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Exhibit 2.6
FORM OF CORPORATE RIGHTS AGREEMENT
This Corporate Rights Agreement (this "Agreement") is made and entered
into as of _______, 1999 (the "Effective Date") by and among HNC Software Inc.,
a Delaware corporation ("HNC"), and Retek, Inc., a Delaware corporation
("Retek") and Retek Information Systems, Inc., a Delaware corporation that is a
wholly-owned subsidiary of Retek ("RIS").
RECITALS
A. HNC owns all of the outstanding shares of Common Stock, par value
$0.01 per share ("Common Stock") of Retek.
B. The parties are contemplating the possibility that Retek may issue
shares of Common Stock in an initial public offering of such Common Stock
registered under the Securities Act of 1933, as amended (the "Initial Public
Offering").
C. The parties desire to enter into this Agreement pursuant to a
Separation Agreement among themselves dated as of ________, 1999 (the
"Separation Agreement") in order to set forth their agreement regarding (i)
HNC's rights to purchase additional shares of Common Stock upon any issuance of
Capital Stock to any Person in order to permit HNC to own at least the Minimum
Ownership Percentage of the Capital Stock of Retek, (ii) certain rights of HNC
with respect to the governance of Retek and RIS, (iii) the grant to HNC of
certain registration rights with respect to the Common Stock (and any other
securities issued in respect thereof or in exchange therefor) held by HNC, and
(iv) certain representations, warranties, covenants and agreements that will
continue in effect so long as Retek is a subsidiary of HNC.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, HNC, Retek and
RIS, for themselves, their successors, and assigns, hereby agree as follows:
ARTICLE I: DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms will
have the following meanings, applicable both to the singular and the plural
forms of the terms described:
"Action" has the meaning ascribed thereto in Section 4.5(o).
"Additional Securities" has the meaning ascribed thereto in Section
3.1(d).
"Affiliate" means, with respect to a given Person, any Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to vote a
majority
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of the securities having voting power for the election of directors (or
other Persons acting in similar capacities) of such Person or otherwise to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Agreement" has the meaning ascribed thereto in the preamble hereto, as
such agreement may be amended and supplemented from time to time in accordance
with its terms.
"Annual Business Plan and Budget" has the meaning ascribed thereto in
Section 4.8.
"Applicable Stock" means at any time the (i) shares of Common Stock
owned by the HNC Entities that were owned on the Effective Date, to the extent
then owned by any HNC Entity, plus (ii) shares of Common Stock purchased by the
HNC Entities pursuant to Article II of this Agreement, plus (iii) shares of
Common Stock that were issued to HNC Entities in respect of shares described in
either clause (i) or clause (ii) of this sentence in connection with any
conversion of such shares or any reclassification, share combination (including
any reverse stock split), share subdivision (including any stock split), share
dividend, share exchange, merger, consolidation or similar transaction or event.
"Capital Stock" means (i) in the case of a corporation, corporate stock
(including without limitation, common stock, preferred stock and rights,
options, warrants or any securities convertible into or ultimately exchangeable
or exercisable for common or preferred stock), (ii) in the case of an
association, limited liability company or other non-corporate business entity,
any and all shares, interests, memberships, participations, rights or other
equivalents (however designated) of corporate stock, (iii) in the case of a
partnership, partnership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Common Stock" has the meaning ascribed thereto in the recitals.
"Disadvantageous Condition" has the meaning ascribed thereto in Section
3.1(a).
"Distribution" means the pro rata distribution by HNC to its
stockholders of the shares of Common Stock of Retek owned by HNC in one or more
transactions occurring after the Initial Public Offering, whenever (and if ever)
such transaction(s) shall occur, in HNC's sole discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
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"HNC Entities" means HNC, its Subsidiaries and any Parent of HNC (other
than Subsidiaries that constitute Retek Entities), and "HNC Entity" shall mean
any of the HNC Entities.
"HNC Ownership Reduction" means any decrease at any time in the
Ownership Percentage to less than ____ percent (___%).
"Holder" means HNC, the other HNC Entities and any Transferee.
"Holder Securities" has the meaning ascribed thereto in Section 3.2(b).
"Initial Public Offering" has the meaning ascribed thereto in the
recitals to this Agreement.
"Initial Public Offering Date" means the date of completion of the
initial sale of Class A Common Stock by Retek in the Initial Public Offering.
"Issuance Event" has the meaning ascribed thereto in Section 2.2.
"Issuance Event Date" has the meaning ascribed thereto in Section 2.2.
"Market Price" of any shares of Common Stock (or other Capital Stock)
on any date means (i) the average of the last sale price of such shares on each
of the five (5) trading days immediately preceding such date on the Nasdaq
National Market or, if such shares are not listed or quoted thereon, on the
principal national securities exchange or automated interdealer quotation system
on which such shares are traded or (ii) if such sale prices are unavailable or
such shares are not so traded, the value of such shares on such date determined
in accordance with agreed-upon procedures reasonably satisfactory to Retek and
HNC.
"Minimum Ownership Percentage" means the ownership of such number of:
(i) shares of Capital Stock of Retek to the extent, and only to the extent,
necessary for HNC to maintain all of the following: (a) control of Retek (within
the meaning of Section 368(c) of the Internal Revenue Code of 1986, as amended
(the "Code")); (b) the status of Retek as a member of the affiliated group of
corporations (within the meaning of Section 1504 of the Code) of which HNC is
the common parent, provided such status has theretofore been maintained; and (c)
HNC's then-existing percentage of the total voting power and value of Retek,
whichever percentage is highest; and (ii) shares of any non-voting Capital Stock
of Retek to the extent, and only to the extent, necessary to own eighty percent
(80%) of each outstanding class of such stock.
"Option" has the meaning ascribed thereto in Section 2.1(a).
"Option Notice" has the meaning ascribed thereto in Section 2.2.
"Other Securities" has the meaning ascribed thereto in Section 3.2.
"Ownership Percentage" means, at any time, the fraction, expressed as a
percentage and rounded to the next highest thousandth of a percent, whose
numerator is the aggregate Value of the Applicable Stock and whose denominator
is the aggregate Value of all the then outstanding shares of Capital Stock of
Retek. For purposes of this definition, "Value" means, with respect to any
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share of stock, the value of such share determined by HNC under principles
applicable for purposes of Section 1504 of the Internal Revenue Code of 1986, as
amended.
"Parent" means any corporation (other than HNC) in an unbroken chain of
corporations ending with HNC if each of such corporations other than HNC owns
stock representing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
"Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, association, unincorporated organization,
government (and any department or agency thereof) or other entity.
"register", "registration" and "registered" means 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.
"Registrable Securities" means shares of Common Stock and any stock or
other securities into which or for which such Common Stock may now or hereafter
be changed, converted or exchanged and any other shares or securities of Retek
issued to any Holder or any Holder's permitted successors and assigns (or such
shares or other securities into which or for which such shares are so changed,
converted or exchanged) upon any reclassification, share combination, share
subdivision, share dividend, share exchange, merger, consolidation or similar
transaction or event or pursuant to the exercise of the Option. As to any
particular Registrable Securities, such Registrable Securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of Registrable Securities by the Holder thereof shall have been declared
effective under the Securities Act and such Registrable Securities shall have
been disposed of in accordance with such registration statement, (ii) such
Registrable Securities are sold by a person in a transaction in which the rights
under the provisions of this Agreement are not assigned, (iii) such Registrable
Securities are sold pursuant to Rule 144 promulgated under the Securities Act,
(iv) such Registrable Securities shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by Retek and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
state securities or blue sky law then in effect or (v) such Registrable
Securities shall have ceased to be outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with any registration of securities pursuant to
Article III, including, without limitation, (i) the fees, disbursements and
expenses of Retek's counsel and accountants; (ii) all expenses, including filing
fees, in connection with the preparation, printing and filing of the
registration statement, any preliminary prospectus or final prospectus, any
other offering document and amendments and supplements thereto and the mailing
and delivering of copies thereof to any underwriters and dealers; (iii) the cost
of printing or producing any agreements among underwriters, underwriting
agreements and blue sky or legal investment memoranda, any selling
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agreements and any other documents in connection with the offering, sale or
delivery of the securities to be disposed of; (iv) all expenses in connection
with the qualification of the securities to be disposed of for offering and sale
under state securities laws, including the fees and disbursements of counsel for
the underwriters in connection with such qualification and in connection with
any blue sky and legal investment surveys; (v) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the securities to be disposed of; (vi) transfer
agents', depositories' and registrars' fees and expenses and the fees and
expenses of any other agent or trustee appointed in connection with such
offering; (vii) all security engraving and security printing expenses; (viii)
all fees and expenses payable in connection with the listing of the securities
on any securities exchange or automated interdealer quotation system or the
rating of such securities; and (ix) any other fees and disbursements of
underwriters customarily paid by the sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any.
"Retek Entities" means Retek and its Subsidiaries, and "Retek Entity"
shall mean any of the Retek Entities.
"Retek Securities" has the meaning ascribed thereto in Section 3.2(b).
"Rule 144" means Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Rule 415 Offering" means an offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule to similar effect) promulgated under
the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Selling Holder" has the meaning ascribed thereto in Section 3.4(a).
"Special Transaction" has the meaning ascribed thereto in Section 4.5.
"Subsidiary" means, as to any Person, any partnership, limited
liability company, joint venture, corporation, trust, association,
unincorporated organization or other business entity of which more than fifty
percent (50%) of the voting capital stock or other voting ownership interests is
owned or controlled, directly or indirectly, by such Person or by one or more of
the Subsidiaries of such Person or by a combination thereof. "Subsidiary," when
used with respect to HNC or Retek, shall also include any other entity
affiliated with HNC or Retek, as the case may be, that HNC and Retek may
hereafter agree in writing shall be treated as a "Subsidiary" of HNC or Retek,
as the case may be, for the purposes of this Agreement.
"Transferee" has the meaning ascribed thereto in Section 3.8.
1.2. Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the corresponding
articles, sections and paragraphs in this Agreement and references to the
parties shall mean the parties to this Agreement.
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ARTICLE II: OPTIONS
2.1. Options.
(a) Retek hereby grants to HNC, on the terms and conditions
set forth herein, a continuing right (the "Option") to purchase from Retek from
time to time such number of shares of the Common Stock as is necessary to allow
the HNC Entities to maintain the Minimum Ownership Percentage of the Capital
Stock of Retek. The Option shall be assignable, in whole or in part and from
time to time, by HNC to any HNC Entity. The exercise price for the shares of
Common Stock purchased pursuant to the Option shall be the Market Price of the
Common Stock as of the date of first delivery of the applicable notice of
exercise of the Option by HNC (or its permitted assignee hereunder) to Retek.
The exercise price of the Option will be payable in cash as provided in Section
2.3.
(b) The provisions of Section 2.1(a) hereof notwithstanding,
the Option granted pursuant to Section 2.1 shall not apply and shall not be
exercisable in connection with the issuance by Retek of any shares of Common
Stock pursuant to any stock option or other executive or employee benefit or
compensation plan maintained by Retek, so long as, from and after the Effective
Date and prior to the issuance of such shares, Retek has repurchased from
stockholders and not subsequently reissued a number of shares equal or greater
to the number of shares to be issued in any such issuance.
2.2. Notice. At least twenty (20) business days prior to the
earlier of (a) the issuance of any shares of Capital Stock (other than in
connection with the Initial Public Offering, including the full exercise of all
underwriters' over-allotment options and other than issuances of Capital Stock
to any HNC Entity), or (b) the first date on which any event could occur that,
in the absence of a full or partial exercise of the Option, would result in an
HNC Ownership Reduction, Retek will notify HNC in writing (an "Option Notice")
of any plans it has to issue such shares and the date on which such event could
first occur. Each Option Notice must specify (a) the date on which Retek intends
to issue such additional shares or on which such event could first occur (such
issuance or event being referred to herein as an "Issuance Event" and the date
of such issuance or event as an "Issuance Event Date"), (b) the number of shares
Retek intends to issue or may issue and, (c) the other terms and conditions of
such Issuance Event.
2.3. Option Exercise and Payment. The Option may be exercised by
HNC (or any HNC Entity to which all or any part of the Option has been assigned)
for a number of shares equal to or less than the number of shares that are
necessary for the HNC Entities to maintain, in the aggregate, the Minimum
Ownership Percentage. Each Option may be exercised at any time after the
delivery of an Option Notice and prior to an Issuance Event Date by the delivery
to Retek by HNC or any HNC entity of a written notice (the "Exercise Notice") to
such effect specifying (i) the number of shares of Common Stock to be purchased
by HNC or any of the HNC Entities upon such exercise of the Option and (ii) a
calculation of the exercise price for such shares. Upon any such exercise of the
Option, Retek will, prior to the Issuance Event Date, deliver to HNC (or any HNC
Entity who is exercising the Option or who is designated by HNC), against
payment therefor, certificates (issued in the name of HNC or its permitted
assignee hereunder or as directed by HNC) representing the shares of Common
Stock being purchased upon such exercise. If after the receipt of an Option
Notice and prior to the corresponding Issuance Event
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Date, HNC delivers to Retek an Exercise Notice, Retek shall deliver the
certificates for the shares of Common Stock being purchased prior to the
applicable Issuance Event Date. Payment for such shares shall be made, on the
date of delivery of such certificates, by wire transfer or intrabank transfer of
immediately-available funds to such account as shall be specified by Retek, for
the full purchase price for such shares.
2.4. Effect of Failure to Exercise. Except as provided in Section
2.6, any failure by HNC to exercise the Option in full shall not affect HNC's
right to thereafter exercise the Option at any time in the future.
2.5. Initial Public Offering. Notwithstanding the foregoing, HNC
shall not be entitled to exercise the Option in connection with the Initial
Public Offering of the Common Stock by Retek if, upon the completion of the
Initial Public Offering, including the full exercise of all underwriters'
over-allotment options, HNC owns at least the Minimum Ownership Percentage
(without regard to clause (i)(c) of the definition of the Minimum Ownership
Percentage).
2.6. Termination of Option . The Option shall terminate upon the
occurrence of any Issuance Event that results in HNC's Ownership Percentage
being less than fifty percent (50%), other than any Issuance Event consummated
in violation of this Agreement. Any portion of the Option assigned to any HNC
Entity other than HNC, also shall terminate in the event that the Person to whom
such portion of the Option has been transferred, ceases to be a HNC Entity for
any reason whatsoever. If Retek fails to deliver any Option Notice on a timely
basis as required by Section 2.2, then the Option shall remain exercisable with
respect to the Issuance Event that triggered such right to exercise the Option
until such time as an Option Notice is provided to HNC and twenty (20) business
days elapse after HNC's receipt of such Option Notice without exercise of the
Option.
ARTICLE III: REGISTRATION RIGHTS
3.1. Demand Registration - Registrable Securities.
(a) Upon written notice provided to Retek at any time after
the Initial Public Offering Date from any Holder of Registrable Securities
requesting that Retek effect the registration under the Securities Act of any or
all of the Registrable Securities held by such Holder, which notice shall
specify the intended method or methods of disposition of such Registrable
Securities and whether the Holders wish such registration to be a Rule 415
Offering (the "Demand Notice"), Retek shall use its best efforts to promptly
effect the registration under the Securities Act and applicable state securities
laws of such Registrable Securities for disposition in accordance with the
intended method or methods of disposition stated in such Demand Notice
(including in a Rule 415 Offering, if Retek is then eligible to register such
Registrable Securities on Form S-3, or a successor form, for such offering);
provided that:
(i) with respect to any registration statement filed, or
to be filed, pursuant to this Section 3.1, if Retek shall furnish to the Holders
of Registrable Securities that have made such request (within three (3) business
days after Retek's receipt of the Demand Notice) a certified resolution of the
Board of Directors of Retek (adopted by the affirmative vote of a majority of
the directors not designated by the HNC Entities) stating that in the Board of
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Directors' good faith judgment it would be significantly disadvantageous to
Retek, because of the existence of, or in anticipation of, any acquisition or
financing activity, or the unavailability, for reasons beyond Retek's reasonable
control, of any financial statements required to effect such requested
registration, or any other event or condition of similar significance to Retek
(a "Disadvantageous Condition"), for such a registration statement to be
maintained effective, or to be filed and become effective at such time, and
setting forth the general reasons for such judgment, then, (a) in the event no
registration statement has yet been filed, Retek shall be entitled not to file
any such registration statement, or (b) in the event a registration statement
covering the disposition of the Registrable Securities is then filed and
declared effective, the Holders will not sell Registrable Securities under such
registration statement until such Disadvantageous Condition no longer exists (at
which time Retek shall promptly deliver notice to such Holders that such
Disadvantageous Condition no longer exists). Upon receipt of any such notice of
a Disadvantageous Condition, such Holders shall forthwith discontinue use of the
prospectus contained in such registration statement and, if so directed by
Retek, each such Holder will deliver to Retek all copies (other than permanent
file copies then in such Holder's possession) of the prospectus then covering
such Registrable Securities that is current at the time of receipt of such
notice and Retek shall promptly amend such prospectus as necessary to enable the
Holders to sell their Registrable Securities under the registration statement at
any time that they are permitted to do so under the provisions of this
Agreement, provided, that notwithstanding the foregoing, the filing of any such
registration statement may not be delayed, nor may sales or other dispositions
of Registrable Securities by Holders under a registration statement be
prevented, for a period in excess of ninety (90) consecutive days (or until such
earlier time as the Disadvantageous Condition no longer exists) due to the
occurrence of any particular Disadvantageous Condition and no more than one
resolution regarding Disadvantageous Conditions may be made by the Board of
Directors of Retek in any twelve (12) month period; and
(ii) the Holders of Registrable Securities shall not have
the right to exercise registration rights pursuant to this Section 3.1 within
(A) the 180-day period following the effective date of the registration
statement for the Initial Public Offering or (B) the -day period following the
effective date of any subsequent registration pursuant to the exercise of the
registration rights provided in this Section 3.1 in which the Holders of
Registrable Securities were allowed to include ten percent (10%) of their
Registrable Securities;
(iii) the Holders of Registrable Securities shall have the
right to request that Retek effect a registration of their Registrable
Securities pursuant to this Section 3.1 on not more than two (2) separate
registrations during any twelve (12) month period, excluding any prior exercises
of such rights that are not deemed to have been effected pursuant to Section
3.1(b). The priority of exercise for such rights shall be allocated among the
Holders in such manner as the Holders may agree. If Registrable Securities
relating to different Request Notices delivered by more than one Holder are
registered under the same registration statement, such offering shall be deemed
to be a single exercise of demand rights by the first Holder to deliver a
Request Notice and the filing of only one registration statement for purposes of
this Section 3.1; and
(iv) the Registrable Securities requested by all Holders
to be registered pursuant to any Demand Notice must have an anticipated
aggregate public offering price (before any underwriters' discounts or
commissions) of at least $ ; and
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(v) after the reduction in HNC's Ownership Percentage to
less than percent ( %), the Holders of Registrable Securities may
collectively exercise their rights under this Section 3.1 (through notice
delivered by Holders owning in the aggregate a majority in economic interest of
the Registrable Securities then held by Holders) on not more than three (3)
occasions.
(b) Notwithstanding any other provision of this Agreement to
the contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 3.1 shall not be deemed to have been effected (and,
therefore, not requested for purposes of paragraph (a) above), (i) unless it has
become effective, (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder, or is withdrawn by Retek
pursuant to Section 3.1(a)(i) or otherwise, and, as a result thereof, the
Registrable Securities requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the related
registration statement or (iii) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied or waived other than by reason of some act
or omission by such Holder of Registrable Securities.
(c) In the event that any registration pursuant to this
Section 3.1 shall involve, in whole or in part, an underwritten offering, the
Holders of a majority of the Registrable Securities to be registered shall have
the right to designate an underwriter or underwriters reasonably acceptable to
Retek as the lead or managing underwriters of such underwritten offering and, in
connection with each registration pursuant to this Section 3.1, such Holders may
select one counsel reasonably acceptable to Retek to represent all such Holders
in connection with such offering.
(d) Retek shall have the right to cause the registration of
additional equity securities for sale for its account, the account of any Retek
Entity or any existing or former directors, officers or employees of the Retek
Entities (the "Additional Securities") in any registration of Registrable
Securities requested by the Holders pursuant to Section 3.1(a); provided,
however, that if the registration and sale of such Additional Securities would
require HNC or any HNC Entity to exercise the Option to maintain HNC's
then-current Ownership Percentage or ownership of percent
( %) of each class of outstanding non-voting Capital Stock, then the number
of such Additional Securities shall be reduced so that exercise of the Option
would not be necessary for HNC or any HNC Entity to maintain such ownership
levels and provided, further, that if such Holders are advised by a nationally
recognized investment banking or commercial banking firm selected by such
Holders and reasonably acceptable to Retek (which shall be the lead underwriter
or a managing underwriter in the case of an underwritten offering) that, in such
firm's good faith view, the inclusion of the Additional Securities in such
registration would be likely to have an adverse effect on the price, timing or
distribution of the offering and sale of the Registrable Securities then
proposed to be sold by any Holder, then all or part of the Additional Securities
shall be excluded from the registration. In the event that any Additional
Securities are included in the registration, the Holders of the Registrable
Securities to be offered may require that any Additional Securities be subject
to the same conditions as are applicable to the Registrable Securities being
sold in the offering. In the event that the number of Registrable Securities
requested to be included in a registration statement by
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the Holders thereof exceeds the number which, in the good faith view of such
lead or managing underwriter, can be sold without adversely affecting the price,
timing, distribution or sale of securities in the offering, the number of
Registrable Securities to be included in such offering shall be allocated pro
rata among the requesting Holders on the basis of the relative number of
Registrable Securities then held by each such Holder (provided that any number
of Registrable Securities in excess of a Holder's request may be reallocated
among the remaining requesting Holders in a like manner, or as may be otherwise
agreed in writing by the Holders).
Retek agrees that, if requested by a Selling Holder, it will
not effect any public sale or distribution of its securities of the same class
proposed to be registered by the Holders, or any securities convertible into the
same class, during the thirty (30) days before the commencement of, during, and
for a period of ninety (90) days after termination of, an offering effected by
the Holders pursuant to this Section 3.1, except: (i) as part of such offering
in accordance with this paragraph (d); (ii) in connection with any dividend
reinvestment plan, employee stock option, bonus, retirement or other
compensation plan or arrangement (other than secondary registrations for resales
pursuant to such plans or arrangements) of Retek; (iii) any public sale or
distribution, the registration statement for which was filed with the SEC before
the receipt of the notice from the requesting Holder or Holders pursuant to
Section 3.1 (otherwise than pursuant to a Rule 415 Offering); or (iv) upon
delivery by Retek of a written opinion addressed to the Selling Holder from a
nationally recognized investment banking firm jointly selected by Retek and the
Selling Holder, at Retek's expense, stating that, in the view of such firm, such
public sale and distribution by Retek could be effected without adversely
affecting the market price for the Registrable Securities.
3.2. Piggyback Registration.
In the event that Retek at any time after the Initial Public Offering
Date proposes to file a registration statement covering the issuance or sale of
any shares of Retek Common Stock, or any other equity securities or securities
convertible into or exchangeable for equity securities of Retek (collectively,
including Common Stock, "Other Securities") under the Securities Act, whether or
not for sale for Retek's account in a manner that would permit the Registrable
Securities to be sold for cash under the Securities Act, then Retek shall, at
least twenty (20) days prior to the filing of such registration statement,
provide written notice to each Holder of Registrable Securities of its intention
to file a registration statement. Subject to the terms and conditions hereof,
such notice shall offer each Holder the opportunity to include in such
registration statement such number of Registrable Securities as any Holder may
request. Upon the written request of any Holder made within fifteen (15) days
after the receipt of Retek's notice (which request shall specify the number of
Registrable Securities intended to be disposed of and the intended method of
distribution thereof), Retek shall use its best efforts to effect, in connection
with the registration of the Other Securities, the registration under the
Securities Act of all Registrable Securities that the Holders have requested to
have registered (to the extent required to permit the disposition (in accordance
with such intended method of disposition thereof) of the Registrable Securities
so requested to be registered); provided that:
(a) if, at any time after giving the Holders written notice of
Retek's intention to register any Other Securities and prior to the effective
date of the registration statement filed in connection therewith, the Board of
Directors of Retek shall determine for any reason not to register the Other
Securities, then Retek shall, after giving prompt written notice of such
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determination to the Holders, be relieved of its obligation to register such
Registrable Securities in connection with the registration of the Other
Securities. Any such termination of a registration shall not preclude the
Holders of Registrable Securities from immediately requesting that such
registration be effected as a registration under Section 3.1 to the extent
permitted thereunder;
(b) if the registration referred to in the first sentence of
this Section 3.2 is to be an underwritten registration on behalf of Retek, and a
nationally recognized investment banking or commercial banking firm selected by
Retek advises Retek in writing that, in such firm's good faith view, all or a
part of such Registrable Securities cannot be sold and the inclusion of all or a
part of such Registrable Securities in such registration would be likely to have
an adverse effect upon the price, timing or distribution of the offering and
sale of the Other Securities then contemplated, then Retek shall include in such
registration:
(i) first, all Other Securities Retek proposes to sell
for its own account ("Retek Securities");
(ii) second, up to the full number of Registrable
Securities held by Holders that have been requested by such
Holders to be included in such registration ("Holder
Securities") in excess of the number of Retek Securities to
be sold in such offering, which number of Holder Securities,
in the good faith view of such investment banking or
commercial banking firm, can be sold without adversely
affecting such offering of Retek Securities and (x) if such
number is less than the full number of such Holder
Securities, such number shall be allocated by HNC among such
Holders and (y) in the event that such investment banking or
commercial banking firm advises that less than all of such
Holder Securities may be included in such offering, the
Holders may withdraw their request for registration of their
Registrable Securities in such offering under this Section
3.2 and ninety (90) days subsequent to the effective date of
the registration statement relating to the Other Securities,
the Holders may request that a registration relating to the
Holder Securities be effected under Section 3.1 to the extent
permitted thereunder; and
(iii) third, up to the full number of the Other Securities
(other than Retek Securities), if any, in excess of the
number of Retek Securities and Registrable Securities to be
sold in such offering, which number of such Other Securities,
in the good faith view of such investment banking firm, can
be so sold without so adversely affecting such offering of
Retek Securities and Registrable Securities (and, if such
number is less than the full number of such Other Securities,
such number shall be allocated pro rata among the holders of
such Other Securities (other than Retek Securities) on the
basis of the number of securities requested to be included
therein by each such holder of such Other Securities);
(c) Retek shall not be required to effect any registration of
Registrable Securities under this Section 3.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or employee
benefit/compensation plans (other than secondary registrations for resales
pursuant to such plans); and
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(d) no registration of Registrable Securities effected under
this Section 3.2 shall relieve Retek of its obligation to effect any
registration of Registrable Securities pursuant to Section 3.1.
3.3. Expenses. Except as provided herein and except for
underwriting discounts and commissions attributable to the Registrable
Securities sold by the Holders, Retek shall pay all Registration Expenses with
respect to a particular offering (or proposed offering). Notwithstanding the
foregoing, each Holder and Retek shall be responsible for its own internal
administrative and similar costs, which shall not constitute Registration
Expenses.
3.4. Registration and Qualification. If and whenever Retek is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 3.1 or 3.2, Retek shall as promptly as
practicable:
(a) prepare, file and use its best efforts to cause to become
effective a registration statement under the Securities Act relating to the
Registrable Securities proposed to be offered; provided, that before filing any
such registration statement, Retek will furnish to each Holder of Registrable
Securities included in such registration (each a "Selling Holder"), counsel
designated by the Selling Holders and the underwriters, if any, copies of any
such registration statement (which registration statement shall be subject to
review of such Selling Holders, counsel and underwriters) and Retek shall
consider in good faith incorporating such changes in the registration statement
as are reasonably requested by the Selling Holders, their counsel and
underwriters;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities until the earlier of (i) such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition set forth in such registration statement and
(ii) the expiration of six (6) months after such registration statement becomes
effective if the registration is effected on Form S-3 (or a comparable successor
form which permits the incorporation by reference of any subsequently filed
periodic reports under the Exchange Act or the expiration of the date that is
three (3) months after the date on which such registration statement becomes
effective on any other registration statement form; provided, that such
six-month or three-month period shall be extended for such number of days that
equals the number of days elapsing from (x) the date the written notice
contemplated by paragraph 3.4(g) below is given by Retek to (y) the date on
which Retek delivers to the Holders of Registrable Securities the supplement or
amendment contemplated by paragraph 3.4(g) below; and provided further, that
Retek may keep such registration statement effective for longer time periods if
desired by Retek;
(c) furnish to the Holders of Registrable Securities and to
any underwriter of such Registrable Securities such number of conformed or
original copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and any summary or final prospectus), in conformity with
the requirements of the Securities Act, such documents incorporated by reference
in such
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registration statement or prospectus, and such other documents, as the Holders
of Registrable Securities or such underwriter may reasonably request, and upon
request a copy of any and all transmittal letters or other correspondence to, or
received from, the SEC or any other governmental agency, stock exchange or
automated inter-dealer quotation system, self-regulatory body or other body
having jurisdiction (including any domestic or foreign securities exchange)
relating to such offering;
(d) use its diligent and reasonable best efforts to register
or qualify all Registrable Securities covered by such registration statement
under the securities or blue sky laws of such U.S. jurisdictions as the Holders
of such Registrable Securities or any underwriter to such Registrable Securities
shall request, and use its diligent and reasonable best efforts to obtain all
appropriate registrations, permits and consents in connection therewith, and do
any and all other acts and things which may be necessary or advisable to enable
the Holders of Registrable Securities or any such underwriter to consummate the
disposition in such jurisdictions of its Registrable Securities covered by such
registration statement; provided, that Retek shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
such jurisdiction wherein it is not so qualified or to consent to general
service of process in any such jurisdiction;
(e) in any underwritten offering use its diligent and
reasonable best efforts to furnish to each Holder of Registrable Securities
included in such registration (each, a "Selling Holder") and to any underwriter
of such Registrable Securities an opinion of independent counsel for Retek
addressed to each Selling Holder and dated the date of the closing under the
underwriting agreement (if any) (or if such offering is not underwritten, dated
the effective date of the registration statement) covering such matters as are
customarily covered in opinions of issuer's counsel delivered to underwriters in
underwritten public offerings of securities and such other matters as the
Selling Holders may reasonably request;
(f) in any underwritten offering use its diligent and
reasonable best efforts to furnish to each Selling Holder a "cold comfort"
letter addressed to each Selling Holder and to any underwriter of such
Registrable Securities signed by the independent public accountants who have
audited the financial statements of Retek included in such registration
statement, in each such case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein) as
are customarily covered in accountants' letters delivered to underwriters in
underwritten public offerings of securities and with respect to events
subsequent to the date of such financial statements;
(g) as promptly as practicable, notify the Selling Holders in
writing (i) at any time when a prospectus relating to a registration pursuant to
Section 3.1 or Section 3.2 is required to be delivered under the Securities Act
of the happening of any event 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 any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii) of any request
by the SEC or any other regulatory body or other body having jurisdiction for
any amendment of or supplement to any registration statement or other document
relating to such offering, and in either such case, at the request of the
Selling Holders prepare and furnish to the Selling Holders a reasonable number
of copies of a supplement to or an amendment
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of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not 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, in light of the
circumstances under which they are made, not misleading;
(h) enter into customary agreements (including if the method
of distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Securities to be so
included in the registration statement;
(i) use its best efforts to list all such Registrable
Securities covered by such registration on each securities exchange and/or
automated inter- dealer quotation system on which a class of common equity
securities of Retek is then listed;
(j) to the extent reasonably requested by the lead or managing
underwriters, send appropriate officers of Retek to attend any "road shows"
scheduled in connection with any such registration, with all out-of-pocket costs
and expense incurred by Retek or such officers in connection with such
attendance to be paid by Retek;
(k) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Section 3.1 or Section 3.2 certificates bearing no legends and representing
ownership of the Registrable Securities being sold in such denominations as
shall be requested by the Selling Holders or the underwriters; and
(l) notify each Selling Holder in writing as soon as
practicable when any registration statement under which such Selling Holder may
sell any Registrable Securities has ceased to be effective.
3.5. Underwriting; Due Diligence.
(a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration requested under
this Article III, Retek shall enter into an underwriting agreement with such
underwriters for such offering, which agreement will contain such
representations and warranties by Retek and such other terms and provisions as
are customarily contained in underwriting agreements of Retek to the extent
relevant and as are customarily contained in underwriting agreements generally
with respect to secondary distributions to the extent relevant, including,
without limitation, indemnification and contribution provisions substantially to
the effect and to the extent provided in Section 3.6 and agreements as to the
provision of opinions of counsel and accountants' letters to the effect and to
the extent provided in Section 3.4(e) and Section 3.4(f). The Selling Holders on
whose behalf the Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement and the
representations and warranties by, and the other agreements on the part of,
Retek to and for the benefit of such underwriters, shall also be made to and for
the benefit of such Selling Holders. Such underwriting agreement shall also
contain such representations and warranties by such Selling Holders and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, when relevant,
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including, without limitation, indemnification and contribution provisions
substantially to the effect and to the extent provided in Section 3.6.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act pursuant to this Article III, Retek shall give the Holders of such
Registrable Securities and the underwriters, if any, and their respective
counsel and accountants, such reasonable and customary access to its books and
records and such opportunities to discuss the business of Retek with its
officers and the independent public accountants who have certified the financial
statements of Retek as shall be necessary, in the opinion of such Holders and
such underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
3.6. Indemnification and Contribution.
(a) In the case of each offering of Registrable Securities
made pursuant to this Article III, Retek agrees to indemnify and hold harmless,
to the extent permitted by law, each Selling Holder, each underwriter of
Registrable Securities so offered and each Person, if any, who controls any of
the foregoing Persons within the meaning of the Securities Act and the officers,
directors, affiliates, employees and agents of each of the foregoing, jointly
and severally, from and against any and all losses, liabilities, costs
(including reasonable attorney's fees and disbursements), claims and damages,
each as incurred, to which they or any of them may become subject, under the
Securities Act or otherwise, including any amount paid in investigation, defense
or settlement of any litigation commenced or threatened, insofar as such losses,
liabilities, costs, claims and damages (or actions or proceedings in respect
thereof, whether or not such indemnified Person is a party thereto) arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement (or in any preliminary or final
prospectus included therein) or in any offering memorandum or other offering
document relating to the offering and sale of such Registrable Securities
prepared by Retek or at its direction, or in any amendment thereof or supplement
thereto, or in any document incorporated by reference therein, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or arising
from or relating to any violation or alleged violation of the Securities Act,
any blue sky laws, securities laws or other applicable laws of any state or
country in which the Registrable Securities are offered and relating to action
required of, or inaction by, Retek in connection with such offering; provided,
however that Retek shall not be liable to any Holder in any such case to the
extent that any such loss, liability, cost, claim or damage arises out of or
relates to any untrue statement or alleged untrue statement, or any omission, if
such statement or omission shall have been made in reliance upon and in
conformity with information that relates to such Selling Holder, if such
information was furnished in writing to Retek by or on behalf of such Selling
Holder specifically for use in the registration statement (or in any preliminary
or final prospectus included therein), offering memorandum or other offering
document, or in any amendment thereof or supplement thereto. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of any Selling Holder and shall survive the transfer of such
securities. The foregoing indemnity agreement is in addition to any liability
that Retek may otherwise have to each Selling Holder, other holder or
underwriter of the Registrable Securities or any controlling person of the
foregoing and the officers, directors, affiliates, employees and agents of each
of the foregoing; provided, further, that, in the case of an offering with
respect to which a Selling Holder has
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designated the lead or managing underwriters (or a Selling Holder is offering
Registrable Securities directly, without an underwriter), this indemnity does
not apply to any loss, liability, cost, claim or damage arising out of or
relating to any untrue statement or alleged untrue statement or omission or
alleged omission in any preliminary prospectus if a copy of a final prospectus
was not sent or given by or on behalf of any underwriter (or such Selling Holder
or other holder, as the case may be) legally required to deliver a final
prospectus to such Person asserting such loss, liability, cost, claim or damage
at or prior to the written confirmation of the sale of the Registrable
Securities as required by the Securities Act and such untrue statement or
omission had been corrected in such final prospectus.
(b) In the case of each registered offering made pursuant to
this Agreement, each Selling Holder, by exercising its registration rights
hereunder, agrees to indemnify and hold harmless Retek, each underwriter who
participates in such offering, each other Selling Holder or other holder with
securities included in such offering and each Person, if any, who controls
(within the meaning of the Securities Act) such underwriter, other Selling
Holder or other holder and the officers, directors, affiliates, employees and
agents of each of the foregoing, against any and all losses, liabilities, costs
(including reasonable attorney's fees and disbursements) reasonably incurred by
them, as incurred claims and damages to which they or any of them may become
subject, under the Securities Act or otherwise, including any amount paid in
investigation, defense or settlement of any litigation commenced or threatened,
insofar as such losses, liabilities, costs, claims and damages (or actions or
proceedings in respect thereof, whether or not such indemnified Person is a
party thereto) arise out of or are based upon any untrue statement or alleged
untrue statement by such Selling Holder of a material fact contained in the
registration statement (or in any preliminary or final prospectus included
therein) or in any offering memorandum or other offering document relating to
the offering and sale of such Registrable Securities prepared by Retek or at its
direction, or any amendment thereof or supplement thereto, or any omission by
such Selling Holder or alleged omission by such Selling Holder of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that such untrue statement
of a material fact is contained in, or such material fact is omitted from,
information relating to such Selling Holder furnished to Retek in writing by or
on behalf of such Selling Holder specifically for use in such registration
statement (or in any preliminary or final prospectus included therein), offering
memorandum or other offering document, or any amendment thereof or supplement
thereto; provided that the maximum liability of any Holder for any loss,
liability, cost, claim or damage pursuant to the foregoing indemnity shall not
exceed the amount of the net proceeds, if any, obtained by the Holder upon the
sale of such Holder's Registrable Securities pursuant to such offering. The
foregoing indemnity is in addition to any liability which such Selling Holder
may otherwise have to Retek, or controlling persons and the officers, directors,
affiliates, employees, and agents of each of the foregoing; provided, however,
that, in the case of an offering made pursuant to this Agreement with respect to
which Retek has designated the lead or managing underwriters (or Retek is
offering securities directly, without an underwriter), this indemnity does not
apply to any loss, liability, cost, claim, or damage arising out of or based
upon any untrue statement or alleged untrue statement or omission or alleged
omission in any preliminary prospectus if a copy of a final prospectus was not
sent or given by or on behalf of any underwriter (or Retek, as the case may be)
legally required to provide a final prospectus to such Person asserting such
loss, liability, cost, claim or damage at or prior to the written
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confirmation of the sale of the Registrable Securities as required by the
Securities Act and such untrue statement or omission had been corrected in such
final prospectus.
(c) Each party indemnified under paragraph (a) or (b) above
(an "Indemnified Party") shall, promptly after receipt of notice of a claim or
action against such Indemnified Party in respect of which indemnity may be
sought hereunder, notify the party required to provide indemnification hereunder
(an "Indemnifying Party") in writing of the claim or action; provided, that the
failure to notify the Indemnifying Party shall not relieve it from any liability
that it may have to an Indemnified Party under this Section 3.6 (except that the
failure to notify an Indemnifying Party promptly of the commencement of any such
action, to the extent materially prejudicial to the Indemnifying Party's ability
to defend such action, shall relieve such Indemnifying Party of any liability
only to the extent the Indemnifying Party is prejudiced with respect to its
indemnification obligations under this Section 3.6). If any such claim or action
shall be brought against an Indemnified Party, and it shall have notified the
Indemnifying Party thereof, unless in such Indemnified Party's good faith
reasonable judgment a conflict of interest between such Indemnified Party and
Indemnifying Party may exist in respect of such claim, the Indemnifying Party
shall be entitled to participate therein, and, to the extent that it wishes,
jointly with any other similarly notified Indemnifying Party, to assume the
defense thereof with counsel reasonably acceptable to the Indemnified Party (who
shall not, except with the consent of the Indemnified Party, be counsel to the
Indemnifying Party). After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or action using
counsel reasonably acceptable to the Indemnified Party, the Indemnifying Party
shall not be liable to the Indemnified Party under this Section 3.6 for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that, any Person entitled to indemnification
hereunder shall have the right to employ separate counsel and to participate in
the defense of any such claim or action, but the fees and expenses of such
counsel shall be at the expense of such Person, unless (i) the Indemnifying
Party has agreed to pay such fees or expenses, (ii) the Indemnifying Party shall
have failed to assume the defense of such claim and employ counsel reasonably
acceptable to such Person, or (iii) in the reasonable good faith judgment of any
such Person based on advice of its counsel, a conflict of interest may exist
between such Person and the Indemnifying Party with respect to such claims or
actions (in which case, if such Person notifies the Indemnifying Party in
writing that such Person elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such claim or action on behalf of such Person). If the
Indemnifying Party is not entitled to or does not assume the defense of such
claim or action, it is understood that the Indemnifying Party shall not, in
connection with any one such claim or action or separate but substantially
similar or related claims or actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (in addition to one separate firm of
local attorneys in each such jurisdiction) at any time for all such Indemnified
Parties. Any Indemnifying Party against whom indemnity may be sought under this
Section 3.6 shall not be liable to indemnify an Indemnified Party if such
Indemnified Party settles such claim or action without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed.
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(d) If the indemnification provided for in this Section 3.6
shall for any reason be unavailable (other than in accordance with its terms) to
an Indemnified Party in respect of any loss, liability, cost, claim or damage
referred to therein, then each Indemnifying Party shall, in lieu of indemnifying
such Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, cost, claim or damage in
such proportion as shall be appropriate to reflect (i) the relative benefits
received by the Indemnifying Party on the one hand and the Indemnified Party on
the other hand or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or if the Indemnified Party failed to give the
notice required under paragraph 3.6(c) above, the relative benefits to and the
relative fault of the Indemnifying Party on the one hand and the Indemnified
Party on the other hand with respect to the statements or omissions which
resulted in such loss, liability, cost, claim or damage as well as any other
relevant equitable considerations. The relative benefits received by the
Indemnifying Party and the Indemnified Party shall be deemed to be in the same
respective proportion as the net proceeds (before deducting expenses) of the
offering received by such party (or, in the case of an underwriter, such
underwriter's discounts and commissions) bear to the aggregate offering price of
the Registrable Securities or Other Securities. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Indemnifying Party on the one hand or the
Indemnified Party on the other hand, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, but not by reference to any Indemnified Party's stock ownership in
Retek. The amount paid or payable by an Indemnified Party as a result of the
loss, cost, claim, damage or liability, or action in respect thereof, referred
to above in this paragraph 3.6(d) shall be deemed to include, for purposes of
this paragraph (d), any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 3.6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediate preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(e) Indemnification and contribution similar to that specified
in the preceding paragraphs of this Section 3.6 (with appropriate modifications)
shall be given by Retek and the Selling Holders with respect to any required
registration or other qualification of securities under any state law or
regulation or governmental authority.
(f) The obligations of the parties under this Section 3.6
shall be in addition to any liability which any party may otherwise have to any
other party.
3.7. Rule 144 and Form S-3. Commencing ninety (90) days after the
Initial Public Offering Date, Retek shall use its best efforts to ensure that
the conditions to the availability of Rule 144 set forth in paragraph (c)
thereof shall be satisfied. Upon the request of any Holder of Registrable
Securities, Retek will deliver to such Holder a written statement as to whether
it has complied with such requirements. Retek further agrees to use its
reasonable efforts to cause all conditions to the availability of Form S-3 (or
any successor form) under the Securities Act of the
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filing of registration statements under this Agreement to be met as soon as
practicable after the Initial Public Offering Date.
3.8. Transfer of Registration Rights. Any Holder may transfer all
or any portion of its rights under this Article III to any transferee of a
number of Registrable Securities owned by such Holder exceeding five percent
(5%) of the outstanding class or series of such securities at the time of
transfer (each transferee that receives such minimum number of Registrable
Securities, a "Transferee"); provided, that each Transferee of Registrable
Securities (other than HNC Entities) to which Registrable Securities are
transferred, sold or assigned directly by a HNC Entity (such Transferee, a "HNC
Transferee") together with any Affiliate of such HNC Transferee (and any
subsequent direct or indirect Transferees of Registrable Securities from such
HNC Transferee and any Affiliates thereof) shall be entitled to request the
registration of Registrable Securities pursuant to Section 3.1 only once prior
to a reduction in HNC's Ownership Percentage to less than fifty percent (50%)
and thereafter shall only be entitled to request the registration of Registrable
Securities pursuant to Section 3.2 and, provided, further, that no HNC
Transferee shall be entitled to request registration pursuant to Section 3.1 for
an amount of Registrable Securities equal to less than $ . Any transfer
of registration rights pursuant to this Section 3.8 shall be effective upon
receipt by Retek of (i) written notice from such Holder stating the name and
address of any Transferee and identifying the number of Registrable Securities
with respect to which the rights under this Agreement are being transferred and
the nature of the rights so transferred and (ii) a written agreement from such
Transferee to be bound by the terms of this Agreement. The Holders may exercise
their rights hereunder in such priority as they shall agree upon among
themselves.
3.9. Market Standoff Agreement. If any registration pursuant to
this Article III shall be in connection with an underwritten public offering of
Registrable Securities, each Selling Holder agrees not to effect any public sale
or distribution, including any sale under Rule 144, of any equity security of
Retek or any security convertible into or exchangeable or exercisable for any
equity security of Retek, in the case of Registrable Securities (otherwise than
through the registered public offering then being made), within seven (7) days
(after the receipt of satisfactory notice from Retek) prior to or ninety (90)
days (or such lesser period as the lead or managing underwriters may permit)
after the effective date of the registration statement (or the commencement of
the offering to the public of such Registrable Securities in the case of Rule
415 offerings), provided that each officer, director, employee and holder of one
percent (1%) of more of the outstanding shares of Capital Stock of Retek also
agrees to be similarly bound by this restriction.
3.10. Limitation on Subsequent Registration Rights. After the date
of this Agreement, Retek shall not, without the prior written consent of the
Holders of majority of the Registrable Securities then outstanding, enter into
any agreement with any holder or prospective holder of any securities of Retek
that would grant such holder registration rights that would prevent Retek from
honoring the registration rights of Holders described herein.
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ARTICLE IV: CORPORATE GOVERNANCE MATTERS AND
INFORMATION RIGHTS
4.1. Seats on Retek Board of Directors. At and after the Initial
Public Offering Date, the Board of Directors of Retek shall consist of not more
and not less than seven (7) members and shall be comprised of (a) the Chief
Executive Officer of Retek, (b) three (3) individuals, each of whom shall have
been nominated by HNC (each an "HNC Designee") and (c) three (3) independent
directors, each of whom shall have appropriate retail industry (or other
relevant industry) experience and shall have been nominated by the Chief
Executive Officer of Retek; provided, however, that HNC's right to nominate the
three (3) HNC Designees shall terminate once HNC and its Affiliates own less
than twenty-five percent (25%) of the outstanding Common Stock; and provided,
further, that the HNC Designee shall resign from the Retek Board of Directors
immediately once HNC and its Affiliates own less than twenty-five percent (25%)
of the outstanding Common Stock. The parties agree to take all necessary action
within their control as is necessary to implement the agreements set forth in
the immediately preceding sentence, including voting their shares of Common
Stock in favor of the Board nominees designated as provided above.
4.2. HNC Designees. For so long as HNC has the right to nominate
the HNC Designees, if a vacancy is caused by the death, disability, retirement,
resignation or removal for cause or otherwise of an HNC Designee, then HNC shall
have the sole right to nominate an individual to fill such vacancy. The parties
agree to take all necessary action within their control (including but not
limited to, entering into voting agreements or proxies with other Retek
stockholders regarding voting of shares of Capital Stock of Retek) as may be
required from time to time to cause the individuals nominated pursuant to this
Section 4.2 to become members of the Board of Directors of Retek, by election,
appointment or otherwise.
4.3. Removal. Any HNC Designee may be removed from office only (a)
for Cause (as defined below) by the vote of the stockholders representing not
less than a majority of the issued and outstanding shares of the Capital Stock
of Retek entitled to vote upon the election of directors; or (b) upon HNC's
determination that the HNC Designee should no longer serve as such. Upon any
such determination by HNC pursuant to part (b) of the immediately preceding
sentence, the parties agree to take all necessary action within their control to
cause such HNC Designee to be removed from the Board of Directors of Retek and a
successor HNC Designee designated by HNC to be immediately elected to the Board
of Directors of Retek to replace such removed HNC Designee.
For purposes of this Agreement, "Cause" means (i) the willful failure
by the HNC Designee to perform his or her lawful duties as a member of Retek's
Board of Directors consistent with such HNC Designee's position, (ii) such HNC
Designee's neglect of his or her duties on a general basis (other than as a
result of illness or disability), (iii) the commission by such HNC Designee of
any act of fraud, theft or criminal dishonesty with respect to Retek or any of
its Affiliates, or the conviction of HNC Designee of any crime involving a
felony, fraud,
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embezzlement or the like, and (iv) the commission of any act involving moral
turpitude which (A) brings Retek or any of its Affiliates into public disrepute
or disgrace, or (B) causes material injury to the customer relations, operations
or the business prospects of Retek or any of its Affiliates.
4.4. Board Committees. The Board of Directors of Retek shall have a
Compensation Committee and an Audit Committee. The Compensation Committee will
be comprised of two (2) non-employee directors and will include at least one (1)
HNC Designee. The Audit Committee will be comprised of two (2) directors and
will include at least one (1) HNC Designee and one independent director.
4.5. Special Transactions. Retek and RIS covenant and agree with
HNC that neither Retek nor RIS shall take any action relating to a Special
Transaction (as defined below) unless (i) with respect to any such Special
Transaction, such Special Transaction is approved by at least two (2) of the HNC
Designees to the Board of Directors of Retek, and (ii) with respect to a Special
Transaction described in Sections 4.5(a), (c), (g), (h), (i), (k), (l) or (m),
such Special Transaction is approved by HNC as the majority stockholder of
Retek.
For the purposes of this Section 4.5, a "Special Transaction" shall
mean any of the following events:
(a) any merger, consolidation or other business combination by
Retek, RIS or any direct or indirect or indirect wholly-owned Subsidiary of
Retek or RIS with one or more Persons in which the outstanding shares of Retek,
RIS or such a wholly-owned Subsidiary of Retek or RIS are exchanged for
securities or other consideration, issued or caused to be issued by the
acquiring corporation or its Subsidiary (other than a mere reincorporation
transaction in which the relative interests of the securityholders of such
entity are not changed) in which the holders of Capital Stock of Retek, RIS or
such a wholly-owned Subsidiary of Retek or RIS immediately prior to such merger
or consolidation do not own a majority of the outstanding shares of the
surviving entity or such merger, consolidation or business combination;
(b) a sale of all, or substantially all of the assets of
Retek, RIS or any of their Subsidiaries;
(c) any material change in the scope of business of Retek, RIS
or any of their Subsidiaries as presently conducted;
(d) any liquidation, dissolution or winding up of Retek, RIS
or any of their Subsidiaries;
(e) any transaction or proposed transaction that would involve
the issuance of Capital Stock of Retek in an amount that would result in an HNC
Ownership Reduction;
(f) any commitment by Retek or RIS to incur annual capital
expenditures or to make investments or capital contributions on behalf of Retek
or RIS in excess of $________ in the
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aggregate; other than any such expenditures that were not otherwise identified
in any Annual Business Plan and Budget, (as described below) previously
submitted to and approved by HNC;
(g) any issuance, sale or exchange of shares of Capital Stock
of Retek or RIS, except the Initial Public Offering or pursuant to sales of
Common Stock to directors, employees or consultants of Retek or RIS pursuant
to stock option or stock purchase plans previously approved (including approval
of the number of shares reserved under such plan(s)) in writing by HNC;
(h) the creation, incurrance, assumption, or guarantee of any
obligation for borrowed money in an aggregate principal amount, in a single
transaction or a series of transactions, of more than $ _________ , or the
extension, refinancing, or modification in any material respect of such
obligation;
(i) any sale, purchase, lease, exchange, mortgage, pledge,
transfer or other acquisition or disposition (in one transaction or a series of
transaction) of assets or a business having a fair market value of more than
$___________;
(j) the formation, or the modification of the structure of,
any committees of the Board of Directors of Retek or RIS;
(k) any adoption or amendment of any employee benefit, stock
option, stock purchase or other equity incentive plan, program or arrangement
for Retek's employees;
(l) any material change in any Annual Business Plan and
Budget;
(m) any amendment to Retek's certificate of incorporation or
by-laws that would (i) authorize any new class or series of capital stock of
Retek or any preferred stock of Retek, (ii) affect or change the rights of the
Common Stock, (iii) change or alter any provision directly or indirectly
relating to the taking of action by stockholders or the Board of Directors of
Retek or the composition or election of Retek's Board of Directors, including,
but not limited to, the voting requirements of the stockholders and directors of
Retek;
(n) the commencement by Retek of any legal action, suit,
arbitration or other proceeding (each, an "Action"), other than any such
proceeding that (i) is in the ordinary course of Retek's business and not
material in amount or in the likely impact on Retek or (ii) where the aggregate
amount of (A) damages or other relief (including the reasonably anticipated
economic impact of any non-monetary relief, as determined by the Board of
Directors of Retek in its good faith judgment) sought by Retek in such Action,
(B) the amount of damages or other relief that would reasonably be expected to
be sought by the defendant or defendants in any counterclaim against Retek in
such Action and (C ) the amount of expenses Retek would reasonably expect to pay
to prosecute or defend such Action is not in the good faith judgment of the
Board of Directors of Retek reasonably anticipated to exceed $_________; and
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(o) the settlement of any Action against Retek of other than
(i) any Action that arises in the ordinary course of Retek's business and not
material in amount or in the likely impact on Retek or (ii) any such settlement
that would result in a cost to Retek (net of any amounts payable to Retek under
insurance policies or recoveries by Retek on any counterclaims) of not more than
$_________ (including the reasonably anticipated economic impact of any
non-monetary relief, as determined by the Board of Directors of Retek in its
good faith judgment).
4.6. Information Rights. Retek shall deliver to HNC in such format
and media as HNC may reasonably request:
(a) as soon as available, but in any event within twenty (20)
days after the end of each month and each quarter, a consolidated balance sheet
of Retek and its consolidated subsidiaries as of the end of such month or
quarter and the related consolidated statements of earnings, stockholders'
equity and statement of cash flows for such month or quarter, as the case may
be, and for the year to date, setting forth, in each case, in comparative form
the figures for the corresponding period of one year earlier, all in reasonable
detail and prepared in accordance with generally accepted accounting principles
("GAAP") (except for the omission of footnotes) applied on a consistent basis
throughout the periods represented;
(b) as soon as available, but in any event within ninety (90)
days after the end of each fiscal year of Retek, a consolidated audited balance
sheet of Retek and its consolidated subsidiaries as of the end of such fiscal
year and the related statements of earnings, stockholders' equity and statement
of cash flows for such fiscal year setting forth, in comparative form the
figures for the previous fiscal year, all in reasonable detail for audit
clearance within HNC. Retek will deliver to HNC within ninety (90) days after
the end of each fiscal year such materials accompanied by the report thereon of
Retek's independent auditors, which report shall state that such financial
statements present fairly the financial condition and results of operations of
Retek and its consolidated subsidiaries as of the close of such fiscal year in
conformity with GAAP consistently applied;
(c) at least three (3) business days prior to Retek's filing
thereof with the SEC, all reports, proxy statements, registration statements and
other filings made by Retek under the Securities Act or the Exchange Act;
(d) all written reports, analyses or studies relating to the
business or financial condition of Retek as Retek shall deliver to any other
holder of its Common Stock, simultaneously with its delivery to such holder;
(e) as soon as available, but in any event no later than five
(5) business days following receipt of a request by HNC, such other information
relating to Retek as HNC may reasonably request, in connection with the
reporting of its ownership interest in Retek under the "equity method" of
accounting in accordance with GAAP or as may otherwise be required by GAAP, to
prepare HNC's own financial statements and reports under the Exchange Act and in
accordance with GAAP; and
(f) as soon as practicable, but in any event no later than two
(2) business days prior to issuance, copies of substantially final drafts of all
press releases and other statements to be
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made available by Retek or any of its Subsidiaries or to the public concerning
material developments in the business, properties, earnings, results of
operations, financial condition or prospects of Retek or any of its Subsidiaries
or the relationship between (i) Retek or any of its Subsidiaries and (ii) HNC or
any of its Affiliates. In addition, within such two day period prior to the
issuance of any such press release or public statement, Retek shall actively
consult with HNC regarding any changes (other than typographical or other
similar minor changes) to such substantially final drafts. Retek further agrees
to review any proposed press release regarding its financial or operating
results for any period with the audit committee of Retek's Board of Directors
and Retek's independent auditors a reasonable amount of time prior to the
initial public release of such press release.
4.7. Annual Business Plan and Budget. Retek will (a) at least one
(1) month prior to the commencement of each fiscal year and at least thirty (30)
days prior to the Initial Public Offering Date, prepare and submit to the Board
of Directors of Retek and to HNC for approval and to HNC a budget and operating
plan for the upcoming fiscal year, including projections or forecasts of capital
and operating expenses, cash flow and profits and losses (the "Annual Business
Plan and Budget"), all itemized in reasonable detail; and (b) at least one month
prior to the commencement of each quarter, prepare and submit to the Board of
Directors of Retek for approval and to HNC projections or forecasts of capital
and operating expenses, cash flow and profits and losses for the remainder of
the fiscal year together with profit projections for the following fiscal year.
Before Retek takes any action that would materially deviate from the approved
Annual Business Plan and Budget, the Board of Directors of Retek and HNC must
first approve such action.
4.8. Inspection and Audit Rights. Retek agrees to permit authorized
representatives of HNC to visit and inspect any of the properties of Retek,
including its books of account, and to take extracts or copies thereof, and to
discuss Retek's affairs, finances and accounts with Retek's officers and
independent accountants, all at such times and as often as may be reasonably
requested, and to make such other inspections as may be necessary to permit HNC
to review any of the financial statements of Retek delivered to HNC pursuant to
this Agreement; provided however, that such representative shall agree to take
reasonable precautions to hold in confidence all non-public information so
provided and so designated by Retek (except that such representatives may
disclose such information to officers of HNC, to HNC's counsel and independent
auditors, to others and as required by law and regulations, including, without
limitation, any laws or regulations requiring HNC to report (or to incorporate
in any reports of HNC) such information regarding Retek). In addition, Retek
will allow the independent auditors of HNC to audit the working papers or, and
to assist in any review undertaken by, Retek's independent accountants.
4.9 Change in Fiscal Year. Retek shall, and shall cause each of
its Subsidiaries to, maintain a fiscal year which commences and ends on the same
dates as does HNC's fiscal year of each calendar year.
4.10 No Violations.
(a) Retek covenants and agrees that it will not take any
action or enter into any commitment or agreement which to Retek's knowledge may
reasonably be anticipated to result, with our without notice and with or without
lapse of time or otherwise, in a contravention or event
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of default by any of Affiliates of (i) any provision of HNC's certificate of
incorporation or by-laws, (ii) any credit agreement or other material agreements
(including agreements relating to covenants not to compete) binding upon HNC or
(iii) any judgment, order or decree of any governmental body, agency or court
having jurisdiction over HNC or any of its respective assets.
(b) Retek and HNC agree to provide to the other any
information and documentation requested by the other for the purpose of
evaluating and ensuring compliance with Section 4.10(a) hereof.
4.11 Automatic Option Share Increases. [TO FOLLOW].
4.12. Termination of Certain Rights. Except as provided in Section
4.1, the provisions of this Article IV shall terminate and be of no further
force or effect at such time as HNC (together with its Affiliates) ceases to own
at least fifty percent (50%) of the outstanding shares of the Capital Stock of
Retek.
ARTICLE V: MISCELLANEOUS
5.1. Limitation of Liability. Neither HNC nor Retek shall be liable
to the other for any special, indirect, incidental or consequential damages of
the other arising in connection with this Agreement.
5.2. Amendments; Waiver. This Agreement may not be amended or
terminated orally, but only by a writing duly executed by or on behalf of the
parties hereto. Any such amendment shall be validly and sufficiently authorized
for purposes of this Agreement if it is signed on behalf of HNC and Retek by any
of their respective presidents or vice presidents. The observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) only by a writing signed by the party to
be bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. Failure by either party, at any
time, to require performance by the other party or to claim a breach of any
provision of this Agreement shall not be construed as a waiver of any right
accruing under this Agreement, nor shall it affect any subsequent breach or the
effectiveness of this Agreement or any part hereof, or prejudice either party
with respect to any subsequent action.
5.3. Term. This Agreement shall remain in effect until all
Registrable Securities held by Holders have been transferred by them to Persons
other than Transferees; provided, that the provisions of Section 3.6 shall
survive any such expiration.
5.4. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement or such provision
of the application of such provision to such party or circumstances, other than
those to which it is so determined to be invalid, illegal or unenforceable,
shall remain in full force and effect to the fullest extent permitted by law and
shall not be affected thereby, unless such a construction would be unreasonable.
5.5. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to
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have been duly given upon receipt if delivered personally, by a national
overnight delivery service or by facsimile transmission, or upon deposit in the
U.S. mail (certified or registered mail, postage prepaid, return receipt
requested):
If to HNC, to: If to Retek or RIS, to:
HNC Software Inc. Retek Inc.
0000 Xxxxxxxxxxx Xxxxx Xxxx Xxxxxxx Xxxxx
Xxx Xxxxx, XX 00000-0000 000 Xxxxxxxx Xxxx, 00xx Xxxxx
Attention: Chief Financial Officer Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000 Attention: Chief Financial Officer
Facsimile: (000) 000-0000
or to such other person or address as any party shall specify by providing
notice in writing to the other party in the manner specified above. All such
notices, requests, demands, waivers and communications shall be deemed to have
been received on the date on which hand delivered, the business day following
deposit with a national overnight delivery service, one (1) business day after
transmission of the facsimile transmission by the sender and issuance by the
transmitting machine of a confirmation slip confirming that the number of pages
constituting the notice have been transmitted without error, or on the third
business day following the date on which so mailed, except for a notice of
change of address, which shall be effective only upon receipt thereof.
5.6. Further Assurances. HNC and Retek shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
instruments and take such other action as may be necessary or advisable to carry
out their obligations under this Agreement and under any exhibit, document or
other instrument delivered pursuant hereto.
5.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same agreement. This Agreement
will become binding when one or more counterparts hereof, individually or taken
together, will bear the signatures of all the parties reflected hereon as
signatories.
5.8. Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of Delaware, without regard to its principles of conflicts of
laws.
5.9. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof.
5.10. Successors. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns. Nothing contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights or remedies.
5.11. Specific Performance. The parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed
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in accordance with their specific terms or were otherwise breached.
Accordingly, it is agreed that they shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any other
remedy to which they may be entitled at law or equity.
5.12 Dispute Resolution. Any dispute, controversy or claim arising
out of or relating to this Agreement or the breach, termination or validity
hereof, or any transaction contemplated hereby, shall be resolved in accordance
with the procedures set forth in Article VII of the Separation Agreement.
5.13 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including, without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
5.14 Jurisdiction and Venue. The parties hereto irrevocably consent
to and agree that any litigation or other dispute resolution proceeding among
the parties relating to this Agreement will take place in San Diego, County,
California. The parties hereby irrevocably consent to the personal jurisdiction
or and the venue in the state and federal court within such county.
5.14 Construction of Agreement. A reference to a Section will mean
a Section in this Agreement unless otherwise explicitly set forth. The titles
and headings herein are for reference purposes only and will not in any manner
limit the construction of this Agreement which will be considered as a whole.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
HNC SOFTWARE INC. RETEK INC.
By: By:
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Name: Name:
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Title: Title:
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Solely for purposes of Section 4.5 and Article V
RETEK INFORMATION SYSTEMS, INC.
By:
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Name:
---------------------
Title:
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