EXHIBIT 4.04
NO.
HNC SOFTWARE INC.
PRACTICAL CONTROL SYSTEMS TECHNOLOGIES, INC. 1998 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
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This Stock Option Agreement (this "AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between HNC Software Inc., a Delaware corporation (the "COMPANY"), and the
participant named below ("PARTICIPANT"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Practical Control Systems
Technologies, Inc. 1998 Stock Option Plan (the "PLAN").
PARTICIPANT: ___________________________________________
SOCIAL SECURITY NUMBER: ___________________________________________
PARTICIPANT'S ADDRESS: ___________________________________________
___________________________________________
TOTAL OPTION SHARES: ___________________________________________
EXERCISE PRICE PER SHARE: ___________________________________________
DATE OF GRANT: ___________________________________________
VESTING START DATE: ___________________________________________
EXPIRATION DATE: ___________________________________________
TYPE OF STOCK OPTION ___________________________________________
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase up to the total number of
shares of Common Stock of the Company set forth above
(collectively, the "SHARES") at the Exercise Price Per Share set
forth above (the "EXERCISE PRICE"), subject to all of the terms
and conditions of this Agreement and the Plan. If designated as
an Incentive Stock Option above, this Option is intended to
qualify as an "incentive stock option" ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "CODE").
2. VESTING; EXERCISE PERIOD.
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2.1 Vesting of Right to Exercise Option. This Option shall
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become exercisable as to portions of the Shares as follows: (a) this Option
shall not be exercisable with respect to any of the Shares until
________________(the "FIRST VESTING DATE"); (b) if Participant has continuously
provided services to the Company or any Subsidiary, Parent or Affiliate of the
Company from the Date of Grant through the First Vesting Date and has not been
Terminated on or before the First Vesting Date, then on the First Vesting Date
this Option shall become exercisable as to twenty-five percent (25%) of the
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Shares; and (c) thereafter, so long as
Participant continuously provides services to the Company or any Subsidiary,
Parent or Affiliate of the Company and is not Terminated, on the first
anniversary of the First Vesting Date and on each successive anniversary of
the First Vesting Date thereafter, this Option shall become exercisable as to
an additional twenty-five percent (25%) of the Shares; provided that this
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Option shall in no event ever become exercisable with respect to more than
100% of the Shares.
2.2 Expiration. This Option shall expire on the Expiration Date set
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forth above and must be exercised, if at all, on or before the earlier of the
Expiration Date or the date on which this Option is earlier terminated in
accordance with the provisions of Section 3.
3. TERMINATION.
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3.1 Termination for Any Reason Except Death or Disability. If
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Participant is Terminated for any reason, except Participant's death or
Disability, then this Option, to the extent (and only to the extent) that it
would have been exercisable by Participant on the date of Termination, may be
exercised by Participant no later than three (3) months after the date of
Termination (or seven (7) months after the date of Termination if the Company is
then subject to Section 16 of the Exchange Act and Participant's transactions in
securities of the Company were subject to Section 16(b) of the Exchange Act on
the date of Termination), but in any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Participant
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is Terminated because of death or Disability of Participant, then this Option,
to the extent that it is exercisable by Participant on the date of Termination,
may be exercised by Participant (or Participant's legal representative) no later
than twelve (12) months after the date of Termination, but in any event no later
than the Expiration Date.
3.3 No Obligation to Employ. Nothing in the Plan or this
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Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent, Subsidiary or Affiliate of
the Company, or limit in any way the right of the Company or any Parent,
Subsidiary or Affiliate of the Company to terminate Participant's employment or
other relationship at any time, with or without cause.
4. MANNER OF EXERCISE.
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4.1 Stock Option Exercise Agreement. To exercise this Option,
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Participant (or in the case of exercise after Participant's death, Participant's
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form attached
hereto as Exhibit A, or in such other form as may be approved by the Company
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from time to time (the "EXERCISE AGREEMENT"), which shall set forth, inter alia,
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Participant's election to exercise this Option, the number of Shares being
purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Participant's investment intent and access
to information as may be required by the Company to comply with applicable
securities laws. If someone other than Participant exercises this Option, then
such person must submit documentation reasonably acceptable to the Company that
such person has the right to exercise this Option.
4.2 Limitations on Exercise. This Option may not be exercised
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unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. This Option may
not be exercised as to fewer than 100 Shares unless it is exercised as to all
Shares as to which this Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by full
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payment of the Exercise Price for the Shares being purchased in cash (by check),
or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock that either:
(1) have been owned by Participant for more than six (6) months and have been
paid for within the meaning of SEC Rule 144 (and, if such shares were purchased
from the Company by use of a promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by Participant in the open public
market; and (3) are clear of all liens, claims, encumbrances or security
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interests;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate sufficient to
avoid imputation of income under Sections 483 and 1274 of the Code; provided,
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however, that Participants who are not employees of the Company shall not be
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entitled to purchase Shares with a promissory note unless the note is adequately
secured by collateral other than the Shares; and provided further that the
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portion of the Exercise Price equal to the par value of the Shares, if any, must
be paid in cash;
(d) by waiver of compensation due or accrued to Participant for
services rendered;
(e) provided that a public market for the Company's stock exists: (1)
through a "same day sale" commitment from Participant and a broker-dealer that
is a member of the National Association of Securities Dealers (an "NASD DEALER")
whereby Participant irrevocably elects to exercise this Option and to sell a
portion of the Shares so purchased to pay for the exercise price and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; or (2) through a "margin" commitment
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from Participant and a NASD Dealer whereby Participant irrevocably elects to
exercise this Option and to pledge the Shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD Dealer in the amount of
the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the exercise price directly to the Company; or
(f) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon
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exercise of this Option, Participant must pay or provide for any applicable
federal or state withholding
obligations of the Company. If the Committee permits, Participant may provide
for payment of withholding taxes upon exercise of this Option by requesting
that the Company retain Shares with a Fair Market Value equal to the minimum
amount of taxes required to be withheld. In such case, the Company shall issue
the net number of Shares to the Participant by deducting the Shares retained
from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement and
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payment are in form and substance satisfactory to counsel for the Company, the
Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If this Option
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is an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (a) the date two (2)
years after the Date of Grant, and (b) the date one (1) year after transfer of
such Shares to Participant upon exercise of this Option, then Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this Option
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and the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. This Option may not be transferred
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in any manner other than by will or by the laws of descent and distribution and
may be exercised during the lifetime of Participant only by Participant. The
terms of this Option shall be binding upon the executors, administrators,
successors and assigns of Participant.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the
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Date of Grant of some of the federal and California tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT
SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.
8.1 Exercise of ISO. If the Option qualifies as an ISO, there
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will be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as a tax preference item for
federal alternative minimum tax purposes and may subject the Participant to the
alternative minimum tax in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If the Option does
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not qualify as an ISO, there may be a regular federal income tax liability upon
the exercise of the Option. Participant will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If Participant is a current or former employee of the Company,
the Company may be required to withhold from Participant's compensation or
collect from Participant and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
8.3 Disposition of Shares. The following tax consequences may
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apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held for more than
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twelve (12) months after the date of the transfer of the Shares pursuant to the
exercise of an ISO and are disposed of more than two (2) years after the Date
of Grant, any gain realized on disposition of the Shares will be treated as
capital gain for federal income tax purposes. The maximum federal capital gain
tax rates are twenty-eight percent (28%) for Shares held more than twelve (12)
months, but not more than eighteen (18) months ("MID-TERM CAPITAL GAIN"), and
twenty percent (20%) for Shares held for more than eighteen (18) months ("LONG-
TERM CAPITAL GAIN"). If Shares purchased under an ISO are disposed of within
the applicable twelve (12) month or two (2) year period, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held for more than
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twelve (12) months after the date of the transfer of the Shares pursuant to the
exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as Mid-Term Capital Gain or Long-Term Capital Gain, as the case may be.
(c) Withholding. The Company may be required to withhold from the
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Participant's compensation or collect from the Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.
9. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of
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the rights of a shareholder with respect to any Shares until Participant
exercises this Option and pays the Exercise Price.
10. INTERPRETATION. Any dispute regarding the interpretation of this
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Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
11. ENTIRE AGREEMENT. The Plan is incorporated herein by reference.
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This Agreement and the Plan and the Exercise Agreement constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior understandings and agreements with respect
to such subject matter.
12. NOTICES. Any notice required to be given or delivered to the
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Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal
delivery; three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by rapifax or telecopier.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
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under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and construed
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in accordance with the internal laws of the State of California, without regard
to that body of law pertaining to choice of law or conflict of law.
15. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of
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the Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts this Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of this Option or disposition of
the Shares and that the Company has advised Participant to consult a tax advisor
prior to such exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate by its duly authorized representative and Participant has executed
this Agreement in duplicate as of the Date of Grant.
HNC SOFTWARE INC. PARTICIPANT
By:_________________________ ________________________________________
(Signature)
Raymond V. Thomas
____________________________ ________________________________________
(Please print name) (Please print name)
Chief Financial Officer
____________________________ ________________________________________
(Please print title)
EXHIBIT A
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HNC SOFTWARE INC.
PRACTICAL CONTROL SYSTEMS TECHNOLOGIES, INC. 1998 STOCK OPTION PLAN (THE "PLAN")
STOCK OPTION EXERCISE AGREEMENT
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I hereby elect to purchase the number of shares of Common Stock of HNC SOFTWARE
INC. (the "Company") as set forth below:
Participant _________________________________________________ Number of Shares Purchased: ________________________________
Social Security Number: _____________________________________ Purchase Price per Share: __________________________________
Address: ____________________________________________________ Aggregate Purchase Price: __________________________________
____________________________________________________ Date of Option Agreement: __________________________________
Daytime Phone: ______________________________________________ Exact Name of Title to Shares: _____________________________
Facsimile Number: ___________________________________________ ____________________________________________________________
Type of Option: [_] Incentive Stock Option ____________________________________________________________
[_] Nonqualified Stock Option
1. DELIVERY OF PURCHASE PRICE. Participant hereby delivers to the Company the
Aggregate Purchase Price, to the extent permitted in the Option Agreement (the
"Option Agreement") as follows (check as applicable and complete):
[_] in cash (by check) in the amount of $__________________, receipt of which
is acknowledged by the Company;
[_] by cancellation of indebtedness of the Company to Participant in the
amount of $_______________________;
[_] by delivery of ___________ fully-paid, nonassessable and vested shares of
the common stock of the Company owned by Participant for at least six (6)
months prior to the date hereof (and which have been paid for within the
meaning of SEC Rule 144), or obtained by Participant in the open public
market, and owned free and clear of all liens, claims, encumbrances or
security interests, valued at the current Fair Market Value of $_________
per share;
[_] by the waiver hereby of compensation due or accrued to Participant for
services rendered in the amount of $______________________ (except that
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the par value of the Shares is tendered in cash (by check) receipt of
which is acknowledged by the Company);
[_] through a "cashless exercise" commitment, delivered herewith, from
Participant and the NASD Dealer ("Broker") named therein, in the amount of
$___________________; or
[_] through a "margin" commitment, delivered herewith from Participant and the
Broker named therein, in the amount of $_____________________.
Please complete the following if you elect to exercise your option through
a "cashless exercise" or "margin" commitment:
Exercised shares shall be registered in the name of:
Name of Broker: __________________________ Broker Phone: _______________
Broker Account Number: ___________________ Broker Fax: _________________
The Broker will remit the exercise price and applicable withholding taxes
directly to the Company.
2. MARKET STANDOFF AGREEMENT. Participant, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by Participant during the period requested by the managing
underwriter following the effective date of a registration statement of the
Company filed under the Securities Act, provided that all officers and directors
of the Company are required to enter into similar
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agreements. Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or other securities) subject to the foregoing
restriction until the end of such period.
3. TAX CONSEQUENCES. PARTICIPANT UNDERSTANDS THAT PARTICIPANT MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PARTICIPANT'S PURCHASE OR DISPOSITION OF
THE SHARES. PARTICIPANT REPRESENTS THAT PARTICIPANT HAS CONSULTED WITH ANY TAX
CONSULTANT(S) PARTICIPANT DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT PARTICIPANT IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.
4. ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated herein by
reference. This Exercise Agreement, the Plan and the Option Agreement
constitute the entire agreement and understanding of the parties and supersede
in their entirety all prior understandings and agreements of the Company and
Participant with respect to the subject matter hereof, and are governed by
California law except for that body of law pertaining to choice of law or
conflict of law.
Date: ___________________________ _______________________________________
Signature of Participant
This is to verify our receipt and acceptance of the attached Exercise Agreement
and our agreement to promptly issue and deliver the shares referred to above,
subject to our receipt of the Aggregate Purchase Price, and taxes due, if any.
The shares, when so issued will be fully paid and nonassessable.
HNC Software Inc.
Date: ___________________________ _______________________________________
Authorized Signature
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