shares of Common Stock thereunder (the
"Proposal") requires 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 affirmative and
negative votes, abstentions and broker non-votes.
VOTING OF PROXIES
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 the Company. 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 will be counted
as votes "for" the Proposal. So far as is known to the Company's Board of
Directors (the "Board"), no other matters are to be brought before the Meeting.
However, as to any other business that may properly come before the Meeting, it
is intended that proxies in the form enclosed will be voted in accordance with
the judgment of the persons holding such proxies.
In the event that sufficient votes in favor of any proposal properly
brought before the Meeting 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 solicitation 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.
<PAGE> 5
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.
PROPOSAL: APPROVAL OF AMENDMENT TO THE 1995 EQUITY INCENTIVE PLAN
In September 1998, the Board adopted, subject to stockholder approval, an
amendment to the Company's 1995 Equity Incentive Plan (the "Incentive Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
by 700,000 shares. The stockholders of the Company are now being asked to
approve such amendment.
The availability of additional stock and stock options will facilitate the
Company's expansion of its employee base. In particular, the Company's pending
acquisition of Open Solutions Inc. ("OSI"), which is expected to be completed on
or about November 30, 1998, will increase, by approximately 150, 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 the Company 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 the Company's competitors and other software
companies.
Below is a summary of the principal provisions of the Incentive Plan
assuming approval of the amendment, 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 December 1996, November 1997 and May
1998 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 the Company'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 the Company's Common Stock were granted under the Incentive Plan, of
which options to purchase 407,502 shares were cancelled. During such period,
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
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<PAGE> 6
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 the Company'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) 4,550,000
shares (the "Base Shares") plus (ii) any shares that were unissued and not
subject to then outstanding options under the Company'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. The Proposal will increase the number of Base Shares
by 700,000 from 4,550,000 to 5,250,000.
Eligibility. Employees, officers, directors, consultants, independent
contractors and advisors of the Company (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 the Company (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 the calendar year in which they commence their employment with
the Company. 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 May
1998, 1,000,000 more shares of Common Stock were reserved for issuance under the
Incentive Plan. 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 the Company's Common Stock on the Nasdaq National
Market was $40.625 per share on September 30, 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, the Company'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 the Company or any parent or
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subsidiary of the Company. 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 the Company's 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 the Company to the Participant; (3) by
surrender of shares of the Company's 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 the Company's 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, the Company 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, the Company 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 the Company, the sale of
substantially all of the assets of the Company or any other similar corporate
transaction, 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 the Company 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 THE COMPANY 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.
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<PAGE> 8
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, 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
required holding period (a "disqualifying disposition"), the 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.
Any additional gain will be capital gain.
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 (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
otherwise be taxable 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
the 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.
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 the
Company (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 twelve 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 the Company. The Company 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, provided that the Company timely
reports such income to the Internal Revenue Service. The Company 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.
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<PAGE> 9
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.
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
the Company's Common Stock on the date of grant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 30, 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; (iii) each Named
Executive Officer set forth in the Summary Compensation Table below; and (iv)
all current directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT(1)
------------------------ ----------------------- ----------
<S> <C> <C>
Capital Research and Management Company(2)........... 2,968,700 11.5%
Robert L. North(3)................................... 394,584 1.5
Todd W. Gutschow(4).................................. 272,023 1.1
Edward K. Chandler(5)................................ 105,284 *
Raymond V. Thomas(6)................................. 93,125 *
Michael A. Thiemann(7)............................... 40,167 *
Charles H. Gaylord, Jr.(8)........................... 50,000 *
Lee E. Martin(9)..................................... 20,933 *
Oliver D. Curme(10).................................. 12,500 *
Thomas F. Farb(11)................................... 7,550 *
All current executive officers and directors as a
group (10 persons)(12)............................. 1,032,733 3.9%
</TABLE>
- ---------------
* Less than 1%
(1) Based upon a total of 25,804,508 shares of Common Stock outstanding as of
September 30, 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 September 30, 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 July 10, 1998. Capital Research and
Management Company ("CRMC") reported sole dispositive power with respect to
2,968,700 shares of Common Stock. The address of CRMC is 333 South Hope
Street, Los Angeles, California 90071.
(3) Includes 77,137 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 317,447 shares of Common Stock subject to options
exercisable within 60 days of September 30, 1998. Mr. North is the
President and Chief Executive Officer and a director of the Company.
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<PAGE> 10
(4) Includes 239,523 shares of Common Stock held by the Todd and Mari Gutschow
Family Trust, of which Mr. Gutschow is a trustee, and 32,500 shares of
Common Stock subject to options exercisable within 60 days of September 30,
1998. Mr. Gutschow is Vice President, Technology Development of the
Company.
(5) Includes 30,000 shares of Common Stock subject to options exercisable
within 60 days of September 30, 1998. Mr. Chandler is a director of the
Company.
(6) Represents 93,125 shares of Common Stock subject to options exercisable
within 60 days of September 30, 1998. Mr. Thomas is Vice President, Finance
and Administration, Chief Financial Officer and Secretary of the Company.
(7) Includes 34,167 shares of Common Stock held of record by the Thiemann
Family Trust dated July 1, 1996, of which Mr. Thiemann is a trustee and
6,000 shares held directly by Michael Thiemann. Mr. Thiemann is the
President of the Financial Solutions Group.
(8) 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 30,000 shares of Common Stock subject to options exercisable
within 60 days of September 30, 1998. Mr. Gaylord is a director of the
Company.
(9) Represents 9,968 shares of Common Stock subject to options exercisable
within 60 days of September 30, 1998. Mr. Martin was Vice President until
February 1998.
(10) Includes 12,500 shares of Common Stock subject to options exercisable
within 60 days of September 30, 1998. Mr. Curme is a director of the
Company.
(11) Represents 7,500 shares of Common Stock subject to options exercisable
within 60 days of September 30, 1998. Mr. Farb is a director of the
Company.
(12) Includes 580,572 shares of Common Stock subject to options exercisable
within 60 days of September 30, 1998, including the options described in
footnotes (3) through (8), (10) and (11). The current executive officers
are: Messrs. North, Gutschow, Thomas, Thiemann, and John Mutch, President
of HNC Insurance Solutions Group, and John Buchanan, President of Retek
Information Systems.
DIRECTOR COMPENSATION
HNC reimburses its Board members for reasonable expenses associated with
their attendance at Board meetings. With the exception of Thomas F. Farb, who
receives a fee from HNC 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 HNC, or
any parent, subsidiary or affiliate of HNC, are eligible to participate in HNC'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 HNC's Common Stock at an exercise
price of $39.875 per share.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities to the Company and its subsidiaries during
each of 1995, 1996 and 1997 to (i) the Company's Chief Executive Officer and
(ii) the Company'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. The Company 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
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS COMPENSATION(2) OPTIONS
------------------------------ ---- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Robert L. North........................ 1997 $196,008 $ 85,700 $ 4,763 70,000
President and Chief Executive Officer 1996 175,000 85,700 4,472 70,000
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(4) 1,919 --
President, Aptex Software Inc........ 1996 146,667 109,170(4) 1,799 --
1995 111,351 202,823(4) 201 --
Lee E. Martin.......................... 1997 79,583 385,739(4) 264 10,000
Vice President, North American 1996 75,000 251,966(4) 205 10,000
Sales(5) 1995 74,719 236,026(4) 200 --
</TABLE>
- ---------------
(1) Principal position at December 31, 1997.
(2) Unless otherwise indicated below, represents premiums for group term life
and disability insurance.
(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.
(4) Includes commissions.
(5) Mr. Martin is no longer an executive officer of the Company.
8
<PAGE> 12
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 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 EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED(1) IN 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.
(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 the Company'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 the Company'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 the Company's Common Stock on December 31,
1997, the last day of trading for 1997.
9
<PAGE> 13
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.
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.
Aptex Software, Inc. ("Aptex") is a partially-owned subsidiary of HNC
formed to exploit HNC's text analysis technology in certain markets. From
January 1996 to September 1996, Michael A. Thiemann, formerly HNC's Executive
Vice President and currently President of HNC's Financial Solutions Group,
managed the Aptex business unit. From Aptex's incorporation in September 1996 to
July 1998, Mr. Thiemann was President, Chief Executive Officer and a director of
Aptex. During his employment as an executive officer of Aptex, Mr. Thiemann was
compensated under an employment agreement that provided for at least $150,000
annual base salary, plus the opportunity to earn a cash bonus of $50,000 each
year, based on certain mutually agreed on financial objectives. In addition,
apart from his compensation from Aptex, Mr. Thiemann received certain sales
commissions from HNC. Mr. Thiemann resigned all of his positions with Aptex as
of July 1, 1998.
Mr. Thiemann purchased a total of 1,000,000 shares of Aptex Common Stock in
September 1996 for $30,000 in cash, pursuant to a Restricted Stock Purchase
Agreement (the "Stock Purchase Agreement") and Aptex's 1996 Equity Incentive
Plan. The Stock Purchase Agreement provided that, upon termination of Mr.
Thiemann's employment with Aptex, Aptex would be entitled to repurchase any
unvested shares, at Mr. Thiemann's purchase price. On January 1, 1997, 25% of
the shares vested free of Aptex's repurchase right and an additional 1/48 of the
shares vested monthly thereafter. At the time of his resignation, there were
375,000 unvested shares, all of which Aptex intends to repurchase for an
aggregate of $11,250.
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. Proxies
solicited by the Company for such meeting will be voted in the discretion of the
persons voting such proxies with respect to all proposals presented by
stockholders for consideration at such meeting after March 23, 1999.
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.
10
<PAGE> 14
Exhibit 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, May 21, 1998 and November __, 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 5,250,0001 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,
- --------
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; (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 21, 1998; and
(v) the authorization of 700,000 additional shares of Common Stock for
issuance under the Plan approved by the Company's stockholders on November
__, 1998.
<PAGE> 15
contractors and advisors render bona fide services not in connection with the
offer and sale of securities in a capital-raising transaction. No person will be
eligible to receive more than 500,0002 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 700,0003 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
- --------
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> 16
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 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> 17
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> 18
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> 19
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.
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<PAGE> 20
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be
issued in satisfaction of Awards granted under this Plan, the Company may
require the Participant to remit to the 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
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<PAGE> 21
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.
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.
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<PAGE> 22
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award
will not be effective unless such Award is in compliance with all applicable
federal and state securities laws, rules and regulations of any governmental
body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed or quoted, as 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
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<PAGE> 23
under this Plan if the other company had applied the rules of this Plan to such
grant. In the event the Company assumes an award granted by another company, the
terms and conditions of such award will remain unchanged (except that the
exercise price and the number and nature of Shares issuable upon exercise of any
such option will be adjusted appropriately pursuant to Section 424(a) of the
Code). In the event the Company elects to grant a new Option rather than
assuming an existing option, such new Option may be granted with a similarly
adjusted Exercise Price.
19. 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.
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<PAGE> 24
"Board" means the Board of Directors of the Company.
"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
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<PAGE> 25
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 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").
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<PAGE> 26
PROXY
HNC SOFTWARE INC.
SPECIAL MEETING OF STOCKHOLDERS - NOVEMBER 20, 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 Special Meeting of Stockholders of HNC
Software Inc. (the "Meeting") to be held on November 20, 1998 at 9:30 a.m.,
P.S.T., at the Embassy Suites Hotel located at 4550 La Jolla Village Drive 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
THE PROPOSAL, 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 SIDE] (CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 27
[X] Please mark votes as in this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL:
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
700,000 SHARES.
[ ] For [ ] Against [ ] Abstain
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 AT LEFT
Signature:__________________________ Date: _________________
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
