<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
<TABLE>
<S> <C>
Check the appropriate box:
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
/X/ Preliminary proxy Statement (AS PERMITTED BY RULE 14A-6(e)(2)).
/ / Definitive proxy Statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
HNC SOFTWARE INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF HNC SOFTWARE INC.]
April 21, 2000
To Our Stockholders:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders of
HNC Software Inc. to be held at HNC's offices located at 5935 Cornerstone Court
West, San Diego, California, on Thursday, May 25, 2000, at 10:00 a.m., local
time.
The matters to be acted upon at the meeting are described in detail in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
Please use this opportunity to take part in HNC'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 BEFORE 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/ JOHN MUTCH
John Mutch
President and Chief Executive Officer
<PAGE>
HNC SOFTWARE INC.
5935 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------
To our stockholders:
The 2000 annual meeting of stockholders of HNC Software Inc. will be held at our
offices at 5935 Cornerstone Court West, San Diego, California, on Thursday,
May 25, 2000, at 10:00 a.m., local time.
At the meeting, you will be asked to consider and vote upon the following
matters:
1. The election of five directors, each to serve until the next annual
meeting of stockholders and until his successor has been elected and qualified
or until his earlier resignation, death or removal. At the meeting, our board of
directors intends to present the following nominees for election as directors:
Edward K. Chandler Thomas F. Farb
Alex W. Hart Charles H. Gaylord, Jr.
John Mutch
2. A proposal to amend our Certificate of Incorporation to increase the
number of shares of common stock from 50,000,000 shares to 120,000,000 shares.
3. A proposal to approve an amendment to our 1995 Equity Incentive Plan to
increase the number of shares of common stock reserved for issuance under the
plan by 1,850,000 shares.
4. A proposal to approve an amendment to our 1995 Employee Stock Purchase
Plan to increase the number of shares of common stock reserved for issuance
under the plan by 200,000 shares and to provide that the number of shares of
common stock reserved for issuance under the plan will be automatically
increased each January 1 by an amount equal to 1% of the total number of shares
outstanding on the previous December 31.
5. A proposal to approve an amendment to our 1995 Directors Stock Option
Plan to increase the number of shares of common stock reserved for issuance
under the plan by 250,000 shares.
6. A proposal to ratify the selection of PricewaterhouseCoopers LLP as our
independent accountants for 2000.
7. To transact the other business that may properly come before the meeting
or any adjournment or postponement of the meeting.
These items of business are more fully described in the attached proxy
statement. Only stockholders of record at the close of business on March 31,
2000 are entitled to notice of and to vote at the meeting or any adjournment or
postponement of the meeting.
By Order of the Board of Directors
/s/ Kenneth J. Saunders
-------------------------------------
Kenneth J. Saunders
Chief Financial Officer and Secretary
San Diego, California
April 21, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, DATE,
SIGN AND PROMPTLY RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT
YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
<PAGE>
HNC SOFTWARE INC.
5935 CORNERSTONE COURT WEST
SAN DIEGO, CALIFORNIA 92121-3728
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PROXY STATEMENT
------------------
APRIL 21, 2000
The accompanying proxy is solicited on behalf of the board of directors of HNC
Software Inc., a Delaware corporation, for use at the 2000 annual meeting of
stockholders to be held at our offices at 5935 Cornerstone Court West, San
Diego, California, on Thursday, May 25, 2000, at 10:00 a.m., local time. This
proxy statement and the accompanying form of proxy were first mailed to
stockholders on or about April 21, 2000. An annual report for 1999 is enclosed
with this proxy statement.
RECORD DATE; QUORUM
Only holders of record of common stock at the close of business on March 31,
2000 will be entitled to vote at the meeting. The presence at the meeting, in
person or by proxy, of a majority of the shares outstanding on that date will
constitute a quorum for the transaction of business. At the close of business on
the record date, we had 26,560,695 shares of common stock outstanding and
entitled to vote.
VOTING RIGHTS; REQUIRED VOTE
Stockholders are entitled to one vote for each share held as of the record date.
Shares may not be voted cumulatively. If a broker, bank, custodian, nominee or
other record holder of our common stock indicates on a proxy that it does not
have discretionary authority to vote shares on a particular matter, a "broker
non-vote," then those shares will not be considered present and entitled to vote
on that matter, although they will be counted in determining whether or not a
quorum is present at the meeting.
Directors are elected by a plurality of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. Approval of proposal no. 2 requires the affirmative vote of a
majority of the shares of common stock outstanding. Abstentions and broker
non-votes will have the effect of a vote against proposal no. 2. Approval of
proposals no. 3, 4, 5 and 6 requires the affirmative vote of the majority of the
shares 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 on those proposals. The inspector of elections appointed
for the meeting will separately tabulate, for each proposal, affirmative and
negative votes, abstentions and broker non-votes.
VOTING OF PROXIES
The proxy accompanying this proxy statement is solicited on behalf of the board
of directors. We ask all stockholders to complete, date and sign the proxy and
promptly return it in the enclosed envelope or otherwise mail it to HNC. All
signed, returned proxies that are not revoked will be voted in accordance with
the instructions contained in the proxy; however, returned signed proxies that
give no instructions as to how they should be voted on a particular proposal
will be counted as votes "for" that proposal. In the case of the election of
directors, proxies that give no instructions as to how they should be voted will
be counted as voted "for" election to the board of all the nominees presented by
the board.
If sufficient votes in favor of the proposals are not received by the date of
the meeting, the persons named as proxies may propose one or more adjournments
of the meeting to permit further solicitations of proxies. Any adjournment
requires the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting.
<PAGE>
HNC will pay the expenses of soliciting the proxies for the meeting. After the
original mailing of the proxies and other soliciting materials, we and/or our
agents may also solicit proxies by mail, telephone, telegraph or in person.
After the original mailing of the proxies and other soliciting materials, we
will request that brokers, custodians, nominees and other record holders of our
common stock forward copies of the proxy and other soliciting materials to
persons for whom they hold shares and request authority for the exercise of
proxies. We reimburse those record holders for their reasonable expenses upon
request. We have retained Corporate Investors Communications, an independent
proxy solicitation firm, to assist in soliciting proxies at an estimated fee of
$6,000 plus reimbursement of reasonable expenses.
REVOCABILITY OF PROXIES
A stockholder may revoke a proxy at any time before it is voted by signing and
returning a proxy bearing a later date, by delivering a written notice of
revocation to HNC stating that the proxy is revoked or by attending 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 the stockholder's beneficial ownership
of the shares and that the broker, bank or other nominee is not voting the
shares at the meeting.
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<PAGE>
PROPOSAL NO. 1--ELECTION OF DIRECTORS
The board currently consists of six directors, five of whom are nominated for
reelection at the meeting. Robert L. North is not standing for reelection at the
meeting. Immediately before the meeting, the size of the board will be set at
five members. At the meeting, stockholders will elect directors to hold office
until the next annual meeting of stockholders and until their respective
successors have been duly elected and qualified or until the director's earlier
resignation, death or removal.
Shares represented by the accompanying proxy will be voted "for" the election of
the five nominees recommended by the board unless the proxy is marked to
withhold authority to vote. If any nominee for any reason is unable to serve or
for good cause will not serve, the proxies may be voted for a substitute nominee
as the proxy holder may determine. We are not aware of any nominee who will be
unable to or for good cause will not serve as a director.
DIRECTORS/NOMINEES
The names of the nominees, and certain information about them, are set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION SINCE
- ---------------- --- -------------------- -------
<S> <C> <C> <C>
Edward K. Chandler (1)....... 42 Managing Director, Graystone Venture Partners, LLC 1991
Alex W. Hart (2)............. 59 Independent Consultant to the financial services industry 1998
Thomas F. Farb (1)........... 43 General Partner and Chief Financial Officer, Summit Partners 1987
Charles H. Gaylord, Jr. (2).. 54 Private technology investor 1995
John Mutch................... 43 President and Chief Executive Officer, HNC Software Inc. 1999
</TABLE>
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(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Edward K. Chandler has been a director of HNC since August 1991. Since July
1991, he has been president of Prairie-EKC, Inc., a partner of the general
partner of PCE 1991 Limited Partnership, a venture capital firm, and a principal
of Prairie Capital Partnership, a venture capital firm. Since November 1996,
Chandler has also been a managing director of Graystone Venture Partners, LLC, a
venture capital firm. He holds a bachelor's of arts degree in economics from
Yale University and a master's degree in business administration from Harvard
University.
Alex W. Hart has been a director of HNC since October 1998. Since February 1998,
he has been an independent consultant to the financial services industry. From
August 1996 to February 1998, Hart served as chief executive officer of Advanta
Corporation, a diversified financial services company. From March 1994 to August
1996, Hart served as executive vice chairman of Advanta Corporation. From
November 1988 to March 1994, he served as president and chief executive officer
of MasterCard International. He holds a bachelor's of arts degree in social
relations from Harvard University and has completed studies at the Graduate
School of Bank Marketing at the University of Colorado and the Graduate Program
for Data Processing Management at Harvard Business School.
Thomas F. Farb has been a director of HNC since November 1987. Since September
1998, he has served as general partner and chief financial officer of Summit
Partners, a private investment firm. From April 1994 to August 1998, Farb served
as senior vice president, chief financial officer and treasurer of Interneuron
Pharmaceuticals, Inc., a publicly-held diversified pharmaceutical company, and
as an officer of several of its subsidiaries. From October 1992 to March 1994,
Farb served as vice president of corporate development, chief financial officer
and controller of Cytyc Corporation, a medical device and diagnostics company.
Farb also serves as a director of Redwood Trust, Inc., a California-based
publicly-held Real Estate Investment Trust. He holds a bachelor's of arts degree
in sociology from Harvard University.
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<PAGE>
Charles H. Gaylord, Jr. has been a director of HNC since May 1995. He is
currently a private technology investor and a director of Stac Inc., a
publicly-held software company. From December 1993 to September 1994, Gaylord
served as executive vice president of Intuit Inc., a publicly-held personal and
small business finance software company, following Intuit's acquisition of
ChipSoft, Inc., a tax preparation software company. Before that acquisition,
from June 1990 to December 1993, he served first as president and chief
executive officer and a director of ChipSoft and then as chairman of the board
of directors and chief executive officer. He holds bachelor's and master's of
science degrees in aerospace engineering from Georgia Institute of Technology
and a master's degree in business administration from Harvard University.
John Mutch has been a director of HNC since December 1999. He was appointed
president and chief executive officer during December 1999. Mutch joined us in
July 1997, where he served initially as vice president, marketing, until
September 1998, and later as president of HNC Insurance Solutions from September
1998 to December 1999. He was a founder of MVenture Holdings, Inc., a private
equity fund that invests in start-up technology companies, and served as a
general partner from June 1994 to July 1997. From December 1986 to June 1997,
Mutch held a variety of executive marketing positions with Microsoft
Corporation, including director of organization marketing. He holds a bachelor's
of science degree in applied economics from Cornell University and a master's
degree in business administration from the University of Chicago.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
BOARD OF DIRECTORS. During 1999, the Board met 21 times, including telephone
conference meetings, and acted by written consent six times. No director
attended fewer than 75% of the total number of meetings of the board held while
he was a director and the total number of meetings held by all committees of the
board on which the director served during the time he served.
Standing committees of the board include an audit committee and a compensation
committee. The board does not have a nominating committee or a committee
performing similar functions.
AUDIT COMMITTEE. Chandler and Farb are the current members of the audit
committee. The audit committee met five times during 1999. The audit committee
meets with our independent accountants to review the adequacy of our internal
control systems and financial reporting procedures; reviews the general scope of
our annual audit and the fees charged by the independent accountants; reviews
and monitors the performance of non-audit services by our auditors, reviews the
fairness of any proposed transaction between HNC and any officer, director or
other affiliate of HNC (other than transactions subject to the review of the
compensation committee), and after review, makes recommendations to the full
board; and performs further functions as may be required by any stock exchange
or over-the-counter market upon which the HNC common stock may be listed.
COMPENSATION COMMITTEE. Gaylord and Hart are the current members of the
compensation committee. Oliver D. Curme was a member of the compensation
committee until April 1999, when his term as a director ended. During 1999, the
compensation committee met 16 times. The compensation committee recommends
compensation for our officers and employees, grants (or delegates authority to
grant) options and stock awards under our employee benefit plans, and reviews
and recommends adoption of and amendments to stock option and employee benefit
plans.
DIRECTOR COMPENSATION
We reimburse board members for reasonable expenses associated with their
attendance at board meetings. We pay Farb a fee of $1,000 for each board meeting
he attends. None of the other board members 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 our 1995 Directors Stock Option Plan. During 1999, Chandler,
Farb, and Gaylord were each granted an option under this plan to purchase 10,000
shares of common stock at a price of $29.6875 per share.
4
<PAGE>
During 1999, Hart was granted an option under this plan to purchase 10,000
shares of common stock at a price of $39.9375 per share.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH
NOMINATED DIRECTOR.
5
<PAGE>
PROPOSAL NO. 2: APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
In April 2000, the board approved an amendment to our certificate of
incorporation, subject to stockholder approval, to increase the number of
authorized shares of common stock by 70,000,000 shares. This amendment will
increase the number of shares authorized from 50,000,000 shares to
120,000,000 shares. The amendment will not affect the par value of the common
stock, which will remain at $0.001 per share. No other change in the rights
of stockholders is proposed. This proposed increase would result in
additional shares being available for, among other things, stock splits,
stock dividends, issuance from time to time for other corporate purposes,
such as acquisitions of companies or pursuant to stock options or other
employee benefit plans. HNC believes that the availability of the additional
shares will provide it with the flexibility to meet business needs as they
arise, to take advantage of favorable opportunities and to respond to a
changing corporate environment.
As of December 31, 1999, approximately 25,704,000 of our authorized shares of
common stock were issued and outstanding. Of the remaining 24,296,000 shares
of common stock, approximately 10,812,000 were reserved for issuance under
our stock benefit plans and upon conversion of our convertible notes. If the
proposed amendment is approved, we will have approximately 13,484,000 shares
of common stock that are authorized, but that are not outstanding or reserved
for future issuance.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT
OF THE CERTIFICATE OF INCORPORATION.
6
<PAGE>
PROPOSAL NO. 3: APPROVAL OF AMENDMENT TO THE 1995 EQUITY INCENTIVE PLAN
In April 2000, the board adopted, subject to stockholder approval, an
amendment to our 1995 Equity Incentive Plan to increase the number of shares
of common stock reserved for issuance under the plan by 1,850,000 shares. We
are now asking the stockholders to approve the amendment.
The board believes that the increase in the number of shares reserved for
issuance under the incentive plan is in the best interests of HNC because of
the continuing need to provide stock options to attract and retain quality
employees in order to remain competitive in the industry. The granting of
equity incentives under the incentive plan plays an important role in our
efforts to attract and retain employees of outstanding ability. Competition
for skilled engineers and other key employees in the software industry is
intense and the use of significant stock options for retention and motivation
of personnel is pervasive in the high technology industries. The board
believes that the additional reserve of shares for equity incentives will
provide us with adequate flexibility to ensure that we can continue to meet
those goals and facilitate expansion of our employee base.
The closing price of HNC common stock on the Nasdaq National Stock Market was
$72.06 per share on March 31, 2000.
Below is a summary of the principal provisions of the incentive plan. The
summary is qualified in its entirety by reference to the full text of the
incentive plan, which may be obtained from HNC. The incentive plan is also on
file with the Securities and Exchange Commission and is available at the
SEC's website at www.sec.gov.
INCENTIVE PLAN HISTORY. The board and stockholders originally adopted and
approved the incentive plan in May 1995. The Board and stockholders amended
it once in each of 1996, 1997 and 1999 and twice in 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
HNC's future performance through awards of stock options, restricted stock
and stock bonuses. From the inception of the incentive plan through December
31, 1999, options to purchase a total of 8,414,899 shares were granted under
the incentive plan, of which options to purchase 2,671,185 shares were
canceled. During the same time period, options were granted under the
incentive plan to the executive officers named in the Summary Compensation
Table, as follows:
John Mutch, 485,000 shares;
Kenneth J. Saunders, 136,238 shares;
Earl V. Malit, 25,000 shares;
J. Anthony Patterson, 50,000 shares;
John Buchanan, 121,214 shares;
Robert L. North, 150,626 shares;
Raymond V. Thomas, 51,214 shares; and
Michael A. Thiemann, 140,000 shares.
During the same time period, the current executive officers as a group (10
persons) were granted options under the incentive plan to purchase a total of
817,452 shares, and options to purchase a total of 7,597,447 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 or to any associate of any executive officer or director of HNC. 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, 1999, with
exception that John Mutch was granted 5.8% of total options granted. No
significant grants have been made to any of the executive officers named in
the Summary Compensation Table during 2000.
7
<PAGE>
SHARES SUBJECT TO THE INCENTIVE PLAN. The stock subject to issuance under the
incentive plan consists of shares of authorized but unissued common stock.
The number of shares currently reserved for issuance under the incentive plan
is the sum of 7,250,000 shares plus shares transferred to the incentive plan
from our 1987 Stock Option Plan. Shares transferred to the incentive plan
from the 1987 plan consist of shares that were unissued and not subject to
outstanding options under the 1987 plan on the effective date of the
incentive plan, and shares issuable upon exercise of options granted under
the 1987 plan that expire or become unexercisable for any reason without
having been exercised in full. These shares are no longer available for
distribution under the 1987 plan but are available for distribution under the
incentive plan. If any option granted under the incentive plan expires or
terminates for any reason without being exercised in whole or in part, then
the shares released from the option will again become available for grant and
purchase under the incentive plan. As of December 31, 1999, there were a
total of 7,487,838 shares of common stock reserved for issuance under the
incentive plan. This number of shares is subject to proportionate adjustment
to reflect stock splits, stock dividends and other similar events. In
addition, 1,430,000 shares of common stock have been reserved for issuance
under HNC's 1998 Stock Option Plan; and 1,251,327 shares of common stock have
been reserved for issuance under option plans that HNC has assumed in
connection with acquisitions through December 31, 1999. A total of 242,393
shares are currently available for future grants under HNC's 1998 Stock
Option Plan; no additional shares will be granted from plans that HNC has
assumed in connection with acquisitions through December 31, 1999.
ELIGIBILITY. Employees, officers, directors, consultants, independent
contractors and advisors of HNC (and of any of its subsidiaries and
affiliates) are eligible to receive awards under the incentive plan. No
participant is eligible to receive more than 500,000 shares of common stock
in any calendar year under the incentive plan, other than new employees of
HNC (including directors and officers who are also new employees) who are
eligible to receive up to a maximum of 700,000 shares in the calendar year in
which they start their employment with HNC. As of December 31, 1999,
approximately 700 persons were eligible to participate in the incentive plan,
1,600,286 shares had been issued upon exercise of options granted under the
incentive plan and 4,143,428 shares were subject to outstanding options. As
of that date, 1,744,124 shares were available for future grant.
ADMINISTRATION. The incentive plan is administered by the compensation
committee of the board. The members of the committee are appointed by the
board and are "NON-EMPLOYEE DIRECTORS," as defined in Rule 16b-3 under the
Securities Exchange Act and "OUTSIDE DIRECTORS," as defined in Section 162(m)
of the Internal Revenue Code. The committee currently consists of Charles H.
Gaylord, Jr. and Alex W. Hart. Oliver D. Curme was a member of the
compensation committee until April 1999, when his term as a director ended.
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 HNC's
President and Chief Executive Officer to make option grants to non-officer
employees within specified ranges of shares based on the position and grade
level for the employee and 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 under the incentive
plan.
STOCK OPTIONS. The incentive plan permits grants of options that are intended
to qualify either as incentive options or nonqualified options. Incentive
options may be granted only to employees (including officers and directors
who are also employees) of HNC or any parent or subsidiary of HNC. The per
share exercise price for each incentive option must be no less than the "fair
market value" (as defined in the incentive plan) of a share of common stock
at the time the option is granted. In the case of an incentive option granted
to a 10% stockholder, the per share exercise price must be no less than 110%
of the fair market value of a share of common stock at the time the option is
granted. Options granted under the incentive plan before August 1999
generally have a term of up to ten years, and options granted after August
1999 generally have a term of up to seven years.
Participants may pay the exercise price of options granted under the incentive
plan as approved by the committee at the time of grant: (1) in cash (by check);
(2) by cancellation of indebtedness we owe to the
8
<PAGE>
participant; (3) by surrender of shares of HNC common stock, as long as the
participant has owned the shares for at least six months and the shares
surrendered have a fair market value on the date of surrender equal to the
total 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.
broker; (7) by a "margin" commitment from the Participant and an NASD broker;
or (8) by any combination of the foregoing.
RESTRICTED STOCK AWARDS. The committee may grant restricted stock awards to
purchase stock to eligible participants, either in addition to, or in tandem
with, other awards under the incentive plan. The committee determines the
terms, conditions and restrictions of the awards. The purchase price for
restricted stock awards must be no less than the fair market value of HNC
common stock on the date of the award and can be paid for in any of the forms
of consideration listed in items (1) through (5) in "Stock Options" above, as
are approved by the Committee at the time of grant. To date, HNC has not
granted any restricted stock awards under the incentive plan.
STOCK BONUS AWARDS. The committee may grant stock bonus awards to eligible
participants, either in addition to, or in tandem with, other awards under
the incentive plan. The committee determines the terms, conditions and
restrictions of the stock bonuses. To date, HNC has not granted any stock
bonus awards under the incentive plan and does not intend to grant stock
bonus awards from shares now reserved or now proposed to be reserved under
the incentive plan.
MERGERS, CONSOLIDATIONS, CHANGE OF CONTROL. In the event of a merger,
consolidation, dissolution or liquidation of HNC, the sale of substantially
all of the assets of HNC or any other similar corporate transaction, the
successor corporation may assume, replace or substitute equivalent awards in
exchange for those granted under the incentive plan or provide substantially
similar consideration, shares or other property as was provided to
stockholders of HNC in the transaction (after taking into account the
provisions of the awards). If the successor corporation does not assume or
substitute the awards, the awards will expire upon the closing of the
transaction at the time and upon the 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 signed under the incentive plan. However, the
board and the committee may not, without stockholder approval, amend the
incentive plan in any manner that requires stockholder approval under the
Internal Revenue Code or the regulations under the Internal Revenue Code, or
under the Securities Exchange Act or Rule 16b-3 (or its successor) under the
Securities Exchange Act.
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
it was adopted by the board.
FEDERAL INCOME TAX INFORMATION. THE FOLLOWING IS A GENERAL SUMMARY AS OF THE
DATE OF THIS PROXY STATEMENT OF THE FEDERAL INCOME TAX CONSEQUENCES TO HNC AND
PARTICIPANTS UNDER THE INCENTIVE PLAN. THE FEDERAL TAX LAWS MAY CHANGE AND THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPANT WILL DEPEND UPON
THE PARTICIPANT'S INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPANT HAS BEEN AND IS
ENCOURAGED TO SEEK THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX
CONSEQUENCES OF PARTICIPATION IN THE INCENTIVE PLAN.
INCENTIVE STOCK OPTIONS. A participant will recognize no income upon grant of
an incentive option and will incur no tax on its exercise, unless the
participant is subject to the alternative minimum tax as described below. If
the participant holds shares acquired upon exercise of an incentive option
for more than one year after the date the incentive option was exercised and
for more than two years after the date it was granted, the participant
generally will realize capital gain or loss (rather than ordinary income or
loss) upon disposition of the shares. The amount of this gain or loss will be
equal to the difference between the amount realized upon the disposition of
the shares and the option exercise price.
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<PAGE>
If the participant disposes of shares acquired upon exercise of an incentive
option before the expiration of either required holding period, then the gain
realized upon the disposition, up to the difference between the fair market
value of the shares on the date of exercise (or, if less, the amount realized
on a sale of the 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
shares acquired upon exercise of an incentive option on the date of exercise
and the exercise price for the shares is an adjustment to income for purposes
of the alternative minimum tax. Taxpayers must pay alternative minimum tax if
the amount of the alternative minimum tax is more than their regular income
tax. The amount of the alternative minimum tax is 26% of the portion of an
individual taxpayer's alternative minimum taxable income (28% of that portion
if the alternative minimum taxable income is more than $175,000). For
alternative minimum taxable income that would otherwise be taxable as net
capital gain, the maximum alternative minimum tax rate is 20%. Alternative
minimum taxable income is determined by adjusting regular taxable income for
certain items, increasing that income by specified tax preference items and
reducing this amount by the applicable exemption amount ($45,000 in case of a
joint return, subject to reduction under certain circumstances). The
difference between the fair market value of shares acquired upon the exercise
of an incentive option on the date of exercise and the exercise price is a
tax preference item for this purpose. If the taxpayer disposes of the shares
before the expiration of either required holding period, but the disposition
occurs in the same calendar year as exercise of the incentive option, there
is no alternative minimum tax adjustment for those shares. Also, upon a sale
of 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 shares at exercise over the amount paid for the shares.
NONQUALIFIED STOCK OPTIONS. A participant will not recognize any taxable
income at the time a nonqualified option is granted. However, upon exercise
of a nonqualified option, the participant must include the spread in income
as compensation. The spread is the difference between the fair market value
of the purchased shares on the date of exercise and the exercise price of the
shares. The participant must treat the included amount as ordinary income.
The included amount may be subject to withholding by HNC, either by payment
in cash or withholding out of the participant's salary. When the participant
sells the shares, 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 nonqualified options.
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 HNC. HNC generally will be entitled to a deduction in
connection with the exercise of a nonqualified option or the receipt of
restricted stock or stock bonuses by a participant to the extent that the
participant recognizes ordinary income, provided that HNC timely reports the
income to the Internal Revenue Service. HNC will be entitled to a deduction
in connection with the disposition of shares acquired upon the exercise of an
incentive option only to the extent that the participant recognizes ordinary
income on a disqualifying disposition of the shares.
ERISA. The incentive plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 and is not qualified under
Section 401(a) of the Internal Revenue Code.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT
TO THE 1995 EQUITY INCENTIVE PLAN.
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PROPOSAL NO. 4: AMENDMENT OF 1995 EMPLOYEE STOCK PURCHASE PLAN
Stockholders are being asked to approve an amendment to our 1995 Employee
Stock Purchase Plan to increase the number of shares of common stock reserved
for issuance under the plan by 200,000 shares, from 650,000 shares to 850,000
shares. The amendment will also provide for an automatic increase each year
in the pool of shares reserved for issuance under the employee stock purchase
plan equal to 1% of the total shares outstanding at the end of the previous
year. The board believes that the increase in the number of shares reserved
for issuance under the stock purchase plan is in the best interests of HNC
because there is a continuing need to provide equity participation to attract
and retain quality employees and remain competitive in the industry. We
believe that the stock purchase plan plays an important role in our efforts
to attract and retain employees of outstanding ability.
The board approved the proposed amendment in March 2000, to be effective upon
stockholder approval. Below is a summary of the principal provisions of the
stock purchase plan. The summary is qualified in its entirety by reference to
the full text of the stock purchase plan, which may be obtained from HNC. The
stock purchase plan is also on file with the Securities and Exchange
Commission and is available at the SEC's Web site at www.sec.gov.
STOCK PURCHASE PLAN HISTORY. The stock purchase plan was adopted by the board
and approved by the stockholders in May 1995. In January 1998, the Board
amended the stock purchase plan to permit participants to increase the
percentage of their payroll deductions once during an open 12 month Offering
Period. The board and stockholders amended it in 1999 to increase the number
of shares available for issuance under the plan. The purpose of the plan is
to provide participating employees with a convenient means of acquiring an
equity interest in HNC through payroll deductions, to enhance their sense of
participation in the affairs of HNC, and to provide an incentive for
continued employment. We intend that the stock purchase plan will qualify as
an "employee stock purchase plan" under Section 423 of the Internal Revenue
Code.
SHARES SUBJECT TO THE STOCK PURCHASE PLAN. The stock subject to issuance
under the stock purchase plan consists of shares of our authorized but
unissued common stock. The board has reserved a total of 850,000 shares of
common stock for issuance under the stock purchase plan, subject to
stockholder approval. This number of shares is subject to proportional
adjustment to reflect stock splits, stock dividends and other similar events.
ADMINISTRATION. The compensation committee of the board administers the stock
purchase plan. The interpretation or construction by the committee of any
provisions of the plan will be final and binding on all participating
employees.
ELIGIBILITY. All employees of HNC, or any subsidiary of HNC designated by the
board as eligible to participate in the stock purchase plan, are eligible to
participate in an Offering Period (as defined below) under the plan, except
the following:
employees who are not employed by HNC or any subsidiary of HNC one
month before the beginning of the Offering Period;
employees who are customarily employed for less than 20 hours per week;
employees who are customarily employed for less than five months in a
calendar year; and
employees who own stock or hold options to purchase stock, or as a
result of participation in the stock purchase plan would own stock or
hold options to purchase stock, with 5% or more of the total combined
voting power or value of all classes of our stock.
As of December 31, 1999, approximately 1,000 persons were eligible to
participate in the stock purchase plan for the offering period beginning
August 1, 1999. At that date, 327,464 shares had been issued under the stock
purchase plan and 322,536 shares were available for future issuance, not
including the proposed
11
<PAGE>
amendment. The closing price of the common stock on the Nasdaq National Stock
Market was $72.06 per share on March 31, 2000.
Participating employees participate in the stock purchase plan through
payroll deductions. A participating employee sets the rate of payroll
deductions, which may not be less than 2% nor more than 10% of the
participating employee's W-2 compensation, including base salary, wages,
commissions, overtime, shift premiums, bonuses and draws against commissions,
and before any deductions under Sections 125 or 401(k) of the Internal
Revenue Code. No participating employee is permitted to purchase shares under
the stock purchase plan at a rate which, when added to the employee's rights
to purchase stock under all similar purchase plans of HNC, exceeds $25,000 in
fair market value determined as of the Offering Date for each calendar year.
OFFERING PERIODS. Each offering of common stock under the stock purchase plan
is for a period of 12 months (the "OFFERING PERIOD"). Offering Periods start
on February 1 and August 1 of each year and end on January 31 and July 31 of
each year. Each Offering Period consists of two six-month purchase periods
(individually, a "PURCHASE PERIOD") during which payroll deductions of the
participating employees are accumulated. The board has the power to set the
beginning date of any Offering Period and to change the dates or the duration
of Offering Periods or Purchase Periods without stockholder approval if the
change is announced at least 15 days before the scheduled beginning of the
first Offering Period or Purchase Period to be affected. The first day of
each Offering Period is the "OFFERING DATE" for that Offering Period and the
last business day of each Purchase Period is the "PURCHASE DATE" for that
Purchase Period.
Participating employees may elect to participate in any Offering Period by
enrolling as provided under the terms of the stock purchase plan. Once
enrolled, a participating employee will automatically participate in each
succeeding Offering Period unless the participating employee withdraws from
the Offering Period or the stock purchase plan is terminated. After the rate
of payroll deductions for an Offering Period is set by a participating
employee, that rate is effective for the remainder of the Offering Period
(and for all subsequent Offering Periods in which the participating employee
is automatically enrolled) unless otherwise changed by the participating
employee. The participating employee may increase or lower the rate of
payroll deductions a maximum of once during a single Offering Period. A
participating employee may increase or decrease the rate of payroll
deductions for any subsequent Offering Period not later than the 15th day of
the month before the beginning of that offering period.
PURCHASE PRICE. The purchase price of shares that may be acquired in any
Purchase Period under the stock purchase plan is 85% of the lesser of: (i)
the fair market value of the shares on the Offering Date; or (ii) the fair
market value of the shares on the Purchase Date. The fair market value of a
share of the common stock is defined as the closing price on the Nasdaq
National Market on the last trading date before the date of determination (or
the average closing price over the number of consecutive trading days before
the date of determination as the board determines to be appropriate).
PURCHASE OF STOCK UNDER THE STOCK PURCHASE PLAN. The number of whole shares a
participating employee will be able to purchase in any Purchase Period is
determined by dividing the total payroll amount withheld from the
participating employee during the Purchase Period under the stock purchase
plan by the purchase price for each share determined as described above. The
purchase takes place automatically on the Purchase Date of that Purchase
Period.
WITHDRAWAL. A participating employee may withdraw from any Offering Period.
Upon withdrawal, the accumulated payroll deductions will be returned to the
withdrawn participating employee, without interest, provided that the
withdrawal occurs at least 15 days before the related Purchase Date. If the
withdrawal occurs less than 15 days before such Purchase Date, payroll
deductions will continue for the remainder of that Offering Period. No
further payroll deductions for the purchase of shares will be made for the
succeeding Offering Period unless the participating employee enrolls in the
new Offering Period at least 15 days before the Offering Date.
12
<PAGE>
AMENDMENT OF THE STOCK PURCHASE PLAN. The board may at any time amend,
terminate or extend the term of the stock purchase plan, except that any
termination cannot affect the terms of shares previously granted under the
stock purchase plan, and any amendment cannot change the terms of shares
previously granted which would adversely affect the right of any
participating employee. In addition, any amendment must have stockholder
approval if the amendment would: (a) increase the number of shares that may
be issued under the stock purchase plan; (b) change the designation of the
employees (or class of employees) eligible for participation in the stock
purchase plan; or (c) constitute an amendment for which stockholder approval
is required in order to comply with Rule 16b-3 (or any successor rule) of the
Securities Exchange Act of 1934.
TERM OF THE STOCK PURCHASE PLAN. The stock purchase plan will continue until
the earlier to occur of: (a) termination of the stock purchase plan by the
board; (b) the issuance of all the shares of common stock reserved for
issuance under the stock purchase plan; or (c) May 2005, ten years after the
date the board adopted the stock purchase plan.
FEDERAL INCOME TAX INFORMATION. THE FOLLOWING IS A GENERAL SUMMARY AS OF THE
DATE OF THIS PROXY STATEMENT OF THE FEDERAL INCOME TAX CONSEQUENCES TO HNC
AND EMPLOYEES PARTICIPATING IN THE STOCK PURCHASE PLAN. THE FEDERAL TAX LAWS
MAY CHANGE AND THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES FOR ANY
PARTICIPATING EMPLOYEE WILL DEPEND UPON THE EMPLOYEE'S INDIVIDUAL
CIRCUMSTANCES. EACH PARTICIPATING EMPLOYEE HAS BEEN AND IS ENCOURAGED TO SEEK
THE ADVICE OF A QUALIFIED TAX ADVISER REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE STOCK PURCHASE PLAN.
The stock purchase plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code.
TAX TREATMENT OF THE PARTICIPATING EMPLOYEE. Participating employees will not
recognize income for federal income tax purposes either upon enrollment in
the stock purchase plan or upon the purchase of shares. All tax consequences
are deferred until a participating employee sells the shares, disposes of the
shares by gift or dies.
If shares are held for more than one year after the date of purchase and more
than two years from the beginning of the applicable Offering Period, or if
the participating employee dies while owning the shares, the participating
employee will realize ordinary income on a sale (or a disposition by way of
gift or upon death) to the extent of the lesser of: (a) 15% of the fair
market value of the shares at the beginning of the Offering Period; or (b)
the actual gain (the amount by which the market value of the shares on the
date of sale, gift or death exceeds the purchase price). All additional gain
upon the sale of shares is treated as capital gain. If the shares are sold
and the sale price is less than the purchase price, there is no ordinary
income and the participating employee has a capital loss for the difference
between the sale price and the purchase price.
If the shares are sold or are otherwise disposed of, including by way of gift
(but not death, bequest or inheritance) (in any case, a "DISQUALIFYING
DISPOSITION") within either the one-year or the two-year holding periods
described above, the participating employee will realize ordinary income at
the time of sale or other disposition, taxable to the extent that the fair
market value of the shares at the date of purchase is greater than the
purchase price. This excess will constitute ordinary income (not currently
subject to withholding) in the year of the sale or other disposition even if
no gain is realized on the sale or if a gratuitous transfer is made. The
difference, if any, between the proceeds of sale and the aggregate fair
market value of the shares at the date of purchase is a capital gain or loss.
The maximum tax rate applicable to ordinary income is 39.6%. Long-term
capital gain is taxed at a maximum rate of 20%. To receive long-term capital
gain treatment, the stock must be held for more than one year. Capital gains
may be offset by capital losses and up to $3,000 of capital losses may be
offset annually against ordinary income.
TAX TREATMENT OF HNC. HNC will be entitled to a deduction in connection with
the disposition of shares acquired under the stock purchase plan only to the
extent that the participating employee recognizes ordinary income on a
disqualifying disposition of the shares. We will treat any transfer of record
ownership of shares as a disposition, unless we are notified to the contrary.
In order to enable us to learn of disqualifying dispositions and ascertain
the amount of the deductions to which we are entitled, participating
employees are
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<PAGE>
required to notify us in writing of the date and terms of any disposition of
shares purchased under the stock purchase plan.
ERISA. The stock purchase plan is not subject to any of the provisions of
ERISA nor is it qualified under Section 401(a) of the Internal Revenue Code.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF THE
1995 EMPLOYEE STOCK PURCHASE PLAN
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PROPOSAL NO. 5 - AMENDMENT OF 1995 DIRECTORS STOCK OPTION PLAN
Stockholders are being asked to approve an amendment to our 1995 Directors
Stock Option Plan to increase the number of shares of common stock reserved
for issuance under the plan by 250,000 shares, from 500,000 shares to 750,000
shares. The board believes that the increase in the number of shares reserved
for issuance under the directors plan is in the best interests of HNC because
of the continuing need to provide equity participation to attract and retain
quality outside directors. The directors plan plays an important role in our
efforts to attract and retain outside directors of outstanding ability.
The board approved the proposed amendment in March 2000, to be effective upon
stockholder approval. Below is a summary of the principal provisions of the
directors plan. The summary is qualified in its entirety by reference to the
full text of the directors plan, which may be obtained from HNC. The
directors plan is also on file with the Securities and Exchange Commission
and is available at the SEC's website at www.sec.gov.
DIRECTORS PLAN HISTORY. The directors plan was adopted by the board and
stockholders in May 1995. The board and stockholders amended it in 1999 to
increase the number of shares available for issuance under the plan. The
purpose of the directors plan is to enhance our ability through the use of
equity incentives to attract and retain highly qualified outside directors.
STOCK SUBJECT TO OPTIONS. The stock subject to options under the directors
plan consists of shares of our authorized but unissued common stock. A total
of 750,000 shares may be issued under the directors plan, subject to
stockholder approval. This number of shares is subject to proportional
adjustment to reflect stock splits, stock dividends and other similar events.
If any outstanding option under the directors plan expires or is terminated
for any reason, the shares of common stock allocable to the unexercised
portion of that option will again be available for the grant of options under
the directors plan.
ADMINISTRATION. The directors plan is administered by the board. The
interpretation by the board of any of the provisions of the directors plan or
any option granted under the directors plan will be final and conclusive.
ELIGIBILITY. Under the directors plan, HNC may grant options to each director
who is not an employee of HNC (or of any parent, subsidiary or affiliate of
HNC) in accordance with the formula specified in the next paragraph. As of
December 31, 1999, five persons were eligible to receive options under the
directors plan, 125,000 shares had been issued upon exercise of options and
our current non-employee directors, as a group, had been granted options to
purchase a total of 330,000 shares under the directors plan. As of December
31, 1999, 155,000 shares were subject to outstanding options and 220,000
shares were available for future option grants under the directors plan. The
closing price of our common stock on the Nasdaq National Market was $72.06
per share on March 31, 2000, the record date.
FORMULA FOR OPTION GRANTS. Each outside director will automatically be
granted an option to purchase 25,000 shares of common stock on the date the
outside director first becomes a member of the board (an "INITIAL GRANT"). At
each anniversary of the Initial Grant to an individual outside director
thereafter, the outside director will automatically be granted an additional
option to purchase 10,000 shares of common stock, so long as he or she
continuously remains a director of HNC (a "SUCCEEDING GRANT").
TERMS OF OPTION GRANTS. Options granted under the directors plan are intended
to be non-qualified options. Each Initial Grant and each Succeeding Grant
will have a term of ten years and be exercisable as they vest. The shares
subject to the Initial Grant vest as follows, so long as the outside director
continuously remains a director of HNC: (i) 40% of the shares vest on the
first anniversary of the Initial Grant; (ii) 30% of the shares vest on the
second anniversary of the Initial Grant; (iii) 20% of the shares vest on the
third anniversary of the Initial Grant; and (iv) the remaining 10% of the
shares vest on the fourth anniversary of the Initial Grant. Each Succeeding
Grant will vest at the rate of 25% per year beginning on the first
anniversary of the date of the Succeeding Grant, so long as the outside
director continuously remains a
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director of HNC. The option exercise price will be the fair market value (as
defined in the directors plan) of the common stock as of the date of the
grant. The option exercise price will be payable in cash (by check) and in a
number of other forms of consideration, including fully paid shares of common
stock owned by the outside director for more than six months, by waiver of
compensation due or accrued to the outside director for services rendered,
through a "same day sale," through a "margin commitment," or through any
combination of these.
MERGERS, CONSOLIDATIONS, CHANGE OF CONTROL. In the event of a merger,
consolidation, dissolution or liquidation of HNC, the sale of substantially
all of the assets of HNC or any other similar corporate transaction, the
vesting of all options granted under the directors plan will accelerate and
the options will become exercisable in full before the event at the times and
on the conditions as the committee determines. If the options are not
exercised before the corporate transaction, they will terminate as provided
in the directors plan.
AMENDMENT OF THE DIRECTORS PLAN. The committee may terminate or amend the
directors plan to the extent permitted by law, and with respect to any shares
at the time not subject to options. The committee may not, without
stockholder approval, increase the total number of shares of common stock
available for issuance under the directors plan or change the class of
persons eligible to receive options. Further, the provisions relating to
eligibility, the award formula and the terms and conditions of options shall
not be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code, ERISA or the rules under these laws. In
any case, no amendment of the directors plan may adversely affect any options
outstanding at the time of the amendment or any unexercised portions of
options then outstanding without the written consent of the option holder.
TERM OF THE DIRECTORS PLAN. Unless terminated earlier as provided in the
directors plan, options may be granted under the directors plan from time to
time up until May 2005, ten years after the date the board adopted the
directors plan.
FEDERAL INCOME TAX INFORMATION. For the federal tax implications to the
outside directors and HNC for options granted under the directors plan, see
the discussion of the tax implications of non-qualified options in "Proposal
No. 3 - Amendment of 1995 Equity Incentive Plan - Federal Income Tax
Information" above.
ERISA. The directors plan is not subject to any of the provisions of ERISA
nor is it qualified under Section 401(a) of the Internal Revenue Code.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF THE
1995 DIRECTORS STOCK OPTION PLAN
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PROPOSAL NO. 6: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
We have selected PricewaterhouseCoopers LLP as the independent accountants to
perform the audit of our financial statements for 2000, and the stockholders
are being asked to ratify our selection. We have engaged
PricewaterhouseCoopers LLP as our independent accountants since 1989.
Representatives of PricewaterhouseCoopers LLP will be present at the meeting,
will have the opportunity to make a statement at the meeting if they desire
to do so, and will be available to respond to appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP.
NEW PLAN BENEFITS
The amounts of future option grants under the incentive plan are not
determinable because, under the terms of the incentive plan, grants are made
in the discretion of the committee. Future option exercise prices are not
determinable because they are based upon fair market value of our common
stock on the date of grant. Similarly, the amounts of future stock purchases
under the stock purchase plan are not determinable because, under the terms
of the stock purchase plan, purchases are based upon elections made by
participating employees. Future purchase prices are not determinable because
they are based upon fair market value of our common stock.
Only outside directors are eligible to participate in the directors plan.
Each outside director that joins the board is automatically granted an option
to purchase 25,000 shares. After that, each outside director who has been
granted an Initial Grant will automatically be granted an option to purchase
10,000 shares of common stock on the anniversary of the date of that outside
director's Initial Grant, so long as the outside director continuously
remains a director of HNC. There are currently four directors eligible for
Succeeding Grants. The exercise prices of these options are not determinable
because they will be equal to fair market value of the common stock on the
date of grant.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information about the beneficial ownership of our
common stock as of March 31, 2000 by:
each stockholder known by us to be the beneficial owner of more than 5%
of our common stock;
each director and nominee;
each executive officer named in the Summary Compensation Table below;
and
all directors and executive officers as a group.
The percentage of beneficial ownership for the table is based on 26,560,695
shares of HNC common stock outstanding as of March 31, 2000. Unless otherwise
indicated below, the persons and entities named in the table have sole voting
and sole investment power over their shares of our common stock, except to
the extent that individuals may share authority with their spouses under
community property laws. Unless otherwise indicated, each entity or person
listed below maintains a mailing address of c/o HNC Software Inc., 5935
Cornerstone Court West, San Diego, California 92121.
The number of shares beneficially owned by each stockholder is determined
under the rules of the Securities and Exchange Commission and is not
necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes those shares that the stockholder
has the right to acquire within 60 days after March 31, 2000 through the
exercise of any option. The percentage ownership of the common stock,
however, is based on the assumption, required by the rules of the Securities
and Exchange Commission, that only the person or entity whose ownership is
being reported has converted options into shares of our common stock.
<TABLE>
<CAPTION>
HNC SHARES BENEFICIALLY OWNED
-------------------------------------------------------
OPTIONS
EXERCISABLE
NAME OF BENEFICIAL OWNER COMMON STOCK WITHIN 60 DAYS TOTAL PERCENT
- ------------------------ ------------ -------------- ----- -------
<S> <C> <C> <C> <C>
Capital Research and Management Company (1)........ 3,411,098 -- 3,411,098 12.8%
The TCW Group, Inc. (2)............................ 2,682,377 -- 2,682,377 10.1%
Franklin Resources, Inc. (3)....................... 2,317,735 -- 2,317,735 8.7%
Robert L. North (4)................................ 355,037 24,363 379,400 1.4%
John Buchanan...................................... 904 103,500 104,404 *
Edward K. Chandler ................................ 75,284 25,000 100,284 *
John Mutch ........................................ 2,677 97,215 99,892 *
Charles H. Gaylord, Jr. (5)........................ 21,500 50,000 71,500 *
Michael A. Thiemann ............................... -- 33,000 33,000 *
Raymond V. Thomas ................................. 19,000 -- 19,000 *
Alex W. Hart ...................................... 400 12,000 12,400 *
J. Anthony Patterson .............................. -- 9,373 9,373 *
Kenneth J. Saunders ............................... -- -- -- *
Earl V. Malit ..................................... -- -- -- *
Thomas F. Farb .................................... -- -- -- *
All current executive officers and directors
as a group (15 persons) ........................... 140,765 320,381 461,146 1.7%
</TABLE>
- ------------------
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<PAGE>
*Less than 1% ownership.
(1) Based upon an amendment to Schedule 13G dated February 10, 2000,
indicating that Capital Research and Management Company has sole
dispositive power with respect to 3,411,100 shares. Includes 1,630,198
shares held by SMALLCAP World Fund, Inc. The address of CRMC is 333 South
Hope Street, Los Angeles, California 90071.
(2) Based upon an amendment to Schedule 13G dated February 11, 2000,
indicating that The TCW Group, Inc. and Robert Day share voting and
dispositive power with respect to these shares. The address of The TCW
Group, Inc. and Robert Day is 865 South Figueroa Street, Los Angeles,
California 90017.
(3) Based upon an amendment to Schedule 13G dated January 19, 2000, indicating
that Franklin Resources, Inc. may be deemed to have beneficial ownership
of 2,317,735 shares. Includes 2,300,200 shares held by Franklin Advisors,
Inc. The address of Franklin is 777 Mariners Island Boulevard, San Mateo,
California 94404.
(4) Shares of common stock are held of record by the Robert L. North & Dixie
L. North Revocable Inter Vivos Trust, of which North is a trustee.
(5) Shares of common stock are held of record by the Gaylord Family Trust UTD
12/31/93, Charles H. Gaylord, Jr. and Lynn M. Gaylord trustees.
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<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the names, offices, and ages of each of our
executive officers, as of March 31, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John Mutch............................ 43 President and Chief Executive Officer
Kenneth J. Saunders................... 38 Chief Financial Officer and Secretary
W. Ward Carey......................... 35 Senior Vice President, Business Strategy
Kenneth G. Cramer..................... 36 Vice President, Business Development
Russell C. Clark...................... 31 Vice President, Corporate Finance and Assistant Secretary
Earl V. Malit......................... 37 President, HNC Insurance Solutions
Bruce E. Hansen....................... 40 President, HNC Financial Solutions
J. Anthony Patterson.................. 43 President, HNC Telecom Solutions
Douglas W. Burke...................... 32 President and Chief Operating Officer, eHNC Inc.
John Buchanan......................... 43 President and Chief Executive Officer, Retek Inc.
</TABLE>
John Mutch has been a director of HNC since December 1999. He was appointed
president and chief executive officer during December 1999. Mutch joined us
in July 1997, where he served initially as vice president, marketing, until
September 1998, and later as president of HNC Insurance Solutions from
September 1998 to December 1999. He was a founder of MVenture Holdings, Inc.,
a private equity fund that invests in start-up technology companies, and
served as a general partner from June 1994 to July 1997. From December 1986
to June 1997, Mutch held a variety of executive marketing positions with
Microsoft Corporation, including director of organization marketing. He holds
a bachelor's of science degree in applied economics from Cornell University
and a master's degree in business administration from the University of
Chicago.
Kenneth J. Saunders was appointed chief financial officer during December
1999, and secretary in January 2000. Saunders joined us in January 1997,
where he initially served as treasurer until June 1998, as corporate
controller from June 1998 to January 1999, and then as vice president,
corporate finance and corporate controller from January 1999 to December
1999. From January 1992 to December 1996, Saunders was employed with Risk
Data Corporation, where he served most recently as chief financial officer.
In August 1996, HNC Software Inc. acquired Risk Data Corporation. From
January 1991 to January 1992, he was vice president of finance and
administration for A-Mark Financial Corporation. Saunders was with Arthur
Andersen from 1984 to 1987. He holds a bachelor's of accountancy from Widener
University and is a Certified Public Accountant.
W. Ward Carey was appointed senior vice president, business strategy during
December 1999. Carey joined us in March 1999, where he served initially as
the vice president of corporate marketing. He worked with Credit Suisse First
Boston from May 1996 to April 1999, where he was a charter member of the
Technology Group. Carey also held various management positions with BT Alex.
Brown from January 1986 to May 1996. He holds a bachelor's of science degree
in political science from Columbia University.
Kenneth G. Cramer joined us as vice president, business development during
January 2000. Cramer was previously the managing director of Harlingwood
Partners, LP, a private equity and investment banking firm from September
1997 to October 1999. He was a principal with ICV, LLC, from July 1996 to
August 1997. Cramer also held various management positions with Salomon Smith
Barney from August 1986 to June 1996, most recently as vice president,
investment banking division. He holds a bachelor's of arts degree in computer
science from Cornell University.
Russell C. Clark joined us as vice president, corporate finance during
January 2000. From August 1990 to January 2000, Clark held various positions
with PricewaterhouseCoopers LLP's Technology Industry Group, most recently as
senior manager. He holds a bachelor's degree in business administration,
accounting from the University of Iowa, and is a Certified Public Accountant.
20
<PAGE>
Earl V. Malit was appointed president, HNC Insurance Solutions during the
fourth quarter of 1999. Malit joined us in July 1999, where he served as
senior vice president of product management, until November of 1999. Prior to
joining HNC, Malit was the vice president of business planning at Sega of
America. In the last 15 years, he has also held a variety of product
marketing positions at Compaq, Epson and Mattel. Malit holds a bachelor's of
science degree in mathematics from the University of California and a
master's degree in business administration from the University of Chicago.
Bruce E. Hansen joined us as president, HNC Financial Solutions during the
first quarter of 2000. He served as president and chief executive officer of
CASA, a privately held advanced analytical solutions company that specializes
in one-to-one marketing and strategic risk management solutions, until we
completed our acquisition of CASA during March 2000. From April 1995 to April
1998, Hansen held a variety of senior management positions ranging from
finance and planning to marketing to new business development at Summit
Medical Systems, MEDE America Corporation and National Electronics
Corporation. He also served as vice president of product management for
Automatic Data Processing Inc. Earlier, Hansen served as vice president of
new business development at the Chase Manhattan Bank. He received a
bachelor's of science degree in economics from Harvard University, and a
master's degree in business administration, finance from the University of
Chicago.
J. Anthony Patterson became president of HNC Telecom Solutions in August
1999. Patterson was chief executive officer of Muze Inc., a
business-to-business Internet content affiliate of the privately held
Metromedia Company, from September 1996 to March 1998. He co-founded Summit
Associates, Inc., a bank consulting and software development firm, where he
also served as chief operating officer and executive vice president from
January 1992 to March 1995. Patterson served as vice president and general
manager of the Entertainment Group of Trade Service Corporation, an
international company that provided services in data and information
acquisition, management, publishing, and distribution, from March 1995 to
September 1996. He has also held senior management and marketing positions
with the Bank of America Corporation from May 1988 from January 1992.
Patterson received a bachelor's of science degree and a master's degree in
business administration, management from Pepperdine University.
Douglas W. Burke was appointed president and chief operating officer of our
e-business subsidiary, eHNC Inc., in the fourth quarter of 1999. Burke served
as the executive director of Internet products for HNC Financial Solutions
from April 1999 to October 1999. Burke was the director, product management
at Globeset from January 1998 to April 1999. He served as president and chief
operating officer at Tenth Mountain Systems from January 1997 to December
1998. Burke also served as vice president of electronic commerce at SAIC from
January 1994 to January 1997. He holds a bachelor's of science degree in
economics from the University of California and a master's degree in business
administration, telecommunications from the University of Pittsburgh.
John Buchanan joined Retek in May 1995 and is currently Retek's president and
chief executive officer. From October 1991 to May 1995, he served as
president of Transpacific Information Systems Inc., a technology investment
company principally involved in introducing internationally developed
software products into North America. He also serves on the board of
directors of Mediconsult.com, Inc., a company that provides patient oriented
healthcare information and services on the Internet. Buchanan holds a
bachelor's of commerce degree in accounting and computer systems from the
University of Otago, New Zealand.
21
<PAGE>
EXECUTIVE COMPENSATION
The following table shows all compensation awarded, earned or paid for services
rendered in all capacities to HNC and its subsidiaries during each of 1999, 1998
and 1997 to (i) HNC's Chief Executive Officer; (ii) HNC's other executive
officers as of December 31, 1999 whose compensation exceeded $100,000 for 1999;
(iii) HNC's former Chief Executive Officer; and (iv) two former executive
officers. This information includes the dollar values of base salaries and bonus
awards, the number of shares subject to options granted to purchase shares of
HNC common stock and Retek common stock. It also includes other compensation, if
any, whether paid or deferred. HNC does not grant stock appreciation rights and
has no long-term compensation benefits other than stock options.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------------------- ---------------------------------------
HNC eHNC RETEK
SECURITIES SECURITIES SECURITIES
OTHER ANNUAL UNDERLYING UNDERLYING UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(4) OPTIONS OPTIONS OPTIONS
- --------------------------- ---- ------ ----- -------------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
John Mutch 1999 $140,292 $205,000(5) $356 240,000 75,000 --
Chief Operating Officer, HNC 1998 176,731 30,000 10,782(6) 145,000 -- --
and Former President, HNC 1997 67,020 18,013 302 120,000 -- --
Insurance Solutions (1)
Kenneth J. Saunders 1999 129,167 45,500 96 101,238 20,000 --
Corporate Controller and 1998 113,654 37,600 83 10,000 -- --
Assistant Secretary, HNC (2) 1997 100,625 11,550 72 5,000 -- --
Earl V. Malit 1999 84,127 25,000 55 100,000 -- --
President, HNC Insurance 1998 N/A N/A N/A N/A -- --
Solutions 1997 N/A N/A N/A N/A -- --
J. Anthony Patterson 1999 70,514 20,835 160,576(7) 50,000 -- --
President, HNC Telecom 1998 N/A N/A N/A N/A -- --
Solutions 1997 N/A N/A N/A N/A -- --
John Buchanan 1999 250,000 106,250 -- 30,000 -- 591,100
President, HNC Retek Inc. 1998 200,000 97,500 1,878 30,000 -- --
1997 150,000 90,000 1,878 -- -- --
Robert L. North 1999 362,083 -- 3,413 50,000 100,000 --
President and Chief 1998 265,000 125,125 1,316 50,000 -- --
Executive Officer (3) 1997 196,008 40,425 4,763 70,000 -- --
Raymond V. Thomas 1999 187,500 -- 976 20,000 40,000 --
Vice President, Finance and 1998 156,250 59,904 805 20,000 -- --
Administration, Chief 1997 129,584 25,550 729 20,000 -- --
Financial Officer and
Secretary (3)
Michael A. Thiemann 1999 236,699 46,214 25,118(8) 40,000 50,000 --
Former President, HNC 1998 191,640 78,174(9) 824 100,000 -- --
Financial Solutions and 1997 151,591 114,153(9) 1,919 -- -- --
Former President, Aptex
(now eHNC Inc.)
</TABLE>
- -----------------
(1) Appointed President and Chief Executive Officer in December 1999, effective
January 15, 2000.
(2) Appointed Chief Financial Officer and Secretary in December 1999, effective
January 15, 2000.
(3) Resigned in December 1999, effective January 2000.
(4) Unless otherwise indicated below, represents premiums for group term life
and disability insurance.
(5) Includes signing bonus of $25,000.
(6) Represents premiums for group term life insurance and disability insurance
of $971 and housing rent of $9,811.
(7) Represents premiums for group term life insurance and disability insurance
of $68 and relocation reimbursements of $160,508.
(8) Represents premiums for group term life insurance and disability insurance
of $224 and vacation payouts of $24,894.
(9) Includes commissions.
22
<PAGE>
The following table shows option grants under our incentive plan during 1999 to
each of the executive officers named in the Summary Compensation Table. In
accordance with the rules of the Securities and Exchange Commission, the table
shows 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 and do not represent
HNC's estimate or projection of future common stock prices or values.
HNC OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL REALIZABLE
NUMBER OF OF TOTAL HNC VALUE AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED 1999 PER SHARE DATE 5% 10%
- --------------------- ------- ----------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
John Mutch .......... 40,000 1.0% $24.37 3/18/2009 $613,172 $1,553,899
100,000 2.6 36.00 10/13/2009 2,264,021 5,737,473
2,452 0.1 81.50 12/14/2009 125,677 318,490
97,548 2.5 81.50 12/14/2009 4,999,814 12,670,511
------ --- --------- ----------
240,000 6.2 8,002,684 20,280,373
Kenneth J. Saunders.. 4,252 0.1 26.75 1/28/2009 71,531 181,274
21,986 0.6 26.75 1/28/2009 369,869 937,320
75,000 1.9 87.50 12/13/2006 2,671,597 6,225,956
------ --- --------- ---------
101,238 2.6 3,112,997 7,344,550
Earl V. Malit........ 12,800 0.3 31.25 7/6/2009 251,558 637,497
12,200 0.3 31.25 7/6/2009 239,766 607,614
25,000 0.6 36.00 10/13/2006 366,390 853,845
50,000 1.3 47.75 11/10/2006 971,952 2,265,062
------ --- ------- ---------
100,000 2.5 1,829,666 4,364,018
J. Anthony Patterson. 15,870 0.4 31.50 8/10/2009 314,388 796,720
34,130 0.9 31.50 8/10/2009 676,121 1,713,424
------ --- ------- ---------
50,000 1.3 990,509 2,510,144
John Buchanan (1).... 11,214 0.3 26.75 (1) 188,652 478,082
18,786 0.5 26.75 (1) 316,036 800,896
------ --- ------- -------
30,000 0.8 504,688 1,278,978
Robert L. North...... 10,626 0.3 26.75 1/28/2009 178,760 453,014
39,374 1.0 26.75 1/28/2009 662,386 1,678,616
------ --- ------- ---------
50,000 1.3 841,146 2,131,630
Raymond V. Thomas.... 11,214 0.3 26.75 1/28/2009 188,652 478,082
8,786 0.2 26.75 1/28/2009 147,806 374,570
------- --- ------- -------
20,000 0.5 336,458 852,652
Michael A. Thiemann.. 40,000 1.0 24.37 3/18/2009 613,172 1,553,894
</TABLE>
- --------------------
(1) These options were canceled in connection with the Retek initial public
offering that took place in November 1999.
23
<PAGE>
The options shown in the table were granted at fair market value, are incentive
stock options (to the extent permitted under the Internal Revenue Code) and will
expire ten years from the date of grant, except for Saunders' option for 75,000
shares and Malit's option for 25,000 shares and 50,000 shares, which expire
seven years from the date of grant. Options are subject to earlier termination
upon termination of the option holder's employment.
The following table shows options to purchase shares of eHNC common stock
granted during 1999 by eHNC to each of the executive officers named in the
Summary Compensation Table. eHNC Inc. is a wholly-owned subsidiary of HNC.
eHNC OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL REALIZABLE
NUMBER OF OF TOTAL VALUE AT ASSUMED ANNUAL
SECURITIES eHNC OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED 1999 PER SHARE DATE 5% 10%
- --------------------- ------- ----------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
John Mutch .......... 75,000 2.5% $2.98 10/01/2009 $140,558 $356,201
Kenneth J. Saunders.. 20,000 0.7 2.98 10/01/2009 37,482 94,987
Earl V. Malit........ -- -- -- -- -- --
J. Anthony Patterson. -- -- -- -- -- --
John Buchanan ....... -- -- -- -- -- --
Robert L. North...... 100,000 3.4 2.98 10/01/2009 187,411 474,935
Raymond V. Thomas.... 40,000 1.3 2.98 10/01/2009 74,964 363,030
Michael A. Thiemann.. 50,000 1.7 2.98 10/01/2009 93,705 237,468
</TABLE>
The following table shows options to purchase shares of Retek common stock
granted during 1999 by Retek to each of the executive officers named in the
Summary Compensation Table. Retek Inc. is a wholly-owned subsidiary of HNC.
RETEK OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE
NUMBER OF RETEK VALUE AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------------
NAME GRANTED 1999 PER SHARE DATE 5% 10%
- --------------------- ------- ----------- --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
John Mutch .......... -- --% $-- -- $-- $-
Kenneth J. Saunders.. -- -- -- -- -- --
Earl V. Malit........ -- -- -- -- -- --
J. Anthony Patterson. -- -- -- -- -- --
John Buchanan ....... 591,100 8.1 10.00 10/29/2009 3,717,396 9,420,612
Robert L. North...... -- -- -- -- -- --
Raymond V. Thomas.... -- -- -- -- -- --
Michael A. Thiemann.. -- -- -- -- -- --
</TABLE>
The following table shows information about the exercise of options to purchase
HNC common stock during 1999 by each of the executive officers named in the
Summary Compensation Table, including the total 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, 1999. Also
reported are values of "in-the-money" options that represent the positive spread
between the respective exercise prices of outstanding stock
24
<PAGE>
options and $105.75 per share, which was the closing price of HNC's common
stock as reported on the Nasdaq National Market on December 31, 1999, the
last day of trading for 1999.
HNC AGGREGATE OPTION EXERCISES IN 1999 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END (1) AT YEAR-END (2)
-------------------------- -----------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (1) REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ------------ ----------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>>
John Mutch........... 51,618 $1,397,654 69,632 383,750 $4,801,042 $22,854,062
Kenneth J. Saunders.. 13,750 132,500 -- 116,241 -- 4,537,490
Earl V. Malit ....... -- -- -- 100,000 -- 6,506,250
J. Anthony Patterson. -- -- 4,166 45,834 309,325 3,403,175
John Buchanan........ -- -- 90,000 13,500 6,761,250 1,027,125
Robert L. North...... 175,000 2,660,000 210,825 129,175 18,885,528 9,833,847
Raymond V. Thomas.... 25,000 1,485,625 101,666 48,334 9,645,779 3,699,220
Michael A. Thiemann.. 25,000 746,723 -- 115,000 -- 8,523,750
</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 total
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 $105.75, the closing price of HNC's common stock on December
31, 1999, the last day of trading for 1999.
The following table shows the number of shares covered by both exercisable and
unexercisable options to purchase eHNC common stock held as of December 31, 1999
by each of the executive officers named in the summary compensation table. None
of the named executive officers exercised any options to purchase eHNC common
stock during 1999. The value of unexercised options at year-end is based on the
spread between the exercise price of each outstanding option and $2.98, the fair
market value of a share of eHNC common stock as of December 31, 1999, as
determined by the eHNC board of directors. Shares of eHNC common stock are not
traded on any public market.
eHNC OPTION YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END AT YEAR-END
--------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
John Mutch........... -- 75,000 -- $ --
Kenneth J. Saunders.. -- 20,000 -- --
Earl V. Malit ....... -- -- -- --
J. Anthony Patterson. -- -- -- --
John Buchanan........ -- -- -- --
Robert L. North...... -- 100,000 -- --
Raymond V. Thomas.... -- 40,000 -- --
Michael A. Thiemann.. 8,333 41,667 -- --
</TABLE>
The following table shows the number of shares covered by both exercisable and
unexercisable options to
25
<PAGE>
purchase Retek common stock held as of December 31, 1999 by each of the
executive officers named in the summary compensation table. None of the named
executive officers exercised any options to purchase Retek common stock
during 1999. The value of unexercised options at year-end is based on the
positive spread between the exercise price of each outstanding option and
$75.25, the closing price of Retek's common stock on December 31, 1999, the
last day of trading for 1999.
<TABLE>
<CAPTION>
RETEK OPTION YEAR-END VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END AT YEAR-END
------------------------------ -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John Mutch........... -- -- $- $-
Kenneth J. Saunders.. -- -- -- --
Earl V. Malit ....... -- -- -- --
J. Anthony Patterson. -- -- -- --
John Buchanan........ -- 591,100 -- 38,569,275
Robert L. North...... -- -- -- --
Raymond V. Thomas.... -- -- -- --
Michael A. Thiemann.. -- -- -- --
</TABLE>
EMPLOYMENT AGREEMENTS AND SEVERANCE AGREEMENTS
On December 14, 1999, HNC entered into an agreement with Robert L.
North, the former President and Chief Executive Officer of HNC, that requires
North to provide or be available to provide consulting services to HNC and
eHNC for at least 20 hours per month until December 31, 2000. HNC will pay
North monthly, in an amount equal to the monthly base salary he received
while he was an officer of HNC. In addition, for as long as North is a
director of HNC or a consultant to HNC, the options to purchase HNC common
stock and eHNC common stock that had been granted to North will continue to
vest and will become exercisable as provided in his option agreements.
North's options to purchase HNC common stock and eHNC common stock will vest
and become exercisable in full upon the earliest to occur of the following:
(a) December 31, 2000; (b) North dies or is disabled; (c) North resigns from
the HNC board of directors; or (c) North is not reelected to, or is removed
from, the HNC board of directors.
On December 13, 1999, HNC entered into an agreement with Raymond V.
Thomas, the former Vice President, Finance and Administration, Chief
Financial Officer and Secretary of HNC, that requires Thomas to provide or be
available to provide consulting services to HNC and eHNC for at least 30
hours per month until December 31, 2000. HNC will pay Thomas monthly, in an
amount equal to the monthly base salary he received while he was an officer
of HNC. In addition, until December 31, 2000, the options to purchase HNC
common stock and eHNC common stock that had been granted to Thomas will
continue to vest and will become exercisable as provided in his option
agreements. Thomas' options to purchase HNC common stock and eHNC common
stock will vest and become exercisable in full on December 31, 2000 as long
as he has fulfilled his consulting obligations under the agreement and other
obligations related to noncompetition and nonsolicitation of HNC or eHNC
employees.
On October 13, 1999, HNC entered into an employment agreement with
John Mutch in connection with Mutch's appointment as HNC's Chief Operating
Officer. The agreement was for a term of one year. It provides that Mutch
would be paid a salary of $325,000 per year, a signing bonus of $25,000, a
target bonus amount for 1999 of $195,000 pro rated for the portion of 1999
remaining and a target bonus amount for 2000 of $195,000. The agreement also
provided for the grant of an option to purchase 100,000 shares of HNC common
stock that would vest and become exercisable as to 25,000 of the shares on
the date of grant and as to the remaining shares in 36 equal monthly
installments, beginning on the first anniversary of the date of grant. The
vesting of the option will accelerate and the option will be exercisable in
full if Mutch is terminated by HNC without cause or if Mutch's employment is
terminated because of his death or disability. In addition, the agreement
provides that if Mutch is terminated without cause, he will be entitled to a
severance payment equal to his salary for the remainder of the term of the
agreement, payable in a lump sum, plus the pro rata portion of any earned
bonus.
On December 13, 1999, HNC entered into a further employment
agreement with John Mutch in connection with his appointment as President and
Chief Executive Officer of HNC, which was effective on January 15, 2000. The
agreement is for a term of one year. It provides that Mutch will be paid a
salary of $400,000 per year, and will be eligible for a target bonus of
$240,000, based on attainment of bonus objectives determined by the HNC board
of directors. The agreement also provides for the grant of an option to
purchase 100,000 shares of HNC common stock that would vest and become
exercisable in 48 equal monthly installments, beginning in February 2000. The
vesting of the option will accelerate and the option will be exercisable in
full if Mutch is terminated by HNC without cause or if Mutch's employment is
terminated because of his death or disability. In addition, the agreement
provides that if Mutch is terminated without cause, he will be entitled to a
severance payment equal to his salary for the remainder of the term of the
agreement, payable in a lump sum, plus the pro rata portion of any earned
bonus.
27
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. Gaylord and Hart,
neither of whom has any interlocking relationships as defined by the SEC.
REPORT ON EXECUTIVE COMPENSATION
Final decisions regarding executive compensation and stock option grants to
executives are made by the Compensation Committee of the Board (the
"COMMITTEE"). The Committee is composed of two independent non-employee
directors, neither of whom has any interlocking relationships as defined by the
SEC. Although the Chief Executive Officer and the Chief Financial Officer attend
some of the meetings of the Committee, they do not participate in deliberations
that relate to their own compensation.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the board to establish our general compensation
policy for all of our employees. The Committee typically reviews base salary
levels and target bonuses for the Chief Executive Officer ("CEO") and other
executive officers and employees at or about the beginning of each year. The
Committee administers our incentive and equity plans, including the Equity
Incentive Plan, 1998 Option Plan and the Employee Stock Purchase Plan.
The Committee's philosophy in compensating executive officers, including the
CEO, is to relate compensation directly to corporate performance. Thus, our
compensation policy, which applies to executive officers and our other key
employees, relates a portion of each individual's total compensation to our
revenue and profit objectives as well as individual objectives set at the
beginning of the year. Consistent with this policy, a designated portion of the
compensation of our executive officers is contingent on corporate performance
and, in the case of certain executive officers, is also based on the individual
officer's performance, as determined by the Committee in its discretion.
Long-term equity incentives for executive officers are effected through the
granting of stock options. Stock options have value for the executive only if
the price of our common stock increases above the fair market value on the grant
date and the executive remains in our employ for the period required for the
options to vest.
The Committee determines base salaries, incentive compensation and stock option
grants of the executive officers in part based on its review of the Radford
Executive Compensation Report (the "RADFORD STUDY"), the American Electronics
Association Executive Compensation Survey for Electronics and Information
Technology Companies and other surveys of prevailing compensation practices
among high-technology companies with whom HNC competes for executive talent, and
by their evaluation of this information in connection with our corporate goals.
These surveys are nationally known for their data bases of high technology
company compensation practices. The Radford Survey itself includes over 500 high
technology companies. To this end, the Committee attempts to compare the
compensation of our executive officers with comparable survey positions and the
compensation practices of comparable companies to determine base salary, target
bonuses and target total cash compensation. In addition to their base salaries,
our executive officers, including the CEO, are each eligible to receive cash
bonuses and option grants.
In preparing the performance graph for this proxy statement, we used the H&Q
Technology Index as our published line of business index. The companies in the
Radford Survey are substantially similar to the companies contained in the H&Q
index. Nevertheless, certain of the companies in the H&Q index were included in
the Radford Survey and our other salary surveys because they were not determined
to be competitive with us for executive talent or because compensation
information was not available.
This competitive market information is reviewed by the Committee with the CEO
for each executive level position and within the Committee as to the CEO. In
addition, each executive officer's performance for the last year and objectives
for the next year are viewed, together with the executive officer's
responsibility level and our fiscal performance versus objectives and potential
performance targets for the next year.
28
<PAGE>
1999 EXECUTIVE COMPENSATION
BASE COMPENSATION. The foregoing information was presented to the Committee in
February 1999. The Committee reviewed the recommendations and performance and
market data outlined above and established a base salary level to be effective
February 1, 1999 for each executive officer, including the CEO.
INCENTIVE COMPENSATION. Cash bonuses are awarded to the extent that an executive
officer has achieved predetermined individual objectives and we had met
predetermined revenue and profit objectives set by the board at the beginning of
the year. The CEO's subjective judgment of executives' performance (other than
his own) is taken into account in determining whether those individual
objectives have been satisfied. Performance is measured at the end of the year.
For 1999, the basis of target incentive compensation for executive officers were
our revenues and profits, ranging from approximately 60% to 100% of an
individual's target incentive compensation, with the balance, if any, based on
individual objectives, depending on the individual executive. The targets and
actual bonus payments are determined by the Committee, in its discretion.
STOCK OPTIONS. Stock options are an essential element of our executive
compensation package. The Committee believes that equity-based compensation in
the form of stock options links the interests of management and stockholders by
focusing employees and management on increasing stockholder value. The actual
value of the equity-based compensation depends entirely on appreciation of our
common stock. Approximately 100% of our full-time employees participate in the
Equity Incentive Plan.
In 1999, we granted stock options to executive officers to aid in the
retention of executive officers and to align their interests with those of
the stockholders. See "Executive Compensation--Option Grants in 1999." Stock
options typically have been granted to executive officers when the executive
first joins us, in connection with a significant change in responsibilities
and, occasionally, to achieve equity within a peer group. The Committee may,
however, grant additional stock options to executives for other reasons. The
number of shares subject to each stock option granted is within the
discretion of the Committee and is based on anticipated future contribution
and ability to impact corporate and/or business unit results, past
performance or consistency within the executive's peer group. In the
discretion of the Committee, executive officers may also be granted stock
options to provide greater incentives to continue their employment with us
and to strive to increase the value of our common stock. In 1999, as part of
an annual review of the stock options held by executive officers and
managers, the Committee considered these factors, as well as the number of
options held by such executive officers as of the date of grant that remained
unvested. The stock options generally become exercisable over a four-year
period and are granted at a price that is equal to the fair market value of
our common stock on the date of grant.
For 2000, the Committee will be considering whether to grant future options
under the Equity Incentive Plan to executive officers based on the factors
described above, with particular attention to company-wide management objectives
and the executive officers' success in obtaining specific individual financial
and operational objectives established or to be established for 2000, to our
revenue and profit expectations and to the number of options currently held by
the executive officers that remain unvested.
COMPANY PERFORMANCE AND CEO COMPENSATION. The Committee makes a recommendation
to the full board regarding the base salary and incentive compensation of the
CEO.
The board accepted the Committee's recommendation for North's cash compensation
for 1999. Effective in February 1999, North's base salary increased to $370,000.
The Committee did not award North incentive compensation for 1999. As an
additional incentive to North to achieve the objectives established by the
Committee for 1999, in March 1999, the Committee exercised its discretion and
granted North a stock option to purchase 50,000 shares of our common stock to
become exercisable as to 25% of the shares underlying the option for each full
year following the date of grant that North renders services to HNC. In granting
the stock option to North, the Committee reviewed North's prior outstanding
option grants, the number of options that remained unexercisable, the number of
shares North already owned as of the date the option was granted and HNC's
performance in 1998. The Committee believes that this grant was
29
<PAGE>
appropriate because it provided the proper incentive to North and takes
account of his prior significant stock holdings. The Committee reviewed the
compensation practices of comparable companies in making this award to North.
Effective January 2000, North resigned as CEO and President of HNC, as an
officer of eHNC, and from the Board of Directors of eHNC.
Mutch was promoted from President, HNC Insurance Solutions Inc. to CEO and
President of HNC effective January 2000. His base salary, therefore, increased
to $400,000 and he became eligible for a target bonus of up to $240,000 for
fiscal year 2000. In addition, Mutch was granted a stock option to purchase up
to 100,000 shares of our common stock to become exercisable in 48 equal monthly
installments beginning in February 2000.
Mutch was awarded incentive compensation of $180,000 for 1999. This bonus figure
represents approximately 92% of the target bonus for Mutch for 1999. All of
Mutch's incentive compensation was based upon obtaining and surpassing corporate
operating revenue and profit objectives and performance relative to individual
goals for HNC Insurance Solutions.
COMPLIANCE WITH SECTION 162(m) OF THE CODE. We intend to comply with the
requirements of Section 162(m) of the Internal Revenue Code for 2000. The Equity
Incentive Plan is already in compliance with Section 162(m) by limiting stock
awards to named executive officers. We do not expect cash compensation for 2000
to any of our executive officers to be more than $1,000,000 or consequently
affected by the requirements of Section 162(m).
COMPENSATION COMMITTEE
/s/ Charles H. Gaylord, Jr.
----------------------------
CHARLES H. GAYLORD, JR.
DIRECTOR
/s/ Alex W. Hart
----------------------------
ALEX W. HART
DIRECTOR
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COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the SEC. It shall not
be deemed to be incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act or under the Securities Exchange Act, except to the extent
that we specifically incorporate this information by reference. Also, it
shall not otherwise be deemed soliciting material or filed under these Acts.
The graph below compares the cumulative total stockholder return on our
common stock from December 31, 1995 to December 31, 1999 with the cumulative
total return on the Nasdaq Stock Market--U.S. Index and the H&Q Technology
Index over the same period (assuming the investment of $100 in our common
stock and in each of the other indices on the date of our initial public
offering, and reinvestment of all dividends).
The comparisons in the graph below are based on historical data and are not
intended to forecast the possible future performance of our common stock.
<TABLE>
<CAPTION>
NASDAQ STOCK H&Q TECHNOLOGY
HNC SOFTWARE INC. MARKET--U.S. INDEX INDEX
----------------- ------------------ -----
MARKET INVESTMENT INVESTMENT INVESTMENT
PRICE VALUE INDEX VALUE INDEX VALUE
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
12/31/95............................. $23.875 $341.05 345.9 $113.84 836.8 $105.94
12/31/96............................. $31.250 $446.40 425.4 $140.02 1,040.0 $131.67
12/31/97............................. $43.000 $614.25 522.1 $171.82 1,219.3 $154.37
12/31/98............................. $40.438 $577.68 735.7 $241.68 1,896.6 $240.11
12/31/99............................. $105.750 $1,510.71 1,325.8 $436.90 4,235.6 $536.24
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 1999 to the present, there are no currently proposed
transactions in which the amount involved exceeds $60,000 to which HNC or any
of its subsidiaries was (or is to be) a party and in which any executive
officer, director, 5% beneficial owner of our common stock or member of the
immediate family of any of these persons had (or will have) a direct or
indirect material interest, except for payments set forth under "Executive
Compensation" above and the transactions described below.
In August 1999, HNC loaned $200,000 to J. Anthony Patterson, the President of
HNC Telecom Solutions, to assist in his purchase of a home. The loan is
secured by a second mortgage on the home. The loan is due in full in August
2004 and bears interest at the rate of 5.19% compounded monthly. Interest
payments are made semi-monthly.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at our 2001 Annual Meeting
of Stockholders must be received at our principal executive offices no later
than December 18, 2000 in order to be included in our proxy statement and
form of proxy relating to that meeting. Stockholders wishing to bring a
proposal before our 2001 annual meeting of stockholders (but not include it
in our proxy materials) must provide written notice of the proposal to the
Secretary of HNC at our principal executive offices by March 22, 2001. In
addition, stockholders must comply with the procedural requirements in our
Bylaws. Stockholders can obtain a copy of our Bylaws from us. The Bylaws are
also on file with the SEC.
COMPLIANCE UNDER SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Exchange Act requires our directors and officers, and
persons who own more than 10% of a registered class of our equity securities,
to file initial reports of ownership and reports of changes in
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<PAGE>
ownership with the SEC. The SEC regulations also require these persons to
furnish us with a copy of all Section 16(a) forms they file. Based solely on
our review of the copies of the forms furnished to us and written
representations from our executive officers and directors, we believe that
all Section 16(a) filing requirements were met during 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 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.
32
<PAGE>
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, November 20,
1998, March 18, 1999, November 9, 1999 and March 30, 2000
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 9,100,000 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, or
in the event of a change in the corporate structure, capitalization or a
dividend of property affecting the value of the Company's Shares, then
appropriate adjustments may be made by the Board in (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, subject to any required action by the stockholders of
the Company and compliance with applicable securities laws; PROVIDED, HOWEVER,
that fractions of a Share will not be issued but will either be replaced by a
cash payment equal to the Fair Market Value of such fraction of a Share or will
be rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company. All other
Awards may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any Parent, Subsidiary or
Affiliate of the Company; PROVIDED such consultants, contractors and advisors
render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction. No person will be eligible to
receive more than 500,000 Shares in any calendar year under this Plan pursuant
to the grant of Awards hereunder, other than new employees of the Company or of
a Parent, Subsidiary or Affiliate of the Company (including new employees who
are also officers and directors of the Company or any Parent, Subsidiary or
Affiliate of the Company) who are eligible to receive up to a maximum of 700,000
Shares in the calendar year in which they commence their employment. A person
may be granted more than one Award under this Plan.
<PAGE>
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject
to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or any other
incentive or compensation plan of the Company or any Parent,
Subsidiary or Affiliate of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 COMMITTEE DISCRETION. Any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.
4.3 EXCHANGE ACT REQUIREMENTS. If two or more members of the
Board are Outside Directors, the Committee will be comprised of at least two (2)
members of the Board, all of whom are Outside Directors and Disinterested
Persons. During all times that the Company is subject to Section 16 of the
Exchange Act, the Company will take appropriate steps to comply with the
disinterested administration requirements of Section 16(b) of the Exchange 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:
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<PAGE>
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 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
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<PAGE>
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") 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
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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.
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;
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(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid
for within the meaning of SEC Rule 144 (and, if such shares
were purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such shares); or
(2) were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms
as may be approved by the Committee and bearing interest at a
rate sufficient to avoid imputation of income under Sections
483 and 1274 of the Code; PROVIDED, HOWEVER, that Participants
who are not employees or directors of the Company will not be
entitled to purchase Shares with a promissory note unless the
note is adequately secured by collateral other than the
Shares; PROVIDED, FURTHER, that the portion of the Purchase
Price equal to the par value of the Shares, if any, must be
paid in cash;
(d) by waiver of compensation due or accrued to the Participant
for services rendered; PROVIDED, FURTHER, that the portion of
the Purchase Price equal to the par value of the Shares, if
any, must be paid in cash;
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of
the National Association of Securities Dealers (an
"NASD DEALER") whereby the Participant irrevocably
elects to exercise the Option and to sell a portion
of the Shares so purchased to pay for the Exercise
Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(2) through a "margin" commitment from the Participant
and a NASD Dealer whereby the Participant irrevocably
elects to exercise the Option and to pledge the
Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer
in the amount of the Exercise Price, and whereby the
NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
8.2 LOAN GUARANTEES. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
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,
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determined on the date that the amount of tax to be withheld is to be determined
(the "TAX DATE"). All elections by a Participant to have Shares withheld for
this purpose will be made in writing in a form acceptable to the Committee and
will be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, then except as provided below, the election will be
irrevocable as to the particular Shares as to which the
election is made;
(c) all elections will be subject to the consent or disapproval of
the Committee;
(d) if the Participant is an Insider and if the Company is subject
to Section 16(b) of the Exchange Act: (1) the election may not
be made within six (6) months of the date of grant of the
Award, except as otherwise permitted by SEC Rule 16b-3(e)
under the Exchange Act, and (2) either (A) the election to use
stock withholding must be irrevocably made at least six (6)
months prior to the Tax Date (although such election may be
revoked at any time at least six (6) months prior to the Tax
Date) or (B) the exercise of the Option or election to use
stock withholding must be made in the ten (10) day period
beginning on the third day following the release of the
Company's quarterly or annual summary statement of sales or
earnings; and
(e) in the event that the Tax Date is deferred until six (6)
months after the delivery of Shares under Section 83(b) of the
Code, the Participant will receive the full number of Shares
with respect to which the exercise occurs, but such
Participant will be unconditionally obligated to tender back
to the Company the proper number of Shares on the Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 VOTING AND DIVIDENDS. No Participant will have any of
the rights of a stockholder with respect to any Shares until the Shares are
issued to the Participant. After Shares are issued to the Participant, the
Participant will be a stockholder and have all the rights of a stockholder
with respect to such Shares, including the right to vote and receive all
dividends or other distributions made or paid with respect to such Shares;
provided, that if such Shares are Restricted Stock, then any new, additional
or different securities the Participant may become entitled to receive with
respect to such Shares by virtue of a stock dividend, stock split or any
other change in the corporate or capital structure of the Company will be
subject to the same restrictions as the Restricted Stock; provided, further,
that the Participant will have no right to retain such stock dividends or
stock distributions with respect to Shares that are repurchased at the
Participant's original Purchase Price pursuant to Section 12.
10.2 FINANCIAL STATEMENTS. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; PROVIDED, HOWEVER, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
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)
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days after the later of Participant's Termination Date and the date
Participant purchases Shares under this Plan, for cash and/or cancellation of
purchase money indebtedness, at: (A) with respect to Shares that are "Vested"
(as defined in the Award Agreement), the higher of: (l) Participant's
original Purchase Price, or (2) the Fair Market Value of such Shares on
Participant's Termination Date, PROVIDED, that such right of repurchase (i)
must be exercised as to all such "Vested" Shares unless a Participant
consents to the Company's repurchase of only a portion of such "Vested"
Shares and (ii) terminates when the Company's securities become publicly
traded; or (B) with respect to Shares that are not "Vested" (as defined in
the Award Agreement), at the Participant's original Purchase Price, provided,
that the right to repurchase at the original Purchase Price lapses at the
rate of at least 20% per year over five (5) years from the date the Shares
were purchased (or from the date of grant of options in the case of Shares
obtained pursuant to a Stock Option Agreement and Stock Option Exercise
Agreement), and if the right to repurchase is assignable, the assignee must
pay the Company, upon assignment of the right to repurchase, cash equal to
the excess of the Fair Market Value of the Shares over the original Purchase
Price.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; PROVIDED, HOWEVER, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time
or from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will
not be effective unless such Award is in compliance with all applicable federal
and state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system 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.
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17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Participant's employment or other relationship at any
time, with or without cause.
18. CORPORATE TRANSACTIONS.
18.1 ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (OTHER THAN
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company (other than any stockholder
which merges (or which owns or controls another corporation which merges) with
the Company in such merger) cease to own their shares or other equity interests
in the Company, (d) the sale of substantially all of the assets of the Company,
or (e) any other transaction which qualifies as a "corporate transaction" under
Section 424(a) of the Code wherein the stockholders of the Company give up all
of their equity interest in the Company (except for the acquisition, sale or
transfer of all or substantially all of the outstanding shares of the Company
from or by the stockholders of the Company), any or all outstanding Awards may
be assumed, converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
stockholders (after taking into account the existing provisions of the Awards).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the Participant. In the
event such successor corporation (if any) refuses to assume or substitute
Options, as provided above, pursuant to a transaction described in this
Subsection 18.1, such Options will expire on such transaction at such time and
on such conditions as the Board will determine.
18.2 OTHER TREATMENT OF AWARDS. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.3 ASSUMPTION OF AWARDS BY THE COMPANY. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either; (a) granting an Award under this Plan in substitution
of such other company's award; or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied to
an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant. In the event the Company assumes an award
granted by another company, the terms and conditions of such award will remain
unchanged (EXCEPT that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will 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
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Awards pursuant to this Plan; PROVIDED, HOWEVER, that: (a) no Option may be
exercised prior to initial stockholder approval of this Plan; (b) no Option
granted pursuant to an increase in the number of Shares subject to this Plan
approved by the Board will be exercised prior to the time such increase has
been approved by the stockholders of the Company; and (c) in the event that
stockholder approval of such increase is not obtained within the time period
provided herein, all Awards granted hereunder will be canceled, any Shares
issued pursuant to any Award will be canceled, and any purchase of Shares
hereunder will be rescinded. So long as the Company is subject to Section
16(b) of the Exchange Act, the Company will comply with the requirements of
Rule 16b-3 (or its successor), as amended, with respect to stockholder
approval.
20. TERM OF PLAN. Unless earlier terminated as provided herein,
this Plan will terminate ten (10) years from the date this Plan is adopted by
the Board or, if earlier, the date of stockholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; PROVIDED, HOWEVER, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or (if the Company is subject
to the Exchange Act or Section 16(b) of the Exchange Act) pursuant to the
Exchange Act or Rule 16b-3 (or its successor), as amended, thereunder,
respectively.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan
by the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:
"AFFILIATE" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"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.
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"DISINTERESTED PERSON" means a director who has not, during
the period that person is a member of the Committee and for one year prior to
commencing service as a member of the Committee, been granted or awarded equity
securities pursuant to this Plan or any other plan of the Company or any Parent,
Subsidiary or Affiliate of the Company, except in accordance with the
requirements set forth in Rule 16b-3(c)(2)(i) (and any successor regulation
thereto) as promulgated by the SEC under Section 16(b) of the Exchange Act, as
such rule is amended from time to time and as interpreted by the SEC.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination (if such day is a trading day) as
reported in The WALL STREET JOURNAL, and, if such date of
determination is not a trading day, then on the last trading
day prior to the date of determination;
(b) if such Common Stock is publicly traded and is then listed on
a national securities exchange, its closing price on the last
trading day prior to the date of determination on the
principal national securities exchange on which the Common
Stock is listed or admitted to trading as reported in THE WALL
STREET JOURNAL;
(c) if such Common Stock is publicly traded but is not quoted on
the Nasdaq National Market nor listed or admitted to trading
on a national securities exchange, the average of the closing
bid and asked prices on the last trading day prior to the date
of determination as reported in THE WALL STREET JOURNAL; or
(d) if none of the foregoing is applicable, by the Committee in
good faith.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act.
"OUTSIDE DIRECTOR" means any director who is not; (a) a
current employee of the Company or any Parent, Subsidiary or Affiliate of the
Company; (b) a former employee of the Company or any Parent, Subsidiary or
Affiliate of the Company who is receiving compensation for prior services (other
than benefits under a tax-qualified pension plan); (c) a current or former
officer of the Company or any Parent, Subsidiary or Affiliate of the Company; or
(d) currently receiving compensation for personal services in any capacity,
other than as a director, from the Company or any Parent, Subsidiary or
Affiliate of the Company; PROVIDED, HOWEVER, that at such time as the term
"Outside Director", as used in Section 162(m) of the Code is defined in
regulations promulgated 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.
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"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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HNC SOFTWARE INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
As Adopted May 4, 1995
As Amended January 23, 1998, March 18, 1999 and March 30, 2000
1. ESTABLISHMENT OF PLAN. HNC Software Inc., a Delaware corporation
(the "COMPANY"), proposes to grant options for purchase of the Company's Common
Stock, $0.001 par value, to eligible employees of the Company and its
Subsidiaries (as hereinafter defined) pursuant to this Employee Stock Purchase
Plan (this "PLAN"). For purposes of this Plan, "PARENT CORPORATION" and
"SUBSIDIARY" (collectively, "SUBSIDIARIES") shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "CODE"). The
Company intends this Plan to qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments to or replacements of such
Section), and this Plan shall be so construed. Any term not expressly defined in
this Plan but defined for purposes of Section 423 of the Code shall have the
same definition herein. A total of 850,000 shares of the Company's Common Stock
is reserved for issuance under this Plan. In addition, on each January 1, the
aggregate number of shares of the Company's Common Stock reserved for issuance
under this Plan shall be increased automatically by a number of shares equal to
one percent (1%) of the total outstanding shares of the Company as of the
immediately preceding December 31; provided, however, that the automatic annual
increase shall not operate to increase the shares available for issuance under
the Plan above 15,000,000 Shares which is the maximum number of Shares available
for issuance under the Plan.. Such Share numbers shall be subject to adjustments
effected in accordance with Section 14 of this Plan. Such number shall be
subject to adjustments effected in accordance with Section 14 of this Plan.
2. PURPOSE. The purpose of this Plan is to provide employees of the
Company and Subsidiaries designated by the Board of Directors of the Company
(the "BOARD") as eligible to participate in this Plan with a convenient means of
acquiring an equity interest in the Company through payroll deductions, to
enhance such employees' sense of participation in the affairs of the Company and
Subsidiaries, and to provide an incentive for continued employment.
3. ADMINISTRATION. This Plan shall be administered by a committee
appointed by the Board (the "Committee") consisting of at least two (2) members
of the Board, each of whom is a Disinterested Person as defined in Rule 16b-3(d)
of the Securities Exchange Act of 1934 (the "EXCHANGE ACT"). As used in this
Plan, references to the "Committee" shall mean either such committee or the
Board if no committee has been established. After registration of the Company
under the Exchange Act, Board members who are not Disinterested Persons may not
vote on any matters affecting the administration of this Plan, but any such
member may be counted for determining the existence of a quorum at any meeting
of the Board. Subject to the provisions of this Plan and the limitations of
Section 423 of the Code or any successor provision in the Code, all questions of
interpretation or application of this Plan shall be determined by the Board and
its decisions shall be final and binding upon all participants. Members of the
Board shall receive no compensation for their services in connection with the
administration of this Plan, other than standard fees as established from time
to time by the Board for services rendered by Board members serving on Board
committees. All expenses incurred in connection with the administration of this
Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Subsidiaries is
eligible to participate in an Offering Period (as hereinafter defined) under
this Plan except the following:
(a) employees who are not employed by the Company or Subsidiaries
one (1) month before the beginning of such Offering Period;
(b) employees who are customarily employed for less than twenty
(20) hours per week;
(c) employees who are customarily employed for less than five (5)
months in a calendar year;
(d) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own stock
or hold options to purchase stock possessing five percent (5%) or
<PAGE>
more of the total combined voting power or value of all classes of stock of the
Company or any of its Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Subsidiaries.
5. OFFERING DATES. The offering periods of this Plan (each, an
"OFFERING PERIOD") shall be of twelve (12) months duration commencing on
February 1 and August 1 of each year and ending on January 31 and July 31,
respectively, thereafter; PROVIDED, HOWEVER, that notwithstanding the foregoing,
the first such Offering Period shall commence on the first business day after
the date on which the registration statement filed by the Company with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended (the "SECURITIES ACT") registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "FIRST OFFERING
DATE") and shall end on January 31, 1996. Each Offering Period shall consist of
two (2) six-month purchase periods (individually, a "PURCHASE PERIOD") during
which payroll deductions of the participants are accumulated under this Plan.
The first business day of each Offering Period is referred to as the "OFFERING
DATE". The last business day of each Purchase Period is referred to as the
"PURCHASE DATE". The Board shall have the power to change the duration of
Offering Periods or Purchase Periods with respect to future offerings without
stockholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period or Purchase Period
to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company's treasury department (the "TREASURY DEPARTMENT") not
later than the 15th day of the month before such Offering Date unless a later
time for filing the subscription agreement authorizing payroll deductions is set
by the Board for all eligible employees with respect to a given Offering Period.
An eligible employee who does not deliver a subscription agreement to the
Treasury Department by such date after becoming eligible to participate in such
Offering Period shall not participate in that Offering Period or any subsequent
Offering Period unless such employee enrolls in this Plan by filing a
subscription agreement with the Treasury Department not later than the 15th day
of the month preceding a subsequent Offering Date. Once an employee becomes a
participant in an Offering Period, such employee will automatically participate
in the Offering Period commencing immediately following the last day of the
prior Offering Period unless the employee withdraws or is deemed to withdraw
from this Plan or terminates further participation in the Offering Period as set
forth in Section 11 below. Such participant is not required to file any
additional subscription agreement in order to continue participation in this
Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee
in this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i)
eighty-five percent (85%) of the fair market value of a share of the Company's
Common Stock on the Offering Date (but in no event less than the par value of a
share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock); PROVIDED, HOWEVER, that the number of shares of the Company's Common
Stock subject to any option granted pursuant to this Plan shall not exceed the
lesser of (a) the maximum number of shares set by the Board pursuant to Section
10(c) below with respect to the applicable Offering Period, or (b) the maximum
number of shares which may be purchased pursuant to Section 10(b) below with
respect to the applicable Offering Period. The fair market value of a share of
the Company's Common Stock shall be determined as provided in Section 8 hereof.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date;
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PROVIDED, HOWEVER, that in no event may the purchase price per share of the
Company's Common Stock be below the par value per share of the Company's Common
Stock.
For purposes of this Plan, the term "FAIR MARKET VALUE" on a
given date shall mean the fair market value of the Company's Common Stock as
determined by the Board in its sole discretion, exercised in good faith;
PROVIDED, HOWEVER, that where there is a public market for the Common Stock, the
fair market value per share shall be the average of the last reported bid and
asked prices of the Common Stock on the last trading day prior to the date of
determination (or the average closing price over the number of consecutive
trading days preceding the date of determination as the Board shall deem
appropriate), or, in the event the Common Stock is listed on a stock exchange or
on the Nasdaq National Market, the fair market value per share shall be the
closing price on such exchange or quotation system on the last trading date
prior to the date of determination (or the average closing price over the number
of consecutive trading days preceding the date of determination as the Board
shall deem appropriate); and PROVIDED FURTHER, that notwithstanding the
foregoing, the fair market value of the Company's Common Stock on the First
Offering Date (which is the first business day of the first Offering Period
under this Plan) shall be deemed to be the price per share at which shares of
the Company's Common Stock are initially offered for sale to the public in the
Company's initial public offering of its Common Stock pursuant to a registration
statement filed with the SEC under the Securities Act
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE
OF SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made as
a percentage of the participant's compensation in one percent (1%) increments
not less than two percent (2%), nor greater than ten percent (10%) or such lower
limit set by the Committee. Compensation shall mean all W-2 compensation,
including, but not limited to base salary, wages, commissions, overtime, shift
premiums and bonuses, plus draws against commissions; PROVIDED, HOWEVER, that
for purposes of determining a participant's compensation, any election by such
participant to reduce his or her regular cash remuneration under Sections 125 or
401(k) of the Code shall be treated as if the participant did not make such
election. Payroll deductions shall commence on the first payday following the
Offering Date and shall continue to the end of the Offering Period unless sooner
altered or terminated as provided in this Plan.
(b) A participant may lower (and, effective for Offering Periods
commencing on or after February 1, 1998, increase) the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Offering Period. A participant may increase or decrease the
rate of payroll deductions for any subsequent Offering Period by filing with the
Treasury Department a new authorization for payroll deductions not later than
the 15th day of the month before the beginning of such Offering Period.
(c) All payroll deductions made for a participant are credited to
his or her account under this Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(d) On each Purchase Date, so long as this Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest. In
the event that this Plan has been oversubscribed, all funds not used to purchase
shares on the Purchase Date shall be
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returned to the participant, without interest. No Common Stock shall be
purchased on a Purchase Date on behalf of any employee whose participation in
this Plan has terminated prior to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the Company
shall arrange the delivery to each participant of a certificate representing the
shares purchased upon exercise of his option.
(f) During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised. Shares to be delivered to a participant
under this Plan will be registered in the name of the participant or in the name
of the participant and his or her spouse.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No employee shall be entitled to purchase stock under this Plan
at a rate which, when aggregated with his or her rights to purchase stock under
all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan.
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator may
be purchased by a participant on any single Purchase Date.
(c) No employee shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
thirty (30) days prior to the commencement of any Offering Period, the Board
may, in its sole discretion, set a maximum number of shares which may be
purchased by any employee at any single Purchase Date (hereinafter the "MAXIMUM
SHARE AMOUNT"). In no event shall the Maximum Share Amount exceed the amounts
permitted under Section 10(b) above. If a new Maximum Share Amount is set, then
all participants must be notified of such Maximum Share Amount not less than
fifteen (15) days prior to the commencement of the next Offering Period. Once
the Maximum Share Amount is set, it shall continue to apply with respect to all
succeeding Purchase Dates and Offering Periods unless revised by the Board as
set forth above.
(d) If the number of shares to be purchased on a Purchase Date by
all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Board shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares to
be purchased under a participant's option to each participant affected thereby.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under
this Plan by signing and delivering to the Treasury Department a written notice
to that effect on a form provided for such purpose. Such withdrawal may be
elected at any time at least fifteen (15) days prior to the end of an Offering
Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
this Plan.
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(c) If the purchase price on the first day of any current Offering
Period in which a participant is enrolled is higher than the purchase price on
the first day of any subsequent Offering Period, the Company will automatically
enroll such participant in the subsequent Offering Period. A participant does
not need to file any forms with the Company to automatically be enrolled in the
subsequent Offering Period.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement, death or the failure of a
participant to remain an eligible employee, immediately terminates his or her
participation in this Plan. In such event, the payroll deductions credited to
the participant's account will be returned to him or her or, in the case of his
or her death, to his or her legal representative, without interest. For purposes
of this Section 12, an employee will not be deemed to have terminated employment
or failed to remain in the continuous employ of the Company in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
PROVIDED that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall promptly deliver to the participant all payroll deductions credited to
such participant's account. No interest shall accrue on the payroll deductions
of a participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; PROVIDED, HOWEVER, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration"; and PROVIDED FURTHER, that the price per
share of Common Stock shall not be reduced below its par value per share. Such
adjustment shall be made by the Board, whose determination shall be final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
In the event of the proposed dissolution or liquidation of the Company,
the Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under this Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger or consolidation of the Company with or into another corporation,
each option under this Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, that the participant
shall have the right to exercise the option as to all of the optioned stock. If
the Board makes an option exercisable in lieu of assumption or substitution in
the event of a merger, consolidation or sale of assets, the Board shall notify
the participant that the option shall be fully exercisable for a period of
twenty (20) days from the date of such notice, and the option will terminate
upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation; PROVIDED, that the price per share of Common Stock shall not
be reduced below its par value per share.
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15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the end
of each Purchase Period a report of his or her account setting forth the total
payroll deductions accumulated, the number of shares purchased, the per share
price thereof and the remaining cash balance, if any, carried forward to the
next Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such shares
were purchased (the "NOTICE PERIOD"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates representing such shares in his or her name (and not in the name of
a nominee) during the Notice Period. The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to this Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary, or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company or
the Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with this Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board, this Plan will become effective on the date that is the First Offering
Date (as defined above); PROVIDED, HOWEVER, that if the First Offering 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, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board. No purchase of shares pursuant to this Plan shall occur prior to such
stockholder approval. Thereafter, no later than twelve (12) months after the
Company becomes subject to Section 16(b) of the Exchange Act, the Company will
comply with the requirements of Rule 16b-3 with respect to stockholder approval.
This Plan shall continue until the earlier to occur of (a) termination of this
Plan by the Board (which termination may be effected by the Board at any time),
(b) issuance of all of the shares of Common Stock reserved for issuance under
this Plan, or (c) ten (10) years from the adoption of this Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under this Plan in the event of such participant's death
subsequent to the end of an Purchase Period but prior to delivery to him of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under this
Plan in the event of such participant's death prior to a Purchase Date.
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(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange or automated quotation system upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Delaware.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or the extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 hereof within twelve (12) months of the adoption of such amendment
(or earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this
Plan;
(b) change the designation of the employees (or class of
employees) eligible for participation in this Plan; or
(c) constitute an amendment for which stockholder approval is
required in order to comply with Rule 16b-3 (or any successor rule) of the
Exchange Act.
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HNC SOFTWARE INC.
1995 DIRECTORS STOCK OPTION PLAN
As Adopted May 4, 1995
and As Amended March 18, 1999,
June 12, 1999, November 9, 1999 and March 30, 2000
1. PURPOSE. This 1995 Directors Stock Option Plan (this "PLAN") is
established to provide equity incentives for nonemployee members of the Board of
Directors of HNC Software Inc. (the "COMPANY"), who are described in Section 6.1
below, by granting such persons options to purchase shares of stock of the
Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board of Directors of the Company (the "BOARD"), this Plan will become effective
on the time and date (the "EFFECTIVE DATE") on which the registration statement
filed by the Company with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), to register the
initial public offering of the Company's Common Stock is declared effective by
the SEC; 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, consistent with applicable laws, within twelve (12) months after
the date this Plan is adopted by the Board. Options ("OPTIONS") may be granted
under this Plan after the Effective Date provided that, in the event that
stockholder approval is not obtained within the time period provided herein,
this Plan, and all Options granted hereunder, shall terminate. No Option that is
issued as a result of any increase in the number of shares authorized to be
issued under this Plan shall be exercised prior to the time such increase has
been approved by the stockholders of the Company and all such Options granted
pursuant to such increase shall similarly terminate if such stockholder approval
is not obtained. So long as the Company is subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended, (the "EXCHANGE ACT") the Company
will comply with the requirements of Rule 16b-3 with respect to stockholder
approval.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall
be nonqualified stock options ("NQSOs"). The shares of stock that may be
purchased upon exercise of Options granted under this Plan (the "SHARES") are
shares of the Common Stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan (the "MAXIMUM NUMBER") is 750,000
Shares, subject to adjustment as provided in this Plan. If any Option is
terminated for any reason without being exercised in whole or in part, the
Shares thereby released from such Option shall be available for purchase under
other Options subsequently granted under this Plan. At all times during the term
of this Plan, the Company shall reserve and keep available such number of Shares
as shall be required to satisfy the requirements of outstanding Options granted
under this Plan; PROVIDED, HOWEVER that if the aggregate number of Shares
subject to outstanding Options granted under this Plan plus the aggregate number
of Shares previously issued by the Company pursuant to the exercise of Options
granted under this Plan exceeds the Maximum Number of Shares, then
notwithstanding anything herein to the contrary, no further Options may be
granted under this Plan until the Maximum Number is increased or the aggregate
number of Shares subject to outstanding Options granted under this Plan plus the
aggregate number of Shares previously issued by the Company pursuant to the
exercise of Options granted under this Plan is less than the Maximum Number.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "COMMITTEE"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no Committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
<PAGE>
6. ELIGIBILITY AND AWARD FORMULA.
6.1 ELIGIBILITY. Options may be granted only to directors of the
Company who are not employees of the Company or any Parent, Subsidiary or
Affiliate of the Company, as those terms are defined in Section 17 below.
6.2 INITIAL GRANT. Each Optionee who on or after the Effective
Date is or becomes a member of the Board will automatically be granted an Option
for 25,000 Shares (the "INITIAL GRANT"). Initial Grants shall be made on the
later of the Effective Date or the date such Optionee first becomes a member of
the Board.
6.3 SUCCEEDING GRANTS. On each anniversary of the Initial Grant,
if the Optionee is still a member of the Board and has served continuously as a
member of the Board since the date of the Optionee's Initial Grant, the Optionee
will automatically be granted an Option for 10,000 Shares (a "SUCCEEDING
GRANT").
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:
7.1 FORM OF OPTION GRANT. Each Option granted under this Plan
shall be evidenced by a written Stock Option Grant ("GRANT") in such form (which
need not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
7.2 VESTING.
(a) OPTIONS GRANTED ON OR AFTER JUNE 20, 1999. Options
granted under this Plan on or after June 20, 1999 shall be fully vested and
exercisable in full on the date such Options are granted.
(b) OPTIONS GRANTED PRIOR TO JUNE 20, 1999. Options granted
under this Plan prior to June 20, 1999 shall become exercisable as they vest
according to the vesting schedule set forth below (as used herein, the date an
Optionee receives an Initial Grant or a Succeeding Grant that is granted prior
to June 20, 1999, is referred to in this Plan as the "START DATE" for such
Option):
(i) INITIAL GRANTS. Each Option granted prior to June
20, 1999 that is an Initial Grant will vest as follows, so long as the Optionee
continuously remains a director of the Company: (A) on the first (1st)
anniversary of the Initial Grant, the Initial Grant will vest as to forty
percent (40%) of the Shares; (B) on the second (2nd) anniversary of the Initial
Grant, the Initial Grant will vest as to thirty percent (30%) of the Shares; (C)
on the third (3rd) anniversary of the Initial Grant, the Initial Grant will vest
as to twenty percent (20%) of the Shares; and (D) on the fourth (4th)
anniversary of the Initial Grant, the Initial Grant will vest as to ten percent
(10%) of the Shares.
(ii) SUCCEEDING GRANTS. Each Option granted prior to
June 20, 1999 that is a Succeeding Grant will vest as to twenty-five percent
(25%) of the Shares upon each of the first four (4) successive anniversaries of
the Start Date for such Succeeding Grant, so long as the Optionee continuously
remains a director of the Company.
7.3 EXERCISE PRICE. The exercise price of an Option shall be the
Fair Market Value (as defined in Section 17.4) of the Shares, at the time that
the Option is granted.
7.4 TERMINATION OF OPTION. Except as provided below in this
Section, each Option shall expire ten (10) years after its Start Date (the
"EXPIRATION DATE"). The Option (to the extent it is subject to vesting) shall
cease to vest if the Optionee ceases to be a member of the Board. The date on
which the Optionee ceases to be a member of the Board shall be referred to as
the "TERMINATION DATE". An Option may be exercised after the Termination Date
only as set forth below:
(a) TERMINATION GENERALLY. If the Optionee ceases to be a
member of the Board for any reason except death or disability, then each Option
then held by such Optionee, to the extent (and only to the
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extent) that it would have been exercisable by the Optionee on the Termination
Date, may be exercised by the Optionee within seven (7) months after the
Termination Date, but in no event later than the Expiration Date.
(b) DEATH OR DISABILITY. If the Optionee ceases to be a
member of the Board because of the death of the Optionee or the disability of
the Optionee within the meaning of Section 22(e)(3) of the Internal Revenue Code
of 1986, as amended (the "CODE"), then each Option then held by such Optionee,
to the extent (and only to the extent) that it would have been exercisable by
the Optionee on the Termination Date, may be exercised by the Optionee (or the
Optionee's legal representative) within twelve (12) months after the Termination
Date, but in no event later than the Expiration Date.
8. EXERCISE OF OPTIONS.
8.1 NOTICE. Options may be exercised only by delivery to the
Company of an exercise agreement in a form approved by the Committee stating the
number of Shares being purchased, the restrictions imposed on the Shares and
such representations and agreements regarding the Optionee's investment intent
and access to information as may be required 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.
8.2 PAYMENT. Payment for the Shares purchased upon exercise of
an Option may be made (a) in cash or by check; (b) by surrender of shares of
Common Stock of the Company that have been owned by the Optionee for more than
six (6) months (and which 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 were obtained by
the Optionee in the open public market, having a Fair Market Value equal to the
exercise price of the Option; (c) by waiver of compensation due or accrued to
the Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD DEALER") whereby the Optionee 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; (e) provided
that a public market for the Company's stock exists, through a "margin"
commitment from the Optionee and a NASD Dealer whereby the Optionee 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.
8.3 WITHHOLDING TAXES. Prior to issuance of the Shares upon
exercise of an Option, the Optionee shall pay or make adequate provision for any
federal or state withholding obligations of the Company, if applicable.
8.4 LIMITATIONS ON EXERCISE. Notwithstanding the exercise
periods set forth in the Grant, exercise of an Option shall always be subject to
the following limitations:
(a) An Option shall not be exercisable until such time as
this Plan (or, in the case of Options granted pursuant to an amendment
increasing the number of shares that may be issued pursuant to this Plan, such
amendment) has been approved by the stockholders of the Company in accordance
with Section 15 hereof.
(b) An Option shall not be exercisable unless such exercise
is in compliance with the Securities Act and all applicable state securities
laws, as they are in effect on the date of exercise.
(c) The Committee may specify a reasonable minimum number of
Shares that may be purchased upon any exercise of an Option, provided that such
minimum number will not prevent the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
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<PAGE>
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or by the Optionee's
guardian or legal representative, unless otherwise permitted by the Committee.
No Option may be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its stockholders.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration, or
in the event of a change in the corporate structure, capitalization or a
dividend of property affecting the value of the Company's Shares, appropriate
adjustments will be made by the Board in the number of Shares available under
this Plan and the number of Shares subject to outstanding Options and the
exercise price per share of such outstanding Options, subject to any required
action by the stockholders of the Company and compliance with applicable
securities laws; PROVIDED, HOWEVER, that no fractional shares shall be issued
upon exercise of any Option and any resulting fractions of a Share shall be
rounded up to the nearest whole Share.
12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this Plan or any
Option granted under this Plan shall confer on any Optionee any right to
continue as a director of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to and conditioned upon
compliance with all applicable requirements of law, including without limitation
compliance with the Securities Act, compliance with all other applicable state
securities laws and compliance with the requirements of any stock exchange or
national market system on which the Shares may be listed. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration or qualification requirement of any state securities laws,
stock exchange or national market system.
14. ACCELERATION OF OPTIONS. 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 Options
granted under this Plan are assumed or replaced by the successor corporation,
which assumption will be binding on all Optionees), (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 of the Code
wherein the stockholders of the Company give up all of their equity interests 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), the vesting of all options granted pursuant to
this Plan will accelerate and the options will become exercisable in full prior
to the consummation of such event at such times and on such conditions as the
Committee determines, and if such options are not exercised prior to the
consummation of the corporate transaction, they shall terminate in accordance
with the provisions of this Plan.
15. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan (but may not terminate or amend the terms of any
outstanding option without the consent of the Optionee); PROVIDED, HOWEVER, that
the Committee shall not, without the approval of the stockholders of the
Company, increase the total number of Shares available under this Plan (except
by operation of the provisions of Sections 4 and 11 above) or change the class
of persons eligible to receive Options. Further, the provisions in Sections 6
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<PAGE>
and 7 of this Plan shall not be amended more than once every six (6) months,
other than to comport with changes in the Code, the Employee Retirement Income
Security Act or the rules thereunder. In any case, no amendment of this Plan may
adversely affect any then outstanding Options or any unexercised portions
thereof without the written consent of the Optionee.
16. TERM OF PLAN. Options may be granted pursuant to this Plan from
time to time within a period of ten (10) years from the date this Plan is
adopted by the Board.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms
shall have the following meanings:
17.1 "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 the Option, 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.
17.2 "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 Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
17.3 "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.
17.4 "FAIR MARKET VALUE" shall mean, as of any date, the value
of a share of the Company's Common Stock determined by the Board in its sole
discretion, exercised in good faith; PROVIDED, HOWEVER, that where there is a
public market for the Common Stock, the Fair Market Value per share shall be the
average of the closing bid and asked prices of the Common Stock on the last
trading day prior to the date of determination as reported in THE WALL STREET
JOURNAL (or, if not so reported, as otherwise reported by the Nasdaq Stock
Market) or, in the event the Common Stock is listed on a stock exchange or on
the Nasdaq National Market, the Fair Market Value per share shall be the closing
price on the exchange or on the Nasdaq National Market on the last trading date
prior to the date of determination as reported in THE WALL STREET JOURNAL;
PROVIDED, HOWEVER, that notwithstanding the foregoing, with respect to the
Initial Grants that are granted on the Effective Date, the "Fair Market Value"
shall mean the price per share at which shares of the Company's Common Stock are
initially offered for sale to the public by the Company's underwriters in the
initial public offering of the Company's Common Stock pursuant to a registration
statement filed with the SEC under the Securities Act.
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<PAGE>
PROXY
HNC SOFTWARE INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John Mutch and Kenneth J. Saunders, or either
of them, as proxies each with full power to appoint his substitute, and
hereby authorizes them to represent and to vote all shares of stock of HNC
Software Inc. which the undersigned is entitled to vote, as specified on the
reverse side of this card at the Annual Meeting of Stockholders of HNC
Software Inc. (the "Meeting") to be held on Thursday, May 25, 2000 at 10:00
a.m. local time, at the Company's offices located at 5935 Cornerstone Court
West, San Diego, California and at any adjournment or postponement thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY RELATES
WILL BE VOTED AS SPECIFIED AND, IF NO SPECIFICATION IS MADE WILL BE VOTED FOR
ALL NOMINEES FOR DIRECTORS IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4, 5 AND 6,
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 ADJOUNMENTS OR POSTPONEMENTS THEREOF TO THE EXTENT AUTHORIZED BY RULE
14a-4(c) PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
SEE REVERSE (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) SEE REVERSE
SIDE SIDE
<PAGE>
DETACH HERE
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4, 5 AND 6.
FOR MORE DETAILED DESCRIPTION OF THE PROPOSALS,
PLEASE PREFER TO THE PROXY STATEMENT.
1. The election of five directors, each to serve until the next annual
meeting of stockholders and until his successor has been elected and
qualified or until his earlier resignation, death or removal.
NOMINEES: (01) Edward K. Chandler, (02) Thomas F. Farb, (03) Alex W. Hart,
(04) Charlee H. Gaylord, Jr. and (05) John Mutch
/ / FOR ALL NOMINEES / / WITHHELD FROM ALL NOMINEES
/ / __________________________________________________________________
(Instruction: to withhold authority to vote for any individual nominee
write that nominee's name on the space provided above.)
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
2. To amend HNC's Certificate of Incorporation to increase the number of
shares of Common Stock from 50,000,000 shares to 120,000,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve an amendment to HNC's 1995 Equity Incentive Plan to increase
the number of shares of Common Stock reserved for issuance under the plan
by 1,850,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
4. To approve an amendment to HNC's 1995 Employee Stock Purchase Plan to
increase the number of shares of Common Stock reserved for issuance under
the plan by 200,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
5. To approve an amendment to HNC's 1995 Directors Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance under
the plan by 250,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
6. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
7. To transact the other business that may properly come before the Meeting
or any adjournment or postponement of the meeting.
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 an 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.
Signature:________________________________________ Date: _____________________
Signature:________________________________________ Date: _____________________
