-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BGmzcLOxobRSmnE1eHXbiupTigTDI5ogbjZDru2YsXICTOMm2oCQuP8Md/Qf1GkM kATPPy4VNYOE75fR5TMYzA== 0000936392-96-000601.txt : 19960814 0000936392-96-000601.hdr.sgml : 19960814 ACCESSION NUMBER: 0000936392-96-000601 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HNC SOFTWARE INC/DE CENTRAL INDEX KEY: 0000945093 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 330248788 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26146 FILM NUMBER: 96609379 BUSINESS ADDRESS: STREET 1: 5930 CORNERSTONE CT WEST CITY: SAN DIEGO STATE: CA ZIP: 92121-3728 BUSINESS PHONE: 6195468877 MAIL ADDRESS: STREET 1: 5930 CORNERSTONE CT WEST CITY: SAN DIEGO STATE: CA ZIP: 92121-3728 10-Q 1 FORM 10-Q 1 ================================================================================ THIS PAPER DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________ . COMMISSION FILE NUMBER 0-26146 - -------------------------------------------------------------------------------- HNC SOFTWARE INC. (Exact name of registrant as specified in its charter) - -------------------------------------------------------------------------------- DELAWARE 33-0248788 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5930 CORNERSTONE COURT WEST SAN DIEGO, CA 92121 (Address of principal executive offices) (619) 546-8877 (Registrant's telephone number, including area code) -------------------------------- INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) YES X NO ___ AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO --- --- AS OF JULY 31, 1996 THERE WERE 15,583,911 SHARES OF $0.001 PAR VALUE COMMON STOCK OUTSTANDING. =============================================================================== 2 INDEX LISTING - --------------------------------------------------------------------------------
Page Number ------ PART I FINANCIAL INFORMATION - ------ Item 1: FINANCIAL STATEMENTS -------------------- Consolidated Balance Sheet at June 30, 1996 (unaudited) 3 and December 31, 1995 Consolidated Statement Of Income (unaudited) for the 4 three month and six month periods ended June 30, 1996 and 1995 Consolidated Statement Of Cash Flows (unaudited) for 5 the six month periods ended June 30, 1996 and 1995 Notes To Consolidated Financial Statements (unaudited) 6 Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 ------------------------------------------------- PART II OTHER INFORMATION - ------- Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15 --------------------------------------------------- Item 6: EXHIBITS AND REPORTS ON FORM 8-K 19 -------------------------------- PART III EXHIBITS - -------- RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY FILED JUNE 13, 1996 ---------------------------------------------------------- BYLAWS OF THE COMPANY, AS AMENDED --------------------------------- STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS -----------------------------------------------------
2 3 PART I - FINANCIAL INFORMATION - -------------------------------------------------------------------------------- Item 1: FINANCIAL STATEMENTS HNC SOFTWARE INC. CONSOLIDATED BALANCE SHEET (in thousands, except per share data) ASSETS
June 30, December 31, 1996 1995 ----------- ------------ (Unaudited) Current assets: Cash and cash equivalents $ 1,184 $19,929 Short-term investments 13,617 14,590 Trade accounts receivable, net 7,419 4,597 Current portion of deferred income 2,338 1,702 Other current assets 1,572 1,150 ------- ------- Total current assets 26,130 41,968 Property and equipment, net 3,477 2,593 Deferred income taxes, less current portion 3,364 346 Other assets 454 187 Long-term investments 27,001 8,336 ------- ------- $60,426 $53,430 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 721 $ 669 Accrued liabilities 2,060 2,451 Deferred revenue 2,006 2,041 ------- ------- Total current liabilities 4,787 5,161 Common stock, $0.001 par value - 50,000 and 20,000 shares authorized: 15,461 and 14,719 shares issued and outstanding, respectively 15 15 Paid-in capital 54,714 49,124 Retained earnings (accumulated deficit) 910 (870) ------- ------- Total stockholders' equity 55,639 48,269 ------- ------- $60,426 $53,430 ======= =======
See accompanying notes to consolidated financial statements. 3 4 HNC SOFTWARE INC. CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended Six Months Ended ------------------------------ ------------------------------ June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995 ------------- ------------- ------------- ------------- Revenues: Software license and installation $ 5,659 $ 3,820 $10,448 $ 6,808 Contracts and other 3,051 2,100 6,030 4,200 ------- ------- ------- ------- Total revenues 8,710 5,920 16,478 11,008 ------- ------- ------- ------- Operating expenses: Software license and installation 1,162 739 2,126 1,304 Contracts and other 1,930 1,493 4,009 3,080 Research and development 2,013 1,154 3,602 2,063 Sales and marketing 1,667 1,245 3,169 2,262 General and administrative 888 597 1,734 1,100 ------- ------- ------- ------- Total operating expenses 7,660 5,228 14,640 9,809 ------- ------- ------- ------- Operating income 1,050 692 1,838 1,199 Other income, net 555 57 1,116 91 ------- ------- ------- ------- Income before income tax provision 1,605 749 2,954 1,290 Income tax provision 638 232 1,174 400 ------- ------- ------- ------- Net income $ 967 $ 517 $ 1,780 $ 890 ======= ======= ======= ======= Net income per share $ 0.06 $ 0.11 ======= ======= Pro forma net income per share $ 0.04 $ 0.07 ======= ======= Shares used in computing net income per share 16,989 16,870 ======= ======= Shares used in computing pro forma net income per share 13,070 12,870 ======= =======
See accompanying notes to consolidated financial statements. 4 5 HNC SOFTWARE INC. CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Six Months Ended ------------------------------- June 30, 1996 June 30, 1995 ------------- ------------- Cash flows from operating activities: Net Income $ 1,780 $ 890 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 685 321 Changes in assets and liabilities: Accounts receivable, net (2,822) (332) Other assets (689) 424 Deferred tax assets 1,139 (48) Accounts payable 52 (142) Accrued liabilities (391) 355 Deferred revenue (35) 1,932 -------- ------- Net cash (used in) provided by operating activities (449) 3,400 -------- ------- Cash flows from investing activities: Purchases of investments (21,164) (101) Maturities of investments 1,655 1,182 Proceeds from sale of investments 1,649 -- Acquisitions of property and equipment (1,569) (787) Net cash (used in) provided by investing activities (19,429) 294 -------- ------- Cash flows from financing activities: Net proceeds from issuance of common stock 965 15,601 Charges against issuance of common stock (476) Repayments of bank notes payable -- (687) -------- ------- Net cash provided by financing activities 965 14,438 -------- ------- Net (decrease) increase in cash and cash equivalents (18,745) 18,132 Cash and cash equivalents at beginning of period 19,929 4,786 -------- ------- Cash and cash equivalents at end of period $ 1,184 $22,918 ======== ======= Supplemental cash flow disclosure: Unrealized tax benefit from stock option plans $ 4,793 $ -- ======== ======= Interest paid $ -- $ 16 ======== ======= Income taxes paid $ 30 $ 20 ======== =======
See accompanying notes to consolidated financial statements. 5 6 HNC SOFTWARE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- NOTE 1 GENERAL In management's opinion, the accompanying unaudited consolidated financial statements for HNC Software Inc. (the "Company") for the three months and six months ended June 30, 1996 and 1995 have been prepared in accordance with generally accepted accounting principles for interim financial statements and include all adjustments (consisting only of normal recurring accruals) that the Company considers necessary for a fair presentation of its financial position, results of operations, and cash flows for such periods. Accordingly, they do not contain all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All such financial statements are unaudited except the December 31, 1995 balance sheet. This report and the accompanying unaudited and audited financial statements should be read in conjunction with the Company's audited financial statements and notes thereto presented in its 1995 Annual Report and Form 10-K for fiscal year ended December 31, 1995. Footnotes and other disclosures for the fiscal year ended December 31, 1995, which would substantially duplicate the disclosures in the Company's audited financial statements for Fiscal Year 1995 contained in the 1995 Annual Report and Form 10-K for fiscal year ended December 31, 1995, have been omitted. The interim financial information herein is not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 1996. Note 2 TERMINATED ACQUISITION On May 23, 1996, the Company announced that it had terminated the previously announced proposed acquisition of Credit and Risk Management Associates because the transaction did not qualify for 'pooling of interests' accounting treatment. In connection with this terminated acquisition, the Company incurred transaction costs of approximately $99,000. Note 3 PENDING ACQUISITION On July 22, 1996, the Company announced that it had signed a definitive agreement to acquire Risk Data Corporation, an insurance information technology product and services firm located in Irvine, California. This transaction has not yet been consummated and remains subject to the satisfaction of certain conditions, including qualification of the transaction for 'pooling of interests' accounting treatment. Under the terms of the transaction, the consideration to be paid by the Company will 6 7 consist of a number of shares of the Company's common stock and options to purchase shares of the Company's Common Stock determined by dividing $61,000,000 by the average closing price of the Company's common stock for the ten days preceding the closing of the transaction. Accordingly, under the current terms of the proposed acquisition, the maximum aggregate number of shares of Common Stock to be issued outright and to be subject to stock options issued in the transaction would be approximately 2,140,000 shares. Note 4 STOCK SPLIT On March 5, 1996, the Company announced that its Board of Directors approved a two-for-one stock split effected in the form of a common stock dividend. This stock dividend was paid to the corporation's stockholders of record as of the close of business on March 18, 1996. Such stockholders of record received stock certificates representing one additional share of HNC Software Inc. common stock for each outstanding share of common stock then held. Distribution of shares issued pursuant to the stock dividend occurred on April 3, 1996. All references in the accompanying interim financial information to share and per share amounts have been adjusted to give retroactive effect to the stock split. Note 5 NET INCOME PER SHARE Net income per share is computed based on the weighted average number of common shares and common stock equivalents, using the treasury stock method, outstanding during the respective periods. Pro forma net income per share is computed based on the weighted average number of common shares and common stock equivalents, using the treasury stock method, outstanding during the respective periods after giving retroactive effect to the conversion of all outstanding shares of preferred stock into 4,478,332 shares of common stock which occurred upon the closing of the Company's initial public offering on June 26, 1995. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, all stock options granted since May 5, 1994 and through May 5, 1995 have been included as outstanding for all periods prior to June 26, 1995 using the treasury stock method. 7 8 Note 6 STOCK-BASED COMPENSATION In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (FAS) No. 123, "Accounting for Stock-Based Compensation." FAS 123 was adopted by the Company as required for its fiscal 1996 financial statements and did not have a material effect on the Company's financial position or results of operations. The Company continues to measure compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees," and will provide pro forma disclosures of net income and earnings per share in its annual financial statements as if the fair value-based method prescribed by FAS 123 had been applied in measuring compensation expense. 8 9 HNC SOFTWARE INC. - -------------------------------------------------------------------------------- Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Item 2 contains certain forward-looking statements regarding the Company, its business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause the Company's actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: the Company's ability to successfully develop new products for new markets; the Company's loss of a large customer; the Company's inability to secure new government contracts for technology development; the impact of competition on the Company's revenues, market share or ability to maintain its premium usage-based pricing terms and to generate recurring revenue; the availability to the Company, at reasonable cost, of data required to operate or update its intelligent decision software products; changes in law or regulatory requirements that adversely affect or preclude customers from using the Company's products for certain applications; delays in the Company's introduction of new products; and failure by the Company to keep pace with emerging technologies. THREE MONTHS ENDED JUNE 30, 1996 AND 1995 REVENUES. Revenues for the three months ended June 30, 1996 were $8.7 million, an increase of 47% over revenues of $5.9 million for the same period in the prior year. This increase was primarily due to greater software license and installation revenues which were $5.7 million for the quarter ended June 30, 1996, an increase of 48% from $3.8 million for the comparable quarter in 1995. This increase in software license and installation revenues resulted primarily from an increase in revenues from the Company's Falcon credit card fraud detection product and to a lesser extent from the Colleague automated mortgage underwriting product, SkuPLAN, the demand forecasting product for the retail market and the AREAS property valuation product. The Company's software license and installation revenues are derived from monthly license fees, perpetual license fees, annual maintenance fees and installation fees. The Company typically licenses its products for a monthly usage fee under long-term contracts that include software licenses, decision model updates, application consulting, on-line or on-site support and maintenance. Contracts and other revenues for the three months ended June 30, 1996 were $3.0 million, an increase of 45% as compared to $2.1 million for the same period in the prior year. The increase in contracts and other revenues was due primarily to increased commercial contract revenues for new product pilots including Eagle (a merchant risk management system), ProfitMax (a credit card profitability management system) and 9 10 Capstone (a credit card application processing system). Contracts and other revenues are derived primarily from development and consulting contracts with commercial customers and research contracts with the United States Government. Revenues from contract services are generally recognized as the services are performed using the percentage of completion method based on costs incurred to date compared to total estimated costs at completion. All revenues for new product pilots are reported as contract revenues. In 1996 the Company has a significant number of new product development projects and new product pilot installations in process which it expects to begin shipping in production versions primarily in 1997. However, there can be no assurance that these product development projects or pilot installations will be successful or that the customers who serve as pilot installation sites for these new products will be satisfied with these products or agree to license them. If the Company's new product development efforts are unsuccessful or are not well received by pilot customers, the Company may be compelled to delay or entirely discontinue the release of production versions of these products, which would have a material adverse effect on the Company's results of operations. The Company's success depends upon its ability to enter new markets by developing new products on a timely and cost-effective basis. The Company's products often require customer data for decision model development and system installation. As a result, completion of new products may be delayed while the Company extracts sufficient amounts of statistically relevant data and develops the models. During this development process, the Company relies on its potential customers in the new market to provide data and to help train Company personnel in the use and meaning of the data in the specific industry. These relationships also assist the Company in establishing presence and credibility in the new market. There can be no assurance that these companies, most of which have significantly greater financial and marketing resources than the Company, will not compete with the Company in the future or will not otherwise discontinue their relationships with or support of the Company, either during development of the Company's products or thereafter. The Company's success will depend upon its ability to maintain competitive technologies, enhance its current products and develop new products in a timely and cost-effective manner that meet changing market conditions, including evolving customer needs, new competitive product offerings, emerging industry standards and changing technology. The sales cycle associated with the purchase of the Company's products is typically lengthy and subject to a number of significant risks, including customers' budgetary constraints and internal acceptance reviews, over which the Company has little or no control. 10 11 SOFTWARE LICENSE AND INSTALLATION EXPENSES. Software license and installation expense primarily consists of the Company's expenses for personnel engaged in installation and support and related costs. Software license and installation expenses for the second quarter of 1996 were $1.2 million and constituted 21% of software and installation revenues for the quarter, whereas such expenses were $739,000 and represented 19% of software and installation revenues in the second quarter of 1995. The primary reason for the increase in these expenses was increased staffing and associated costs in client services to support the increased volume of business. CONTRACTS AND OTHER EXPENSES. Contracts and other expenses consist primarily of personnel-related expenses associated with the Company's performance of such contracts. Contracts and other expenses in the second quarter of 1996 were $1.9 million or 63% of contracts and other revenues as compared to $1.5 million or 71% of such revenues in the second quarter of 1995. The reduction in expenses as a percent of revenues is due to increased pricing on certain contracts. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in the second quarter of 1996 were $2.0 million and 23% of total revenues compared to $1.2 million and 19% of total revenues in the second quarter of the prior year. The increase in expenses was due primarily to increases in staffing and related costs to support increased new product development activities, including the expenses for the Company's new text analysis products, which the Company began commercial development of in January of 1996. SALES AND MARKETING EXPENSES. Sales and marketing expenses were $1.7 million or 19% of total revenues in the second quarter of 1996 compared to $1.2 million and 21% of total revenues in the second quarter of 1995. The increase in sales and marketing expenses was due primarily to increased staffing and product promotion activities to support higher sales volumes and new product introductions, including the Company's new text analysis products. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were $888,000 and 10% of total revenues in the second quarter of 1996, compared to $597,000 and 10% of total revenues in the prior year. The primary reason for the increase in these costs was increased staffing and related expenses to support higher levels of sales and development activity of the Company. General and administrative expenses in the second quarter of 1996 also includes $99,000 of costs associated with the terminated acquisition of Credit and Risk Management Associates. Please see Note 2 to the Notes to Consolidated Financial Statements included in this report. OPERATING INCOME. The above factors resulted in operating income of $1.1 million and 12% of total revenues for the second quarter of 1996, compared to an operating income of $692,000 and 12% of total revenues in the same quarter of the prior year. 11 12 The Company's quarterly revenues and operating results have varied significantly in the past and may do so in the future. Although to date a significant portion of the Company's revenues has come from monthly usage fees under long-term contracts, there can be no assurance that the Company will continue to realize such recurring revenues or that customers under such contracts would not seek to cancel such contracts if the Company's products were not competitive or did not achieve cost effective results. A significant portion of the Company's business has been derived from substantial orders placed by large organizations, and the timing of such orders has caused material fluctuations in the Company's operating results. The Company's expense levels are based in part on its expectations regarding future revenues and in the short term are fixed to a large extent. Operating results also may fluctuate due to factors such as the demand for the Company's products, product life cycles, the introduction and acceptance of new products and product enhancements by the Company or its competitors, changes in the mix of distribution channels through which the Company's products are offered, changes in the level of operating expenses, customer order deferrals in anticipation of new products, competitive conditions in the industry and economic conditions generally or in various industry segments. The Company has continued to invest in research and development and sales and marketing in an effort to better service its customers and markets. The Company expects to continue to increase absolute dollar spending on both research and development and sales and marketing in the future. OTHER INCOME, NET. Other income for the second quarter of 1996 was $555,000 compared to $57,000 in the second quarter of the prior year. The increase was due to increased interest income in 1996 from higher cash and investment balances which consisted primarily of the proceeds from the Company's initial public offering in June, 1995 and secondary public offering in December, 1995. INCOME BEFORE INCOME TAX PROVISION. The resulting income before tax provision for the second quarter of 1996 was $1.6 million or 18% of total revenues, compared to income before tax provision of $749,000 or 13% of total revenues for the comparable quarter of 1995. SIX MONTHS ENDED JUNE 30, 1996 AND 1995 REVENUES. Revenues for the six months ended June 30, 1996 were $16.5 million, an increase of 50% over revenues of $11.0 million for the same period in the prior year. This increase was primarily due to greater software license and installation revenues which were $10.4 million for the six months ended June 30, 1996, an increase of 53% from $6.8 million for the comparable quarter in 1995. This increase in software license and installation revenues resulted primarily from an increase in revenues from the Company's Falcon credit card fraud detection product and to a lesser extent from the Colleague automated mortgage underwriting product, SkuPLAN, the demand forecasting product for the retail market and the AREAS property valuation product. 12 13 Contracts and other revenues for the six months ended June 30, 1996 were $6.0 million, compared to $4.2 million for the same period in the prior year, a 44% increase. The increase in contracts and other revenues was due primarily to increased commercial contract revenues for new product pilots for Eagle (a merchant risk management system), ProfitMax (a credit card profitability management system) and Capstone (a credit card application processing system). SOFTWARE LICENSE AND INSTALLATION EXPENSES. Software license and installation expense primarily consists of the Company's expenses for personnel engaged in installation and support and related costs. Software license and installation expenses for the six months of 1996 were $2.1 million and constituted 20% of software and installation revenues for the quarter, whereas such expenses were $1.3 million and represented 19% of software and installation revenues in the six months of 1995. The primary reason for the increase in these expenses was increased staffing and associated costs in client services to support the increased volume of business. In 1996 the Company has a significant number of new product development projects in process which it expects to begin installing in a production phase primarily in 1997. However, there can be no assurance that these product development projects or pilot installations will be successful or that the customers who serve as pilot installation sites for these new products will be satisfied with these products or agree to license them. If the Company's new product development efforts are unsuccessful or are not well received by pilot customers, the Company may be compelled to delay or entirely discontinue the release of production versions of these products, which would have a material adverse effect on the Company's results of operations. CONTRACTS AND OTHER EXPENSES. Contracts and other expenses consist primarily of personnel-related expenses. Contracts and other expenses during the first six months of 1996 were $4.0 million or 66% of contracts and other revenues as compared to $3.1 million or 73% of such revenues in the first six months of 1995. The reduction in expenses as a percent of revenues is due to increased pricing on certain contracts. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in the first six months of 1996 were $3.6 million and 22% of total revenues compared to $2.1 million and 19% of total revenues in the first six months of 1995. The increase in expenses was due primarily to increases in staffing and related costs to support increased new product development activities, including the Company's new text analysis products. SALES AND MARKETING EXPENSES. Sales and marketing expenses were $3.2 million or 19% of total revenues in the first six months of 1996 compared to $2.3 million and 21% of total revenues in the second quarter of 1995. The increase in sales and marketing expenses was due primarily to increased staffing and product promotion activities to support higher sales volumes and new product introductions, including the Company's new text analysis products. 13 14 GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses were $1.7 million and 11% of total revenues in the first six months of 1996, compared to $1.1 million and 10% of total revenues in the prior year. The primary reason for the increase in these costs was increased staffing and related expenses to support higher levels of activity of the Company and includes costs of $99,000 associated with the terminated acquisition of CRMA. See Note 2 to the Notes to Consolidated Financial Statements included in this report. OPERATING INCOME. The above factors resulted in operating income of $1.8 million and 11% of total revenues for the first six months of 1996, compared to an operating income of $1.2 million and 11% of total revenues in the same period of the prior year. OTHER INCOME, NET. Other income for the first six months of 1996 was $1.1 million compared to $91,000 in the first six months of the prior year. The increase was due to increased interest income in 1996 from higher cash and investment balances which consisted primarily of the proceeds from the Company's initial public offering in June, 1995 and secondary public offering in December, 1995. INCOME BEFORE INCOME TAX PROVISION. The resulting income before tax provision for the first six months of 1996 was $3.0 million or 18% of total revenues, compared to income before tax provision of $1.3 million or 12% of total revenues for the comparable quarter of 1995. LIQUIDITY AND CAPITAL RESOURCES FINANCING ACTIVITIES During the six months ended June 30, 1996 the Company obtained $965,000 of cash from financing activities. These funds came primarily from the exercise of stock options and the purchase of shares under the Company's employee stock purchase plan. As of June 30, 1996 the Company had $41.8 million in cash, cash equivalents and investments. Management believes that the Company's cash and investments and cash generated from operations will be adequate for the Company's cash requirements for the next twelve months. OPERATING ACTIVITIES Cash used by operating activities for the six months ended June 30, 1996 was $449,000 compared to cash provided by operations of $3.4 million for the first six months of the prior year. The increase in cash used by operating activities was due primarily to increased accounts receivable balances due to increased revenues and an increase in the average days outstanding of these higher receivable balances. The days outstanding have increased largely because of the increase in new product pilot contracts which generally pay more slowly. 14 15 INVESTING ACTIVITIES Cash used in investing activities was $19.3 million for six months ended June 30, 1996 compared to cash provided by investing activities of $294,000 for the first six months of the prior year. This was due to net purchases of short and long term investments of $17.7 million and acquisitions of property and equipment, primarily computer equipment of $1.6 million. Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its 1996 Annual Meeting of Stockholders on May 23, 1996 (the "Annual Meeting"). At the Annual Meeting the Company's stockholders elected the Company's Board of Directors and approved the proposals described more fully below. Proxies were solicited by the Company pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. As of April 5, 1996, the record date for the Annual Meeting, there were approximately 15,169,455 shares of the Company's Common Stock outstanding and entitled to vote, of which 11,386,868 shares were present in person or by proxy at the Annual Meeting. The directors of the Company who were elected at the Annual Meeting were: Edward K. Chandler, Oliver D. Curme, Roger L. Evans, Thomas F. Farb, Charles H. Gaylord, Jr. and Robert L. North. The proposals considered at the Annual Meeting were voted on as follows: 1. Election of Directors. Proposal to elect six directors of the Company, each to serve until the next Annual Meeting of Stockholders and until his successor is duly elected and qualified or until his earlier resignation or removal.
VOTES FOR VOTES WITHHELD --------- -------------- Nominees -------- Edward K. Chandler 11,324,807 62,061 Oliver D. Curme 11,324,807 62,061 Roger L. Evans 11,324,607 62,261 Thomas F. Farb 11,323,107 63,761 Charles H. Gaylord, Jr. 11,324,607 62,261 Robert L. North 11,324,807 62,061
15 16 2. Amendment of Certificate of Incorporation. Proposal to amend the Company's Certificate of Incorporation to increase the authorized number of shares of the Company's Common Stock, $0.001 par value, from 20,000,000 to 50,000,000 shares.
BROKER VOTES FOR VOTES AGAINST ABSTENTIONS NON-VOTES --------- ------------- ----------- --------- 9,888,249 1,161,128 130,380 207,111
3. Ratification of Auditors. Proposal to ratify the appointment of Price Waterhouse LLP as the Company's auditors for the Company's fiscal year ending December 31, 1996.
BROKER VOTES FOR VOTES AGAINST ABSTENTIONS NON-VOTES --------- ------------- ----------- --------- 11,255,261 1,217 130,390 0
16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized. HNC SOFTWARE INC. Date: August 12, 1996 By: /s/ RAYMOND V. THOMAS ------------------------------------ Raymond V. Thomas Vice President Finance & Administration and Chief Financial Officer (for Registrant as duly authorized officer and as Principal Financial and Accounting Officer) 17 18 Item 6: EXHIBITS AND REPORTS ON FORM 8-K (a) The following documents are filed as exhibits with this Report: Exhibit 3(i).04 Restated Certificate of Incorporation of the Company filed June 13, 1996. Exhibit 3(ii).05 Bylaws of the Company, as amended. Exhibit 11.01 Statement Regarding Computation of Pro Forma Per Share Earnings. Exhibit 27 Financial Data Schedule. (b) Reports on Form 8-K None 18 19 INDEX TO EXHIBITS ----------------- The following exhibits are filed with this Report: Exhibit 3(i).04 Restated Certificate of Incorporation of the Company filed June 13, 1996. Exhibit 3(ii).05 Bylaws of the Company, as amended. Exhibit 11.01 Statement Regarding Computation of Per Share Earnings. Exhibit 27 Financial Data Schedule. 19 EX-3.I.04 2 RESTATED CERTIFICATE OF INCORPORATION 1 PART II - EXHIBITS - -------------------------------------------------------------------------------- EXHIBIT 3(i).04 RESTATED CERTIFICATE OF INCORPORATION OF HNC SOFTWARE INC. (ORIGINALLY INCORPORATED ON APRIL 17, 1995) ARTICLE I The name of the corporation is HNC Software Inc. ARTICLE II The address of the registered office of the corporation in the State of Delaware is 15 E. North Street, City of Dover, 19901, County of Kent. The name of its registered agent at that address is Incorporating Services, Ltd. ARTICLE III The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV The total number of shares of all classes of stock which the corporation has authority to issue is Fifty-Four Million (54,000,000) shares, consisting of two classes: Fifty Million (50,000,000) shares of Common Stock, $0.001 par value per share, and Four Million (4,000,000) shares of Preferred Stock, $0.001 par value per share. The Board of Directors is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a certificate of designation pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof, and to increase or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding). The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the corporation entitled to vote, unless a vote of any other holders is required pursuant to a certificate or certificates establishing a series of Preferred Stock. Except as expressly provided in any certificate of designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board of Directors without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including without limitation, voting rights, dividend rights, liquidation rights, redemption rights and 1 2 conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, the Preferred Stock, or any future class or series of Preferred Stock or Common Stock. ARTICLE V The Board of Directors of the corporation shall have the power to adopt, amend or repeal the Bylaws of the corporation. ARTICLE VI Election of directors need not be by written ballot unless the Bylaws of the corporation shall so provide. ARTICLE VII To the fullest extent permitted by law, no director of the corporation shall be personally liable for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article VII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision. _____________________ HNC Software Inc., a Delaware corporation, hereby certifies that the foregoing Restated Certificate of Incorporation, which restates, integrates and further amends the provisions of the Certificate of Incorporation of this corporation as heretofore amended or supplemented, has been duly adopted by the corporation's Board of Directors and stockholders in accordance with Sections 242 and 245 of the Delaware General Corporation Law. IN WITNESS WHEREOF, said corporation has caused this Restated Certificate of Incorporation to be signed and attested by its duly authorized officers this 28th day of May, 1996. HNC SOFTWARE INC. By: /s/ ROBERT L. NORTH --------------------------------- Robert L. North, President ATTEST: /s/ RAYMOND V. THOMAS - ---------------------------------- Raymond V. Thomas, Secretary 2 EX-3.II.05 3 BYLAWS OF THE COMPANY, AS AMENDED. 1 EXHIBIT 3 (ii).05 BYLAWS OF HNC SOFTWARE INC. (a Delaware corporation) As Adopted April 19, 1995 and Amended March 13, 1996 ARTICLE I STOCKHOLDERS Section 1.1: Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as the Board of Directors shall each year fix. Any other proper business may be transacted at the annual meeting. Section 1.2: Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time by the Chairman of the Board, the Chief Executive Officer, the President, the holders of shares of the Corporation that are entitled to cast not less than ten percent (10%) of the total number of votes entitled to be cast by all shareholders at such meeting, or by a majority of the members of the Board of Directors. Special meetings may not be called by any other person or persons. If a special meeting of stockholders is called by any person or persons other than by a majority of the members of the Board of Directors, then such person or persons shall call such meeting by delivering a written request to call such meeting to each member of the Board of Directors, and the Board of Directors shall then determine the time, date and place of such special meeting, which shall be held not more than one hundred twenty (120) nor less than thirty-five (35) days after the written request to call such special meeting was delivered to each member of the Board of Directors. Section 1.3: Notice of Meetings. Written notice of all meetings of stockholders shall be given stating the place, date and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation of the Corporation, such notice shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. Section 1.4: Adjournments. Any meeting of stockholders may adjourn from time to time to reconvene at the same or another place, and notice need not be given of any such adjourned meeting if the time, date and place thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) 1 2 days, or if after the adjournment a new record date is fixed for the adjourned meeting, then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. Section 1.5: Quorum. At each meeting of stockholders the holders of a majority of the shares of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, except if otherwise required by applicable law. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting may adjourn the meeting. Shares of the Corporation's stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation's stock held by it in a fiduciary capacity. Section 1.6: Organization. Meetings of stockholders shall be presided over by such person as the Board of Directors may designate, or, in the absence of such a person, the Chairman of the Board, or, in the absence of such person, the President of the Corporation, or, in the absence of such person, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairman of the meeting and, subject to Section 1.11 hereof, shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him or her to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7: Voting; Proxies. Unless otherwise provided by law or the Certificate of Incorporation, and subject to the provisions of Section 1.8 of these Bylaws, each stockholder shall be entitled to one (1) vote for each share of stock held by such stockholder. Each stockholder entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Voting at meetings of stockholders need not be by written ballot unless such is demanded at the meeting before voting begins by a stockholder or stockholders holding shares representing at least one percent (1%) of the votes entitled to vote at such meeting, or by such stockholder's or stockholders' proxy; provided, however, that an election of directors shall be by written ballot if demand is so made by any stockholder at the meeting before voting begins. If a vote is to be taken by written ballot, then each such ballot shall state the name of the stockholder or proxy voting and such other information as the chairman of the meeting deems appropriate. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Unless otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the shares of stock entitled to vote thereon 2 3 that are present in person or represented by proxy at the meeting and are voted for or against the matter. Section 1.8: Fixing Date for Determination of Stockholders of Record. (a) Generally. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If no record date is fixed by the Board of Directors, then the record date shall be as provided by applicable law. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (b) Stockholder Request for Action by Written Consent. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date for such consent. Such request shall include a brief description of the action proposed to be taken. The Board of Directors shall, within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date. Such record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors within ten (10) days after the date on which such a request is received, then the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, to its principal place of business, or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, then the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action. Section 1.9: List of Stockholders Entitled to Vote. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at 3 4 a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. Section 1.10: Action by Written Consent of Stockholders. (a) Procedure. Unless otherwise provided by the Certificate of Incorporation, and except as set forth in Section 1.8(b) above, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Written stockholder consents shall bear the date of signature of each stockholder who signs the consent and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, to its principal place of business or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. No written consent shall be effective to take the action set forth therein unless, within sixty (60) days of the earliest dated consent delivered to the Corporation in the manner provided above, written consents signed by a sufficient number of stockholders to take the action set forth therein are delivered to the Corporation in the manner provided above. (b) Notice of Consent. Prompt notice of the taking of corporate action by stockholders without a meeting by less than unanimous written consent of the stockholders shall be given to those stockholders who have not consented thereto in writing and, in the case of a Certificate Action (as defined below), if the Delaware General Corporation Law so requires, such notice shall be given prior to filing of the certificate in question. If the action which is consented to requires the filing of a certificate under the Delaware General Corporation Law (a "Certificate Action"), then if the Delaware General Corporation Law so requires, the certificate so filed shall state that written stockholder consent has been given in accordance with Section 228 of the Delaware General Corporation Law and that written notice of the taking of corporate action by stockholders without a meeting as described herein has been given as provided in such section. Section 1.11: Inspectors of Elections. (a) Applicability. Unless otherwise provided in the Corporation's Certificate of Incorporation or required by the Delaware General Corporation Law, the following provisions of this Section 1.11 shall apply only if and when the Corporation has a class of voting stock that is: (i) listed on a national securities exchange; (ii) authorized for quotation on an interdealer quotation system of a registered national securities association; or (iii) held of record by more than 2,000 stockholders; in all other cases, observance of the provisions of this Section 1.11 shall be optional, and at the discretion of the Corporation. 4 5 (b) Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. (c) Inspector's Oath. Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. (d) Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (i) ascertain the number of shares outstanding and the voting power of each share, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. (e) Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the inspectors at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise. (f) Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies in accordance with Section 212(c)(2) of the Delaware General Corporation Law, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.11 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. Section 1.12: Notice of Stockholder Business; Nominations. (a) Annual Meeting of Stockholders. (i) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders shall be made at an annual meeting of 5 6 stockholders (A) pursuant to the Corporation's notice of such meeting, (B) by or at the direction of the Board of Directors or (C) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.12, who is entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 1.12. (ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of subparagraph (a)(i) of this Section 1.12, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder's notice must be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year's annual meeting (except in the case of the 1995 annual meeting, for which such notice shall be timely if delivered in the same time period as if such meeting were a special meeting governed by subparagraph (b) of this Section 1.12); provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation. Such stockholder's notice shall set forth: (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, and (2) the class and number of shares of the Corporation that are owned beneficially and held of record by such stockholder and such beneficial owner. (iii) Notwithstanding anything in the second sentence of subparagraph (a)(ii) of this Section 1.12 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased board of directors at least seventy (70) days prior to the first anniversary of the preceding year's annual meeting (or, if the annual meeting is held more than thirty (30) days before or sixty (60) days after such anniversary date, at least seventy (70) days prior to such annual meeting), a stockholder's notice required by this Section 1.12 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive office of the Corporation not later than the 6 7 close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation. (b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of such meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of such meeting (i) by or at the direction of the Board of Directors or (ii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.12. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation's notice of meeting, if the stockholder's notice required by subparagraph (a)(ii) of this Section 1.12 shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the ninetieth (90th) day prior to such special meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. (c) General. (i) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law or these bylaws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.12 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded. (ii) For purposes of this Section 1.12, the term "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to section 13, 14 or 15(d) of the Exchange Act. (iii) Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. 7 8 ARTICLE II BOARD OF DIRECTORS Section 2.1: Number; Qualifications. The Board of Directors shall consist of one or more members. The current number of directors shall be six (6), and thereafter shall be fixed from time to time by resolution of the Board of Directors. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation. Section 2.2: Election; Resignation; Removal; Vacancies. The Board of Directors shall initially consist of the person or persons elected by the incorporator or named in the Corporation's initial Certificate of Incorporation. Each director shall hold office until the next annual meeting of stockholders and until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. Any director may resign at any time upon written notice to the Corporation. Subject to the rights of any holders of Preferred Stock then outstanding: (i) any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors and (ii) any vacancy occurring in the Board of Directors for any cause, and any newly created directorship resulting from any increase in the authorized number of directors to be elected by all stockholders having the right to vote as a single class, may be filled by the stockholders, by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Section 2.3: Regular Meetings. Regular meetings of the Board of Directors may be held at such places, within or without the State of Delaware, and at such times as the Board of Directors may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board of Directors. Section 2.4: Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or a majority of the members of the Board of Directors then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally or in writing, by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile or similar communication method. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting. Section 2.5: Telephonic Meetings Permitted. Members of the Board of Directors, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or similar communications equipment shall constitute presence in person at such meeting. 8 9 Section 2.6: Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the total number of authorized directors shall constitute a quorum for the transaction of business. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 2.7: Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, or in his or her absence by the President, or in his or her absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8: Written Action by Directors. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee, respectively. Section 2.9: Powers. The Board of Directors may, except as otherwise required by law or the Certificate of Incorporation, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. Section 2.10: Compensation of Directors. Directors, as such, may receive, pursuant to a resolution of the Board of Directors, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board of Directors. 9 10 ARTICLE III COMMITTEES Section 3.1: Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in subsection (a) of Section 151 of the Delaware General Corporation Law, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation, or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation, or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation under Sections 251 or 252 of the Delaware General Corporation Law, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation; and unless the resolution of the Board of Directors expressly so provides, no such committee shall have the power or authority to declare a dividend, authorize the issuance of stock or adopt a certificate of ownership and merger pursuant to section 253 of the Delaware General Corporation Law. Section 3.2: Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these Bylaws. 10 11 ARTICLE IV OFFICERS Section 4.1: Generally. The officers of the Corporation shall consist of a Chief Executive Officer and/or a President, one or more Vice Presidents, a Secretary, a Treasurer and such other officers, including a Chairman of the Board of Directors and/or Chief Financial Officer, as may from time to time be appointed by the Board of Directors. All officers shall be elected by the Board of Directors; provided, however, that the Board of Directors may empower the Chief Executive Officer of the Corporation to appoint officers other than the Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. Any officer may resign at any time upon written notice to the Corporation. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board of Directors. Section 4.2: Chief Executive Officer. Subject to the control of the Board of Directors and such supervisory powers, if any, as may be given by the Board of Directors, the powers and duties of the Chief Executive Officer of the Corporation are: (a) To act as the general manager and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation; (b) To preside at all meetings of the stockholders; (c) To call meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and (d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation. The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall designate another officer to be the Chief Executive Officer. If there is no President, and the Board of Directors has not designated any other officer to be the Chief Executive Officer, then the Chairman of the Board shall be the Chief Executive Officer. Section 4.3: Chairman of the Board. The Chairman of the Board shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and duties as provided in these bylaws and as the Board of Directors may from time to time prescribe. 11 12 Section 4.4: President. The President shall be the Chief Executive Officer of the Corporation unless the Board of Directors shall have designated another officer as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board of Directors to the Chairman of the Board and/or to any other officer, the President shall have the responsibility for the general management the control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board of Directors. Section 4.5: Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President, or that are delegated to him or her by the Board of Directors or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer in the event of the Chief Executive Officer's absence or disability. Section 4.6: Chief Financial Officer. Subject to the direction of the Board of Directors and the President, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of chief financial officer. Section 4.7: Treasurer. The Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board of Directors or the President may from time to time prescribe. Section 4.8: Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board of Directors. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board of Directors or the President may from time to time prescribe. Section 4.9: Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof. Section 4.10: Removal. Any officer of the Corporation shall serve at the pleasure of the Board of Directors and may be removed at any time, with or without cause, by the Board of Directors. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. 12 13 ARTICLE V STOCK Section 5.1: Certificates. Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. Any or all of the signatures on the certificate may be a facsimile. Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to agree to indemnify the Corporation and/or to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 5.3: Other Regulations. The issue, transfer, conversion and registration of stock certificates shall be governed by such other regulations as the Board of Directors may establish. ARTICLE VI INDEMNIFICATION Section 6.1: Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), by reason of the fact that he or she (or a person of whom he or she is the legal representative), is or was a director or officer of the Corporation or a Reincorporated Predecessor (as defined below) or is or was serving at the request of the Corporation or a Reincorporated Predecessor (as defined below) as a director or officer of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the Delaware General Corporation Law, against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnity in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. As used herein, the term "Reincorporated 13 14 Predecessor" means a corporation that is merged with and into the Corporation in a statutory merger where (a) the Corporation is the surviving corporation of such merger; (b) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor to Delaware. Section 6.2: Advance of Expenses. The Corporation shall pay all expenses (including attorneys' fees) incurred by such a director or officer in defending any such proceeding as they are incurred in advance of its final disposition; provided, however, that if the Delaware General Corporation Law then so requires, the payment of such expenses incurred by such a director or officer in advance of the final disposition of such proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Article VI or otherwise; and provided, further, that the Corporation shall not be required to advance any expenses to a person against whom the Corporation directly brings a claim, in a proceeding, alleging that such person has breached his or her duty of loyalty to the Corporation, committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or derived an improper personal benefit from a transaction. Section 6.3: Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI. Section 6.4: Indemnification Contracts. The Board of Directors is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification rights to such person. Such rights may be greater than those provided in this Article VI. Section 6.5: Effect of Amendment. Any amendment, repeal or modification of any provision of this Article VI shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI and existing at the time of such amendment, repeal or modification. 14 15 ARTICLE VII NOTICES Section 7.1: Notice. Except as otherwise specifically provided herein or required by law, all notices required to be given pursuant to these Bylaws shall be in writing and may in every instance be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by prepaid telegram, telex, overnight express courier, mailgram or facsimile. Any such notice shall be addressed to the person to whom notice is to be given at such person's address as it appears on the records of the Corporation. The notice shall be deemed given (i) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (ii) in the case of delivery by mail, upon deposit in the mail, (iii) in the case of delivery by overnight express courier, on the first business day after such notice is dispatched, and (iv) in the case of delivery via telegram, telex, mailgram, or facsimile, when dispatched. Section 7.2: Waiver of Notice. Whenever notice is required to be given under any provision of these bylaws, a written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. ARTICLE VIII INTERESTED DIRECTORS Section 8.1: Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (i) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (ii) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a 15 16 committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IX MISCELLANEOUS Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board of Directors. Section 9.2: Seal. The Board of Directors may provide for a corporate seal, which shall have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board of Directors. Section 9.3: Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, magnetic tape, diskettes, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 9.4: Reliance Upon Books and Records. A member of the Board of Directors, or a member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. Section 9.5: Certificate of Incorporation Governs. In the event of any conflict between the provisions of the Corporation's Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern. Section 9.6: Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Corporation's Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect. 16 17 ARTICLE X AMENDMENT Section 10.1: Amendments. Stockholders of the Corporation holding a majority of the Corporation's outstanding voting stock shall have the power to adopt, amend or repeal Bylaws. To the extent provided in the Corporation's Certificate of Incorporation, the Board of Directors of the Corporation shall also have the power to adopt, amend or repeal Bylaws of the Corporation, except insofar as Bylaws adopted by the stockholders shall otherwise provide. 17 18 ____________________________________________________________________ BYLAWS OF HNC SOFTWARE INC. (A DELAWARE CORPORATION) AS ADOPTED APRIL 19, 1995 AND AMENDED MARCH 13, 1996 _____________________________________________________________________ 18 19 BYLAWS OF HNC SOFTWARE INC. (a Delaware corporation) TABLE OF CONTENTS
PAGE ---- ARTICLE I - STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.1: Annual Meetings . . . . . . . . . . . . . . . . . . . . 1 Section 1.2: Special Meetings . . . . . . . . . . . . . . . . . . . . 1 Section 1.3: Notice of Meetings . . . . . . . . . . . . . . . . . . . 1 Section 1.4: Adjournments . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.5: Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.6: Organization . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.7: Voting; Proxies . . . . . . . . . . . . . . . . . . . . 2 Section 1.8: Fixing Date for Determination of Stockholders of Record . . . . . . . . . . . . . . . . . . . . . . . 3 Section 1.9: List of Stockholders Entitled to Vote . . . . . . . . . 3 Section 1.10: Action by Written Consent of Stockholders . . . . . . . 4 Section 1.11: Inspectors of Elections . . . . . . . . . . . . . . . . 4 Section 1.12: Notice of Stockholder Business; Nominations . . . . . . 5 ARTICLE II - BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.1: Number; Qualifications . . . . . . . . . . . . . . . . . 8 Section 2.2: Election; Resignation; Removal; Vacancies . . . . . . . 8
19 20
PAGE ---- Section 2.3: Regular Meetings . . . . . . . . . . . . . . . . . . . . 8 Section 2.4: Special Meetings . . . . . . . . . . . . . . . . . . . . 8 Section 2.5: Telephonic Meetings Permitted . . . . . . . . . . . . . 8 Section 2.6: Quorum; Vote Required for Action . . . . . . . . . . . . 9 Section 2.7: Organization . . . . . . . . . . . . . . . . . . . . . . 9 Section 2.8: Written Action by Directors . . . . . . . . . . . . . . 9 Section 2.9: Powers . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 2.10: Compensation of Directors . . . . . . . . . . . . . . . 9 ARTICLE III - COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 3.1: Committees . . . . . . . . . . . . . . . . . . . . . . . 10 Section 3.2: Committee Rules . . . . . . . . . . . . . . . . . . . . 10 ARTICLE IV - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 4.1: Generally . . . . . . . . . . . . . . . . . . . . . . . 11 Section 4.2: Chief Executive Officer . . . . . . . . . . . . . . . . 11 Section 4.3: Chairman of the Board . . . . . . . . . . . . . . . . . 11 Section 4.4: President . . . . . . . . . . . . . . . . . . . . . . . 12 Section 4.5: Vice President . . . . . . . . . . . . . . . . . . . . . 12 Section 4.6: Chief Financial Officer . . . . . . . . . . . . . . . . 12 Section 4.7: Treasurer . . . . . . . . . . . . . . . . . . . . . . . 12 Section 4.8: Secretary . . . . . . . . . . . . . . . . . . . . . . . 12 Section 4.9: Delegation of Authority . . . . . . . . . . . . . . . . 12
20 21
PAGE ---- Section 4.10: Removal . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE V - STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5.l: Certificates . . . . . . . . . . . . . . . . . . . . . . 13 Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificate . . . . . . . . . . . . . . 13 Section 5.3: Other Regulations . . . . . . . . . . . . . . . . . . . 13 ARTICLE VI - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 6.1: Indemnification of Officers and Directors . . . . . . . 13 Section 6.2: Advance of Expenses . . . . . . . . . . . . . . . . . . 14 Section 6.3: Non-Exclusivity of Rights . . . . . . . . . . . . . . . 14 Section 6.4: Indemnification Contracts . . . . . . . . . . . . . . . 14 Section 6.5: Effect of Amendment . . . . . . . . . . . . . . . . . . 14 ARTICLE VII - NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 7.l: Notice . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 7.2: Waiver of Notice . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VIII - INTERESTED DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8.1: Interested Directors; Quorum . . . . . . . . . . . . . . 15 ARTICLE IX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 9.1: Fiscal Year . . . . . . . . . . . . . . . . . . . . . . 16
21 22
PAGE ---- Section 9.2: Seal . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 9.3: Form of Records . . . . . . . . . . . . . . . . . . . . 16 Section 9.4: Reliance Upon Books and Records . . . . . . . . . . . . 16 Section 9.5: Certificate of Incorporation Governs . . . . . . . . . . 16 Section 9.6: Severability . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE X - AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 10.1: Amendments . . . . . . . . . . . . . . . . . . . . . . . 17
22 23 CERTIFICATION OF BYLAWS OF HNC SOFTWARE INC. (A DELAWARE CORPORATION) KNOW ALL BY THESE PRESENTS: I, Raymond V. Thomas, certify that I am Secretary of HNC Software Inc., a Delaware corporation (the "Company"), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and correct copy of the Bylaws of the Company in effect as of the date of this certificate. Dated: April 19, 1995 /s/ RAYMOND V. THOMAS ---------------------------- Raymond V. Thomas, Secretary 23 EX-11.01 4 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.01 HNC SOFTWARE INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (in thousands, except per share data)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- ------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Net Income $ 967 $ 517 $ 1,780 $ 890 ======= ======= ======= ======= Shares (1) Weighted average common shares outstanding 15,365 2,261 15,167 2,119 Weighted average common stock options and warrant as determined by application of the treasury stock method (2) 1,624 1,852 1,703 1,794 Weighted average preferred shares outstanding assuming conversion to common stock -- 8,957 -- 8,957 ------- ------- ------- ------- Weighted average common and common equivalent shares outstanding 16,989 13,070 16,870 12,870 ======= ======= ======= ======= Net income per share of common stock $ 0.06 $ 0.04 $ 0.11 $ 0.07 ======= ======= ======= =======
- ------------------ (1) All share and per share amounts have been adjusted to give retroactive effect to the stock split, which occurred on April 3, 1996. (2) Includes an adjustment for options pursuant to SAB No. 83 using the treasury stock method at the initial public offering price of $14.00 per share for shares issued prior to June 26, 1995. EX-27 5 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1,184 13,617 7,419 0 0 26,130 3,477 0 60,426 4,787 0 0 0 54,729 910 60,426 16,478 16,478 6,135 6,135 8,505 0 (1,116) 2,954 1,174 1,780 0 0 0 1,780 0.11 0.11
-----END PRIVACY-ENHANCED MESSAGE-----