HNC SOFTWARE INC/DE
8-K, 2000-08-25
PREPACKAGED SOFTWARE
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549




                                    FORM 8-K


                 Current Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934



        Date of Report (Date of Earliest Event Reported): AUGUST 7, 2000


                                HNC SOFTWARE INC.
             (Exact name of Registrant as Specified in its Charter)


                                    DELAWARE
                 (State or Other Jurisdiction of Incorporation)


                0-26146                                33-0248788
        (Commission File Number)                    (I.R.S. Employer
                                                 Identification Number)



                5935 CORNERSTONE COURT WEST, SAN DIEGO, CA 92121
                    (Address of Principal Executive Offices)

                                 (858) 546-8877
              (Registrant's Telephone Number, Including Area Code)

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ITEM 5:  OTHER EVENTS.

HNC Software Inc. announced on August 7, 2000 in a news release that HNC's board
of directors declared a dividend on HNC common stock of all the shares of Retek
Inc. common stock owned by HNC. The Retek shares will be distributed on or about
September 29, 2000 to those HNC stockholders who are holders of record of HNC
common stock at 5 p.m. Eastern Daylight Time on September 15, 2000, the record
date for the dividend. HNC currently owns 40 million Retek shares, representing
approximately 84.5 percent of Retek's outstanding common stock.

HNC has received a private letter ruling from the Internal Revenue Service that
HNC's dividend of its shares of Retek stock will be tax-free to HNC and its
stockholders for U.S. federal income tax purposes. HNC stockholders of record at
the record date will receive whole shares of Retek common stock and cash
payments for fractional shares. Cash received in lieu of fractional shares will
be taxable for U.S. federal income tax purposes.

The number of Retek shares that will be distributed as a dividend on each share
of HNC common stock that is outstanding on the September 15, 2000 dividend
record date will be determined by the total number of shares of HNC common stock
that are outstanding on September 15, 2000.

Consequently, the actual distribution ratio for the dividend will decrease to
the extent that the number of outstanding shares of HNC common stock increases
prior to the September 15, 2000 record date. Increases in the number of HNC
shares outstanding on the record date may result from issuances of HNC stock in
various transactions, including but not limited to HNC stock option exercises,
business acquisitions and conversions of HNC's outstanding convertible notes
into HNC common stock. HNC has also accelerated the vesting of 25 percent of its
outstanding stock options that would have been unvested as of the September 15,
2000 record date to afford its option holders the opportunity to participate in
receipt of the dividend. As a result of this vesting acceleration, options to
purchase approximately 2.8 million shares of HNC common stock will be vested and
exercisable between August 7 and the September 15 record date. HNC Software Inc.
announced in a news release on August 21, 2000 that holders of approximately
$68.8 million of its $100.0 million convertible notes have converted their notes
into approximately 1.5 million shares of HNC common stock, leaving approximately
$31.2 million outstanding. These newly issued shares will be eligible to receive
the dividend of Retek shares declared on August 7, 2000 by HNC's board of
directors.

To the extent that HNC's outstanding convertible notes are not converted into
shares of HNC common stock before the dividend record date, the anti-dilution
provisions of the notes will be triggered by the dividend and will reduce the
conversion price of the notes. This reduction in the conversion price would
increase the number of shares of HNC common stock issuable upon the potential
conversion of the notes, and the amount of the increase could be substantial.
The actual amount of the potential increase cannot yet be computed, but will be
determined by the relative values of HNC and Retek stock during certain time
periods prior to the payment of the dividend.

After September 15, 2000, an information statement will be mailed to HNC
stockholders of record as of the record date. The information statement will
include a statement of the final distribution ratio for the dividend, as well as
information on how to calculate the cost basis for federal income tax purposes
of the Retek shares distributed in the dividend and the shares of HNC common
stock on which the dividend is paid.

In connection with the Retek dividend, HNC will adjust the exercise price of all
of its stock options that are outstanding immediately following payment of the
dividend. The adjusted stock option

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exercise price will be calculated by multiplying the pre-dividend option
exercise price by the price of HNC common stock immediately after payment of the
dividend, and dividing that product by the price of HNC common stock immediately
before payment of the dividend.

Because HNC anticipates that this adjustment will be less than the change in
value of unvested HNC stock options resulting from the Retek distribution, HNC
will pay cash bonuses to employees who hold unvested stock options as of the
record date. Based on current analyses, HNC estimates that the aggregate amount
of these cash bonuses will be approximately $39 million. HNC anticipates that
the adjustment to the exercise price of its unvested options and the cash bonus,
taken together, will be less than the change in value of unvested HNC options
arising from the Retek distribution. HNC does not plan to pay any cash bonuses
to holders of its stock options that vest on or before the record date.

HNC also announced in the August 7, 2000 news release that its board of
directors has authorized the company to repurchase up to $30 million dollars of
its common stock from time to time for cash at market prices in open market,
negotiated or block transactions. The time and amount of any repurchases will be
determined by HNC. Any shares repurchased are expected to be used by the company
for a number of reasons, including mergers and acquisitions in which stock is
issued as well as to partially fund stock options granted by the company.


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                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                               HNC SOFTWARE INC.



Date:  August 25, 2000                 By: /s/ KENNETH J. SAUNDERS
                                          --------------------------------------
                                          Kenneth J. Saunders,
                                          Chief Financial Officer and
                                          Secretary


                                       By: /s/ RUSSELL C. CLARK
                                          --------------------------------------
                                          Russell C. Clark,
                                          Vice President, Corporate Finance
                                          and Assistant Secretary



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