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Exhibit 99
[HNC SOFTWARE LOGO]
September 22, 2000
Dear HNC Software Stockholder:
We are sending you this Information Statement to inform you that we are
spinning off our subsidiary, Retek Inc. ("Retek"), to the holders of our common
stock. We are effecting this spin-off by distributing 1.243 shares of Retek
common stock as a dividend on each outstanding share of HNC common stock,
amounting to 40,000,000 shares of Retek common stock in total. The dividend will
be distributed after the close of the market at 5:00 PM Eastern Daylight time on
September 29, 2000 to holders of record of HNC common stock at 5:00 PM Eastern
Daylight time on September 15, 2000.
Retek provides Internet-based, business-to-business software solutions
for retailers and their trading partners. Retek's software offers a retail
focused solution that incorporates technology to predict customer demand and
behavior. Retek's software solutions enable retailers to use the Internet to
communicate and collaborate efficiently with their suppliers, distributors,
wholesalers, logistics providers, brokers, transportation companies,
consolidators and manufacturers. Retek seeks to further enhance the ability of
retailers to interact with their supply chain through retail.com, an electronic
commerce network providing collaborative business-to-business software solutions
to the retail industry. Retek markets its software solutions through its direct
and indirect sales channels primarily to retailers who sell to their customers
via traditional retail stores, catalogs and/or Internet-based store fronts. To
date, Retek has licensed its solutions primarily to larger retailers. Retek
expects its retail.com network offering to extend its target market by making
its solutions available to small and mid-sized retailers and their trading
partners.
In September 1999, HNC's Board of Directors determined that it would be
in the best interests of HNC's stockholders to separate Retek's business from
HNC's business. In November 1999, Retek completed the initial public offering of
its common stock, which resulted in the issuance of approximately 13.65% of
Retek's stock to the public. Since then, Retek has issued approximately 1.33
million additional shares of Retek common stock upon the exercise of stock
options granted under Retek's employee stock purchase plan and in connection
with Retek's acquisition of other businesses, and business alliances.
Following this spin-off, we will no longer own shares of Retek and Retek
will be a fully independent, publicly-traded company. No vote of HNC
stockholders is required
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in connection with the spin-off of Retek. Therefore, you are not required to
take any action. We are sending you the enclosed Information Statement, which
contains important information about the terms of the spin-off, for your
information only. The enclosed Information Statement provides information about:
- the U.S. federal income tax treatment of the shares of Retek common
stock you will receive in the spin-off;
- how we determined the number of shares of Retek common stock you
will receive in the spin-off;
- how fractional shares of Retek common stock will be treated;
- a brief description of the background and business of Retek and
Retek's common stock; and
- how you can obtain additional information about the spin-off.
We believe the spin-off will benefit HNC, Retek and our stockholders.
Thank you for your investment in HNC.
Sincerely,
HNC SOFTWARE INC.
John Mutch
President and Chief Executive Officer
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INFORMATION STATEMENT
SPIN-OFF OF RETEK INC.
THROUGH THE DISTRIBUTION
BY
HNC SOFTWARE INC.
OF 40,000,000 SHARES OF RETEK COMMON STOCK
TO
HNC SOFTWARE INC. COMMON STOCKHOLDERS
THE DATE OF THIS INFORMATION STATEMENT IS SEPTEMBER 22, 2000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE REVIEWED THIS INFORMATION STATEMENT OR DETERMINED IF THIS
INFORMATION STATEMENT IS ACCURATE OR ADEQUATE. IN ADDITION, NEITHER THE
SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORS HAVE
APPROVED RETEK'S COMMON STOCK OR HNC'S DISTRIBUTION OF RETEK COMMON STOCK TO YOU
PURSUANT TO THIS SPIN-OFF. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SPIN-OFF
APPROVAL AND STRUCTURE
On August 7, 2000, HNC's Board of Directors approved the spin-off of
Retek to holders of HNC's common stock. To effect this spin-off, HNC's Board
declared a dividend on HNC common stock consisting of the 40,000,000 shares of
Retek common stock owned by HNC. As of September 15, 2000 these shares
represented approximately 83.93% of the outstanding shares of Retek's common
stock. The dividend will be distributed on September 29, 2000, in the amount of
1.243 shares of Retek common stock for each share of HNC common stock
outstanding on the record date for the dividend, as explained in more detail
below.
You will not be required to pay any cash or other consideration for the
whole shares of Retek common stock distributed to you in the spin-off or to
surrender or exchange your shares of HNC common stock to receive the dividend of
Retek common stock.
HOW MANY RETEK SHARES WILL YOU RECEIVE IN THE SPIN-OFF?
For each share of HNC common stock that you owned at 5:00 PM Eastern
Daylight time on September 15, 2000, the record date, you will be entitled to
receive that number of Retek shares equal to the quotient obtained by dividing
the total number of
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shares of Retek common stock to be distributed in the spin-off by the number of
shares of HNC common stock that were outstanding at 5:00 PM Eastern Daylight
time on the record date. Thus, the following equation determines the number of
shares of HNC common stock you will be entitled to receive for each share of HNC
common stock you held on the record date for the dividend:
Total number of shares of Retek
to be distributed in the spin-off = 40,000,000 = 1.243
-------------------------------------- ----------
Number of shares of 32,179,222
HNC common stock outstanding
as of 5:00 PM Eastern Daylight time
on the record date
Based on the approximate number of shares of HNC common stock
outstanding as of 5:00 PM Eastern Daylight time on September 15, 2000, you will
be entitled to receive approximately 1.243 shares of Retek common stock for each
share of HNC common stock you owned at 5:00 PM Eastern Daylight time on the
record date.
WHEN AND HOW WILL I RECEIVE THE DIVIDEND?
We will distribute the spin-off dividend on September 29, 2000 by
releasing our shares of Retek common stock to be distributed in the spin-off to
the transfer agent. As of 5:00 PM Eastern Daylight time on September 29, 2000
the transfer agent will cause a Retek stock certificate for the shares of Retek
common stock to which you are entitled by reason of the dividend to be
registered in your name. As of that time, you will become the record holder of
that number of shares of Retek common stock.
The transfer agent will not deliver, and you will not receive, any
fractional shares of Retek common stock in connection with the spin-off.
Instead, on September 29, 2000 the Retek transfer agent will aggregate all
fractional shares and sell them on behalf of those holders who otherwise would
be entitled to receive a fractional share of Retek stock. Such holders will then
receive a cash payment from the Retek transfer agent in the amount of their pro
rata share of the total net proceeds of that sale, less ordinary and customary
commissions or charges, of that sale. The transfer agent will have full
discretion to sell the aggregate fractional Retek shares at such price or prices
as the transfer agent may decide.
You will receive stock certificates representing your ownership of whole
shares of Retek common stock from the transfer agent. The transfer agent will
begin mailing stock certificates representing your ownership of whole shares of
Retek common stock on or promptly after September 29, 2000, the distribution
date. Your check for any cash that you may be entitled to receive instead of
fractional shares of HNC common stock will follow separately. We currently
estimate that it will take about two weeks from the dividend payment date for
the transfer agent to complete these mailings.
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TRADING BETWEEN THE RECORD DATE AND DISTRIBUTION DATE
After the September 15, 2000 record date and market close on September
29, 2000, the distribution date, there will be two markets in HNC common stock,
a "regular way" market and an "ex-dividend" market. Shares that trade on the
regular way market will trade with an entitlement to shares of Retek common
stock distributed pursuant to the spin-off. Shares that trade on the ex-dividend
market will trade without an entitlement to shares of Retek common stock
distributed pursuant to the spin-off. Therefore, if you owned shares of HNC
common stock at 5:00 PM Eastern Daylight time on the record date, and sell those
shares on the regular way market prior to market close on September 29, 2000,
the distribution date, you will also be trading the shares of Retek common stock
that would have been distributed to you on those HNC shares pursuant to the
spin-off. If you sell those shares of HNC common stock on the ex-dividend market
prior to the distribution date, you will still receive the shares of Retek
common stock that were to be distributed to you pursuant to your ownership of
the shares of HNC common stock.
In addition, between the record date and market close on the
distribution date there will be two markets in Retek common stock, a "regular
way" market and a "when-issued trading" market. The regular way market will be
the same market for shares of Retek common stock that currently exists. The
when-issued trading market will be a market for shares of Retek common stock
that will be distributed to HNC stockholders on the distribution date. If you
owned shares of HNC common stock at 5:00 PM Eastern Daylight time on the record
date, then you are entitled to shares of Retek common stock distributed pursuant
to the spin-off. You may trade this entitlement to shares of Retek common stock,
without the shares of HNC common stock you own, on the when-issued trading
market.
U.S. FEDERAL INCOME TAX CONSEQUENCES
Tax-Free Status of the Spin-off. We have received a private letter
ruling from the Internal Revenue Service or "IRS" stating that our distribution
of whole shares of Retek common stock to our common stockholders in connection
with the spin-off will be tax-free to us and to the holders of our common stock
for U.S. federal income tax purposes. This means that, for U.S. federal income
tax purposes:
- HNC common stockholders will not recognize a gain or loss by
reason of the receipt of whole shares of Retek common stock as a
result of the spin-off; and
- HNC will not recognize a gain or loss by reason of the spin-off.
Although private letter rulings are generally binding on the IRS, HNC
and its stockholders will not be able to rely on the ruling if any of the
factual representations or assumptions we made to obtain the ruling are
incorrect or untrue in any material respect.
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We are not currently aware of any facts or circumstances that would cause any of
these representations or assumptions to be incorrect or untrue in any material
respect. Nevertheless, if the IRS subsequently held our spin-off to be taxable,
the above consequences would not apply and HNC and its common stockholders could
be subject to taxation.
Subsequent Sale of Stock. If you sell your shares of Retek common stock
or HNC common stock after the distribution, you will recognize gain or loss on
such sale based on the difference between the proceeds you receive from the sale
and the tax basis allocated to the shares you sold as described below under
"Allocation of Tax Basis." This gain or loss will be a capital gain or loss,
assuming that you held such shares as a capital asset, and will be a long-term
or short-term gain or loss based on your holding period for such shares as
described below under "Holding Period."
Holding Period. For capital gains purposes, the holding period of the
shares of Retek common stock that you receive as a result of the spin-off will
include the holding period for your record date shares of HNC common stock,
provided that your record date shares of HNC common stock are held as a capital
asset on the dividend payment date.
Treatment of Fractional Shares. If you receive cash in lieu of a
fractional share of Retek common stock as part of the spin-off, that cash will
be treated for U.S. federal income tax purposes as if it were paid to you in
exchange for such fractional share of Retek stock. Provided that the fractional
share is considered to be held as a capital asset, you will realize a capital
gain or loss measured by the difference between the cash you receive for such
fractional share and your tax basis in that fractional share as described below.
This capital gain or loss will be treated as a long-term or short-term gain or
loss based on your holding period for your shares of HNC common stock on which
the distribution of Retek common stock is distributed to you.
Allocation of Tax Basis. Your tax basis in the Retek common stock you
receive in the spin-off will be determined based on your tax basis in the shares
of HNC common stock you owned on the record date (the "RECORD DATE SHARES").
Your record date shares are the shares of HNC common stock on which HNC's
dividend of Retek common stock to you in the spin-off will be made. Following
the spin-off, your aggregate tax basis in your record date shares of HNC common
stock and in the shares of Retek common stock you receive in the spin-off,
including any fractional Retek shares sold for cash as described above, will be
the same as your aggregate tax basis in your record date shares of HNC common
stock immediately prior to the spin-off. The aggregate tax basis in your record
date shares of HNC common stock immediately prior to the spin-off will be
allocated between your record date shares of HNC common stock and the shares of
Retek common stock you receive in the spin-off in proportion to the fair market
value of those shares of HNC common stock and Retek common stock at market close
on the September 29, 2000 distribution date.
For your reference, attached, as Appendix 1 is an example of how the tax
basis in your record date shares would be reallocated between your record date
shares and the shares of Retek common stock you receive in the spin-off.
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State, Local and Foreign Tax Consequences. You should consult your own
tax advisor regarding the state, local and foreign tax consequences of your
receipt of shares of Retek common stock in the spin-off and any payment for
fractional shares.
Tax Return Statement. U.S. Treasury regulations require you to attach to
your U.S. federal income tax return, for the year in which the spin-off occurs,
a detailed statement setting forth certain information regarding the nature of
the spin-off. Within a reasonable time after completion of the spin-off, we will
provide you with the information necessary to comply with that requirement. You
should retain this statement so it can be completed and attached to your tax
return.
The summary of U.S. federal income tax consequences set forth above is
for general information purposes only and may not be applicable to stockholders
who are not citizens or residents of the United States or who are otherwise
subject to special treatment under the Internal Revenue Code. All HNC
stockholders should consult their own tax advisors as to the particular tax
consequences to them of the spin-off, including the state, local and (if
applicable) foreign tax consequences.
INFORMATION ABOUT RETEK
OVERVIEW OF RETEK'S BUSINESS
Retek provides Internet-based, business-to-business software solutions
for retailers and their trading partners that enable retailers to manage the
entire retail supply chain. Retek's software offers a retail focused solution
that incorporates technology that can predict customer demand and behavior,
which Retek refers to as predictive technology. Retek's software solutions
enable retailers to use the Internet to communicate and collaborate efficiently
with their suppliers, distributors, wholesalers, logistics providers, brokers,
transportation companies, consolidators and manufacturers.
Key strategic features of Retek's software solutions are:
- Link participants in the retail supply chain. Retek's solutions
electronically link retailers with their trading partners to
facilitate collaboration across all aspects of the supply chain,
from the initial prediction of customer demand through product
design and manufacturing, to inventory management, with the goal
of enabling retailers to reduce unnecessary costs and
time-to-market, while increasing product quality and improving
margins.
- Use of predictive and analytic technologies. Retek's solutions
use advanced predictive tools to process and analyze the vast
amounts of data available to retailers. These unique,
proprietary technologies enable Retek's customers to identify
patterns in data that may not otherwise be visible in order to
reduce inventories, increase marketing effectiveness and improve
customer satisfaction.
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- Internet-based, rapidly deployable and scalable solutions.
Retek's Internet-based software solutions are easy to use and
rapidly deploy. They are highly scalable and retail sector
focused.
Retek's various products perform functions such as inventory control,
automated warehouse management and import management and can be used in
forecasting, inventory replenishment and other functions. Retek's retail.com
website and related solutions allow participants in the retail supply chain,
ranging from retailers to their direct and indirect suppliers and manufacturers,
to collaboratively plan and communicate through the use of Internet-based tools.
Retek's revenues for its fiscal year ended December 31, 1999 were
approximately $69.2 million, which resulted in net loss of approximately $5.4
million for that fiscal year.
BACKGROUND OF THE SEPARATION OF RETEK FROM HNC
In September 1999, HNC's Board of Directors decided to separate Retek's
business from HNC's business and in November 1999 entered into a series of
agreements with Retek to effect that separation. In connection with the
separation, in November 1999, HNC transferred to Retek all the shares of Retek
Information Systems, Inc., a subsidiary that conducted much of the business of
HNC's retail division. Immediately after the date, Retek began operating as a
separate subsidiary of HNC. Retek consummated an initial public offering of
approximately 13.65% of its common stock on November 17, 1999. Upon the
completion of the initial public offering, HNC owned approximately 86.35% of the
shares of Retek common stock.
In the final step of the separation, HNC plans to distribute all of the
shares of Retek common stock it owns to the holders of HNC's common stock on a
pro rata basis. On August 7, 2000, after consideration of the timing, structure
and terms of various means by which to complete the separation of Retek from
HNC, the HNC Board of Directors approved the distribution of 40,000,000 shares
of Retek common stock to holders of HNC common stock as of 5:00 PM Eastern
Daylight time on September 15, 2000 by means of a dividend as described in this
Information Statement. Effective as of the time of the completion of the
spin-off, nominees of HNC who have been serving on Retek's Board of Directors
will resign from Retek's Board. After the spin-off, HNC will not own any shares
of Retek common stock and Retek will be a fully independent, publicly-traded
company.
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INFORMATION ABOUT RETEK COMMON STOCK
RETEK COMMON STOCK
Under Retek's Amended and Restated Certificate of Incorporation, the
authorized capital stock of Retek consists of 150,000,000 shares of common
stock, $0.01 par value, and 5,000,000 shares of undesignated preferred stock,
$0.01 par value. As of September 15, 2000, there were 47,656,314 shares of Retek
common stock outstanding and no shares of Retek preferred stock outstanding.
MARKET FOR RETEK COMMON STOCK
Retek common stock trades on the Nasdaq Stock Market, as a National
Market System stock under the symbol "RETK." A public market was established for
Retek common stock as a result of Retek's initial public offering in November
1999.
The following table sets forth, for the periods indicated, the high and
low sale prices of Retek common stock as reported on the Nasdaq Stock Market. We
urge you to obtain current quotations for Retek common stock.
1999 High Low
---- ---- ---
Fourth Quarter (November 18 to December 31) $93.94 $32.56
2000 High Low
---- ---- ---
First Quarter (January 1 to March 31) $77.25 $41.875
Second Quarter (April 1 to June 30) $42.25 $16.75
Third Quarter (July 1 through September 15) $44.00 $24.1875
RETEK'S TRANSFER AGENT
The transfer agent and registrar for Retek's common stock is ChaseMellon
Shareholder Services LLC. You may contact the transfer agent and registrars at
the address set forth below or at its toll free number 1-800-370-1163.
Stockholders outside the United States and Canada may contact the transfer agent
and registrar by calling (312) 704-7100. All correspondence should be sent to
the following address.
ChaseMellon Shareholder Services
Attention Retek Shareholder Services
P.O. Box 3315
South Hackensack, New Jersey 07606
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
Retek and HNC are each subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended. Accordingly,
each company files registration statements, reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC, including
financial statements. Retek has been subject to the Securities Exchange Act
reporting requirements for at least 90 days and is current in its reporting. If
you would like more information about Retek, we urge you to read Retek's reports
filed with the SEC.
You may read and obtain copies (at prescribed rates) of Retek's and
HNC's reports at the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C., 20549. You may also obtain these reports at the SEC's
website at http://www.sec.gov. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.
Our website offers additional information about the spin-off at
http://www.hncs.com.
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APPENDIX "1"
TO
INFORMATION STATEMENT
Examples of Allocation of Tax Basis
To aid you in calculating the allocation of your tax basis, we have
provided examples below, based on the fictitious companies Parent and Sub. In
the following examples: (a) "Parent" is the name of the parent company spinning
off its subsidiary, " Sub"; and (b) pursuant to Parent's distribution of the Sub
stock it holds, each holder of Parent common stock is entitled to receive 1.5 of
a share of Sub common stock for every share of Parent common stock held by such
holder.
1. On January 1, 2000, Stockholder purchased 100 shares of Parent common
stock at $80 per share for a total of $8,000. Stockholder's tax basis in his
shares of Parent common stock is $8,000. Thereafter, in the distribution,
Stockholder received 150 shares of Sub common stock. On August 1, 2001,
Stockholder sold his 100 shares of Parent common stock for $95 per share and
sold his 150 shares of Sub common stock for $40 per share. Stockholder's
proceeds from the sale totaled $15,500. Stockholder's aggregate tax basis in the
shares of Sub's common stock and Parent's common stock was $8,000. Therefore,
Stockholder will be subject to long-term capital gains tax on $7,500
($15,500-$8,000 = $7,500).
2. On January 1, 2000, Stockholder purchased 43 shares of Parent common
stock at $80 per share for a total of $3,440. Stockholder's tax basis in her
shares of Parent common stock is thus $3,440. On the distribution date, the fair
market value of Parent common stock was $95 per share and the fair market value
of Sub common stock was $30 per share.
Upon the distribution, Stockholder was entitled to 64.5 shares of Sub
common stock. Stockholder received 64 shares of Sub common stock and $15 in
cash, representing payment for one-half of the value of one share of Sub common
stock (0.5 x $30 = $15).
Stockholder's aggregate tax basis in the shares of Sub common stock and
Parent common stock she holds after the distribution is $3,440. The fair market
value of one share of Parent common stock on the distribution date was 316% of
the fair market value of one share of Sub common stock. Therefore, Stockholder's
per share tax basis in her Parent common stock should be 316% of his per share
tax basis in her Sub common stock. The sum of Stockholder's per share tax basis
in Parent common stock multiplied by the number of shares of Parent common stock
she holds plus Stockholder's per share tax basis in Sub common stock multiplied
by the number of shares of Sub common stock she holds equals her aggregate tax
basis in those shares which will be equal to the aggregated tax basis
Stockholder held in her shares of Parent common stock before the
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distribution. Thus, the following equation will yield Stockholder's per share
tax basis in her Sub common stock:
(S x X) + (P x Y) = Stockholder's aggregate tax basis
S = the number of shares of Sub common stock (including fractional
shares) held by Stockholder and received in the distribution;
P = the number of shares of Parent common stock held by Stockholder
on the record date for determining Parent stockholders entitled to
receive Sub stock in the distribution;
X = Stockholder's per share tax basis in such Sub common stock;
Y = Stockholder's per share tax basis in such Parent common stock;
and
Y = R x X
R = the percent of the fair market value of Sub common stock
represented by the fair market value of Parent common stock.
Thus, in the example above "X" is determined by the following formula:
64.5X + 43 (3.16 X) = $3,440; therefore X = $17.17.
Therefore, Stockholder's per share tax basis in his Sub common stock is
$17.17. Stockholder's per share tax basis in his Parent common stock is $54.25.
Note: You cannot add the per share tax basis of a share of Parent and a share of
Sub together to equal the per share tax basis of Parent before the distribution
($80). You must multiply the per share tax basis of one share of Sub stock by
1.5 because, in the above example, 1.5 is the number of shares of Sub common
stock that Stockholder received for each share of Parent common stock she held.
In our example, to check the calculation, use the following formula:
($54.25) + (1.50 x $17.17) = the original per share tax basis
$54.25 + $25.75 = $80 (the original per share tax basis)
Stockholder will be subject to long-term capital gains tax on $6.42, the
difference between her basis in one-half of a share of Sub common stock ($8.58)
and the $15.00 in cash she received as payment for her half share of Sub common
stock ($15.00 - $8.58 = $6.42).
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