-----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, T5D7stTe+pjGuXKHL7w+vmYXvZL30LUhI6Je8nXMwXlWOi/tDC7/JgRir2fS5hrT cEL2+7mBH1vGVjtbFuJ+uA== 0001095811-00-000993.txt : 20000417 0001095811-00-000993.hdr.sgml : 20000417 ACCESSION NUMBER: 0001095811-00-000993 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000414 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: S-3 SEC ACT: SEC FILE NUMBER: 333-34778 FILM NUMBER: 601409 BUSINESS ADDRESS: STREET 1: 5930 CORNERSTONE CT W 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 S-3 1 FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2000 REGISTRATION NO. 333-_______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------- HNC SOFTWARE INC. (Exact name of Registrant as specified in its charter) DELAWARE 7372 33-0248788 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer incorporation or organization) Classification Code Number) identification no.)
---------------------- 5935 CORNERSTONE COURT WEST SAN DIEGO, CALIFORNIA 92121-3278 (858) 546-8877 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) KENNETH J. SAUNDERS CHIEF FINANCIAL OFFICER HNC SOFTWARE INC. 5935 CORNERSTONE COURT WEST SAN DIEGO, CALIFORNIA 92121-3278 (858) 546-8877 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------- Copies to: KENNETH A. LINHARES, ESQ. KATHERINE TALLMAN SCHUDA, ESQ. FENWICK & WEST LLP TWO PALO ALTO SQUARE PALO ALTO, CALIFORNIA 94306 (650) 494-0600 -------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement and until the close of business on March 17, 2001 or until the earlier sale of all shares registered hereunder. -------------------- If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________ --------------------- CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------ PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF TO BE REGISTERED (1) REGISTERED (1) PRICE PER SHARE (2) PRICE (2) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $0.001 237,552 $58.1875 $13,822,557 $3,649.16 - ------------------------------------------------------------------------------------------------------------------------------------
(1) The shares of Common Stock set forth in the Calculation of Registration Fee Table, and which may be offered pursuant to this Registration Statement, include, pursuant to Rule 416 of the Securities Act of 1933, as amended, such additional number of shares of the Registrant's Common Stock as may become issuable as a result of any stock split, stock dividend or similar event on the shares listed or on such additional shares. (2) Estimated solely for the purpose of calculating the amount of the registration fee, pursuant to Rule 457(c) under the Securities Act, based on the average of the high and low prices of the common stock on the Nasdaq National Market on April 12, 2000. -------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. 237,552 SHARES HNC SOFTWARE INC. COMMON STOCK ------------------- All of the 237,552 shares of common stock of HNC Software Inc. are being sold by stockholders of HNC. HNC will not receive any proceeds from the sale of shares offered by the selling stockholders. See "Selling Stockholders" and "Plan of Distribution." The common stock is listed on the Nasdaq National Market under the symbol "HNCS." The shares of common stock offered will be sold as described under "Plan of Distribution." On April __, 2000, the closing price per share of the common stock on the Nasdaq National Market was $____. ------------------- THE COMMON STOCK OFFERED INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3. ------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS APRIL __, 2000 3 NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HNC, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SUCH SECURITIES BY ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. TABLE OF CONTENTS
PAGE ---- HNC Software Inc.............................................................2 Risk Factors.................................................................3 Cautionary Note on Forward-Looking Statements...............................11 Use of Proceeds.............................................................11 Selling Stockholders........................................................11 Plan of Distribution........................................................13 Legal Matters...............................................................15 Experts.....................................................................15 Documents Incorporated by Reference in this Prospectus......................15 Where You Can Find More Information.........................................15
HNC SOFTWARE INC. HNC is a business-to-business software company that develops, markets, licenses and supports predictive software solutions for various service industries, including companies in the insurance, financial services, telecommunications, e-commerce and retail industries. Our predictive software solutions help service industry companies manage and optimize their customer relationships. Our products improve the decision-making process in functions such as credit card fraud detection, credit application processing and insurance claim review. By analyzing high volumes of customer transactions in real-time, our predictive solutions help companies shift the decision-making process from a retrospective to a prospective basis. HNC was founded in 1986 under the laws of California and was reincorporated under the laws of Delaware in June 1995. We completed our initial public stock offering in June 1995. We are headquartered in San Diego, California. Our principal executive offices are located at 5935 Cornerstone Court, West, San Diego, California 92121-3728. Our telephone number is (858) 546-8877. 2 4 RISK FACTORS This offering of shares of common stock is risky. Anyone who may receive common stock under this prospectus should carefully consider the following risk factors in addition to the other information presented in or incorporated by reference into this prospectus and any prospectus supplement. We may encounter additional risks in the future, some of which may be referred to in subsequent reports and filings that are incorporated in this prospectus by reference. These documents should be read carefully, as they may modify and supplement the risks referred to below. FLUCTUATIONS IN OUR QUARTERLY RESULTS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECLINE Our revenues and operating results have varied significantly in the past. We expect these fluctuations to continue. Consequently, we believe that period-to-period comparisons of our financial results should not be relied upon as an indication of future performance. It is possible that in some future periods our revenues and operating results may fall below the expectations of market analysts and investors, and in this event the market price of our common stock would likely fall. Factors that affect our revenues and operating results include the following: - Failure of our target markets and customers to accept our products; - Delays in large orders from customers; - Decrease in recurring revenues; - The lengthy sales cycle of most of our products; - Our ability to successfully and timely develop, introduce and market new products and product enhancements; - The timing of our new product announcements and introductions in comparison with our competitors; - Changes in the mix of our distribution channels; - Changes in the level of our operating expenses; - Our ability to achieve progress and fulfill our obligations under percentage-of-completion contracts; - Our success in completing pilot product installations within contracted fee budgets; - Competitive conditions in the industries we serve, including the ability of certain Internet competitors to spend larger amounts to market their product and service offerings; - Domestic and international economic conditions; - Market conditions in our targeted markets; - Changes in prevailing technologies; - Acquisition-related expenses and charges; - Increased operating expenses related to the development of products for the Internet; - Our ability to recognize revenues in accordance with generally accepted accounting principles; and - Factors unique to our product lines. All of these factors are difficult to forecast. 3 5 BECAUSE OUR PRODUCTS' SALES CYCLE IS LENGTHY AND UNPREDICTABLE, OUR SALES AND MARKETING COSTS MAY INCREASE, AND IT IS DIFFICULT TO DETERMINE WHEN SALES WILL OCCUR We cannot predict the timing of the recognition of our revenues accurately because of the length of our sales cycles. If sales forecasted from specific customers are not realized, we may be unable to compensate for the resulting revenue shortfall, and our operating results would be harmed. The sales cycle to license our products can typically range from 60 days to 18 months. Customers are often cautious in making decisions to acquire our products, because purchasing our products typically involves a significant commitment of capital and may involve shifts by the customer to a new software and/or hardware platform. Delays in completing sales can arise while customers complete their internal procedures to approve large capital expenditures and test and consider our applications. We may incur substantial sales and marketing expenses and expend significant management effort while potential customers are evaluating our products and before they place an order with us. If orders for our products are not received as anticipated, our operating results could be harmed. WE MAY FAIL TO INTEGRATE ACQUIRED COMPANIES EFFECTIVELY, AND THE ACQUISITIONS MAY DISRUPT OUR BUSINESS AND ADVERSELY AFFECT OUR OPERATIONS We have acquired a number of businesses and product lines. From mid-February to mid-April 2000, we acquired four companies, Advanced Information Management Solutions, Inc., ONYX Technologies, Inc., The Center for Adaptive Systems Applications, Inc. and Celerity Technologies, Inc., and we are likely to have future acquisitions. Acquisition of these companies and other companies may in the future result in unforeseen operating difficulties and expenditures and other risks, including the following: - The process of integrating acquired businesses into our own business may absorb significant management attention that would otherwise be available for the development of our core business; - We might not realize the anticipated benefits of our acquisitions; - Acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities; - We might encounter difficulties in attempting to assimilate the operations, technologies and products of companies we acquire; - We might not be able to successfully manage and integrate diverse geographic operations resulting from acquisitions; - We might not be able to coordinate the diverse operating structures, policies and practices of the acquired companies and to successfully integrate their employees into our organization and culture; - We might lose key employees of the acquired companies; - We might not be able to acquire businesses on favorable terms; - In the future, we might face increased competition for acquisition opportunities, which might inhibit our ability to complete suitable acquisitions, might increase the costs of completing acquisitions and might preclude us from obtaining needed technologies and employees; - We will often be entering markets in which we have limited or no prior experience, and we might not be able to successfully develop and market products for new industries or for markets with which we might not be familiar; - Despite due diligence reviews, acquired businesses might bring with them unanticipated liabilities or risks that could adversely affect our results of operations or business; and - The accounting treatment of acquisitions can also adversely affect our reported results of operations, since acquisitions generate substantial costs as well as accounting charges and amortization of goodwill and other intangible assets, all of which may reduce our earnings. 4 6 GROWTH PLACES A SIGNIFICANT STRAIN ON OUR BUSINESS, AND OUR FAILURE TO SUCCESSFULLY MANAGE OUR GROWTH COULD DISRUPT OUR CORPORATE ORGANIZATION, DIVERT US FROM OTHER OBJECTIVES AND HURT OUR BUSINESS In recent years, we have experienced changes in our operations that have placed significant demands on our administrative, operational and financial resources. These demands are expected to continue to challenge our management and operations, and include the following: - Growth and diversification of our customer base; - Expansion of our product functionality and the number of products we market and support; - Our acquisition of other businesses and their employees; - Expansion of our product line into new markets and technology mediums; and - Growth of our sales, marketing, customer support, research and development and finance and administrative operations. These demands highlight the following risks: - Our future performance will depend in part on our ability to successfully manage change and growth, both in our domestic and international operations; - We will need to adapt our operational and financial control systems, if necessary, to respond to changes in the size and diversification of our business; and - We will need to be able to successfully integrate acquired businesses with our operations. OUR NEW PRODUCTS MIGHT NOT ACHIEVE MARKET ACCEPTANCE The market for predictive software solutions is still emerging. The rate at which businesses have adopted our products has varied significantly by market and by product within each market, and we expect to continue to experience variations in the degree to which our products are accepted. Although some businesses in our target markets have recognized the advantages of using predictive software solutions to automate the decision-making process, many prospective customers have developed decision automation systems internally rather than licensing them from outside vendors. Our ability to grow will depend on the extent to which our potential customers accept our products. This acceptance may be limited by: - The failure of prospective customers to conclude that predictive software solutions are valuable and should be acquired and used; - The reluctance of our prospective customers to replace their existing solutions with our products; - Marketing efforts of our competitors; and - The emergence of new technologies that could cause our products to be less competitive or obsolete. Because the market for predictive software solutions is still in a relatively early stage of development, we cannot assess the size of the market accurately, and we have limited insight into trends that may emerge and affect our business. For example, we may have difficulty in predicting customer needs, in developing products that could address those needs and in establishing a distribution strategy for these products. We may also have difficulties in predicting the competitive environment that will develop. WE WILL NOT BE ABLE TO COMPETE SUCCESSFULLY UNLESS WE ARE ABLE TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGIES In our markets, technology changes rapidly, and there are continuous technological improvements. Our success will depend upon our ability to continue to develop and maintain competitive technologies, enhance our current 5 7 products and develop, in a timely and cost-effective manner, new products that meet changing market conditions. We must respond to evolving customer needs, new competitive product offerings, emerging industry standards and changing technology. The rapid growth of the Internet environment creates new opportunities, risks and uncertainties for businesses, such as ours, which develop software solutions that must also be designed to operate in Internet, intranet and other online environments. We have previously experienced significant delays in the development and introduction of new products and product enhancements, primarily due to difficulties with model development, which has in the past required multiple iterations, as well as difficulties with acquiring data and adapting to particular operating environments. The length of these delays has varied depending upon the size and scope of the project and the nature of the problems encountered. In the future, we may not be able to develop and market product enhancements or new products that respond to changing technologies. WE ARE SUBSTANTIALLY DEPENDENT UPON THE SUCCESS OF A LIMITED NUMBER OF PRODUCTS OR PRODUCT LINES, EACH OF WHICH FACES UNCERTAINTIES AND FUTURE CHALLENGES We currently have one product or product line in each of our target markets that account for a majority of our total revenues from that market. These products accounted for 46.5% of our total revenues in 1999, 49.2% of our total revenues in 1998 and 57.9% of our total revenues in 1997. In the insurance market, our CompAdvisor (formerly CRLink) product accounted for 20.9% of total revenues in 1999, 21.5% of total revenues in 1998 and 23.0% of total revenues in 1997, and we expect that we will continue to depend upon CompAdvisor for a substantial portion of our total revenues for the foreseeable future. Revenues from Falcon, our credit card fraud detection product line, accounted for 15.4% of total revenues in 1999, 14.5% of total revenues in 1998 and 16.0% of total revenues in 1997, and we expect that we will continue to depend upon Falcon products for a substantial portion of our total revenues for the foreseeable future. Each of these products and product lines face substantial risks, including the following: - Any failure to timely introduce future product enhancements may adversely affect the continued market acceptance of CompAdvisor and the Falcon product line, and such market acceptance may also be adversely affected by product introductions of our competitors; - Demand for, or use of, CompAdvisor could decline as a result of competition, simplification of state workers' compensation fee schedules, changes in the overall payment system or regulatory structure for workers' compensation claims, technological change, our inability to obtain or use state fee schedule or claims data, saturation of market demand, industry consolidation or other factors; - Demand for, or use of, our Falcon product line could decline as a result of competition, technological change, changing patterns of credit card fraud that the Falcon product line might not detect and other methods of credit card fraud prevention that might reduce customers' needs for the Falcon product line; demand could also be adversely affected by fluctuations in interest rates, reduction in capital spending or other factors; - Due to increasing saturation of market demand for the Falcon product line, we may also need to rely increasingly on international sales to maintain or increase Falcon revenue levels; - As many Falcon customers are banks and related financial institutions, our future success depends upon the capital expenditure budgets of these customers, their economic health and their continued demand for Falcon products; - The financial services industry tends to be cyclical, which may result in reductions in demand for our products; - Consolidation in the financial services industry has reduced the customer base for our financial solutions products, and this may lead to reduced demand for our products; and - Industry consolidation also could adversely affect our base of recurring revenues on transaction-based contracts and, if our customers consolidate their contracts with us, could result in lower payments to us than we would receive under a larger number of contracts. 6 8 WE DEPEND ON THIRD PARTY DATA TO UPDATE OUR STATISTICAL MODELS. AND FAILURE TO OBTAIN THIS DATA ON A TIMELY BASIS COULD HARM THE PERFORMANCE OF OUR PRODUCTS The development, installation and support of our products requires us to periodically update our statistical models for applications such as credit card fraud control and profitability management, loan underwriting and insurance. In order to accomplish this updating, we must continually have access to large quantities of current and statistically relevant data that are reliable and available on a timely basis. We might not be able to continue to have timely access to sufficient quantities of statistically relevant data in the required formats or on reasonable terms and conditions. This risk is heightened by a number of factors, including the following: - Much of the data we require are not owned or controlled by us and are collected privately and maintained in proprietary databases; - Our customers agree to provide us the data we need to analyze transactions, report results and build new fraud detection and profitability models; if we fail to maintain good relationships with our customers, we could lose access to this required data; - CompAdvisor also uses data from state workers' compensation fee schedules adopted by state regulatory agencies; in most cases, these data must be periodically updated and refreshed to enable our predictive software products to continue to work effectively; third parties have previously asserted copyright interests in this type of data; such an assertion in the future could threaten the continued availability of such data. OUR MARKETS ARE HIGHLY COMPETITIVE The market for predictive software solutions is intensely competitive and is constantly changing. We encounter competition from a number of sources, including: - Other application software companies, including enterprise software vendors; - Management information systems departments of customers and potential customers, including financial institutions, insurance companies and retailers; - Third-party professional services organizations, including consulting divisions of public accounting firms; - Internet start-up companies; - Hardware suppliers that bundle or develop complementary software; - Network and service providers that seek to enhance their value-added services; - Neural-network tool suppliers; and - Insurers and third party administrators. We expect to face increasing competition and pricing pressures from both our current competitors and new market entrants, as well as from other technologies. - Our Falcon and eFalcon products compete against other methods of preventing credit card fraud, such as credit card activation programs, smart cards, using credit cards that contain the cardholders' photographs and other card authorization techniques; - Increased competition, whether from other products or new technologies, could result in price reductions, fewer customer orders, reduced gross margins and loss of market share, any of which could adversely affect our business, financial condition and results of operations; - Price competition could adversely affect our ability to obtain new long-term contracts and renewals of existing long-term contracts on favorable terms. Any reduction of our prices could adversely affect our margins, business, financial condition and results of operations; - Some of our current competitors, and many of our potential competitors, have broader integrated product lines and significantly greater financial, technical, marketing and other resources than we do. As a result, they may have competitive advantages over us, including: 7 9 -- The ability to respond more quickly to new or emerging technologies and changes in customer requirements; -- The ability to devote greater resources to the development, promotion and sale of their products; and -- The ability to sell products competitive to ours at lower prices as part of integrated suites of related products that are vital to the customer's computing infrastructure; - Current and potential competitors have established or may establish cooperative relationships to increase the ability of their products to address the needs of our prospective customers; - New competitors or alliances among competitors may emerge and rapidly gain significant market share; - We rely upon our customers to provide data, expertise and other support for the ongoing updating of our statistical models; our customers may compete with us in the future or otherwise discontinue their support; - We may not be able to compete successfully against current and future competitors, and this may adversely affect our business, financial condition and results of operations. IF WE DO NOT RECRUIT AND RETAIN QUALIFIED PERSONNEL, OUR BUSINESS COULD BE HARMED Our success depends to a significant degree upon the continued service of members of our senior management and our key research, development, sales and marketing personnel. Our dependence on key personnel creates risks for our business. We have employment agreements with only a small number of employees, and these agreements may not result in the retention of these employees for any significant period of time. We could lose members of the management teams or key employees of the businesses we acquire before we are able to familiarize ourselves with the operating details of those businesses or provide suitable replacements. We have historically had difficulty in recruiting a sufficient number of qualified sales and technical employees. In addition, competitors and other businesses may be successful in attempts to recruit our key employees. Many of our employees possess unique skills and are not easily replaceable, and their loss could adversely affect our business. We may not be successful in attracting, assimilating and retaining personnel. A SUBSTANTIAL PORTION OF OUR SALES ARE MADE TO INTERNATIONAL CUSTOMERS, AND INTERNATIONAL SALES POSE UNIQUE RISKS International operations and export sales, including sales in Canada, represented 23.2% of our total revenues in 1999, 23.1% of our total revenues in 1998 and 18.9% of our total revenues in 1997. We intend to continue to expand our operations outside the United States and to enter additional international markets, which will require significant management attention and financial resources. For more mature products, like Falcon, we may need to increase our international sales in order to continue to expand the product's customer base. We have committed and continue to commit significant time and development resources to customizing our products for selected international markets, and to developing international sales and support channels. These international marketing efforts require us to incur increased sales, marketing and support expenses. If these efforts are not successful in generating additional international sales on a timely basis, our margins and earnings will be adversely affected. In addition, we typically experience slower payment cycles from our international customers, which adversely affects our cash flows. International sales are more likely to be subject to other risks as well, including: adverse changes in regulatory requirements; import and export restrictions and tariffs; difficulties in staffing and managing foreign operations; burdens of complying with foreign laws; greater difficulty or delay in accounts receivable collection; potentially adverse tax consequences; reduced protection of intellectual property rights; and political and economic instability. Our international sales are currently denominated predominately in United States dollars, and a small portion are denominated in the currencies of Western Europe, Canada and Australia. An increase in the value of the United States dollar relative to foreign currencies could make our products more expensive, and therefore potentially less competitive, in foreign markets. In the future, to the extent that our international sales are denominated in local currencies, foreign currency translations may contribute to significant fluctuations in our business, financial condition and results of operations. If for any reason, exchange or price controls or other restrictions on foreign currencies are imposed, our business, financial condition and results of operations could be adversely affected. 8 10 IF OUR PRODUCTS FAIL TO COMPLY WITH GOVERNMENT REGULATIONS AND INDUSTRY STANDARDS, WE COULD BE EXPOSED TO LIABILITY OR THE PRODUCTS COULD BECOME OBSOLETE Many of our customers must comply with a number of government regulations and industry standards. As a result, many of our key products must comply as well. For example: our financial services products are affected by Regulation B under the Equal Credit Opportunity Act, by regulations governing the extension of credit to consumers and by Regulation E under the Electronic Fund Transfers Act governing the transfer of funds from and to consumer deposit accounts, as well as VISA and MasterCard electronic payment standards. Our products in the mortgage services market are affected by regulations from Fannie Mae and Freddie Mac for conforming loans, among others. This failure of our products to comply with regulations and standards could result in legal action against us or our customers by regulatory authorities or by third parties, including actions seeking civil or criminal penalties, injunctions against our use of data or civil damages. We may also be liable to our customers for failure of our products to comply with regulatory requirements. The adoption of insurance-related regulations could adversely affect our insurance products. Simplification of state-mandated workers' compensation laws or regulations or state workers' compensation fee schedules could diminish the need for, and the benefit provided by, our CompAdvisor product. In many states, including California, there have been periodic legislative efforts to reform workers' compensation laws in order to reduce the cost of workers' compensation insurance and to curb abuses of the workers' compensation system. Changes in workers' compensation laws or regulations could adversely affect our insurance products by making them obsolete, or by requiring extensive changes in these products to reflect new workers' compensation rules. To the extent that we sell new products targeted to markets that include regulated industries and businesses, our products will need to comply with these additional regulations. OUR INTELLECTUAL PROPERTY MIGHT NOT BE PROTECTIBLE, AND, IF WE FAIL TO PROTECT AND PRESERVE OUR INTELLECTUAL PROPERTY, WE MAY LOSE AN IMPORTANT COMPETITIVE ADVANTAGE We believe our intellectual property affords us a competitive advantage. Any loss or invalidity of our intellectual property, or any failure to protect our intellectual property, could adversely affect our competitive position, and ultimately, our business. Despite the measures we take to protect our intellectual property, it may be possible for third parties to copy or otherwise to obtain and use our products or technology without authorization, or to develop similar technology independently. There is a risk that our pending or future patent applications may not be granted, or that our patents may not be upheld as valid or may not prevent the development of competitive products. To ensure that customers will not be harmed by an interruption in our business, we often place software source code for our products into escrow, which may increase the likelihood of misappropriation or other misuse of our intellectual property. Effective protection of intellectual property rights may be unavailable or limited in foreign countries in which we do business. We have developed technologies under research projects conducted under agreements with various United States Government agencies or subcontractors. Although we have acquired commercial rights to these technologies, the United States Government typically retains ownership of intellectual property rights and licenses in the technologies developed by us under these contracts, and in some cases can terminate our rights in these technologies if we fail to commercialize them on a timely basis. Under our contracts with the United States Government, the results of our research may be made public by the Government, which could limit our competitive advantage with respect to future products based on our research. WE ARE AT RISK OF CLAIMS THAT OUR PRODUCTS OR SERVICES INFRINGE THE PROPRIETARY RIGHTS OF OTHERS In November 1998, Nestor, Inc. filed a complaint against us alleging that we infringed a United States patent issued to Nestor and seeking a declaration that a United States patent issued to us is invalid and seeking damages and injunctive relief. The complaint also seeks treble compensatory damages, punitive damages and injunctive relief for alleged violations of the Sherman Antitrust Act and the Rhode Island Antitrust Act. Although Nestor has dismissed its claim that we infringe Nestor's patent, there is a risk that this litigation will be resolved against us. Given our ongoing efforts to develop and market new technologies and products, we may from time to time be served with claims from other third parties asserting that our products or technologies infringe their intellectual property rights. If, as a result of any claims, we were precluded from using technologies or intellectual property rights, licenses to the disputed third-party technology or intellectual property rights might not be available on reasonable commercial terms, or at all. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation, either as plaintiff or defendant, could result in significant expense and divert the efforts of our technical and management personnel from productive tasks, whether or not litigation is resolved in our favor. An adverse ruling in any litigation might require us to pay substantial damages, to discontinue our use and sale 9 11 of infringing products and to expend significant resources in order to develop non-infringing technology or obtain licenses to infringing technology. A court might also invalidate our patents, trademarks or other proprietary rights. A successful claim against us, coupled with our failure to develop or license a substitute technology, could cause our business, financial condition and results of operations to be adversely affected. As the number of software products increases and the functionality of these products further overlaps, we believe that our risk of infringement claims will increase. BECAUSE OUR PRODUCTS AND SERVICES ARE COMPLEX AND PERFORM MISSION-CRITICAL FUNCTIONS, WE ARE VULNERABLE TO PRODUCT DEFECT AND PRODUCT LIABILITY CLAIMS Our software products are complex and perform critical functions for our customers, factors which increase the risk of product defects and product liability claims. Our software products may contain undetected errors or failures when first introduced or as new versions are released. To the extent that we may have to develop new products that operate in new environments, the possibility for program errors and failures may increase, particularly where new technologies are involved and where there is a need for extremely rapid product deployment, as in the case of products designed for the Internet. Since our products are used in business-critical applications, any product errors or failures may give rise to substantial product liability claims. Although our license agreements with our customers typically contain provisions designed to limit our exposure to potential product liability claims, it is possible that limitation of our liability provisions may not be effective as a result of existing or future laws or judicial decisions. THE PRICE OF OUR COMMON STOCK HAS BEEN VOLATILE Investment in our common stock has inherent risks. Our common stock has had significant price volatility, which has increased since the November 1999 initial public offering of our subsidiary Retek's common stock, and this volatility may be expected to continue in the future. The price of our common stock may be affected by many factors, including announcements of the introduction of new products by us or our competitors, acquisitions of businesses or products by us, quarter-to-quarter variations in our operating results, the gain or loss of significant orders, market conditions in the technology and emerging growth company sectors, and other factors. The stock market itself has been extremely volatile, particularly with respect to the securities of technology companies. The market's volatility has often been unrelated or disproportionate to the operating performance of the affected companies. Market fluctuations may adversely affect the price of our common stock. IF WE SPIN-OFF OUR THE STOCK OF OUR RETEK SUBSIDIARY, OUR STOCKHOLDERS MAY SUFFER DILUTION IN THE OWNERSHIP OF OUR STOCK In March 1998, we issued $100 million in principal face amount of 4.75% convertible notes due 2003. These notes are currently convertible into our common stock at a price of $44.85 per share. If we spin-off our Retek subsidiary to our stockholders, then, in accordance with the terms of the trust indenture governing these notes, the conversion price of the notes would be reduced, which would increase the number of shares of our common stock that are issuable upon conversion of the notes. The reduction in the conversion price of the notes could be substantial, depending on the ratio of the market prices of our and our Retek subsidiary's common stock, and would result in dilution to the equity interest of our stockholders and a reduction in our earnings per share. OUR BOARD OF DIRECTORS CAN, WITHOUT STOCKHOLDER APPROVAL, CAUSE PREFERRED STOCK TO BE ISSUED ON TERMS THAT ADVERSELY AFFECT COMMON STOCKHOLDERS Under our certificate of incorporation, our board of directors is authorized to issue up to 4,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by our stockholders. If the board causes any preferred stock to be issued, the rights of the holders of our common stock would be adversely affected. The board's ability to determine the terms of preferred stock and to cause its issuance, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock. We have no current plans to issue shares of preferred stock. In addition, Section 203 of the Delaware General Corporation Law restricts business combinations with any "interested stockholder" as defined by the statute. The statute may have the effect of delaying, deferring or preventing a change in control of our company. 10 12 CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS This prospectus (including the documents incorporated in this prospectus by reference) contains forward-looking statements regarding HNC's plans, expectations, estimates and beliefs. These statements involve risks and uncertainties, and actual results could differ materially from those reflected in the forward-looking statements. Forward-looking statements in this prospectus are typically identified by words such as "may," "will," "should," "expects," "intends" "plans," "believes," "estimates," "anticipates," and other similar expressions, or the negative of such terms. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Readers of this prospectus are cautioned that such forward-looking statements are subject to many known and unknown risks and uncertainties that may cause actual results, events, developments, achievements or performance to be materially different from the results, events, developments or performance expressed, implied or contemplated by the forward-looking statements. HNC will not necessarily update the information in this prospectus if and when any forward-looking statement later turns out to be inaccurate. Some of the important risks and uncertainties that may affect HNC's future results and performance are described in "Risk Factors," above. Additional information about factors that could affect HNC's future results and events is included in HNC's reports filed with the SEC and incorporated by reference in this prospectus. USE OF PROCEEDS HNC will not receive any of the proceeds from the sale of shares by the selling stockholders. SELLING STOCKHOLDERS The following table sets forth certain information known to HNC with respect to the beneficial ownership of the common stock by the selling stockholders as of April 1, 2000. The selling stockholders are the former stockholders of ONYX Technologies, Inc. or The Center for Adaptive Systems Applications, Inc., two corporations which HNC acquired in March 2000. The selling stockholders have not had any position, office or other material relationship with HNC within the three years ending on the dates of the acquisitions. Following the acquisition of The Center for Adaptive Systems Applications, Inc., Bruce E. Hansen, an officer of the acquired company, became an officer of HNC with the title President, HNC Financial Solutions. Mr. Hansen has entered into a noncompetition agreement with HNC. The table assumes that the selling stockholders sell all of the shares offered by them in this offering. However, we are unable to determine the exact number of shares that will actually be sold or when or if such sales will occur. This table also assumes that the selling stockholders do not acquire any other shares of our common stock pending the offering. Assignees of selling stockholders, if any, who acquire shares of our common stock from selling stockholders and satisfy certain conditions are entitled to the same registration rights as the selling stockholders. If any assignee who meets these conditions notifies us that the assignee wishes to sell shares under this prospectus, we will amend or supplement the prospectus to name the assignee as a selling stockholder. The selling stockholders have advised us that they are the beneficial owners of the shares being offered under this prospectus.
SHARES BENEFICIALLY SHARES BEING SHARES BENEFICIALLY OWNED BEFORE OFFERING OFFERED OWNED AFTER OFFERING --------------------- ------------ --------------------- NAME OF SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT - --------------------------- -------- --------- ------------ -------- --------- Former Stockholders of ONYX: James Kell Canty(1) 118,308 * 30,000 88,308 * Jeffrey A. Collins(1) 117,608 * 30,000 87,608 * Peter C. Hoeve(1) 117,308 * 30,000 87,308 *
11 13
SHARES BENEFICIALLY SHARES BEING SHARES BENEFICIALLY OWNED BEFORE OFFERING OFFERED OWNED AFTER OFFERING --------------------- ------------ --------------------- NAME OF SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT - --------------------------- -------- --------- ------------ -------- --------- Former Stockholders of The Center for Adaptive Systems Applications: Stephen V. Coggeshall(2)(8) 32,724 * 32,724 -- * John R. Davies 32,724 * 32,724 -- * Camilo C. Gomez(2)(8) 32,724 * 32,724 -- * Roger Jones 14,316 * 14,316 -- * Jerry and Vardina Wind 8,726 * 8,726 -- * Robert F. Stellingwerf 6,817 * 6,817 -- * Colin Crook (3)(8) 10,361 * 5,408 4,953 * Citibank, N.A.(4) 5,681 * 5,681 -- * C. Wade Tambor (5)(8) 6,543 * 5,044 1,499 * PS Capital, LLC 1,090 * 1,090 -- * Guowei Wu 332 * 332 -- * Jose Hernandez 270 * 270 -- * Leann Griesinger 218 * 218 -- * Csilla and Eric Tambor 436 * 436 -- * Mary and Patrick Tambor 436 * 436 -- * Marvin Alme 218 * 218 -- * June Durnall 193 * 193 -- * Xiaozhong Li (2)(6) 138 * 96 42 * Kevin Rygg 78 * 78 -- * Shanji Xiong (2)(7) 1,664 * 21 1,643 * ------- --- ------- ------- --- TOTALS: 508,913 1.9% 237,552 271,361 1.0% ======= ======= =======
- --------------- * Less than 1% (1) An employee of ONYX Technologies, Inc. Mr. Canty's shares include 1,000 shares subject to a call option expiring April 22, 2000. (2) An employee of The Center for Adaptive Systems Applications, Inc. (3) Includes options that are currently exercisable to purchase up to 4,953 shares. (4) Represents shares subject to issuance upon the exercise of warrants. (5) Includes options that are currently exercisable to purchase up to 1,499 shares. (6) Includes options that are currently exercisable or are exercisable within 60 days to purchase up to 42 shares. (7) Includes options that are currently exercisable or are exercisable within 60 days after April 1, 2000 to purchase up to 1,643 shares. (8) Former director of The Center for Adaptive Systems Applications, Inc. The shares that are beneficially owned by the former stockholders of The Center for Adaptive Systems Applications, Inc. include 5,681 shares subject to issuance upon the exercise of warrants. They also include approximately 38,100 shares held in escrow under an escrow agreement that was entered into in connection with our acquisition of The Center for Adaptive Systems Applications, Inc. The escrow is intended to secure any claims we may make based on the representations and covenants that were made to us in the applicable acquisition agreement. The escrow agreement continues until March 2001, except that the escrow will not fully terminate until any claims we might make against the 12 14 escrow shares are resolved. As long as the escrow continues, none of the shares held in escrow may be sold without our consent. PLAN OF DISTRIBUTION We are registering the shares on behalf of the selling stockholders pursuant to registration rights agreements we entered into with the former stockholders of ONYX Technologies, Inc. and The Center for Adaptive Applications, Inc. The registration statement of which this prospectus is a part has been filed pursuant to those registration rights agreements. To our knowledge, no selling stockholder has entered into any agreement, arrangement or understanding with any particular broker or market maker with respect to the sale of the shares covered by this prospectus. The selling stockholders may offer and sell shares of common stock from time to time. In addition, a selling stockholder's donees, pledgees, transferees and other successors in interest may sell shares received from a named selling stockholder after the date of this prospectus. The selling stockholders will act independently of HNC in making decisions with respect to the timing, manner and size of each sale. Sales may be made over the Nasdaq National Market or otherwise, at then prevailing market prices, at prices related to prevailing market prices or at negotiated prices. The shares may be sold in various ways, including but not limited to the following: - one or more block trades in which the broker-dealer engaged by a selling stockholder will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; - purchases by the broker-dealer as principal and resale by the broker or dealer for its account pursuant to this prospectus; and - ordinary brokerage transactions and transactions in which the broker solicits purchasers. The selling stockholders have advised HNC that they have not, as of the date of this prospectus, entered into any agreements, understandings or arrangements with any underwriters or broker-dealers for the sale of shares, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of shares by the selling stockholders. Transactions under this prospectus may or may not involve brokers or dealers. The selling stockholders may sell shares directly to purchasers or to or through broker-dealers, who may act as agents or principals. Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in selling shares. Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from the selling stockholders in amounts to be negotiated in connection with the sale. Broker-dealers or agents may also receive compensation in the form of discounts, concessions or commissions from the purchasers of shares for whom the broker-dealers may act as agents or to whom they sell as principal, or both. This compensation as to a particular broker-dealer might exceed customary commissions. The selling stockholders and any participating broker-dealers may be deemed to be "underwriters" within the meaning of the Securities Act in connection with sales of shares covered by this prospectus. Any commission, discount or concession received by a broker-dealer and any profit on the resale of shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. Because selling stockholders may be deemed to be underwriters within the meaning of the Securities Act, the selling stockholders will be subject to the prospectus delivery requirements of the Securities Act. HNC has informed the selling stockholders that the anti-manipulation rules under the Exchange Act apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. The selling stockholders have advised HNC that during the time they may be engaged in the attempt to sell registered shares, they will: - not engage in any stabilization activity in connection with any of HNC's securities; 13 15 - not bid for or purchase any of HNC's securities or any rights to acquire HNC's securities, or attempt to induce any person to purchase any of HNC's securities or rights to acquire HNC's securities, other than, in each case, as permitted under the Exchange Act; - not sell or distribute the shares until after the prospectus has been appropriately amended or supplemented, if required, to set forth the terms of sale or distribution; and - make all sales of shares in broker's transactions through broker-dealers acting as agents, in transactions directly with market makers or in privately negotiated transactions where no broker or other third party (other than the purchaser) is involved. The selling stockholders have agreed with HNC in the registration rights agreements not to sell any of the shares pursuant to this prospectus in an underwritten offering without HNC's prior written consent. In addition, any securities covered by this prospectus that qualify for sale under Rule 144 of the Securities Act may be sold under that rule rather than under this prospectus. The registration rights agreements require the selling stockholders to offer and sell shares under this prospectus only during certain permitted "windows." Under the registration rights agreement for the acquisition of ONYX Technologies, the ONYX selling stockholders' permitted window commences on or, within no more than four business days after, the effective date of the registration statement of which this prospectus is a part, and continues for 30 calendar days, except that, in certain circumstances, HNC may postpone the permitted window before it commences or may suspend the permitted window after it has commenced. This could happen if HNC determines in good faith that it would be seriously detrimental to HNC and its securityholders for the permitted window to be in effect or if a material development occurs which HNC believes should be disclosed in this prospectus. The postponement or suspension may not exceed 45 days. After any postponement or suspension, the permitted window will commence, or recommence, until it has included a full 30 days. Under the registration rights agreement for the acquisition of The Center for Adaptive Systems Applications, there may be up to three permitted windows for the sale of shares under this prospectus by the former stockholders of that company, and there must be at least 30-day intervals between these permitted windows. Each permitted window will be for a period of 30 calendar days, and will commence after holders of at least one-third of the shares then subject to the registration rights agreement give HNC a notice of resale stating that they intend to sell shares during the permitted window and indicating their intended plan of distribution. As soon as practicable after receipt of that notice (but in any event within four business days), HNC will give notice to all holders of shares subject to that registration rights agreement that the permitted window will commence, or that the registration statement of which this prospectus is a part must be amended (in which case, HNC will file the amendment, and attempt to cause it to become effective, as soon as practicable). As in the case of the ONYX registration rights agreement, HNC may postpone or suspend any permitted window for the sale of shares by the former stockholders of The Center of Adaptive Systems Applications, under certain circumstances and for periods not exceeding 45 days. If a permitted window is postponed before it commences, the selling stockholders may withdraw their notice of resale so that the permitted window will not be triggered until they decide to give a new notice. If a permitted window is suspended after it has commenced, the suspended portion of the 30-day window can be used by the selling stockholders after they give a new notice of resale. The registration rights agreement for The Center for Adaptive Systems Applications provides that HNC will use diligent efforts to cause the registration statement to remain effective until March 17, 2001. HNC may terminate the registration statement, and this offering will terminate, on the earlier of (i) March 17, 2001, (ii) when HNC has already effected all required permitted windows, (iii) with respect to any former stockholder of The Center of Adaptive Systems Applications, the date on which, in the opinion of counsel for HNC, all shares subject to the registration rights agreement may be sold in a three month period without registration under the Securities Act pursuant to Rule 144 or otherwise or (iv) when all the shares covered by this prospectus have been sold. Upon the occurrence of certain events, the selling stockholders may not offer or sell shares under this prospectus unless and until the prospectus has been supplemented or amended to include additional disclosures, as follows: (a) to the extent the shares are sold at a fixed price or at a price other than the prevailing market price, such price must be set forth in the prospectus, (b) if the shares are sold in block transactions and the purchaser acting in the capacity of an underwriter wishes to resell, such arrangements must be described in the prospectus, (c) if a selling stockholder sells to a broker-dealer acting in the capacity as an underwriter, the broker-dealer must be identified in the 14 16 prospectus, (d) if the compensation paid to broker-dealers is other than usual and customary discounts, concessions or commissions, disclosure of the terms of the transaction must be included in the Prospectus and (e) if a donee or pledgee of a selling stockholder intends to sell more than 500 shares, the prospectus must so indicate. HNC has agreed to pay the expenses of registering the shares under the Securities Act, including registration and filing fees, printing expenses, administrative expenses and certain legal and accounting fees. The selling stockholders will bear all discounts, commissions or other amounts payable to underwriters, dealers or agents as well as fees and disbursements for legal counsel retained by any selling stockholder. HNC and the selling stockholders have agreed to indemnify each other and other related parties against specified liabilities, including liabilities arising under the Securities Act. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of shares against liabilities, including liabilities arising under the Securities Act. LEGAL MATTERS The validity of the shares of common stock offered hereby will be passed upon for HNC by Fenwick & West LLP, Palo Alto, California. DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS The SEC allows HNC to "incorporate by reference" in this prospectus the information that HNC files with the SEC. This means that HNC can disclose important information by referring the reader to those SEC filings. The information incorporated by reference is considered to be part of this prospectus, and later information HNC files with the SEC will update and supersede this information. HNC incorporates by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until termination of the offering: - Annual report on Form 10-K for the fiscal year ended December 31, 1999, as amended. - Current report on Form 8-K filed March 27, 2000. - The description of HNC's common stock contained in HNC's registration statement on Form 8-A, and any amendment or report filed for the purpose of updating such description. SOME OF THE INFORMATION ABOUT HNC THAT MAY BE IMPORTANT TO AN INVESTMENT DECISION IS NOT PHYSICALLY INCLUDED IN THIS PROSPECTUS. INSTEAD, THE INFORMATION IS "INCORPORATED" INTO THIS PROSPECTUS BY REFERENCE TO ONE OR MORE DOCUMENTS THAT HNC FILED WITH THE SEC. THESE DOCUMENTS (INCLUDING ANY EXHIBITS THAT ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THIS PROSPECTUS INCORPORATES) ARE AVAILABLE UPON REQUEST WITHOUT CHARGE FROM INVESTOR RELATIONS, HNC SOFTWARE INC., 5935 CORNERSTONE COURT WEST, SAN DIEGO, CALIFORNIA 92121-3728 (TELEPHONE NUMBER (858) 546-8877). RECIPIENTS SHOULD MAKE ALL REQUESTS FOR DOCUMENTS BY THE FIFTH BUSINESS DAY BEFORE THEY MAKE THEIR FINAL INVESTMENT DECISION, TO BE SURE THE DOCUMENTS ARRIVE ON TIME. INFORMATION THAT HAS BEEN INCORPORATED BY REFERENCE IS CONSIDERED PART OF THIS PROSPECTUS AND DISCLOSED TO INVESTORS, WHETHER OR NOT INVESTORS OBTAIN A COPY OF THE DOCUMENT CONTAINING THE INFORMATION. This prospectus may contain information that updates, modifies or is contrary to information in one or more of the documents incorporated by reference in this prospectus. Reports HNC files with the SEC after the date of this prospectus may also contain information that updates, modifies or is contrary to information in this prospectus or in documents incorporated by reference in this prospectus. Investors should review these reports as they may disclose a change in the business, prospects, financial condition or other affairs of HNC after the date of this prospectus. 15 17 WHERE YOU CAN FIND MORE INFORMATION The documents incorporated by reference into this prospectus are available from us upon request. We will provide a copy of any and all of the information that is incorporated by reference in this prospectus, not including exhibits to the information unless those exhibits are specifically incorporated by reference into this proxy statement prospectus, to any person, without charge, upon written or oral request. Requests for documents should be directed to Investor Relations, HNC Software Inc., 5935 Cornerstone Court West, San Diego, California 92121-3728 (telephone number (858) 546-8877). We file reports, proxy statements and other information with the Securities and Exchange Commission. Copies of our reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the SEC: Judiciary Plaza Citicorp Center Seven World Trade Center Room 1024 5000 West Madison Street 13th Floor 450 Fifth Street, N.W. Suite 1400 New York, New York 10048 Washington, D.C. 20549 Chicago, Illinois 60661 Copies of these materials can also be obtained by mail at prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC maintains a Website that contains reports, proxy statements and other information regarding each of us. The address of the SEC Website is http://www.sec.gov. HNC has filed a registration statement under the Securities Act with the Securities and Exchange Commission with respect to the shares to be sold by the selling stockholders. This prospectus has been filed as part of the registration statement. This prospectus does not contain all of the information set forth in the registration statement because certain parts of the registration statement are omitted in accordance with the rules and regulations of the SEC. The registration statement is available for inspection and copying as set forth above. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES PURSUANT TO THIS PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH OR INCORPORATED HEREIN BY REFERENCE OR IN OUR AFFAIRS SINCE THE DATE OF THIS PROSPECTUS. 16 18 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The aggregate estimated expenses to be paid by the Registrant in connection with this offering are as follows: Securities and Exchange Commission registration fee.................. $ 3,649 Accounting fees and expenses*........................................ 5,000 Legal fees and expenses*............................................. 10,000 Miscellaneous*....................................................... 16,351 --------- Total........................................................... $ 35,000 ========
- ---------------- * Estimate ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. As permitted by Section 145 of the Delaware General Corporation Law, the Registrant's Certificate of Incorporation includes a provision that eliminates the personal liability of its directors to the Registrant or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability: (i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit. In addition, as permitted by Section 145 of the Delaware General Corporation Law, the Bylaws of the Registrant provide that: (i) the Registrant is required to indemnify its directors and officers, as well as directors and officers of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise when they are serving in such capacities at the request of the Registrant, to the fullest extent permitted by the Delaware General Corporation Law; (ii) the Registrant may, in its discretion, indemnify other officers, employees and agents as set forth in the Delaware General Corporation Law; (iii) upon receipt of an undertaking to repay such advances if indemnification is determined to be unavailable, the Registrant is required to advance expenses, as incurred, to its directors and officers to the fullest extent permitted by the Delaware General Corporation Law in connection with a proceeding (except that the Registrant is not required to advance expenses to a person against whom it brings a claim for breach of the duty of loyalty, failure to act in good faith, intentional misconduct, knowing violation of law or deriving an improper personal benefit); (iv) the rights conferred in the Bylaws are not exclusive and the Registrant is authorized to enter into indemnification agreements with its directors, officers and employees and agents; (v) the Registrant may not retroactively amend the Bylaw provisions in a way that adversely affects the indemnification provided thereunder. The Registrant's policy is to enter into indemnity agreements with each of its directors and officers. The indemnity agreements provide that directors and officers will be indemnified and held harmless against all expenses (including attorneys' fees), judgments, fines, ERISA excise taxes or penalties and settlement amounts paid or reasonably incurred by them in any action, suit or proceeding, including any derivative action by or in the right of the Registrant, on account of their services as a director or officer of the Registrant or as directors or officers of any other corporation, partnership or enterprise when they are serving in such capacities at the request of the Registrant; except that no indemnity is provided in a derivative action in which such director or officer is finally adjudged by a court to be liable to the Registrant due to willful misconduct in the performance of his or her duty to the Registrant, unless the court determines that such director or officer is entitled to indemnification. The Registrant will not be obligated pursuant to the agreements to indemnify or advance expenses to an indemnified party with respect to proceedings or claims (i) initiated voluntarily by the indemnified party and not by way of defense, except with respect to a proceeding authorized by the Board of Directors and successful proceedings brought to enforce a right to indemnification and/or advancement of expenses under the indemnity agreements; (ii) for any amounts paid in settlement of a proceeding unless the Registrant consents to such settlement; (iii) on account of any suit in which judgment is rendered against the indemnified party for an accounting of profits made from the purchase or sale by the indemnified party of securities of the Registrant pursuant to the provisions of Section 16(b) of the Exchange Act and related laws and regulations; (iv) on account of conduct by an indemnified party that is finally adjudged to have been in bad faith or conduct that the II-1 19 indemnified party did not reasonably believe to be in, or not opposed to, the best interests of the Registrant; (v) on account of any criminal action or proceeding arising out of conduct that the indemnified party had reasonable cause to believe was unlawful; or (vi) if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful. The indemnity agreement requires a director or officer to reimburse the Registrant for expenses advanced only if and to the extent it is ultimately determined that the director or executive officer is not entitled, under Delaware law, the Registrant's Certificate of Incorporation, the Registrant's Bylaws, his or her indemnity agreement or otherwise to be indemnified for such expenses. The indemnity agreement provides that it is not exclusive of any rights a director or executive officer may have under the Certificate of Incorporation, the Bylaws, other agreements, any majority-in-interest vote of the stockholders or vote of disinterested directors, Delaware law, or otherwise. The indemnification provision in the Bylaws, and the indemnity agreements entered into between the Registrant and its directors and officers, may be sufficiently broad to permit indemnification of the Registrant's directors and officers for liabilities arising under the Securities Act. The indemnity agreements require the Registrant to maintain director and officer liability insurance to the extent readily available. The Registrant currently carries a director and officer insurance policy. ITEM 16. EXHIBITS. The following exhibits are filed herewith or incorporated by reference herein: EXHIBIT TITLE
EXHIBIT NUMBER DESCRIPTION ----------------------- -------------------------------------------------- 4.01 Registration Rights Agreement dated as of March 9, 2000 by and among the Registrant and the former stockholders of Onyx Technologies, Inc. (Incorporated by reference to Exhibit Number 4.01 to the Report on Form 8-K filed March 27, 2000.) 4.02* Registration Rights Agreement dated as of March 17, 2000 by and among the Registrant and the former stockholders of The Center for Adaptive Systems Applications, Inc. 5.01* Opinion of Fenwick & West LLP 23.01* Consent of Fenwick & West LLP (included in Exhibit 5.01) 23.02* Consent of PricewaterhouseCoopers LLP, Independent Accountants 23.03* Consent of PricewaterhouseCoopers LLP, Independent Accountants 24.01* Power of Attorney (see page II-4)
- ------------------- * Filed herewith II-2 20 ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made pursuant to this Registration Statement, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Securities Act"); (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement (notwithstanding the foregoing, any increase or decrease in volume or securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement); and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by paragraphs (1)(i) or (1)(ii) is contained in any periodic report filed with or furnished to the Securities and Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each post-effective amendment shall be deemed a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California, on April 14, 2000. HNC SOFTWARE, INC. By: /s/ Kenneth J. Saunders ------------------------------------- Kenneth J. Saunders Chief Financial Officer and Secretary POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints John Mutch, Kenneth J. Saunders and Russell C. Clark, and each of them, his or her attorneys-in-fact and agents, each with the power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
NAME TITLE DATE - ---- ----- ---- PRINCIPAL EXECUTIVE OFFICER: /s/ John Mutch President, Chief Executive Officer April 14, 2000 - ----------------------------------- and Director John Mutch PRINCIPAL FINANCIAL OFFICER: /s/ Kenneth J. Saunders Chief Financial Officer and Secretary April 14, 2000 - ----------------------------------- Kenneth J. Saunders PRINCIPAL ACCOUNTING OFFICER: /s/ Russell C. Clark Vice President, Corporate Finance April 14, 2000 - ----------------------------------- and Assistant Secretary Russell C. Clark ADDITIONAL DIRECTORS: /s/ Robert L. North Chairman of the Board of Directors April 14, 2000 - ----------------------------------- Robert L. North /s/ Edward K. Chandler Director April 14, 2000 - ----------------------------------- Edward K. Chandler /s/ Thomas F. Farb Director April 14, 2000 - ----------------------------------- Thomas F. Farb /s/ Charles H. Gaylord, Jr. Director April 14, 2000 - ----------------------------------- Charles H. Gaylord, Jr. /s/ Alex W. Hart Director April 14, 2000 - ----------------------------------- Alex W. Hart
II-4 22 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT TITLE - --------------------- ----------------------------------------------------- 4.01 Registration Rights Agreement dated as of March 9, 2000 by and among the Registrant and the former stockholders of Onyx Technologies, Inc. (Incorporated by reference to Exhibit Number 4.01 to the Report on Form 8-K filed March 27, 2000.) 4.02 Registration Rights Agreement dated as of March 17, 2000 by and among the Registrant and the former stockholders of The Center for Adaptive Systems Applications, Inc. 5.01 Opinion of Fenwick & West, LLP 23.01 Consent of Fenwick & West (included in Exhibit 5.01) 23.02 Consent of PricewaterhouseCoopers LLP, Independent Accountants 23.03 Consent of PricewaterhouseCoopers LLP, Independent Accountants 24.01 Power of Attorney (see Page II-4 of this Registration Statement)
EX-4.02 2 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS 1 EXHIBIT 4.02 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of March 17, 2000 (the "EFFECTIVE Date") by and between HNC SOFTWARE INC., a Delaware corporation ("HNC"), on the one hand, and the undersigned persons and entities listed on Exhibit A hereto (collectively, the "SECURITY HOLDERS" and each individually, a "SECURITY HOLDER") who have executed and delivered to HNC a counterpart signature page to this Agreement. The Security Holders were, immediately prior to the Effective Time of the Merger (as defined below) all of the stockholders and warrant holders of The Center for Adaptive Systems Applications, Inc., a Delaware corporation ("CASA"). Notwithstanding the fact that a Security Holder's name may be listed in Exhibit A hereto, no Security Holder will be a party to this Agreement, nor have any rights hereunder, unless and until such Security Holder executes and delivers to HNC a counterpart signature page to this Agreement. R E C I T A L S A. CASA, HNC and CASA Merger Corp., a Delaware corporation that is a wholly-owned subsidiary of HNC ("SUB"), have entered into an Agreement and Plan of Reorganization dated as of February 11, 2000, as amended by Amendment No. 1 thereto dated as of March 1, 2000 (the "PLAN"). Pursuant to the Plan, Sub is to be merged with and into CASA in a statutory merger (the "MERGER"), with CASA to be the surviving corporation of the Merger and thus to become a wholly-owned subsidiary of HNC. The date on which the Merger becomes effective shall be the Effective Date of this Agreement. B. As a condition precedent to the consummation of the Merger, the Plan provides that if shares of HNC Common Stock and HNC Warrants are issued in the Merger pursuant to a private placement as set forth in Section 2.10.1 of the Plan, then pursuant to Section 2.10.3 of the Plan the Security Holders who execute and deliver counterpart signature pages to this Agreement to HNC shall be granted certain Form S-3 registration rights with respect to the shares of HNC Common Stock that are issued to them in connection with the Merger pursuant to Section 2.1.2 of the Plan, and the shares of HNC Common Stock that are issuable upon the exercise of HNC Warrants that are issued to them in connection with the Merger pursuant to Section 2.5 of the Plan, all subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the facts stated in the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows: 1. REGISTRATION RIGHTS 1.1 CERTAIN DEFINITIONS. For purposes of this Agreement: (a) Securities Act. The term "SECURITIES ACT" means the U.S. Securities Act of 1933, as amended, or any successor law. 2 (b) Exchange Act. The term "EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as amended, or any successor law. (c) Registration. The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement. (d) Registrable Securities. The term "REGISTRABLE SECURITIES" means: (i) the shares of HNC Common Stock (other than Escrow Shares) that are issued to the Security Holders in the Merger pursuant to Section 2.1.2 of the Plan upon the conversion in the Merger of the outstanding shares of CASA Common Stock that are owned and held by Security Holders immediately prior to the Effective Time; (ii) the shares of HNC Common Stock that are issued or issuable to Security Holders upon the exercise of any HNC Warrants that are issued to Security Holders in the Merger pursuant to Section 2.5 of the Plan upon the conversion in the Merger of CASA Warrants that are outstanding and owned and held by Security Holders immediately prior to the Effective Time; and (iii) any shares of HNC Common Stock that may be issued as a dividend or other distribution (including without limitation shares of HNC Common Stock issued in a subdivision and split of HNC's outstanding Common Stock) with respect to, or in exchange for, or in replacement of, shares of HNC Common Stock described in clause (i) or clause (ii) of this Section 1.1(d) or in this clause (iii); provided, however, that notwithstanding the foregoing, the term "Registrable Securities" shall not include any such shares described in clauses (i), (ii) and/or (iii) above that are: (v) Escrow Shares; (w) registered under the Securities Act other than pursuant to a registration statement filed pursuant to this Agreement; (x) sold by a person in a transaction in which rights under this Agreement with respect to such shares are not assigned in accordance with the terms of this Agreement; (y) sold pursuant to a registration statement filed pursuant to this Agreement; or (z) sold pursuant to Rule 144 promulgated under the Securities Act or otherwise sold to the public. Only shares of HNC Common Stock shall be Registrable Securities. Except as provided in clause (iii) of the first sentence of this Section 1.1(d), without limitation, the term "Registrable Securities" does not include any shares of HNC Common Stock that were not issued in connection with the Merger. (e) Holder. The term "HOLDER" means: (i) a Security Holder who has executed and delivered to HNC a counterpart signature page to this Agreement and is the original holder of any Registrable Securities; (ii) any assignee of record of Registrable Securities that were originally held by a Security Holder meeting the conditions described in clause (i) of this Section 1.1(e) and to whom rights under this Agreement have been duly assigned in accordance with the provisions of this Agreement. (f) SEC. The term "SEC" or the term "COMMISSION" means the U.S. Securities and Exchange Commission. (g) Form S-3. The term "FORM S-3" means a registration statement filed under Form S-3 under the Securities Act, as such is in effect on the Effective Date, or any successor form of registration statement under the Securities Act subsequently adopted by the -2- 3 SEC which permits inclusion or incorporation of a substantial amount of information by reference to other documents filed by HNC with the SEC. (h) Rule 415. The term "RULE 415" means Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the SEC. (i) Defined Terms from Plan. Capitalized terms used in this Agreement but not defined in this Section 1 or elsewhere in this Agreement shall have the same meanings given to such terms in the Plan. 1.2 FORM S-3 SHELF REGISTRATION. (a) Filing and Registration Period. Subject to the terms and conditions of this Agreement, as promptly as reasonably practicable following the Effective Time of the Merger, and consistent with the requirements of applicable law, HNC shall prepare and file with the SEC a registration statement on Form S-3 for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the then outstanding Registrable Securities (the "SHELF REGISTRATION"). HNC shall use its diligent efforts to have such Shelf Registration declared effective as soon as reasonably practicable after its filing and to keep the Shelf Registration continuously effective under the Securities Act for a continuous period of time (such period of time being hereinafter called the "REGISTRATION PERIOD") commencing on the date the Shelf Registration is declared effective under the Securities Act by the SEC (the "DATE OF EFFECTIVENESS") and ending on the date that is the first (1st) anniversary of the Effective Time of the Merger. HNC shall have no duty or obligation to keep the Shelf Registration (or any Subsequent Registration, as defined below) effective after the expiration of the Registration Period. Accordingly, the Security Holders acknowledge that the Registrable Securities will not be registered under the Securities Act (and that the Shelf Registration will be cancelled and withdrawn) beginning one (1) year after the Effective Time of the Merger. (b) Limitations. Notwithstanding the provisions of Section 1.2(a) above, HNC shall not be obligated to effect any registration, qualification or compliance of Registrable Securities pursuant to Section 1.2 of this Agreement, and the Holders shall not be entitled to sell Registrable Securities pursuant to any registration statement filed under Section 1.2 of this Agreement, as applicable: (i) if HNC ceases to be eligible to use Form S-3 for such offering by the Holders; provided that HNC will use commercially reasonable diligent efforts to continue its eligibility to use Form S-3 during the Registration Period; (ii) if Form S-3 does not then permit the registration on such form of registration statement of an offering by the Holders of the type contemplated by this Agreement; -3- 4 (iii) if HNC is acquired and its Common Stock ceases to be publicly traded; (iv) in any particular jurisdiction in which HNC would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance, unless HNC is already subject to service of process in such jurisdiction; (v) if the SEC refuses to declare such registration effective due to the participation of any particular Holder in such registration (unless such Holder withdraws all such Holder's Registrable Securities from such registration statement); or (vi) if the manner in which any Registrable Securities are disposed of pursuant to the Shelf Registration (or Subsequent Registration, as applicable) is not included within the plan of distribution set forth in the prospectus for the Shelf Registration (or Subsequent Registration, as applicable); provided that the plan of distribution in the Shelf Registration (or Subsequent Registration as applicable) shall be in standard and customary form for non-underwritten re-sale offerings pursuant to registration statements on Form S-3. (c) Subsequent Registration. If the Shelf Registration becomes effective under the Securities Act, and the Shelf Registration or a Subsequent Registration (as defined below) thereafter ceases to be effective for any reason at any time during the Registration Period, then HNC shall use its diligent efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall, within thirty (30) days of such cessation of effectiveness, file an amendment to the Shelf Registration seeking to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" registration statement pursuant to Rule 415 covering all of the then outstanding Registrable Securities (a "SUBSEQUENT REGISTRATION"). If a Subsequent Registration is filed, HNC shall use its diligent efforts to cause the Subsequent Registration to be declared effective as soon as practicable after such filing and to keep such registration statement continuously effective until the end of the Registration Period. (d) Supplements and Amendments. Subject to the provisions of Section 1.2(h) and Section 1.3, during the Registration Period HNC shall supplement and amend the Shelf Registration if, as and when required by the Securities Act, the rules and regulations promulgated thereunder or the rules, regulations or instructions applicable to the registration form used by HNC for such Shelf Registration. (e) Timing and Manner of Sales. No sale of Registrable Securities pursuant to a Shelf Registration or a Subsequent Registration under this Section 1.2 may be made except during a "Permitted Window" (as defined in Section 1.2(h) below). In addition, any sale of Registrable Securities pursuant to a Shelf Registration or a Subsequent Registration under this Section 1.2 may only be made in accordance with the method or methods of distribution of such Registrable Securities that are described in the registration statement (which methods of distribution shall be in standard and customary form for non-underwritten re-sale offerings -4- 5 pursuant to registration statement on Form S-3) for the Shelf Registration (or Subsequent Registration, as applicable) and permitted by such form of registration statement, which methods of distribution will be specified by the Holders in their Notice of Resale (as defined below). A Holder may also sell Registrable Securities in a bona fide private offering if the selling Holder provides HNC with a written opinion of counsel, satisfactory to counsel to HNC, that such offer and sale is an exempt transaction under the Securities Act and applicable state securities laws, complies with all requirements for such exemption(s) and is not made with use of the prospectus for the Shelf Registration (or Subsequent Registration, if applicable). (f) No Underwritings. No sale of Registrable Securities under any Shelf Registration (or Subsequent Registration) effected pursuant to this Section 1.2 may be effected pursuant to any underwritten offering without HNC's prior written consent, which may be withheld in HNC's sole and absolute discretion. (g) Notice of Resale. Before any Holder may make any sale, transfer or other disposition of any Registrable Securities under the Shelf Registration (or a Subsequent Registration) during the Registration Period, a Holder or Holders who own at least a one-third (1/3) of the Registrable Securities then outstanding must first give written notice to HNC (a "NOTICE OF RESALE") of such Holder's or Holders' present intention to so sell, transfer or otherwise dispose of some or all of such Holder's or Holders' Registrable Securities, and the number of Registrable Securities such Holder or Holders propose(s) to so sell, transfer or otherwise dispose of. In addition, a Notice of Resale shall contain the information required to be included therein under Section 1.2(h). No Notice of Resale may be given to HNC earlier than sixty (60) days after the last date on which a Notice of Resale was given to HNC. (h) Permitted Window; Sale Procedures. (i) A "PERMITTED WINDOW" is a period of thirty (30) consecutive calendar days commencing upon HNC's written notification to the Security Holders in response to a Notice of Resale that the prospectus contained in the Form S-3 registration statement filed pursuant to Section 1.2 of this Agreement is available to be used for resales of Registrable Securities pursuant to the Shelf Registration (or a Subsequent Registration, as applicable). (ii) Before a Holder can make a sale of any Registrable Securities pursuant to the Shelf Registration (or a Subsequent Registration), and in order to cause a Permitted Window to commence, such Holder must first give HNC a Notice of Resale indicating such Holder's intention to sell Registrable Securities pursuant to the Shelf Registration (or Subsequent Registration, as applicable) and such Holder's intended plan of distribution of such Registrable Securities (which must conform to the plan of distribution contained in the prospectus for the Shelf Registration (or Subsequent Registration, as applicable)). (iii) Upon receipt of such Notice of Resale (unless a Section 1.3 Certificate of HNC is delivered as provided in Section 1.3), HNC will give written notice to all Holders as soon as practicable, but in no event more than four (4) business days after HNC's -5- 6 receipt of such Notice of Resale that either: (A) the prospectus contained in the registration statement for the Shelf Registration (or Subsequent Registration, if applicable) is current (it being acknowledged that it may be necessary for HNC during this period to supplement the prospectus or make an appropriate filing under the Exchange Act so as to cause the prospectus to become current) and that the Permitted Window will commence on the date of such notice by HNC; or (B) HNC is required under the Securities Act and the regulations thereunder to amend the registration statement for the Shelf Registration (or Subsequent Registration, as applicable) in order to cause the prospectus to be current. In the event that HNC determines that an amendment to the registration statement is necessary as provided above, it will file and cause such amendment to become effective as soon as practicable; whereupon it will notify the Holders that the Permitted Window will then commence. (iv) Subject to the provisions of clause (vi) and Section 1.3(b) below, there will be no more than a maximum of three (3) Permitted Windows during the Registration Period and (unless HNC consents thereto in a writing signed by HNC) there will be at least a thirty (30) day interval between the end of any Permitted Window and the commencement of the next Permitted Window. HNC shall not be obligated to keep the registration statement for the Shelf Registration (or any Subsequent Registration) current during any period other than a Permitted Window. (v) If, pursuant to Section 1.3(a), HNC postpones a Permitted Window that has not commenced, and the Holders withdraw their Notice of Resale, then such withdrawal shall not count as a Permitted Window. (vi) If pursuant to Section 1.3(b), HNC terminates a Permitted Window after such Permitted Window has already commenced, then the Holders shall be entitled to an additional Permitted Window for the number of days as provided in Section 1.3(b). (vii) The Holders may elect to withdraw a request for registration pursuant to a Notice of Resale; provided however, that if HNC has commenced preparation of any supplement or amendment to the registration statement or any part thereof in response to such Notice of Resale prior to receiving written notice from the Holders' of the withdrawal of their request for registration, then the Holders who originally gave HNC such Notice of Resale will promptly reimburse HNC for its actual costs and expenses incurred in preparing and/or filing such supplement and/or amendment. (i) Trading Window Compliance. The Holders acknowledge that HNC maintains an Insider Trading Compliance Program and an Insider Trading Policy, as such may be amended (the "HNC TRADING POLICY") and that the HNC Trading Policy requires that those directors, officers, employees and other persons whom HNC determines to be "Insiders" or "Access Personnel" or otherwise subject to the "trading window" and pre-clearance requirements of the HNC Trading Policy (and members of their immediate families and households) are permitted to effect trades in HNC securities: (i) only during those specified time periods ("TRADING WINDOWS") in which such persons are permitted to make sales, purchases or other -6- 7 trades in HNC's securities under the "trading window" provisions of the HNC Trading Policy; and (ii) only after pre-clearance of such sales, purchases or other trades with HNC's Insider Trading Compliance Officer. If a Holder who is an employee of HNC or an affiliate of HNC is or becomes subject to the "trading window" and/or "pre-clearance" provisions of the HNC Trading Policy described above, then, notwithstanding anything herein to the contrary, such Holder may sell, transfer and dispose of Registrable Securities only during those trading windows during which such HNC "Insiders" or "Access Personnel" are permitted to effect trades in HNC stock under the HNC Trading Policy and only after pre-clearing such trades with HNC's Insider Trading Compliance Officer as provided in the HNC Trading Policy. 1.3 POSTPONEMENT OR TERMINATION OF PERMITTED WINDOWS. If following HNC's receipt of a Notice of Resale pursuant to Section 1.2(g), HNC shall give to the Holders, a certificate (a "SECTION 1.3 CERTIFICATE") signed by the Chief Executive Officer or the Chief Financial Officer of HNC stating that, in the good faith judgment of the Board of Directors of HNC, it would be seriously detrimental to HNC and its security holders for the Permitted Window to be in effect at such time (due, for example, and without limitation, to the existence of a material development or potential material development involving HNC which HNC would be obligated to disclose in the prospectus contained in the Shelf Registration (or Subsequent Registration, as applicable), which disclosure would, in the good faith judgment of the Board of Directors of HNC, be premature or otherwise inadvisable at such time or would have a material adverse affect upon HNC and its security holders), then: (a) if a Permitted Window has not yet commenced as a result of such Notice of Resale, HNC will have the right to postpone the commencement of any Permitted Window for a period of up to forty-five (45) days after HNC's receipt of such Notice of Resale from the Holder or Holders, and if HNC so postpones a Permitted Window, and the Holders withdraw their Notice of Resale, such withdrawal shall not count as a Permitted Window; and (b) if a Permitted Window has already commenced as a result of such Notice of Resale, HNC will have the right to terminate such Permitted Window, in which event (i) no new Notice of Resale may be given to HNC without HNC's written consent for a period of forty-five (45) days after HNC's receipt of such Notice of Resale from the Holder or Holders, and (ii) the Holders will be granted (for each Permitted Window terminated under this Section 1.3(b)) an additional Permitted Window for that number of days that is equal to thirty (30) days minus the number of days that the terminated Permitted Window was in effect before HNC gave a Section 1.3 Certificate notifying the Holders of termination of such Permitted Window pursuant to this Section 1.3(b). HNC may not exercise its rights of postponement or of termination of a Permitted Window more than an aggregate total of four (4) times during the Registration Period. All Holders shall be bound by HNC's postponement or termination of a Permitted Window. 1.4 SHARES OTHERWISE ELIGIBLE FOR RESALE. Notwithstanding anything herein to the contrary, HNC shall not be obligated to effect or continue to keep effective any such registration, -7- 8 registration statement, qualification or compliance with respect to the Registrable Securities held by any particular Holder: (a) if HNC or its legal counsel shall have received a "no-action" letter or similar written confirmation from the SEC that all the Registrable Securities then held by such Holder may be resold by such Holder within a three (3) month period without registration under the Securities Act pursuant to the provisions of Rule 144 promulgated under the Securities Act (or successor provisions), or otherwise; (b) if legal counsel to HNC shall deliver a written opinion to HNC, its transfer agent and the Holders, in form and substance reasonably acceptable to HNC, to the effect that all the Registrable Securities then held by such Holder may be resold by such Holder within a three (3) month period without registration under the Securities Act pursuant to the provisions of Rule 144 promulgated under the Securities Act, or otherwise; or (c) after expiration or termination of the Registration Period. 1.5 EXPENSES. HNC shall pay all expenses incurred in connection with any registration effected by HNC pursuant to this Agreement (excluding brokers' discounts and commissions), including without limitation all filing, registration and qualification, printers', legal and accounting fees. 1.6 OBLIGATIONS OF HNC. Subject to Sections 1.2, 1.3 and 1.4 above, when required to effect the registration of any Registrable Securities under the terms of this Agreement, HNC will, as expeditiously as reasonably possible: (a) furnish to the Holders such number of copies of the prospectus for the Shelf Registration (or Subsequent Registration, as applicable), including a preliminary prospectus (and amendments or supplements thereto), in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them; (b) use its diligent efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as will be reasonably requested by the Holders; provided that HNC will not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such state or jurisdiction unless HNC is already so qualified or subject to service of process, respectively, in such jurisdiction; and (c) promptly notify each Holder of Registrable Securities covered by such registration statement, at any time during a Permitted Window when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event known to HNC's Chief Executive Officer as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a -8- 9 material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and the Holders shall hold all such information in strict confidence until it is made publicly available; (d) cause all such Registrable Securities to be listed on each securities exchange or National Association of Securities Dealers, Inc. Automated Quotation System on which HNC's Common Stock is then listed; (e) for so long as the Shelf Registration (or Subsequent Registration, as applicable) remains effective, promptly prepare, file and furnish to the Holders a reasonable number of copies of any supplement to or an amendment of such prospectus prepared by HNC and filed with the SEC as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall not, during any Permitted Window, include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (f) notify the Holders promptly after HNC shall receive notice thereof, of the date and time on which the Shelf Registration (or Subsequent Registration, as applicable) and each post-effective amendment thereto has become effective or a supplement to any prospectus forming a part of such Shelf Registration (or Subsequent Registration, as applicable) has been filed; (g) notify the Holders promptly of any request by the SEC for the amending or supplementing of the Shelf Registration (or Subsequent Registration, as applicable) or the prospectus contained therein or for any material additional information; and (h) advise the Holders promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of the Shelf Registration (or Subsequent Registration, as applicable) or the initiation or threatening of any proceeding for that purpose and promptly use commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued. 1.7 FURNISH INFORMATION. It shall be a condition precedent to the obligations of HNC to take any action pursuant to this Agreement that the selling Holders will furnish to HNC such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition and plan of distribution of such Registrable Securities as shall be required to timely effect the registration of their Registrable Securities. 1.8 DELAY OF REGISTRATION. No Holder will have any right to obtain or seek an injunction restraining or otherwise delaying any registration that is the subject of this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement. -9- 10 1.9 INDEMNIFICATION. (a) By HNC. To the extent permitted by law, HNC will indemnify, defend and hold harmless each Holder against any losses, claims, damages, or liabilities (joint or several) to which such Holder may become subject under the Securities Act, the Exchange Act or other U.S. federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a "VIOLATION"): (i) any untrue statement or alleged untrue statement of a material fact contained in a registration statement filed by HNC pursuant to this Agreement pursuant to which Registrable Securities are sold, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) the omission or alleged omission to state in such registration statement, preliminary prospectus or final prospectus or any amendments or supplements thereto, a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by HNC of the Securities Act, the Exchange Act, any U.S. federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any U.S. federal or state securities law in connection with the offering of Registrable Securities covered by such registration statement; provided however, that the indemnity agreement contained in this subsection 1.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the written consent of HNC (which consent shall not be unreasonably withheld), nor shall HNC be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder. (b) By Selling Holders. To the extent permitted by law, each selling Holder will indemnify and hold harmless HNC, each of its directors, each of its officers who have signed the registration statement, each person, if any, who controls HNC within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement, against any losses, claims, damages or liabilities (joint or several) to which HNC or any such director, officer, controlling person, underwriter or other such Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will indemnify and reimburse HNC or any such director, officer, controlling person, underwriter or other Holder for any -10- 11 reasonable attorneys' fees and other expenses reasonably incurred by HNC or any such director, officer, controlling person, underwriter or other Holder in connection with investigating or defending any such loss, claim, damage, liability or action, as incurred; provided, however, that the indemnity agreement contained in this subsection 1.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the indemnifying Holder, which consent shall not be unreasonably withheld; and provided further that the total amounts payable in indemnity by a Holder under this subsection 1.9(b) in respect of any Violation shall not exceed the net proceeds received by such Holder in the registered offering out of which such Violation arises. (c) Notice. Promptly after receipt by an indemnified party under this Section 1.9 of notice of the commencement of any action (including any governmental action) against such indemnified party, such indemnified party will, if a claim for indemnification or contribution in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement thereof and, if the indemnifying party is HNC, HNC shall have the right and obligation to control the defense of such action, and if HNC fails to defend such action it shall indemnify and reimburse the Selling Holders for any reasonable attorneys' fees and other expenses reasonably incurred by them in connection with investigating or defending such action; provided, however, that: (i) HNC shall also have the right, at its option, to assume and control the defense of any action with respect to which HNC or any person entitled to be indemnified by the Selling Holders under Section 1.9(b) is entitled to indemnification from the Selling Holders; (ii) the indemnified party or parties shall have the right to participate at its own expense in the defense of such action and (but only to the extent agreed in writing with HNC and any other indemnifying party similarly noticed) to assume the defense thereof with counsel mutually satisfactory to the parties; and (iii) an indemnified party shall have the right to retain its own counsel, with the fees and expenses of such counsel to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to an actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure of an indemnified party to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to the ability of the indemnifying party to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.9, but the omission so to deliver written notice to the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than under this Section 1.9. (d) Defect Eliminated in Final Prospectus. The foregoing indemnity agreements of HNC and the Holders are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended or supplemented prospectus on file with the SEC and effective at the time the sale of Registrable Securities under such registration statement occurs (the "AMENDED PROSPECTUS"), such indemnity agreement shall not inure to the benefit of any person if a copy of the Amended -11- 12 Prospectus was furnished to the indemnified party and was not furnished to the person asserting the loss, liability, claim or damage in the action giving rise to indemnity claims under this Section 1.9, at or prior to the time such action is required by the Securities Act. (e) Survival. The obligations of HNC and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration statement pursuant to this Agreement, and otherwise. 1.10 DURATION AND TERMINATION OF HNC'S OBLIGATIONS. HNC will have no obligations pursuant to Section 1.2 of this Agreement with respect to any Notice of Resale or other request or requests for registration (or inclusion in a registration) made by any Holder or to maintain or continue to keep effective any registration or registration statement pursuant hereto: (a) after the expiration or termination of the Registration Period; (b) if HNC has already effected Permitted Windows pursuant to this Agreement for an aggregate period of ninety (90) days; (c) with respect to a particular Holder if, in the opinion of counsel to HNC, all such Registrable Securities proposed to be sold by such Holder may be sold in a three (3) month period without registration under the Securities Act pursuant to Rule 144 promulgated under the Securities Act or otherwise; or (d) if all Registrable Securities have been registered and sold pursuant to a registration effected pursuant to this Agreement and/or have been transferred in transactions in which registration rights hereunder have not been assigned in accordance with this Agreement. 1.11 ACKNOWLEDGMENT OF OTHER AGREEMENTS. The Holders acknowledge that certain security holders hold "piggyback registration rights" that may allow them to participate in a registration effected pursuant to this Agreement. If after the date of this Agreement and prior to expiration of the Registration Period, HNC enters into an agreement pursuant to which HNC grants registration rights to a third party or parties that may be exercised during the Registration Period, then, within thirty (30) days after it enters into such agreement, HNC will notify the Holders of the grant of such registration rights and their general terms. 2. ASSIGNMENT Notwithstanding anything herein to the contrary, the rights of a Holder under this Agreement may be assigned only with HNC's express prior written consent, which may be withheld in HNC's sole discretion and only to a person who executes and delivers to HNC a writing reasonably satisfactory in form and substance to HNC in which such person agrees to be bound by all the obligations of the Holders under this Agreement; provided, however, that the rights of a Holder under this Agreement may be assigned without HNC's express prior written consent: (a) to a Permitted Assignee (as defined below); or (b) (if applicable) by will or by the laws of intestacy, descent or distribution, provided that, in each case, the assignee executes and delivers to HNC a writing reasonably satisfactory in form and substance to HNC in which such assignee agrees to be bound by all the obligations of the Holders under this Agreement. Any attempt to assign any rights of a Holder under this Agreement without HNC's express prior written consent in a situation in which such consent is required by this Section shall be null and void and without effect. Subject to the foregoing restrictions, all rights, covenants and -12- 13 agreements in this Agreement by or on behalf of the parties hereto will bind and inure to the benefit of the respective permitted successors and assigns of the parties hereto. Each of the following parties are "PERMITTED ASSIGNEES" for purposes of this Section 2: (a) a trust whose beneficiaries consist solely of a Holder and such Holder's immediate family; (b) the personal representative (such as an executor of a Holder's will), custodian or conservator of a Holder, in the case of the death, bankruptcy or adjudication of incompetency of that Holder; or (c) immediate family members of a Holder. 3. GENERAL PROVISIONS 3.1 NOTICES. Unless otherwise provided herein, all notices, instructions and other communications required or permitted to be given hereunder or necessary or convenient in connection herewith must be in writing and shall be deemed to have been given (a) when personally served or when delivered by facsimile (to the facsimile number of the person to whom the notice is given), (b) the first business day following the date of deposit with a nationally recognized overnight courier service or (c) on the earlier of actual receipt or the third (3rd) business day following the date on which the notice is deposited in the United States mail, via first class certified or registered mail, postage prepaid, addressed as follows: (i) if to HNC, at 5935 Cornerstone Court West, San Diego, California 92121, Attention: President; Fax Number: (619) 799-1501; and (ii) if to a Holder, at such Holder's respective address or fax number as set forth on Exhibit A hereto. Any party hereto (and such party's permitted assigns) may by notice so given change its address and fax number for future notices hereunder. 3.2 ENTIRE AGREEMENT. This Agreement constitutes and contains the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect to the subject matter hereof. 3.3 AMENDMENT OF RIGHTS. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of HNC and Holders who have executed this Agreement and own a majority of all the Registrable Securities then outstanding. Any amendment or waiver effected in accordance with this Section 3.3 shall be binding upon each Holder, each permitted successor or assignee of each Holder and HNC. 3.4 GOVERNING LAW. This Agreement will be governed by and construed exclusively in accordance with the internal laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California, excluding that body of law relating to conflict of laws and choice of law. -13- 14 3.5 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, then such provision(s) will be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision(s) were so excluded and will be enforceable in accordance with its terms. 3.6 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their permitted successors and assigns, any rights or remedies under or by reason of this Agreement. 3.7 CAPTIONS. The headings and captions to sections of this Agreement have been inserted for identification and reference purposes only and will not be used to construe or interpret this Agreement. 3.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 3.9 EFFECTIVENESS OF AGREEMENT. Regardless of when signed, this Agreement will not become effective or binding unless and until the Effective Time of the Merger. [THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK] -14- 15 IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date. HNC SOFTWARE INC. SECURITY HOLDERS BY: /S/ Kenneth J. Saunders NAME: * ------------------------------- ----------------------------- NAME: Kenneth J. Saunders BY: ----------------------------- ------------------------------- TITLE: Chief Financial Officer TITLE: __________________________ ---------------------------- * The following CASA stockholders: Stephen V. Coggeshall John R. Davies Camilo C. Gomez Roger Jones Jerry and Vardina Wind Robert F. Stellingwerf Colin Crook C. Wade Tambor PS Capital, LLC Guowei Wu Jose Hernandez Leann Griesinger Csilla and Eric Tambor Mary and Patrick Tambor Marvin Alme June Durnall Xiaozhong Li Kevin Rygg Shanji Xiong [SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT] -15- EX-5.01 3 OPINION RE LEGALITY 1 EXHIBIT 5.01 April 14, 2000 HNC Software Inc. 5935 Cornerstone Court West San Diego, California 92121-3728 Gentlemen/Ladies: At your request, we have examined the Registration Statement on Form S-3 (the "Registration Statement") to be filed by you with the Securities and Exchange Commission (the "Commission") on or about April 14, 2000 in connection with the registration under the Securities Act of 1933, as amended, of an aggregate of 237,552 shares of the Common Stock (the "Common Stock") of HNC Software Inc., a Delaware corporation (the "Company"), all of which shares are presently issued and outstanding and will be sold by certain selling stockholders named in the Registration Statement (the "Selling Stockholders"). The Selling Stockholders are the former stockholders of ONYX Technologies, Inc., a Georgia corporation ("ONYX"), and The Center for Adaptive Systems Applications, Inc., a Delaware corporation ("CASA"). In rendering this opinion, we have examined the following: (1) your registration statement on Form S-1 (File Number 33-91932) filed with and declared effective by the Commission on June 20, 1995, together with the Exhibits filed as a part thereof; (2) your registration statement on Form 8-A filed with the Commission on May 26, 1995, together with the order of effectiveness issued by the Commission therefor on June 20, 1995; (3) the Registration Statement, together with the exhibits filed as a part thereof or incorporated therein by reference; (4) the prospectus prepared in connection with the Registration Statement; (5) the Restated Certificate of Incorporation of the Company filed with the Delaware Secretary of State on June 13, 1996, as certified by the Delaware Secretary of State on June 13, 1996; (6) the Bylaws of the Company, as amended, filed as an Exhibit with the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 filed with the Commission on August 13, 1996; (7) the minutes of meetings of, and actions by the unanimous written consent of, the Board of Directors of the Company contained in the copies of the minutes books of the Company in our possession, including without limitation: (a) the minutes of the special meeting of the Company's Board of Directors held on March 9, 2000 approving the Company's acquisition of ONYX and the issuance of shares of the Company's Common Stock to ONYX shareholders as partial consideration for the Company's acquisition of ONYX; and (b) the minutes of the regular meeting of the Company's Board of Directors held on January 20, 2000 and the minutes of the special meeting of the Company's Board of Directors held on January 31, 2000 approving the Company's acquisition of CASA and the issuance of shares of the Company's Common Stock to CASA's shareholders as consideration for the Company's acquisition of CASA; 2 (8) the Agreement and Plan of Reorganization dated as of March 9, 2000 among the Company, ONYX and a wholly owned subsidiary of the Company and the Registration Rights Agreement entered into pursuant thereto; (9) the Certificate of Merger dated as of March 10, 2000 executed by ONYX and filed with and certified by the Delaware Secretary of State, and the Articles of Merger dated as of March 10, 2000 executed by ONYX and filed with and certified by the Georgia Secretary of State; (10) the Agreement and Plan of Reorganization dated as of February 11, 2000 among the Company, CASA and a wholly owned subsidiary of the Company, as amended by Amendment No. 1 thereto dated as of March 1, 2000 and the Escrow Agreement and Registrations Rights Agreement entered into pursuant thereto; (11) the Certificate of Merger dated as of March 17, 2000 executed by CASA and filed with and certified by the Delaware Secretary of State; and (12) the management certificates you delivered to us in connection with your acquisition of ONYX and CASA, addressed to us and dated March 10, 2000 and March 17, 2000, respectively, and a management certificate of even date herewith, each of which has been executed by you and contains certain representations. In our examination of documents for purposes of this opinion, we have assumed, and express no opinion as to, the genuineness of all signatures on original documents, the authenticity and completeness of all documents submitted to us as originals, the conformity to originals and completeness of all documents submitted to us as copies, the legal capacity of all natural persons executing the documents, the lack of any undisclosed termination, modification, waiver or amendment to any document reviewed by us and the due execution and delivery of all documents where due execution and delivery are prerequisites to the effectiveness thereof. As to matters of fact relevant to this opinion, we have relied solely upon our examination of the documents referred to above and have assumed the current accuracy and completeness of the information obtained from records included in the documents referred to above. We have made no independent investigation or other attempt to verify the accuracy of any of such information or to determine the existence or non-existence of any other factual matters; however, we are not aware of any facts that would cause us to believe that the opinion expressed herein is not accurate. We are admitted to practice law in the State of California, and our opinion herein is limited to the existing laws of the United States of America, the State of California and, with respect to the validity of your corporate actions and the requirements for the issuance of stock, the State of Delaware. Based upon the foregoing, it is our opinion that the 237,552 shares of Common Stock to be sold by the Selling Stockholders pursuant to the Registration Statement are validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to all references to us, if any, in the Registration Statement, the Prospectus constituting a part thereof and any amendments thereto. This opinion speaks only as of its date and we assume no obligation to update this opinion should circumstances change after the date hereof. This opinion is intended solely for the your use as an exhibit to the Registration Statement for the purpose of the above sale of stock and is not to be relied upon for any other purpose. Very truly yours, /s/ FENWICK & WEST LLP ------------------------------ FENWICK & WEST LLP EX-23.02 4 CONSENT OF EXPERTS AND COUNSEL 1 EXHIBIT 23.02 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated January 26, 2000, except as to Note 17, to which the date is March 17, 2000, relating to the financial statements of HNC Software Inc., which appear in HNC Software Inc.'s Annual Report on Form 10-K/A for the year ended December 31, 1999. /s/ PricewaterhouseCoopers LLP San Diego, California April 13, 2000 EX-23.03 5 CONSENT OF EXPERTS AND COUNSEL 1 EXHIBIT 23.03 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated January 25, 2000 relating to the financial statements of Retek Inc., which appear in HNC Software Inc.'s Annual Report on Form 10-K/A for the year ended December 31, 1999. /s/ PricewaterhouseCoopers LLP Minneapolis, Minnesota April 13, 2000 -----END PRIVACY-ENHANCED MESSAGE-----