<PAGE>   1

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1999

                                                 REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                          ---------------------------
                                    FORM S-1
                             REGISTRATION STATEMENT

                                     Under
                           The Securities Act of 1933
                          ---------------------------
                                   RETEK INC.
             (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                <C>                                <C>
           DELAWARE                             7372                            51-0392671
(State or other jurisdiction of     (Primary Standard Industrial             (I.R.S. Employer
incorporation or organization)       Classification Code Number)          Identification Number)
</TABLE>

                  MIDWEST PLAZA, 801 NICOLLET MALL, 11TH FLOOR
                             MINNEAPOLIS, MN 55402
                                 (612) 630-5700
  (Address, including zip code, and telephone number, including area code, of
                   Registrant's principal executive offices)
                          ---------------------------

                                 JOHN BUCHANAN
                      CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                                   RETEK INC.
                        MIDWEST PLAZA, 801 NICOLLET MALL
                       11TH FLOOR, MINNEAPOLIS, MN 55402
                                 (612) 630-5700
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
                          ---------------------------

                                   Copies to:

<TABLE>
<S>                                                       <C>
                CHRISTOPHER D. DILLON                                          JOHN A. FORE
                 SHEARMAN & STERLING                                        KATHLEEN B. BLOCH
            1550 EL CAMINO REAL, SUITE 100                           WILSON SONSINI GOODRICH & ROSATI
                 MENLO PARK, CA 94025                                    PROFESSIONAL CORPORATION
                    (650) 330-2200                                          650 PAGE MILL ROAD
                                                                           PALO ALTO, CA 94304
                                                                              (650) 493-9300
</TABLE>

                          ---------------------------

    Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
                          ---------------------------

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
                                                                  PROPOSED MAXIMUM
                                                                 AGGREGATE OFFERING         AMOUNT OF
     TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED              PRICE (2)          REGISTRATION FEE
----------------------------------------------------------------------------------------------------------
<S>                                                           <C>                      <C>
Common Stock, par value $0.01 per share(1)..................        $93,150,000              $25,896
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Common Stock being registered hereby consists of shares initially being
    offered in the United States and any shares initially offered or sold
    outside the United States that are thereafter sold or resold in the United
    States in transactions not exempt from registration under Section 4(1) or
    4(3) of the Securities Act of 1933, as amended. Offers and sales outside of
    the United States are being made pursuant to the exemption afforded by Rule
    901 of Regulation S under the Securities Act, and this Registration
    Statement shall not be deemed effective with respect to such offers and
    sales.

(2) Estimated solely for the purpose of computing the amount of the registration
    fee pursuant to Rule 457(o) under the Securities Act of 1933.
                          ---------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                 SUBJECT TO COMPLETION, DATED           , 1999

                                            SHARES

                                  [RETEK LOGO]

                                  COMMON STOCK

                               ------------------

     Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $     and $     per share. We have applied to list our common stock on
The Nasdaq National Market under the symbol "RETK."

     The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.

  INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 8.

<TABLE>
<CAPTION>
                                                                         UNDERWRITING
                                                          PRICE TO      DISCOUNTS AND     PROCEEDS TO
                                                           PUBLIC        COMMISSIONS         RETEK
                                                      ---------------- ---------------- ----------------
<S>                                                      <C>              <C>              <C>
 Per Share...........................................    $                $                $
 Total...............................................    $                $                $
</TABLE>

     Delivery of the shares of common stock will be made on or about           ,
1999.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON

                     BANCBOSTON ROBERTSON STEPHENS

                                         U.S. BANCORP PIPER JAFFRAY

                The date of this prospectus is           , 1999.
<PAGE>   3

                               ------------------

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                     PAGE
                                     ----
<S>                               <C>
PROSPECTUS SUMMARY...............       3
RISK FACTORS.....................       8
SPECIAL NOTE REGARDING
  FORWARD-LOOKING STATEMENTS.....      19
OUR SEPARATION
  FROM HNC.......................      20
USE OF PROCEEDS..................      22
DIVIDEND POLICY..................      22
CAPITALIZATION...................      23
DILUTION.........................      24
SELECTED COMBINED FINANCIAL
  DATA...........................      25
MANAGEMENT'S DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS......      26
</TABLE>

<TABLE>
<CAPTION>
                                     PAGE
                                     ----
<S>                               <C>
BUSINESS.........................      38
MANAGEMENT.......................      48
CERTAIN TRANSACTIONS.............      59
PRINCIPAL STOCKHOLDER............      65
DESCRIPTION OF CAPITAL STOCK.....      66
SHARES ELIGIBLE FOR FUTURE
  SALE...........................      71
MATERIAL UNITED STATES FEDERAL
  TAX CONSEQUENCES TO NON-UNITED
  STATES HOLDERS.................      73
UNDERWRITING.....................      76
NOTICE TO CANADIAN RESIDENTS.....      78
LEGAL MATTERS....................      79
EXPERTS..........................      79
WHERE TO FIND MORE INFORMATION...      80
INDEX TO FINANCIAL STATEMENTS....     F-1
</TABLE>

                               ------------------

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

                     DEALER PROSPECTUS DELIVERY OBLIGATION

     UNTIL           , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>   4

                               PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere is this prospectus.
This summary is not complete and does not contain all the information you should
consider before buying shares in this offering. You should carefully read the
entire prospectus and the risk factors beginning on page 8.

     Unless otherwise stated, information in this prospectus assumes that the
underwriters' over-allotment option to purchase an additional           shares
of common stock at the initial offering price is not exercised.

                                   RETEK INC.

     We are a leading provider of web-based, business-to-business software
solutions for retailers and their trading partners. Our software solutions
enable retailers to use the Internet to communicate and collaborate efficiently
with the suppliers, distributors, wholesalers, logistics providers, brokers,
transportation companies, consolidators and manufacturers that make up the
global retail supply chain. Our solutions are rapidly deployable, highly
scalable, retail industry focused and incorporate predictive analytic
technologies. We seek to enhance the ability of retailers to interact with their
supply chain by introducing Retail.com, which we believe is the first electronic
commerce network providing collaborative business-to-business software solutions
to the retail industry.

     We believe that a market opportunity exists to provide retailers with a
business-to-business software solution that is web-based, collaborative and
designed specifically for the retail industry. According to Euromonitor,
worldwide retailer-to-customer sales exceeded $6.5 trillion in 1997. We estimate
that the market for business-to-business commerce is even larger than
retailer-to-customers sales, and involves, according to Dunn & Bradstreet, over
three million retail, wholesale and supplier organizations operating in the
global marketplace. We believe the Internet is beginning to change the way this
marketplace operates. Not only does the Internet provide a new distribution
channel for conducting commerce with customers, it provides an even larger
opportunity for retail businesses to communicate and transact commerce with
their supply chain. According to Forrester Research, business-to-business
electronic commerce is expected to grow from $43 billion in 1998 to $1.3
trillion in 2003 and the market for software solutions for business-to-business
electronic commerce is estimated to grow from $171 million in 1998 to $3.1
billion in 2001.

     We intend to be the leading provider of web-based, business-to-business
software solutions for retailers and their trading partners. As the retail
supply chain evolves into an electronic network, we seek to further enable
retailers to better manage, organize and drive efficiencies through this
network. Key elements of our strategy include:

     -  Extending our web-based, business-to-business collaborative software
        solutions, principally through the introduction of our Retail.com
        network;

     -  Introducing our existing customers to a broader offering of our software
        solutions;

     -  Continuing to leverage our expertise in providing solutions to
        retailers;

     -  Expanding our relationships with implementation and hosting partners;
        and

     -  Extending our technological and product leadership by enhancing our
        software solutions' core functionality and analytic and predictive
        features.

     We are currently a wholly owned subsidiary of HNC Software Inc., a public
company that develops and markets predictive software solutions for businesses
in financial and other industries. Immediately prior to the completion of this
offering, our business will combine the business activities of Retek Information
Systems, Inc. and Retek Logistics, Inc. Retek Information Systems develops and
markets web-based business-to-business software solutions for retailers. Founded
in 1995, Retek Information Systems was

                                        3
<PAGE>   5

acquired by HNC in 1996. Retek Logistics, founded in 1985, develops warehouse
management software solutions. HNC acquired Retek Logistics in 1998. On
September 9, 1999, Retek Logistics was reincorporated as a Delaware corporation
and renamed "Retek Inc." In connection with the separation of our business from
HNC, HNC will contribute all of the outstanding capital stock of Retek
Information Systems to Retek Inc.

     Our principal executive offices are located at Midwest Plaza, 801 Nicollet
Mall, 11th Floor, Minneapolis, Minnesota 55402 and our telephone number is (612)
630-5700. Our web site is http://www.retek.com. The information on the web site
is not part of this prospectus.

     "Retek" is a trademark of Retek. All other trademarks or service marks
appearing in this prospectus are trademarks or service marks of the respective
companies that use them.

                    OUR RELATIONSHIP WITH HNC SOFTWARE INC.

     After the completion of this offering, HNC will own approximately      % of
the total number of outstanding shares of our common stock, or approximately
     % if the underwriters' over-allotment option is exercised in full. HNC has
informed us that, after the completion of this offering, it is HNC's current
intention to distribute pro rata to its stockholders, as a dividend, all of the
shares of our common stock HNC will own after this offering, subject to the
satisfaction and fulfillment of several conditions (this dividend will be
referred to as the distribution in this prospectus). The conditions to the
distribution include, but are not limited to, the following:

   -   HNC's receipt of a written ruling from the Internal Revenue Service that
       the distribution qualifies for tax-free treatment under Section 355 of
       the Internal Revenue Code, such that HNC and HNC's stockholders will not
       recognize income for federal tax purposes as a result of the
       distribution;

   -   HNC's board of directors determining that the distribution is in the best
       interest of HNC's stockholders; and

   -   HNC's ability to effect the distribution in compliance with applicable
       law and without violation or acceleration of its contractual obligations.

     HNC has indicated that the distribution will not occur prior to the later
of (1) March 31, 2000, and (2) 180 days after the completion of this offering
(unless the lead underwriter consents to an earlier date). For additional
information on the risks associated with HNC not carrying out the distribution,
we refer you to "Risk Factors -- Risks Related to Our Separation from HNC."

     HNC has the sole discretion to determine the timing, structure and terms of
the distribution. HNC is not obligated to carry out the distribution and we
cannot assure you as to whether or when the distribution may occur. Neither HNC
nor we have any intention of purchasing or redeeming the shares issued in this
offering if the distribution does not occur. In addition, even if the
distribution is ultimately completed, HNC does not have any obligation with
respect to the timing or any of the terms of the distribution. We refer you to
"Risk Factors -- Risks Related to Our Separation from HNC -- HNC has no
obligation to complete the distribution of our common stock."

     If HNC has received a written ruling from the Internal Revenue Service that
the distribution qualifies for tax-free treatment under Section 355 of the
Internal Revenue Code, and HNC fails to complete the distribution within 120
days after the first date that HNC is eligible to effect the tax-free
distribution, John Buchanan, our chairman and chief executive officer, and three
other executive officers to be chosen by Mr. Buchanan, will receive a 12-month
credit to the vesting schedule of their Retek stock options. In addition, if at
the time of this accelerated vesting, Mr. Buchanan and the three other chosen
executives execute two-year non-compete agreements with Retek, their vesting
schedules will be credited by an additional 12 months.
                                        4
<PAGE>   6

     We will enter into agreements with HNC that provide for the separation of
our business from HNC. These agreements will generally provide for, among other
things, the transfer from HNC to us of assets and the assumption by us of
liabilities relating to our business. For more information regarding the assets
and liabilities to be transferred to us, see our combined financial statements
and related notes that are included elsewhere in this prospectus. If HNC carries
out the tax-free distribution, these agreements will restrict our ability to
take specified actions that would cause the distribution to be taxable to HNC or
its stockholders, and these agreements will require us to indemnify HNC for any
taxes resulting from the distribution becoming taxable as a result of specified
actions. We will also enter into an agreement with HNC regarding the licensing
to us of intellectual property related to our business. All of these transfers
and licenses will be completed immediately prior to the closing of this
offering. See "Certain Transactions."

     Our agreements with HNC will also govern various interim and ongoing
relationships. All of the agreements providing for our separation from HNC will
be made in the context of a parent-subsidiary relationship, will be negotiated
in the overall context of our separation from HNC and will not be conditioned on
HNC's completing the distribution. The terms of these agreements may be more or
less favorable to us than if they had been negotiated with unaffiliated third
parties.

                                        5
<PAGE>   7

                                  THE OFFERING

<TABLE>
<S>                                            <C>
Common stock offered in this offering........  shares
Common stock outstanding after this
  offering:..................................  shares
Use of proceeds from this offering...........  For working capital and general corporate
                                               purposes, including repayment of intercompany
                                               debt to HNC. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol.......  "RETK"
</TABLE>

------------------

     Common stock outstanding after this offering is based on shares outstanding
as of           , 1999, excluding:

     -  the exercise of the underwriters' over-allotment option, and

     -  shares of common stock issuable upon exercise of options outstanding at
        an exercise price of $          per share, none of which are
        exercisable.

                                        6
<PAGE>   8

                        SUMMARY COMBINED FINANCIAL DATA

     The summary combined financial data presented below should be read in
conjunction with our combined financial statements and the related notes,
"Capitalization," "Selected Combined Financial Data," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                                              SIX MONTHS ENDED
                                                  YEAR ENDED DECEMBER 31,         JUNE 30,
                                                ---------------------------   -----------------
                                                 1996      1997      1998      1998      1999
                                                -------   -------   -------   -------   -------
                                                                              (UNAUDITED)
                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>       <C>       <C>       <C>       <C>
COMBINED STATEMENT OF INCOME DATA:
  Total revenue...............................  $13,433   $30,923   $55,033   $25,313   $37,690
  Gross profit................................    9,554    27,278    41,181    19,601    26,970
  Operating income............................    1,418     6,619     8,088     2,504     5,792
  Net income..................................    2,233     3,476     3,878       568     3,460
  Pro forma unaudited basic and diluted net
     income per common share..................                      $  1.73             $  1.55
  Shares used in computing pro forma unaudited
     basic and diluted net income per common
     share....................................                        2,238               2,238
</TABLE>

<TABLE>
<CAPTION>
                                                                     JUNE 30, 1999
                                                               -------------------------
                                                                 ACTUAL      AS ADJUSTED
                                                               -----------   -----------
                                                                    (IN THOUSANDS)
<S>                                                            <C>           <C>
COMBINED BALANCE SHEET DATA:
  Cash and cash equivalents.................................     $   930
  Working capital...........................................      15,800
  Total assets..............................................      57,765
  Payable to HNC Software Inc...............................       7,927
  Total stockholder's equity................................      39,121
</TABLE>

-------------------------

     For an explanation of the determination of the number of shares used in
computing pro forma unaudited basic and diluted net income per common share, see
Note 1 of Notes to Combined Financial Statements.

     The as adjusted amounts reflect the receipt and application of the net
proceeds from the sale of        shares of our common stock at an assumed
initial offering price of $       , after deducting the estimated underwriting
discounts and estimated offering expenses payable by us.

                                        7
<PAGE>   9

                                  RISK FACTORS

     An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and all other information
contained in this prospectus before purchasing our common stock. Any of the
following risks could materially harm our business, operating results and
financial condition. Additional risks and uncertainties not currently known to
us or that we currently consider immaterial could also harm our business,
operating results and financial condition. You could lose all or part of your
investment as a result of these risks.

RISK RELATED TO OUR BUSINESS AND INDUSTRY

IF WE DO NOT RESPOND ADEQUATELY TO OUR INDUSTRY'S RAPID PACE OF CHANGE, SALES OF
OUR PRODUCTS MAY DECLINE.

     If we are unable to develop new software solutions or enhancements to our
existing products on a timely and cost-effective basis, or if new products or
enhancements do not achieve market acceptance, our sales may decline. The life
cycles of our products are difficult to predict because the business-to-business
electronic commerce market for our products is new and emerging and is
characterized by rapid technological change and changing customer needs. The
introduction of products employing new technologies could render our existing
products or services obsolete and unmarketable.

     To be successful, our products and services must keep pace with
technological developments, address the ever-changing and increasingly
sophisticated needs of our customers and achieve market acceptance. In
developing new products and services, we may:

     -  fail to respond to technological changes in a timely or cost-effective
        manner;

     -  encounter products, capabilities or technologies developed by others
        that render our products and services obsolete or noncompetitive or that
        shorten the life cycles of our existing products and services;

     -  experience difficulties that could delay or prevent the successful
        development, introduction and marketing of these new products and
        services; or

     -  fail to achieve market acceptance of our products and services.

THE LENGTHY SALES CYCLE FOR OUR PRODUCTS MAKES OUR REVENUES SUSCEPTIBLE TO
FLUCTUATIONS.

     Delay or failure to complete sales in a particular quarter or year would
reduce our quarterly and annual revenue. Implementation of our software is
complex, time consuming and expensive. In many cases, our customers must change
established business practices or conduct business in new ways to accommodate
installation and use of our software. They must also consider a wide range of
other issues before committing to purchase our products, including product
benefits, competitive alternatives, ease of installation, ability to work with
existing computer systems, ability to support a large user base and the scope of
functions our products provide. We believe that the purchase of our products is
often discretionary and generally involves a significant commitment of capital
and other resources by a customer. As a result of these factors, our sales
cycles can be lengthy, typically ranging from four to 12 months. Consequently,
sales of our software solutions that are anticipated to occur in a given quarter
or year may be accelerated or delayed, potentially resulting in significant
variations in expected quarterly or annual revenue.

FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS COULD LIKELY CAUSE OUR STOCK
PRICE TO DECLINE.

     Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. If our quarterly operating results fail to meet
analysts' expectations, the trading price of our common stock could

                                        8
<PAGE>   10

decline. Some of the factors, many of which are outside our control, which could
cause our operating results to fluctuate include:

     -  the size and timing of customer orders, which can be affected by
        customer budgeting and purchasing cycles;

     -  the demand for and market acceptance of our software solutions;

     -  our competitors' announcements or introductions of new software
        solutions, services or technological innovations;

     -  our ability to develop, introduce and market new products on a timely
        basis;

     -  the mix of products we sell, services we provide and the distribution
        channels we use;

     -  customer deferral of material orders in anticipation of new releases or
        new product introductions;

     -  our success in expanding our sales and marketing programs;

     -  technological changes or problems in computer systems; and

     -  general economic conditions which may affect our customers' capital
        investment levels.

     In addition, we have seen historically stronger revenue growth from the
first quarter to the second quarter than between other quarters. This stronger
revenue growth is due to the fact that Oracle has a May fiscal year-end which
contributes to seasonally greater sales of Oracle Retail(TM) in our second
fiscal quarter.

     Historically, a significant portion of our sales have been realized near
the end of a quarter. As a result, a cancellation or delay in an anticipated
sale past the end of a particular quarter could substantially reduce our revenue
for that quarter. To the extent that the average size of our orders increases,
customers' cancellations or delays of orders will be more likely to harm our
revenue and operating results.

     As the number and size of customer orders increase, we will become more
susceptible to the risk of significant, doubtful accounts receivable from
customers who become unable or unwilling to pay amounts due to us. If we are
unable to collect these accounts receivable, our operating results will be
harmed.

     Our quarterly expense levels are relatively fixed and are based, in part,
on expectations as to future revenue. As a result, if revenue levels fall below
our expectations, our net income will decrease because only a small portion of
our expenses vary with our revenue. For a more detailed description of our
quarterly results, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

OUR RETAIL.COM NETWORK WILL SOON BE INTRODUCED AND IS AT AN EARLY STAGE OF
DEVELOPMENT. WE HAVE NOT ESTABLISHED COMPETITIVE AND PROFITABLE PRICING FOR OUR
RETAIL.COM NETWORK.

     We will begin operating our Retail.com network in the second half of 1999.
We believe that Retail.com will be the first electronic commerce network
providing collaborative business-to-business solutions to retailers. We are
incurring significant infrastructure costs in establishing this network and have
not yet received any revenue as a result of incurring these costs. Broad and
timely acceptance of our Retail.com network is subject to a number of
significant risks. These risks include:

     -  our need to provide value-enhancing software solutions and services on
        our Retail.com network to achieve widespread commercial acceptance of
        our network;

     -  whether our network will be able to support large numbers of retailers
        and the members of their supply chain; and

                                        9
<PAGE>   11

     -  our need to significantly expand our internal resources and incur
        associated expenses to support planned growth of our Retail.com network.

     We have not yet established our pricing and revenue model for the services
to be provided on our Retail.com network. If we are unable to establish
competitive and profitable pricing that is acceptable to our customers, our
Retail.com network will not be commercially successful, which could harm our
revenue and business.

OUR RELATIONSHIP WITH ORACLE IS IMPORTANT IN GENERATING SALES OF OUR PRODUCTS.
IF OUR RELATIONSHIP WITH ORACLE ENDS OR IF ORACLE DOES NOT DEVOTE ADEQUATE
RESOURCES TO PROMOTE AND SELL ORACLE RETAIL(TM) OR IF SALES OF ORACLE RETAIL(TM)
DECLINE, OUR REVENUES WILL DECLINE.

     We have worked with Oracle to establish Oracle Retail(TM), a software
solution which combines our products with Oracle's financial applications. In
addition to Oracle's general sales force, Oracle has dedicated a sales team of
approximately 30 sales professionals who sell and market Oracle Retail(TM)
worldwide. Revenue generated from sales of Oracle Retail(TM) accounted for
approximately 25% of our revenue in the six months ended June 30, 1999. Both we
and Oracle currently have the right to terminate the agreement governing the
sales and marketing of Oracle Retail. In addition, this agreement is currently
being renegotiated. If Oracle were to exercise its right to terminate, or if we
fail to negotiate a new agreement on acceptable terms, our revenue will decline
and our business will be harmed. In addition, Oracle is not obligated to sell
and market Oracle Retail(TM) and, in the future, may decide to stop selling
Oracle Retail(TM) or promote products that compete with Oracle Retail(TM) or our
other products.

     WE EXPECT TO SIGNIFICANTLY INCREASE OUR OPERATING EXPENSES, WHICH WILL
IMPACT OUR ABILITY TO REMAIN PROFITABLE.

     We intend to significantly increase our operating expenses as we:

     -  increase our research and development activities;

     -  increase our services activities;

     -  develop and build our Retail.com network;

     -  expand our distribution channels;

     -  increase our sales and marketing activities, including expanding our
        direct sales force;

     -  build our internal information technology system; and

     -  operate as an independent public company.

     We will incur expenses before we generate any revenue from this increase in
spending. If we do not significantly increase revenue from these efforts, our
business and operating results could be seriously harmed.

COMPETITIVE PRESSURES COULD REDUCE OUR MARKET SHARE OR REQUIRE US TO REDUCE OUR
PRICES, WHICH WOULD REDUCE OUR REVENUE AND/OR OPERATING MARGINS.

     The market for our software solutions is highly competitive and subject to
rapidly changing technology. Competition could seriously impede our ability to
sell additional products and services on terms favorable to us. Competitive
pressures could reduce our market share or require us to reduce our prices,
which would reduce our revenues and/or operating margins. Many of our
competitors have longer operating histories, substantially greater financial,
technical, marketing or other resources, and greater name recognition than we
do. Many of these companies have broader customer relationships that could be
leveraged, including relationships with many of our current and prospective
customers. These companies also have more established customer support and
professional services organizations than we do. In addition, these companies may
adopt aggressive pricing policies that could compel us to reduce the prices
                                       10
<PAGE>   12

of our products and services in response. Our competitors may also be able to
respond more quickly than we can to new or emerging technologies and changes in
customer requirements. Our current and potential competitors may:

     -  develop and market new technologies that render our existing or future
        products obsolete, unmarketable or less competitive;

     -  make strategic acquisitions or establish cooperative relationships among
        themselves or with other solution providers, which would increase the
        ability of their products to address the needs of our customers; and

     -  establish or strengthen cooperative relationships with our current or
        future strategic partners, which would limit our ability to sell
        products through these channels.

     As a result, we may not be able to maintain a competitive position against
current or future competitors.

THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL COULD HARM OUR ABILITY TO GROW OUR BUSINESS.

     We believe that our future success will depend upon our ability to attract
and retain highly skilled personnel, including John Buchanan, our chairman and
chief executive officer, and other key members of management. We currently do
not have any key-man life insurance relating to key personnel, who are employees
at-will and, except for Mr. Buchanan, are not subject to employment contracts.
Mr. Buchanan's employment agreement ends in November 1999. The loss of the
services of any one or more of these key persons could harm our ability to grow
our business.

     We also must attract, integrate and retain skilled sales, research and
development, marketing and management personnel. Competition for these types of
employees is intense, particularly in our industry. Failure to hire and retain
qualified personnel would harm our ability to grow our business.

WE RELY ON THIRD PARTIES TO IMPLEMENT OUR PRODUCTS.

     We rely, and expect to continue to rely, on a number of third parties to
implement our software solutions at customer sites. If we are unable to
establish and maintain effective, long-term relationships with these
implementation providers, or if these providers do not meet the needs or
expectations of our customers, our revenue will be reduced and our customer
relationships will be harmed. Our current implementation partners are not
contractually required to continue to help implement our software solutions. If
the number of our product implementations continues to increase, we will need to
develop new relationships with additional third-party implementation providers
to provide these services.

     We may be unable to establish or maintain relationships with third parties
having sufficient qualified personnel resources to provide the necessary
implementation services to support our needs. If third-party services are
unavailable, we will be required to provide these services internally, which
would significantly limit our ability to meet our customers' implementation
needs and would increase our operating expenses and could reduce our gross
margins. A number of our competitors, including IBM and SAP, have significantly
more established relationships with these third parties and, as a result, these
third parties may be more likely to recommend competitors' products and services
rather than our own. In addition, we cannot control the level and quality of
service provided by our current and future implementation partners.

WE RELY ON THIRD-PARTY AND RELATED PARTY SOFTWARE AND APPLICATIONS.

     We must now, and may in the future have to, license or otherwise obtain
access to the intellectual property of third parties and related parties,
including HNC, Lucent, MicroStrategy and Oracle. For example, we use the Oracle
toolset to provide our software solutions with a web-architected, scalable
foundation. We also use HNC predictive technologies to enhance the analytic
capabilities of our software solutions. Our business would be seriously harmed
if the providers from whom we license such software
                                       11
<PAGE>   13

cease to deliver and support reliable products or enhance their current
products. In addition, the third-party software may not continue to be available
to us on commercially reasonable terms or prices or at all. Our inability to
maintain or obtain this software could result in shipment delays or reduced
sales of our products. Furthermore, we might be forced to limit the features
available in our current or future product offerings. Either alternative could
seriously harm our business and operating results.

IF OUR INTELLECTUAL PROPERTY IS NOT ADEQUATELY PROTECTED, OUR COMPETITORS MAY
GAIN ACCESS TO OUR TECHNOLOGY AND WE MAY LOSE CUSTOMERS.

     We depend on our ability to develop and maintain the proprietary aspects of
our technology. To protect our proprietary technology, we rely primarily on a
combination of contractual provisions, confidentiality procedures, trade
secrets, and copyright and trademark laws.

     We seek to protect our software, documentation and other written materials
under trade secret and copyright laws, which afford only limited protection. In
addition, we cannot assure you that any of our proprietary rights with respect
to our Retail.com network will be viable or of value in the future because the
validity, enforceability and type of protection of proprietary rights in
Internet-related industries are uncertain and still evolving.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult and expensive, and while we are unable to determine the extent to
which piracy of our software products exists, software piracy may be a problem.
In addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States. We intend to
vigorously protect our intellectual property rights through litigation and other
means. However, such litigation can be costly to prosecute and we cannot be
certain that we will be able to enforce our rights or prevent other parties from
developing similar technology, duplicating our products or designing around our
intellectual property.

WE MAY INCUR SIGNIFICANT COSTS IF, IN THE FUTURE, THIRD-PARTIES CLAIM THAT OUR
PRODUCTS INFRINGE ON THEIR INTELLECTUAL PROPERTY.

     There has been a substantial amount of litigation in the software industry
and the Internet industry regarding intellectual property rights. It is possible
that in the future third parties may claim that we or our current or potential
future products infringe their intellectual property. We expect that software
product developers and providers of electronic commerce solutions will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. Any claims, with or without merit, could
be time-consuming, result in costly litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on terms acceptable to us or at
all, which could seriously harm our business.

OUR BUSINESS IS SUBJECT TO ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH
INTERNATIONAL SALES.

     Since we sell our products worldwide, our business is subject to risks
associated with doing business internationally. Our revenue originating outside
North America was 47% and 46% of our total revenue in 1998 and for the six
months ended June 30, 1999. Approximately 22% of these sales in 1998 and 25% of
these sales for the six months ended June 30, 1999 were not denominated in US
dollars. To the extent that our sales are denominated in foreign currencies, the
revenue we receive could be subject to fluctuations in currency exchange rates.
If the effective price of the products we sell to our customers were to increase
due to fluctuations in foreign currency exchange rates, demand for our
technology could fall, which would, in turn, reduce our revenue. We have not
historically attempted to mitigate the effect that currency fluctuations may
have on our revenue through use of hedging instruments, and we do not currently
intend to do so in the future.

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<PAGE>   14

     We anticipate that revenue from international operations will continue to
represent a substantial portion of our total revenue. Accordingly, our future
results could be harmed by a variety of factors, including:

     -  changes in foreign currency exchange rates;

     -  greater risk of uncollectible accounts;

     -  changes in a specific country's or region's political or economic
        conditions, particularly in emerging markets;

     -  trade protection measures and import or export licensing requirements;

     -  potentially negative consequences from changes in tax laws;

     -  difficulty in staffing and managing widespread operations;

     -  international variations in technology standards;

     -  differing levels of protection of intellectual property; and

     -  unexpected changes in regulatory requirements.

IF THE INTERNET FAILS TO BE ACCEPTED AS A VIABLE LONG-TERM COMMUNICATIONS
PROTOCOL, OUR BUSINESS AND OPERATING RESULTS WILL BE SERIOUSLY HARMED.

     As our software solutions are web-based, we depend on the acceptance of the
Internet as a communications protocol. However, this acceptance may not
continue. Rapid growth of the Internet is a recent phenomenon. The Internet may
not be accepted as a viable long-term communications protocol for businesses for
a number of reasons. These reasons include:

     -  potentially inadequate development of the necessary communications and
        computer network technology, particularly if rapid growth of the
        Internet continues;

     -  delayed development of enabling technologies and performance
        improvements;

     -  increased security risks in transmitting and storing confidential
        information over public networks; and

     -  potentially increased governmental regulation.

ERRORS AND DEFECTS IN OUR PRODUCTS COULD RESULT IN SIGNIFICANT COSTS TO US AND
COULD IMPAIR OUR ABILITY TO SELL OUR PRODUCTS.

     Our products are complex and, accordingly, may contain undetected errors or
failures when we first introduce them or as we release new versions. This may
result in loss of, or delay in, market acceptance of our products and could
cause us to incur significant costs to correct errors or failures or to pay
damages suffered by customers as a result of such errors or failures. In the
past, we have discovered software errors in our new releases and new products
after their introduction. We have lost revenue during the period required to
correct these errors. We may in the future discover errors in new releases or
new products after the commencement of commercial shipments.

CHANGES IN ACCOUNTING STANDARDS COULD AFFECT THE CALCULATION OF OUR FUTURE
OPERATING RESULTS.

     Statement of Position 97-2, "Software Revenue Recognition," was issued in
October 1997 by the American Institute of Certified Public Accountants and
amended by Statement of Position 98-4. We adopted Statement of Position 97-2
effective January 1, 1998 and Statement of Position 98-4 effective March 31,
1998. The American Institute of Certified Public Accountants has also issued
Statement of Position 98-9 -- which will be effective for us for transactions
entered into beginning January 1, 2000.

                                       13
<PAGE>   15

However, full implementation guidelines for this standard and additional
standards could be issued in the future. These guidelines and additional
standards could lead to unanticipated changes in our current revenue recognition
policies, which changes could harm our business, financial condition and
operating results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."

OUR BUSINESS COULD BE HARMED IF THE SYSTEMS WE, OUR CUSTOMERS OR OUR VENDORS USE
ARE NOT YEAR 2000 COMPLIANT.

     The risks posed by Year 2000 issues, which arise because computer systems
and software products may be unable to distinguish between twentieth century
dates and twenty-first century dates, could harm our business in a number of
significant ways. If we experience disruptions as a result of the Year 2000
problem, our revenues could decline and we may incur significant costs to
correct any problems. Although we believe that our internally developed systems
and technology are Year 2000 compliant, our systems and technology nevertheless
could be substantially impaired or cease to operate due to Year 2000 problems.
Additionally, we rely on information technology supplied by third parties, and
our strategic partners also are heavily dependent on information technology
systems and on their own third-party vendor systems. Year 2000 problems
experienced by us or any of these third parties could harm our business.
Additionally, the Internet could face serious disruptions arising from the Year
2000 problem, which would harm our business, and particularly our Retail.com
network.

     We cannot guarantee that any of our participating sellers or other Internet
vendors will be Year 2000 compliant in a timely manner. We also cannot guarantee
that retailers and members of their supply chains will be able to utilize our
Retail.com network without serious disruptions arising from the Year 2000
problem. Given the pervasive nature of the Year 2000 problem, it is also
possible that disruptions in industries and market segments, other than the
retail industry, will adversely affect our business.

RISKS RELATED TO OUR SEPARATION FROM HNC

AS LONG AS HNC OWNS A MAJORITY OF OUR CAPITAL STOCK, WE WILL BE CONTROLLED BY
HNC AND OUR OTHER STOCKHOLDERS WILL BE UNABLE TO AFFECT THE OUTCOME OF
STOCKHOLDER VOTING.

     After the completion of this offering, HNC will own approximately      % of
our outstanding common stock, or approximately      % if the underwriters
exercise their over-allotment option in full. As long as HNC owns at least 25%
of our outstanding capital stock, HNC will be able to nominate three of the
seven directors on our board of directors. In addition, as long as HNC owns a
majority of our equity value, HNC will have an option to purchase additional
shares of our common stock and other equity securities, if any, to maintain its
ownership percentage of our capital stock. Investors in this offering will not
be able to affect the outcome of any stockholder vote for so long as HNC owns a
majority of our common stock. As a result, HNC will control all matters
affecting us, including, but not limited to:

     -  the allocation of business opportunities that may be suitable for HNC
        and us;

     -  any determinations with respect to mergers or other business
        combinations involving us;

     -  the acquisition or disposition of assets or business by us;

     -  our debt or equity financing, including future issuance of our common
        stock or other securities;

     -  incurrence of debt by us;

     -  changes to the agreements providing for our separation from HNC;

     -  amendments to our certificate of incorporation or by-laws;

     -  the payment of dividends on our common stock; and

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<PAGE>   16

     -  determinations with respect to our tax returns.

WE WILL NOT BE ABLE TO RELY ON HNC TO FUND OUR FUTURE CAPITAL REQUIREMENTS.

     In the past, our capital needs have been satisfied by HNC. However,
following the separation, HNC will no longer have any obligation to provide
funds to finance our working capital or other cash requirements. We cannot
assure you that financing, if needed, will be available on favorable terms. If
we are unable to obtain financing on favorable terms or at all, our ability to
grow our business will be harmed.

     We believe our capital requirements will vary greatly from quarter to
quarter, depending on, among other things, timing of capital expenditures,
fluctuations in our operating results and cash flows and our financing
activities. We believe that cash generated by our current operations, along with
the proceeds from this offering, will be sufficient to satisfy our working
capital, capital expenditure and research and development requirements for at
least the next 12 months. However, we may require or choose to obtain additional
debt or equity financing in the future. Future equity financings would be
dilutive to the existing holders of our common stock. Future debt financings, if
available, could have as a condition that we agree to restrictive covenants and
would require the consent of HNC. Finally, pursuant to an agreement between HNC
and us, until two years, and possibly longer, after the distribution, our
ability to issue common stock, in connection with acquisitions, offerings or
otherwise, will be limited.

WE MAY HAVE POTENTIAL BUSINESS CONFLICTS OF INTEREST WITH HNC WITH RESPECT TO
OUR PAST AND ONGOING RELATIONSHIP THAT COULD HARM OUR BUSINESS OPERATIONS.

     Conflicts of interest may arise between HNC and us in a number of areas
relating to our past and ongoing relationships, including:

     -  major business combinations involving us or HNC, including an
        acquisition of us by a third party;

     -  our efforts to raise capital in debt or equity financing;

     -  labor, tax, employee benefit, indemnification and other matters arising
        from our separation from HNC;

     -  intellectual property matters;

     -  employee retention and recruiting;

     -  sales or distributions by HNC of all or any portion of its ownership
        interest in us;

     -  the nature, quality and pricing of transitional services HNC has agreed
        to provide us; and

     -  business opportunities that may be attractive to both HNC and us.

     We may not be able to resolve any potential conflicts and, even if we do,
the resolution may be less favorable than if we were dealing with an
unaffiliated party. The agreements we will enter into with HNC may be amended if
the parties agree. While we are controlled by HNC, HNC may be able to require us
to agree to amendments to these agreements that may be less favorable to us than
the original terms of any of these agreements. See "Certain Transactions."

WE WILL BE SUBJECT TO CERTAIN CONTRACTUAL LIMITATIONS WHICH COULD LIMIT THE
CONDUCT OF OUR BUSINESS AND OUR ABILITY TO PURSUE OUR BUSINESS OBJECTIVES.

     The separation agreement that we will enter into with HNC relating to this
offering and the potential distribution will contain a number of restrictive
covenants relating to the distribution, which will require, among other things,
that until two years after the completion of the distribution, we cannot take
certain

                                       15
<PAGE>   17

actions, including the following, without either the consent of HNC or a
supplemental ruling from the Internal Revenue Service:

     -  selling substantially all of our assets, voluntarily dissolving,
        liquidating, or ceasing to maintain an active business;

     -  soliciting a tender offer for our shares of common stock;

     -  entering into or approving any merger transaction which would in the
        aggregate result in an acquisition of a 50% or greater interest in us;
        and

     -  issuing any of our equity securities (except pursuant to the exercise of
        employee stock options) that would in the aggregate result in the
        acquisition of a 50% or greater interest in us or taking any action
        inconsistent with the information, representations or covenants included
        in the ruling submission with the Internal Revenue Service.

     In addition, under the separation agreement we will agree to indemnify HNC
on an after-tax-basis for any tax liability incurred to HNC as a result of our
taking any of these actions, whether or not HNC consents or a supplemental
ruling is obtained or taking or failing to take any other action which causes
the distribution to become taxable. We refer you to "Certain
Transactions -- Separation Agreement."

HNC HAS NO OBLIGATION TO COMPLETE THE DISTRIBUTION OF OUR COMMON STOCK.

     HNC does not have any obligation with respect to the timing or any of the
terms of the distribution of our common stock. We cannot assure you as to
whether or when the distribution will occur, or as to the terms of the
distribution. If the distribution does not occur, the vesting schedule of the
Retek stock options granted to four of our key employees will be credited by 12
months. If these employees enter into non-compete agreements with us, the
vesting schedule will be credited by an additional 12 months. Upon any
acceleration of their vesting schedules, it may be more difficult for us to
retain these key employees. The loss of the services of one or more of these
employees could harm our business. In addition, until the distribution occurs,
the risks discussed relating to HNC's control of us and the potential business
conflicts of interest between HNC and us will continue to be relevant to our
stockholders. See "Our Separation from HNC."

OUR DIRECTORS AND EXECUTIVE OFFICERS MAY HAVE CONFLICTS OF INTEREST BECAUSE OF
THEIR OWNERSHIP OF HNC COMMON STOCK.

     Many of our directors and executive officers own a substantial amount of
HNC common stock and options to purchase HNC common stock. Ownership of HNC
common stock by our directors and officers after our separation from HNC could
create, or appear to create, potential conflicts of interest when directors and
officers are faced with decisions that could have different implications for HNC
and us. For information regarding directors' and officers' ownership of options
to acquire HNC common stock, see "Management -- Executive Compensation --
Aggregated HNC Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values."

THE TRANSITIONAL SERVICES THAT WILL BE PROVIDED TO US BY HNC MAY NOT BE
SUFFICIENT TO MEET OUR NEEDS, AND WE MAY NOT BE ABLE TO REPLACE THESE SERVICES
AFTER OUR AGREEMENTS WITH HNC EXPIRE.

     HNC will agree to provide certain transitional services to us for a limited
time period, including services related to employee benefits for our employees.
Although HNC will be contractually obligated to provide us with these services,
these services may not be provided at the same level as when we were part of
HNC, and we may not be able to obtain the same benefits. After the expiration of
these various arrangements, we may not be able to replace these transitional
services in a timely manner or on terms and conditions, including cost, as
favorable as those we will receive from HNC. The prices charged to us under
these agreements may be higher or lower than the prices that we may be required
to pay third

                                       16
<PAGE>   18

parties for similar services or the costs of similar services if we undertake
them ourselves. For more information about these arrangements, see "Certain
Transactions -- Services Agreement."

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK

OUR SECURITIES HAVE NO PRIOR MARKET, AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THIS OFFERING.

     Before this offering, there has not been a public market for our common
stock, and an active public market for our common stock may not develop or be
sustained after this offering. The market price of our common stock could be
subject to significant fluctuations after this offering. Among the factors that
could affect our stock price are:

     -  quarterly variations in our operating results;

     -  changes in revenue or earnings estimates or publication of research
        reports by analysts;

     -  strategic moves by us or our competitors, such as acquisitions or
        restructurings or changes in business strategy;

     -  actions by institutional stockholders or by HNC prior to its
        distribution of our stock;

     -  speculation in the press or investment community;

     -  general market conditions; and

     -  domestic and international economic factors unrelated to our
        performance.

     The stock markets in general, and the markets for technology stocks in
particular, have experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. These broad market
fluctuations may adversely affect the trading price of our common stock. In
particular, we cannot assure you that you will be able to resell your shares at
or above the initial public offering price, which will be determined by
negotiations between the representatives of the underwriters and us. See the
section entitled "Underwriting" for a discussion of the factors to be considered
in determining the initial public offering price.

THE PRICE OF OUR COMMON STOCK COULD DECLINE AS A RESULT OF SALES OR
DISTRIBUTIONS OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK IN THE PUBLIC MARKET.

     HNC has announced that it is HNC's current intention to distribute all of
the shares of our common stock it owns after this offering is completed to HNC
stockholders provided certain conditions are met. See "Our Separation from HNC."
Substantially all of those shares would be eligible for immediate resale in the
public market following a distribution by HNC. We are unable to predict whether
significant amounts of our common stock will be sold in the open market in
anticipation of, or following, this distribution. We are also unable to predict
whether a sufficient number of buyers would be in the market at that time. Sales
by HNC or others of substantial amounts of our common stock in the public
market, or the perception that such sales might occur, could cause the price of
our common stock to decline.

WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR POTENTIAL STOCK
PRICE VOLATILITY.

     In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation, which has
been prevalent with respect to technology companies. Securities litigation could
result in substantial costs, harm our financial condition and would divert
management's attention and resources.

                                       17
<PAGE>   19

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT AN
ACQUISITION OF US, WHICH COULD DECREASE THE VALUE OF YOUR SHARES.

     Our certificate of incorporation and bylaws and Delaware law will contain
provisions that could make it harder for a third party to acquire us without the
consent of our board of directors, although these provisions have little
significance while we are controlled by HNC. These provisions will include a
classified board of directors and limitations on actions by our stockholders by
written consent. In addition, our board of directors will have the right to
issue preferred stock without stockholder approval, which could be used to
dilute the stock ownership of a potential hostile acquiror. Delaware law will
also impose some restrictions on mergers and other business combinations between
us and any holder of 15% or more of our outstanding common stock, other than
HNC. Although we believe these provisions will provide for an opportunity to
receive a higher bid by requiring potential acquirors to negotiate with our
board of directors, these provisions apply even if the offer may be considered
beneficial by some stockholders.

OUR USE OF THE PROCEEDS FROM THIS OFFERING MAY NOT MAXIMIZE RETURNS ON
INVESTMENT.

     We have broad discretion in how to use the proceeds of this offering.
Stockholders may not agree with the ways management decides to use the proceeds.
Our primary goal with this offering is to create a public market for our common
stock. We currently plan to use the proceeds of this offering for working
capital and general corporate purposes, including the repayment of intercompany
debt to HNC. Until we need to use the proceeds of this offering, we intend to
invest the proceeds in investment grade, interest bearing securities.

PURCHASERS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.

     The initial public offering price of our common stock is substantially
higher than the book value per share of the outstanding common stock.
Accordingly, if you purchase common stock in this offering, you will experience
immediate dilution of approximately $          in the book value per share of
the common stock, meaning that the net tangible book value of each share
purchased by you will be less than the purchase price you paid. To the extent
that outstanding options to purchase our common stock are exercised, or options
reserved for issuance are issued and exercised, each stockholder purchasing in
this offering will experience further substantial dilution. For a more detailed
discussion of the dilution you can expect to experience, see "Dilution."

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<PAGE>   20

               SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

     This prospectus contains forward-looking statements in "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks outlined
under "Risk Factors," that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

     Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform these statements to actual future results.

                                       19
<PAGE>   21

                            OUR SEPARATION FROM HNC

     Set forth in this section is HNC's current intention as to the possible
distribution of any or all of its shares of our common stock to its
stockholders. HNC is not obligated to complete the distribution. If the
distribution is ultimately completed, HNC does not have any obligation with
respect to the timing or any of the terms of the distribution. We cannot assure
you as to whether or not or when the distribution will occur, or as to the terms
of the distribution.

OVERVIEW

     We are currently a wholly owned subsidiary of HNC Software Inc., a public
company that develops and markets predictive software solutions for businesses
in financial and other industries. Immediately prior to the completion of this
offering, our business will combine the business activities of Retek Information
Systems, Inc. and Retek Logistics, Inc. Retek Information Systems develops and
markets web-based business-to-business software solutions for retailers. Founded
in 1995, Retek Information Systems was acquired by HNC in 1996. Retek Logistics,
founded in 1985, develops warehouse management software solutions. HNC acquired
Retek Logistics in 1998. On September 9, 1999, Retek Logistics was
reincorporated as a Delaware corporation and renamed "Retek Inc." In connection
with the separation of our business from HNC, HNC will contribute all of the
outstanding capital stock of Retek Information Systems to Retek Inc.

     HNC has informed us that, following the completion of this offering, it is
HNC's current intention to distribute pro rata to its stockholders, as a
dividend, all of the shares of our common stock HNC will own after this
offering, subject to the satisfaction and fulfillment of several conditions. The
conditions to the distribution include, but are not limited to, the following:

     -  HNC's receipt of a written ruling from the Internal Revenue Service that
        the distribution qualifies for tax-free treatment under Section 355 of
        the Internal Revenue Code, such that HNC and HNC's stockholders will not
        recognize income for federal tax purposes as a result of the
        distribution;

     -  HNC board of directors determining that the distribution is in the best
        interest of HNC's stockholders; and

     -  HNC's ability to effect the distribution in compliance with applicable
        law and without violation or acceleration of its contractual
        obligations.

     HNC has indicated that the distribution will not occur prior to the later
of (1) March 31, 2000, and (2) 180 days after the completion of this offering
(unless the lead underwriter consents to an earlier date).

     HNC has the sole discretion to determine the timing, structure and terms of
the distribution. HNC is not obligated to carry out the distribution, and we
cannot assure you as to whether or when the distribution may occur. Neither HNC
nor we have any intention of purchasing or redeeming the shares issued in this
offering if the distribution does not occur. In addition, even if the
distribution is ultimately completed, HNC does not have any obligation with
respect to the timing or any of the terms of the distribution.

BENEFITS OF THE SEPARATION

     We believe that we will realize certain benefits from our separation from
HNC, including the following:

     -  Greater Strategic Focus.  As a result of having our own management team
        and a board with independent outside directors, we expect to have a
        sharper focus on our business and strategic opportunities. We will also
        have greater ability to modify business processes to better fit the
        needs of our customers and employees.

                                       20
<PAGE>   22

     -  Better Incentives for Employees and Greater Accountability.  The
        separation will allow us to offer our employees compensation, including
        cash and stock based compensation, directly linked to the performance of
        our business. We expect these incentives to enhance our ability to
        attract and retain qualified personnel.

     -  Increased Speed and Responsiveness.  We expect to be able to make
        decisions more quickly, deploy resources more rapidly and efficiently
        and operate with greater flexibility than when we were a part of a
        larger organization. In addition, we expect to enhance our
        responsiveness to customers and partners.

SEPARATION AND TRANSITIONAL AGREEMENTS

     We will enter into agreements with HNC providing for the separation of our
business from HNC, including a separation agreement and a corporate rights
agreement. These agreements will generally provide for, among other things, the
transfer from HNC to us of assets and the assumption by us of liabilities
relating to our business, in each case to the extent agreed to by HNC and us. We
will also enter into agreements with HNC regarding the licensing to us of
intellectual property relating to our business for use in our retail market and
agreements governing our various interim and ongoing relationships with HNC,
including a transitional services agreement pursuant to which HNC will provide
us with specified interim administrative and other services and a tax sharing
agreement pursuant to which we will contribute to the payment of HNC's income
taxes while we are consolidated with HNC for income tax purposes.

     If HNC carries out the tax-free distribution, these agreements will
restrict our ability to take specified actions that, if taken, would cause the
distribution to be taxable to HNC or its stockholders unless we obtain the
consent of HNC or a supplemental ruling from the Internal Revenue Service. In
addition, under the separation agreement, we will agree to indemnify HNC on an
after-tax-basis for any tax liability incurred by HNC with respect to the
distribution as a result of our taking any of these specified actions or any
transaction or event occurring after the distribution that involves our stock,
assets or business or that of any of our affiliates, whether or not HNC consents
or a supplemental ruling is obtained.

     The agreements relating to our separation from HNC will be made in the
context of a parent-subsidiary relationship, were negotiated in the overall
context of our separation from HNC and will not be conditioned on HNC's
completion of the distribution. The terms of these agreements may be more or
less favorable than those we could have negotiated with unaffiliated third
parties. For more information regarding the separation agreements, see "Certain
Transactions."

POSSIBLE FUTURE DISTRIBUTION BY HNC OF OUR COMMON STOCK

     After the completion of this offering, HNC will own      % of the total
number of outstanding shares of our common stock, or approximately      % if the
underwriters' over-allotment option is exercised in full. HNC has informed us
that, after the completion of this offering, it is HNC's current intention to
distribute pro rata to its stockholders, as a dividend, all of the shares of our
common stock HNC will own after this offering, subject to the satisfaction and
fulfillment of several conditions. HNC is not obligated to carry out the
distribution and we cannot assure you as to whether or when the distribution may
occur.

                                       21
<PAGE>   23

                                USE OF PROCEEDS

     The net proceeds to us from the sale of the           shares of common
stock in this offering are estimated to be approximately $          million,
after deducting the underwriting discounts and commissions and estimated
offering expenses, and assuming no exercise of the underwriters' over-allotment
option to purchase           shares from us and assuming an initial public
offering price of $          per share. The primary purposes of this offering
are to increase our working capital, create a public market for our common
stock, increase our visibility in our markets and facilitate future access to
the public finance markets.

     We intend to use the net proceeds from this offering for general corporate
purposes, principally working capital, including repayment of intercompany debt
to HNC, capital expenditures, geographic expansion of our operations, potential
acquisitions, and additional sales and marketing efforts. Except as discussed in
"Management Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," we have no specific
understandings, commitments or agreements with respect to any acquisition of or
investment in complementary businesses, products or technologies and are not
currently engaged in any negotiations for any such acquisition or investment.
Pending such uses, we will invest the proceeds of this offering in short-term,
interest-bearing, investment-grade securities.

                                DIVIDEND POLICY

     We currently expect to retain future earnings, if any, for use in the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.

                                       22
<PAGE>   24

                                 CAPITALIZATION

     The following table sets forth the following information:

     -  our actual capitalization as of September 30, 1999, and

     -  our capitalization on an as adjusted basis, giving effect to the sale of
                  shares of common stock in this offering at an assumed initial
        public offering price of $          per share, assuming no exercise of
        the underwriters' over-allotment option and after deducting the
        underwriting discounts and commissions and estimated offering expenses
        payable by us.

     This table excludes the following shares:

     -            shares of common stock issuable upon the exercise of stock
        options outstanding under our Retek Inc. 1999 Equity Incentive Plan, and
                  shares of common stock available for issuance under this
        equity incentive plan;

     -            shares of common stock available for issuance under our Retek
        1999 Director Stock Option Plan; and

     -            shares of common stock available for issuance under our Retek
        1999 Employee Stock Purchase Plan.

     The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the related notes appearing
elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                                    SEPTEMBER 30, 1999
                                                                --------------------------
                                                                 ACTUAL       AS ADJUSTED
                                                                ---------    -------------
                                                                (IN THOUSANDS, EXCEPT PER
                                                                       SHARE DATA)
<S>                                                             <C>          <C>
Stockholders' equity:
  Preferred stock, par value $0.01 per share:
     shares authorized; no shares issued and outstanding
     actual and no shares issued and outstanding, as
     adjusted...............................................
  Common stock, par value $0.01 per share:           shares
     authorized; no shares issued and outstanding actual and
               shares issued and outstanding, as adjusted...
Additional paid-in capital..................................
Retained earnings...........................................
                                                                 -------        -------
  Total stockholders' equity................................
                                                                 -------        -------
          Total capitalization..............................     $              $
                                                                 =======        =======
</TABLE>

                                       23
<PAGE>   25

                                    DILUTION

     Our net tangible book value as of September 30, 1999 was $          , or
approximately $     per share. Net tangible book value per share represents the
amount of our total tangible assets less our total liabilities, divided by the
number of shares of common stock outstanding. Dilution in net tangible book
value per share represents the difference between the amount per share paid by
purchasers of shares of our common stock in this offering and the net tangible
book value per share of our common stock immediately afterwards. After giving
effect to the sale of the           shares of common stock in this offering and
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us, our pro forma net tangible book value at
September 30, 1999, would have been $          , or approximately $     per
share. This represents an immediate increase in pro forma net tangible book
value of $     per share to existing shareholders and an immediate dilution in
pro forma net tangible book value of $     per share to new investors purchasing
shares of common stock in this offering. The following table illustrates this
dilution on a per share basis:

<TABLE>
<S>                                                             <C>        <C>
Assumed initial public offering price per share.............               $
  Net tangible book value per share as of September 30,
     1999...................................................    $
  Increase attributable to new investors....................
                                                                -------
Pro forma net tangible book value per share after this
  offering..................................................
                                                                           -------
Dilution in pro forma net tangible book value per share to
  new investors.............................................               $
                                                                           =======
</TABLE>

     In connection with this offering, we will make grants of stock options to
executive officers and other employees and independent contractors under our
Retek 1999 Equity Incentive Plan. See "Management -- Employee Benefit
Plans -- Retek 1999 Equity Incentive Plan." An aggregate of           shares of
common stock are issuable upon the exercise of these options at an exercise
price of $     per share. The exercise of these or other stock options granted
under our Retek 1999 Equity Incentive Plan or otherwise in the future could
result in dilution to you. The above table assumes no exercise of any such
options and no exercise of the underwriters' over-allotment option.

                                       24
<PAGE>   26

                        SELECTED COMBINED FINANCIAL DATA

     The data set forth below are qualified in their entirety by reference to,
and should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the combined financial
statements and related notes included elsewhere in this prospectus. The selected
combined financial data as of December 31, 1997 and 1998, and June 30, 1999 and
for each of the years in the three year period ended December 31, 1998 and the
six-month period ended June 30, 1999 have been derived from our audited combined
financial statements included elsewhere in this prospectus. The selected
combined financial data as of December 31, 1994, 1995 and 1996, for each of the
years in the two-year period ended December 31, 1995 and for the six-months
ended June 30, 1998, have been derived from our separate unaudited combined
financial statements, not included in this prospectus, that have been prepared
on the same basis as the audited combined financial statements and, in the
opinion of our management, contain all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of our combined
operating results and combined financial position for such periods. The combined
operating results for the six months ended June 30, 1999 are not necessarily
indicative of the results to be expected for any other interim period or any
future fiscal year.

<TABLE>
<CAPTION>
                                                                                          SIX MONTHS ENDED
                                                  YEAR ENDED DECEMBER 31,                     JUNE 30,
                                       ---------------------------------------------   ----------------------
                                        1994     1995     1996      1997      1998        1998         1999
                                       ------   ------   -------   -------   -------   -----------   --------
                                                                                       (UNAUDITED)
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                    <C>      <C>      <C>       <C>       <C>       <C>           <C>
COMBINED STATEMENT OF INCOME DATA:
Total revenue.......................   $1,912   $3,836   $13,433   $30,923   $55,033     $25,313     $37,690
Gross profit........................      247      698     9,554    27,278    41,181      19,601      26,970
Operating (loss) income.............     (328)    (536)    1,418     6,619     8,088       2,504       5,792
Net (loss) income...................     (321)    (244)    2,233     3,476     3,878         568       3,460
Pro forma unaudited basic and
  diluted net income per common
  share.............................                                         $  1.73                 $  1.55
Shares used in computing pro forma
  unaudited basic and diluted net
  income per common share...........                                           2,238                   2,238
</TABLE>

<TABLE>
<CAPTION>
                                                             DECEMBER 31,                    JUNE 30,
                                             ---------------------------------------------   --------
                                              1994     1995     1996      1997      1998       1999
                                             ------   ------   -------   -------   -------   --------
                                                                  (IN THOUSANDS)
<S>                                          <C>      <C>      <C>       <C>       <C>       <C>
COMBINED BALANCE SHEET DATA:
Cash and cash equivalents..................  $  434   $  523   $ 1,459   $ 2,469   $   415   $   930
Working capital............................    (181)    (480)      680     5,016    12,876    15,800
Total assets...............................     753    1,821    30,173    37,896    51,283    57,765
Payable to HNC Software Inc................     578      883     6,197     6,491     5,944     7,927
Total stockholder's equity.................       7      237    20,469    24,607    36,016    39,121
</TABLE>

-------------------------

     For an explanation of the determination of the number of shares used in
computing pro forma unaudited basic and diluted net income per common share, see
Note 1 of Notes to Combined Financial Statements.

                                       25
<PAGE>   27

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion of our financial condition and results of
operations should be read in conjunction with our combined financial statements
and the related notes, and the other financial information included in this
prospectus. This discussion and analysis contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, those set forth under "Risk
Factors" and elsewhere in this prospectus.

OVERVIEW

     We are currently a wholly owned subsidiary of HNC. Immediately prior to the
completion of this offering, our business will combine the business activities
of Retek Information Systems, Inc. and Retek Logistics, Inc. Retek Information
Systems develops and markets web-based, business-to-business global software
solutions for retailers. Founded in 1995, Retek Information Systems was acquired
by HNC in 1996. Neil Thall Associates, Inc., a wholly owned subsidiary of HNC
since 1991, which develops predictive software solutions for retailers, was
merged into Retek Information Systems in April 1997. Financial results of Neil
Thall Associates are included in all periods presented. Retek Logistics, founded
in 1985, develops warehouse management software solutions. HNC acquired Retek
Logistics in 1998. On September 9, 1999, Retek Logistics was reincorporated as a
Delaware corporation and renamed "Retek Inc." In connection with the separation
of our business from HNC, HNC will contribute all of the outstanding capital
stock of Retek Information Systems to Retek Inc.

     The acquisition of Retek Information Systems by HNC allowed for the
integration of HNC's patented predictive technology into our software solutions
for retailers. We formalized a marketing relationship with Oracle in September
1998, providing us with an effective partnership with a world leader in
electronic commerce, an international channel to the largest retailers and the
support of Oracle's worldwide sales force.

     We have generated revenue from the sale of software licenses, maintenance
and support contracts and professional consulting and contract development
services. Customers who license our software generally purchase maintenance
contracts, typically covering renewable annual periods. In addition, customers
may purchase consulting services, which are customarily billed at a fixed daily
rate plus out-of-pocket expenses. Contract development services, including new
product development services, are typically performed for a fixed fee. We also
offer training services that are billed on a per student or per class session
basis. Our total revenue has grown from $13.4 million in 1996 to $55.0 million
in 1998. We have been profitable for eleven consecutive quarters, resulting in
retained earnings of $12.8 million as of June 30, 1999.

     Our revenue growth has resulted from a combination of increased market
penetration and an expanding product offering. In 1996 the majority of our
license revenue was attributable to a single client/server software solution,
our Retek Merchandising System. Our investments in research and development,
acquisitions and alliances have helped us bring new software solutions to
market. Our investments produced a suite of decision support solutions in 1997;
the retooling of our applications for the web in 1998; and the delivery of
web-based, business-to-business collaborative planning, critical path and
product design solutions in 1999. To support our growth during these periods we
also continued to invest in internal infrastructure by hiring employees
throughout various departments of the organization.

     We market our software solutions worldwide through direct and indirect
sales channels. Revenue generated from our direct sales channel accounted for
approximately 100%, 89% and 74% of our total revenue in 1997, 1998 and the six
months ended June 30, 1999. Our indirect sales channel is driven mainly by our
relationship with Oracle.

     Revenue attributable to customers outside of North America accounted for
approximately 42%, 36% and 43% of our total revenue in 1997, 1998 and the six
months ended June 30, 1999. Approximately 22%
                                       26
<PAGE>   28

and 25% of our sales were denominated in currencies other than the U.S. dollar
for 1998 and the six months ended June 30, 1999.

     We primarily sell perpetual licenses for which we recognize revenue in
accordance with generally accepted accounting principles, upon meeting each of
the following criteria:

     -  execution of a written purchase order, license agreement or contract;

     -  delivery of software authorization keys;

     -  the license fee is fixed and determinable;

     -  collectibility of the proceeds is assessed as being probable; and

     -  vendor-specific objective evidence exists to allocate the total fee to
        elements of the arrangement.

     Vendor-specific objective evidence is based on the price charged when an
element is sold separately, or if not yet sold separately, is established by
authorized management. All elements of each order are valued at the time of
revenue recognition. We recognize revenue:

     -  for sales made through our distributors, resellers and original
        equipment manufacturers, at the time these partners report to us that
        they have sold the software to the end-user and after all revenue
        recognition criteria have been met;

     -  from maintenance agreements related to our software, over the respective
        maintenance periods;

     -  from customer modifications, as the services are performed using the
        percentage of completion method; and

     -  from services, using the percentage of completion method, based on costs
        incurred to date compared to total estimated costs at completion.

     We record amounts received under contracts in advance of performance as
deferred revenue and recognize these amounts within one year from receipt.

                                       27
<PAGE>   29

RESULTS OF OPERATIONS

     The following table presents selected financial data for the periods
indicated as a percentage of our total revenue. Our historical reporting results
are not necessarily indicative of the results to be expected for any future
period.

<TABLE>
<CAPTION>
                                                               AS A PERCENTAGE OF TOTAL REVENUE
                                                             ------------------------------------
                                                                 YEAR ENDED         SIX MONTHS
                                                                DECEMBER 31,      ENDED JUNE 30,
                                                             ------------------   ---------------
                                                             1996   1997   1998    1998     1999
                                                             ----   ----   ----   ------   ------
<S>                                                          <C>    <C>    <C>    <C>      <C>
Revenue:
  License and maintenance.................................    73%    93%     78%     78%      73%
  Services and other......................................    27      7      22      22       27
                                                             ---    ---    ----    ----     ----
     Total revenue........................................   100    100     100     100      100
                                                             ---    ---    ----    ----     ----
Cost of revenue:
  License and maintenance.................................    13      9       8       7        9
  Services and other......................................    16      3      17      15       20
                                                             ---    ---    ----    ----     ----
     Total cost of revenue................................    29     12      25      22       29
                                                             ---    ---    ----    ----     ----
Gross margin..............................................    71     88      75      78       71
Operating expenses:
  Research and development................................    36     31      23      24       26
  Sales and marketing.....................................    14     27      26      28       22
  General and administrative..............................    10      9       7       8        7
  Acquired in-process research and development............    --     --       3       7       --
  Acquisition related amortization of intangibles.........    --     --       1       1        1
                                                             ---    ---    ----    ----     ----
     Total operating expenses.............................    60     67      60      68       56
                                                             ---    ---    ----    ----     ----
Operating income..........................................    11     21      15      10       15
Other income, net.........................................    --     --      --      --       --
                                                             ---    ---    ----    ----     ----
Income before income tax (benefit) provision..............    11     21      15      10       15
Income tax (benefit) provision............................    (6)    10       8       8        6
                                                             ---    ---    ----    ----     ----
Net income................................................    17%    11%      7%      2%       9%
                                                             ===    ===    ====    ====     ====
-------------------------
Cost of license and maintenance revenue, as a percentage
  of license and maintenance revenue......................    18%    10%     10%      9%      12%
Cost of services and other revenue, as a percentage of
  services and other revenue..............................    56%    44%     77%     71%      72%
</TABLE>

SIX MONTHS ENDED JUNE 30, 1998 AND 1999

REVENUE

     Total revenue.  Total revenue is comprised of software license and
maintenance revenue and services and other revenue. Total revenue increased 49%
from $25.3 million in the six months ended June 30, 1998 to $37.7 million in the
six months ended June 30, 1999.

     License and maintenance revenue.  License and maintenance revenue increased
38% from $19.8 million in the six months ended June 30, 1998 to $27.3 million in
the six months ended June 30, 1999. The increase was primarily the result of an
increase in the number of software licenses sold and the introduction of new
product offerings. In addition, products of Retek Logistics were added on March
31, 1998.

                                       28
<PAGE>   30

     Services and other revenue.  Services and other revenue increased 90% from
$5.5 million in the six months ended June 30, 1998 to $10.4 million in the six
months ended June 30, 1999. The increase was driven by increases in both
contract development and consulting services as a result of our expanding
customer base.

COST OF REVENUE

     Cost of license and maintenance revenue.  Cost of license and maintenance
revenue consists primarily of fees for third party software products that are
integrated into our products, and salaries and related expenses of our customer
support organization. Cost of license and maintenance revenue increased by 80%
from $1.8 million in the six months ended June 30, 1998 to $3.3 million in the
six months ended June 30, 1999. This increase was primarily a result of an
increase in the sale of software licenses with higher third party license fees.
As a percentage of license and maintenance revenue, cost of license and
maintenance revenue was 9% for the six months ended June 30, 1998 and 12% for
the six months ended June 30, 1999.

     Cost of services and other revenue.  Cost of services and other revenue
includes salaries and related expenses of our consulting organization; cost of
third parties contracted to provide consulting services to our customers; and an
allocation of our facilities and depreciation expenses. Cost of services and
other revenue increased 91% from $3.9 million for the six months ended June 30,
1998 to $7.5 million for the six months ended June 30, 1999. The increase is
attributable to the increase in staffing to meet the demand of consulting
services, as well as increased costs related to custom development projects.

OPERATING EXPENSES

     Research and development.  Research and development expenses, which are
expensed as incurred, consist primarily of salaries and related costs of our
engineering organization; fees paid to third-party consultants; and an
allocation of our facilities and depreciation expenses. We believe that our
success depends on continued enhancement of our current products and our ability
to develop new technologically advanced products that meet the sophisticated
requirements of our customers. We have increased our investment in research and
development in absolute dollars year over year since 1995. Research and
development expenses increased 61% from $6.1 million in the six months ended
June 30, 1998 to $9.7 million in the six months ended June 30, 1999. The
increase in these expenses was due to increases in engineering personnel and
related costs, as well as increases in third-party consulting costs. We expect
research and development expenses to increase in absolute dollars in future
periods.

     Sales and marketing.  Sales and marketing expenses consist primarily of
salaries and related costs of our sales and marketing organization: sales
commissions; costs of our marketing programs, including public relations,
advertising, trade shows, collateral sales materials, and our customer user
reference group program; rent and facilities costs associated with our regional
and international sales offices; and an allocation of our facilities and
depreciation expenses. Sales and marketing expenses increased 19% from $7.0
million in the six months ended June 30, 1998 to $8.4 million in the six months
ended June 30, 1999. The increases in sales and marketing expenses were due to
growth in our sales and marketing organization, an increase in sales
commissions, increased travel, and an expansion of our marketing programs.
Although we have increased our absolute sales and marketing expenses, the rate
of increase is less than the rate of increase in total revenue. We anticipate
that sales and marketing expenses will increase in absolute dollars to support
our intended expansion of our sales and marketing organization.

     General and administrative.  General and administrative expenses consist
primarily of costs from our finance and human resources organizations; third
party legal and other professional services fees; and an allocation of our
facilities costs and depreciation expenses. General and administrative expenses
increased 21% from $2.1 million in the six months ended June 30, 1998 to $2.6
million in the six months ended June 30, 1999. The increase in absolute general
and administrative expenses is attributable to growth of our administrative
organizations in support of our overall growth. General and administrative
expenses decreased to 7% of total revenue for the six months ended June 30, 1999
from 8% of total revenue for the
                                       29
<PAGE>   31

six months ended June 30, 1998. The decrease in general and administrative
expenses as a percentage of total revenue reflects increasing economies of scale
and operating efficiencies. We expect that becoming an independent public
company may create a short-term increase in general and administrative expenses
as a percentage of total revenues.

     Income Tax Provision.  The income tax provision was $1.9 million for the
six months ended June 30, 1998 and $2.3 million for the six months ended June
30, 1999. The income tax provisions for the six months ended June 30, 1998 and
1999 are based on management's estimates of the effective tax rates to be
incurred by us during those respective full fiscal years. The income tax
provision in 1998 includes the tax effects of non-deductible, one-time
write-offs of in-process research and development related to the purchase of
Retek Logistics, as well as research and development tax credits generated
during the six months ended June 30, 1998 that we anticipate using in the
future. The income tax provision for 1999 includes the tax effects of
non-deductible amortization related to the purchase of Retek Logistics, as well
as research and development tax credits generated during the six months ended
June 30, 1999 that we anticipate using in the future.

YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

REVENUE

     Total revenue.  Total revenue increased 130% from $13.4 million in 1996 to
$30.9 million in 1997 and 78% to $55.0 million in 1998.

     License and maintenance revenue.  License and maintenance revenue increased
197% from $9.7 million in 1996 to $28.9 million in 1997 and 48% to $42.8 million
in 1998. The increase in both 1997 and 1998 was primarily due to the addition of
new customers as well as the introduction of new software solutions. The average
dollar sale per customer has increased as we are selling proportionately more
software solutions to larger retail customers. In addition, revenue from sales
of products of Retek Logistics were added on March 31, 1998.

     Services and other revenue.  Services and other revenue decreased 45% from
$3.7 million in 1996 to $2.0 million in 1997 and increased 505% to $12.3 million
in 1998. The decrease from 1996 to 1997 was primarily attributable to a decrease
in commercial development contracts for the Demand Forecasting product, which
shifted to full commercial release under perpetual licensing arrangements in
early 1997. The increase in 1998 was due to increases in both custom development
and service projects as a result of our increasing customer base.

COST OF REVENUE

     Cost of license and maintenance revenue.  Cost of license and maintenance
revenue increased 53% from $1.8 million in 1996 to $2.7 million in 1997 and
increased 58% to $4.3 million in 1998. The increases are attributable to the
increases in license and maintenance revenue. As a percentage of license and
maintenance revenue, cost of license and maintenance revenue was 18% in 1996,
10% in 1997 and 10% in 1998. The decrease from 1996 to 1997 was attributable to
a decrease in royalty fees paid related to an indirect sales channel.

     Cost of services and other revenue.  Cost of service and other revenue
decreased from $2.1 million in 1996 to $898,000 in 1997 and increased to $9.5
million in 1998. As a percentage of services and other revenue, cost of services
and other revenue was 56% in 1996, 44% in 1997 and 77% in 1998. The decrease in
costs as a percentage of services and other revenues from 1996 to 1997 was
primarily due to a decrease in the number of commercial development contracts,
which have substantially lower margins than custom development or service
projects. The increase in 1998 was primarily attributable to an increase in
consulting contracts for which we utilized a significant amount of contract
labor, which in turn caused a decrease in gross margins for services. During
1997, we started to build our consulting services business

                                       30
<PAGE>   32

and as a result began to incur recruiting, training and management support
expenses. This build-up contributed to the decline in services and other gross
margins.

OPERATING EXPENSES

     Research and development.  We have increased our investment in research and
development in absolute dollars each year since 1995. Research and development
expenses increased 96% from $4.8 million in 1996 to $9.5 million in 1997 and 36%
to $12.9 million in 1998. As a percentage of total revenue, research and
development expenses decreased as a result of increasing economies of scale. The
absolute dollar increases in research and development expenses were due to
significant increases in engineering personnel and related costs, as well as
increases in third-party consulting costs.

     Sales and marketing.  Sales and marketing expenses increased 337% from $1.9
million in 1996 to $8.3 million in 1997 and 70% to $14.1 million in 1998.
Increases in sales and marketing expenses were due to expansion in our sales and
marketing organization, an increase in sales commissions, increased travel, and
the expansion of our marketing programs. Although we increased our absolute
sales and marketing expenses in 1998, they decreased as a percentage of total
revenue.

     General and administrative.  General and administrative expenses increased
106% from $1.4 million in 1996 to $2.9 million in 1997 and 35% to $3.9 million
in 1998. The increase in absolute dollars in general and administrative expenses
was attributable to growth of our administrative organization in support of our
overall growth. The decrease in expenses as a percentage of total revenue
reflected increasing economies of scale and operating efficiencies.

     In-process research and development.  In connection with the acquisition of
Retek Logistics in March 1998, in-process research and development of $1.8
million was charged to results of operations on the acquisition date. Certain
products of Retek Logistics were complete in certain areas and under development
in others. The classification of the technology as complete or under development
was made in accordance with the guidelines of Statement of Financial Accounting
Standards No. 86, Statement of Financial Accounting Standards No. 2 and
Financial Accounting Standards Board Interpretation No. 4. At the time of
acquisition, Retek Logistics had a number of new software products under
development, including Retek Distribution Management Versions 6.0 and 7.0 and
Retek Distribution Management CBT. Retek Distribution Management Version 6.0 and
Retek Distribution Management CBT were both completed during 1998. Retek
Distribution Management 7.0 was in an early state of development as of the
acquisition date and was completed during the second quarter of 1999, incurring
costs of approximately $900,000 to reach technological feasibility.

     We used an independent appraisal firm to assist us with our valuation of
the fair market value of the purchased assets. Fair market value is defined as
the estimated amount at which an asset might be expected to be exchanged between
a willing buyer and willing seller assuming the buyer continues to use the
assets in its current operations. We provided assumptions by product line of
revenue, cost of goods sold and operating expense to the appraiser to assist in
the valuation. The appraisal considered three traditional approaches to
valuation: the cost approach, the market approach and the income approach.

     With respect to the forecasted earnings provided to the appraiser, Retek
Logistics forecast slightly higher revenue growth rates as long as it continues
to meet market demands with new releases each year. These higher growth rates
reflect Retek Logistics' expectation of greater market acceptance with the
release of its Oracle-based platform, as well as improvements incorporated into
Retek Distribution Management Versions 6 and 7. Retek Logistics forecast that
gross margins would remain consistent relative to prior years. Retek Logistics
also forecast that its current operating expense levels would increase only
moderately in absolute dollars and, as a result, earnings before interest and
taxes were expected to increase in later years. We believe these growth
expectations are reasonable if new product versions are offered according to
schedule. The statements regarding our expectations are forward looking
statements, which are subject to risks and uncertainties. Actual results may
differ materially from those anticipated.

                                       31
<PAGE>   33

The important factors that could cause actual results to differ include those
discussed elsewhere in this prospectus.

     With respect to the discount rates used in the valuation approach, the
incomplete technology represents a mix of near and mid-term prospects for the
business and imparts a level of uncertainty to its prospects. It is the nature
of the business to be constantly developing new software for future product
releases. A reasonable expectation of return on the incomplete technology would
be higher than that of completed technology due to these inherent risks. As a
result, the earnings associated with incomplete technology were discounted at a
rate of 40% based upon the methodologies described in the next paragraph.

     Because Retek Logistics did not have short-term or long-term debt as of the
date of acquisition, the Moody's seasoned Baa rate for March 31, 1998 was
utilized as the cost of debt. The Capital Asset Pricing Model was used to
determine the cost of equity. It combines a risk free rate of return with an
equity risk premium multiplied by a factor, referred to as Beta, which is based
on the performance of common stock prices of similar publicly traded companies.
Employing these data, the discount rate attributable to the business was 30%,
which was used for valuing completed technology. Since incomplete technology
represents a mix of near and mid-term prospects for the business and imparts a
certain level of uncertainty and would require a higher return than completed
technology, the valuation report prepared by the appraiser suggests that a rate
of 40% be ascribed to the excess earnings of incomplete technology.

     Acquisition related amortization of intangibles.  In connection with the
purchase of Retek Logistics, the application of the purchase method for the
acquisition resulted in an excess of cost over net assets acquired of
approximately $6.6 million, of which $4.8 million was allocated to intangibles
and $1.8 million was allocated to in-process research and development. In
conjunction with the purchase, we recorded various intangible assets, which are
being amortized over estimated useful lives ranging from three to five years. In
connection with the acquisition of Retek Logistics, HNC has a contingent
obligation to issue additional shares of HNC common stock upon the achievement
of certain financial objectives during 1999. This consideration will not be
reflected in our financial position in the future.

     Income tax (benefit) provision.  The income tax benefit of $815,000 in 1996
was primarily attributable to the recognition of a $1.3 million deferred tax
asset based on anticipated future utilization of all of the remaining net
operating loss carryforwards, research and development credit carryforwards and
foreign tax credit carryforwards. A portion of the deferred tax asset had
previously been offset by a valuation allowance in the amount of $121,000. Based
on pre-tax income generated in the third and fourth quarters of fiscal 1996 and
estimates of future taxable income, our assessment was that it was more likely
than not that we would realize the deferred tax assets in future periods.
Therefore, we released the valuation allowance provided on the deferred tax
assets during the fourth quarter of 1996.

     The 1997 income tax provision of $3.2 million includes the effect of the
anticipated future realization of research and development tax credits generated
during the year. The 1998 income tax provision of $4.2 million includes the tax
effects of the non-deductible, one-time write-offs of in-process research and
development related to the purchase of Retek Logistics. Other items effecting
the tax provision primarily relate to the anticipated future realization of
research and development tax credits generated during the year.

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth a summary of our unaudited quarterly
operating results for each of the six quarters in the period ended June 30,
1999. This information has been derived from unaudited interim financial
statements that, in the opinion of management, have been prepared on a basis
consistent with the financial statements contained elsewhere in this prospectus
and include all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of such information when read in conjunction

                                       32
<PAGE>   34

with our combined financial statements and related notes. The operating results
for any quarter are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                           ------------------------------------------------------------
                                                            1998                            1999
                                           ---------------------------------------   ------------------
                                           MARCH 31   JUNE 30   SEPT. 30   DEC. 31   MARCH 31   JUNE 30
                                           --------   -------   --------   -------   --------   -------
<S>                                        <C>        <C>       <C>        <C>       <C>        <C>
Revenue:
  License and maintenance................  $ 9,032    $10,815   $11,066    $11,840   $11,658    $15,656
  Services and other.....................    2,109      3,357     3,450      3,364     4,989      5,387
                                           -------    -------   -------    -------   -------    -------
     Total revenue.......................   11,141     14,172    14,516     15,204    16,647     21,043
                                           -------    -------   -------    -------   -------    -------
Cost of revenue:
  License and maintenance................      636      1,179     1,260      1,274     1,404      1,854
  Services and other.....................    1,299      2,598     3,069      2,537     2,885      4,577
                                           -------    -------   -------    -------   -------    -------
     Total cost of revenue...............    1,935      3,777     4,329      3,811     4,289      6,431
                                           -------    -------   -------    -------   -------    -------
Gross profit.............................    9,206     10,395    10,187     11,393    12,358     14,612
                                           -------    -------   -------    -------   -------    -------
Operating expenses:
  Research and development...............    2,896      3,170     3,235      3,617     4,277      5,460
  Sales and marketing....................    3,355      3,666     3,242      3,812     3,818      4,556
  General and administrative.............    1,014      1,103       877        927     1,188      1,363
  Acquired in-process research and
     development.........................    1,750         --        --         --        --         --
  Acquisition related
     amortization of intangibles.........       --        143       143        143       258        258
                                           -------    -------   -------    -------   -------    -------
     Total operating expenses............    9,015      8,082     7,497      8,499     9,541     11,637
                                           -------    -------   -------    -------   -------    -------
Operating income.........................      191      2,313     2,690      2,894     2,817      2,975
Other income (expense), net..............       --         --        19         (8)       16         (2)
                                           -------    -------   -------    -------   -------    -------
Income before income tax provision.......      191      2,313     2,709      2,886     2,833      2,973
Income tax provision.....................       79      1,857     1,106      1,179     1,145      1,201
                                           -------    -------   -------    -------   -------    -------
Net income...............................  $   112    $   456   $ 1,603    $ 1,707   $ 1,688    $ 1,772
                                           =======    =======   =======    =======   =======    =======
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
  License and maintenance................       81%        76%       76%        78%       70%        74%
  Services and other.....................       19         24        24         22        30         26
                                           -------    -------   -------    -------   -------    -------
     Total revenue.......................      100        100       100        100       100        100
                                           -------    -------   -------    -------   -------    -------
Cost of revenue:
  License and maintenance................        6          8         9          8         8          9
  Services and other.....................       12         18        21         17        17         22
                                           -------    -------   -------    -------   -------    -------
     Total cost of revenue...............       18         26        30         25        25         31
                                           -------    -------   -------    -------   -------    -------
Gross margin.............................       82         74        70         75        75         69
                                           -------    -------   -------    -------   -------    -------
Operating expenses:
  Research and development...............       26         22        22         24        26         26
  Sales and marketing....................       30         27        22         25        23         22
  General and administrative.............        9          8         6          6         7          6
  Acquired in-process research and
     development.........................       15         --        --         --        --         --
  Acquisition related
     amortization of intangibles.........       --          1         1          1         2          1
                                           -------    -------   -------    -------   -------    -------
     Total operating expenses............       80         58        51         56        58         55
                                           -------    -------   -------    -------   -------    -------
Operating income.........................        2         16        19         19        17         14
Other income (expense), net..............       --         --        --         --        --         --
                                           -------    -------   -------    -------   -------    -------
Income before income tax provision.......        2         16        19         19        17         14
Income tax provision.....................        1         13         8          8         7          6
                                           -------    -------   -------    -------   -------    -------
Net income...............................        1%         3%       11%        11%       10%         8%
                                           =======    =======   =======    =======   =======    =======
</TABLE>

                                       33
<PAGE>   35

     In general, the trends identified in the six months and annual comparisons
apply to the quarterly results of operation, with the following exceptions:

     -  Quarter-over-quarter revenue growth from the first quarter to the second
        quarter in each of 1998 and 1999 was significantly greater than the
        quarter to quarter growth in each of the other quarters. This was a
        result of the Oracle fiscal year-end in May, which results in greater
        sales of Oracle Retail solutions in our second fiscal quarter.

     -  Cost of services and other revenue as a percentage of services and other
        revenue increased significantly in the third quarter of 1998 as a result
        of additional third party costs incurred to complete a large consulting
        project.

     -  Net income increased in each of the six quarters shown except for the
        change from the fourth quarter of 1998 to the first quarter of 1999.
        This change was a result of an increase in research and development
        expenses resulting from vertical expansion into the grocery and consumer
        direct sectors and acquisition-related amortization expenses.

     Retek has been successful in recruiting employees in all functional areas
in order to support the acquisition of new customers and the ongoing care for
our existing customer base. This staffing growth has been the key component of
the quarterly operating expense growth, and will be a significant component of
our future growth potential.

LIQUIDITY AND CAPITAL RESOURCES

     We have funded our operations to date primarily through funding from HNC in
the form of intercompany advances. At June 30, 1999, we had $930,000 in cash and
cash equivalents.

     Net cash provided by operating activities was $734,000 in 1996, $3.8
million in 1997, $885,000 in 1998 and $1.3 million for the six months ended June
30, 1999. Sources of cash for each period resulted primarily from net income
generated in those periods. Use of cash during these periods were principally
from increases in accounts receivable.

     Net cash used in investing activities was $281,000 in 1996, $3.1 million in
1997, $2.4 million in 1998 and $2.8 million for the six months ended June 30,
1999. The uses of cash during these periods were attributable to the acquisition
of capital assets, primarily computer equipment and leasehold improvements.

     Net cash provided by financing activities was $486,000 in 1996 and $294,000
in 1997. Net cash used by financing activities was $547,000 in 1998. Net cash
provided by financing activities was $2.0 million for the six months ended June
30, 1999. Sources and uses of cash for each period resulted from fluctuations in
funding from HNC.

     Deferred revenue consists principally of the unrecognized portion of
revenue received under maintenance service agreements. This revenue is
recognized ratably over the term of the service agreement. Deferred revenue was
$2.6 million at June 30, 1999.

     We believe that the net proceeds from this offering, less the repayment of
intercompany debt to HNC, together with our current cash and cash equivalents
and net cash provided by operating activities, will be sufficient to meet our
working capital and capital expenditure requirements for at least the next 12
months. As a result, HNC will no longer be a source of funding for operating
activities. Management intends to invest our cash in excess of current operating
requirements in short-term, interest-bearing, investment-grade securities.

     A portion of our cash could also be used to acquire or invest in
complementary businesses or products or otherwise to obtain the right to use
complementary technologies or data. From time to time, in the ordinary course of
business, we evaluate potential acquisitions of such businesses, products,
technologies or data. Retek Information Systems currently has an option
exercisable from September 30, 1999 until

                                       34
<PAGE>   36

December 31, 1999 to acquire Webtrak for cash. Webtrak owns the Webtrak Critical
Path and Portfolio Private Label products that we currently distribute. Retek
Information Systems intends to exercise the option shortly after September 30,
1999. We have no other current plans, agreements or commitments relating to
potential acquisitions, and are not currently engaged in any negotiations with
respect to any other transaction.

     Pursuant to an agreement between HNC and us, until two years after the
distribution, our ability to issue common stock in connection with acquisitions,
offerings or otherwise will be limited.

YEAR 2000 COMPLIANCE

Background of Year 2000 Issues

     Many currently installed computer and communications systems and software
products are unable to distinguish 21st century dates from 20th century dates.
This situation could result in system failures or miscalculations causing
disruptions in the operations of any business. As a result, many companies'
software and computer and communications systems may need to be upgraded or
replaced to comply with these Year 2000 requirements.

Customer Representations and Warranties

     Since September 1997, we have generally represented and warranted to our
customers in our software license agreements that the occurrence of the date
January 1, 2000 and any related leap-year issues will not cause our products to
fail to operate properly. In some cases, this warranty includes representations
regarding the ability of our product to store, display, calculate, compute and
otherwise process date-related data. Our warranty generally applies only to our
products and excludes failures resulting from the combination of our products
with other software or hardware or from the use of our software in a manner not
in accordance with the related documentation. If we breach this warranty,
remedies in most cases may include commercially reasonable efforts to replace
the software and to advise the customer how to achieve substantially the same
functionality through different procedures, as well as payment of monetary
damages.

Our Product Testing and Licensing

     We have tested all of our software for Year 2000 compliance. We derived our
testing method from our review and analysis of the Year 2000 testing practices
of other software vendors, relevant industry Year 2000 compliance standards and
the specific functionality and operating environment of our products. The tests
are run on all supported platforms for each release and include testing for date
calculation and internal storage of date information with test numbers starting
in 1999 and going over the Year 2000 boundary. Based on these tests, we believe
our products to be Year 2000 compliant with respect to date calculations and
internal storage of date information.

Interaction of our Products with Third-Party Software

     Our products contain, operate with and depend on third party code that we
may not be able to independently verify is Year 2000 compliant. The majority of
our products interface with and depend on Oracle's development tools. Oracle has
indicated that the version of their products on which current versions of our
software solutions depend is Year 2000 compliant, but Oracle has made no similar
statement regarding earlier versions of its products. Our software solutions
also contain and depend on software licensed to us by Lucent, MicroStrategy and
HNC. Although each of those companies has made representations that the licensed
code is Year 2000 compliant, we may not be able to verify this by independent
testing. Finally, our products also interact with external sources, including
other software programs and operating systems, which may not be Year 2000
compliant or which may not provide date data to our products in a manner that is
Year 2000 compliant. Any interaction with third-party software

                                       35
<PAGE>   37

that is not Year 2000 compliant could cause our products to fail to properly
operate or to properly process date information.

Our Internal Systems

     Although we do not have a formal contingency plan to address Year 2000
issues, we have assessed our internal risks associated with the Year 2000 issue
and concluded that these are minimal. We have inventoried our internal software
and hardware systems, as well as products and services provided by third-party
vendors. These systems include those related to product delivery, customer
service, internal and external communications, accounting and payroll, which we
consider critical areas of our business. We have obtained vendor certification
for the majority of our third-party systems and have developed a detailed risk
assessment and action plan that includes testing of both critical systems and
systems for which no certification has been obtained.

Costs of Addressing Year 2000 Compliance

     To date, our costs to address Year 2000 compliance have not been
significant. Based on our preliminary evaluations, we do not believe we will
incur significant operating expenses or be required to invest heavily in
computer system improvements to be Year 2000 compliant. We estimate that the
total costs will be less than $100,000. However, significant uncertainty exists
concerning the potential costs and effects associated with Year 2000 compliance.
Any Year 2000 compliance problem experienced by us or our customers could
decrease demand for our products, which could seriously harm our business and
operating results.

Risks of Year 2000 Issues

     We are considering potential worst case Year 2000 scenarios that address
issues arising from noncompliance by our customers, suppliers or internal
operating systems. Although our Year 2000 compliance project will strive to
uncover significant noncompliance issues, in the worst case not all Year 2000
problems may be uncovered by the Year 2000, which would harm our business.
However, we believe that our most probable worst case scenario is more likely to
arise from our customers' and vendors' inability to become Year 2000 compliant
than from our failure to bring our products into compliance. As a result, our
supply chain and revenue could be harmed.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"), which is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. This statement establishes a new
model for accounting for derivatives and hedging activities. Under FAS 133, all
derivatives must be recognized as assets and liabilities and measured at fair
value. In July 1999, the FASB issued Statement of Accounting Standards No. 137
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133," which defers the effective date to
all fiscal quarters of fiscal years beginning after June 15, 2000. The adoption
of FAS 133 is not expected to have a significant impact on our combined
financial position or results of operations.

     In January 1999, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-9 ("SOP 98-9"), "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." This SOP
retains the limitations of SOP 97-2 on what constitutes vendor-specific
objective evidence of fair value. SOP 98-9 will be effective for transactions
entered into in fiscal years beginning after March 15, 1999. The adoption of SOP
98-9 is not expected to have a significant impact on our combined financial
position or results of operations.

                                       36
<PAGE>   38

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     The following discusses our exposure to market risk related to changes in
interest rates, foreign currency exchange rates and equity prices.

Interest Rate Risk

     At June 30, 1999, Retek had $930,000 in cash and cash equivalents, which
consisted entirely of cash operating accounts. A decrease in market rates would
have no material effect on the value of these assets. We have no short- or
long-term debt, therefore, an increase in market rates would not directly affect
our financial results.

Foreign Currency Exchange Rate Risk

     We develop products in the United States and sell in North America, Asia
and Europe. As a result, our financial results could be affected by various
factors, including changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Our foreign currency risks are mitigated
principally by contracting primarily in US dollars and maintaining only nominal
foreign currency cash balances. Working funds necessary to facilitate the
short-term operations of our subsidiaries are kept in local currencies in which
they do business, with excess funds transferred to our offices in the United
States. Approximately 22% and 25% of our total sales were denominated in
currencies other than the US dollar for the year ended December 31, 1998 and the
six months ended June 30, 1999.

Equity Price Risk

     We do not own any equity investments. Therefore, we are not currently
exposed to any direct equity price risk.

Impact of European Monetary Conversion

     We are aware of the issues associated with the changes in Europe resulting
from the formation of a European economic and monetary union, or EMU. One change
resulting from this union required EMU member states to irrevocably fix their
respective currencies to a new currency, the euro, as of January 1, 1999, at
which date the euro became a functional legal currency of these countries.
Through December 31, 2002, business in the EMU member states will be conducted
in both the existing national currency, such as the French franc or the Deutsche
mark, and the euro. As a result, companies operating or conducting business in
EMU member states will need to ensure that their financial and other software
systems are capable of processing transactions and properly handling these
currencies, including the euro. We are still assessing the impact that
conversion to the euro will have on our internal systems, the sale of our
solutions and the European and global economies. We will take appropriate
corrective actions based on the results of our assessment. We have not yet
determined the cost related to addressing this issue although we do not expect
these costs to be significant.

                                       37
<PAGE>   39

                                    BUSINESS

RETEK OVERVIEW

     We are a leading provider of web-based, business-to-business software
solutions for retailers and their trading partners. Our software solutions
enable retailers to use the Internet to communicate and collaborate efficiently
with the suppliers, distributors, wholesalers, logistics providers, brokers,
transportation companies, consolidators and manufacturers that make up the
global retail supply chain. Our solutions are rapidly deployable, highly
scalable, retail industry focused and incorporate predictive analytic
technologies. We seek to enhance the ability of retailers to interact with their
supply chain by introducing Retail.com, which we believe will be the first
electronic commerce network providing collaborative business-to-business
software solutions to the retail industry.

     We market our software solutions through our direct and indirect sales
channels primarily to retailers who sell to their customers via traditional
retail stores, catalogs and/or web store fronts. To date we have licensed our
solutions across a variety of retail industry sectors to over 100 retailers,
including AnnTaylor, Brooks Brothers, Disney Stores, Eckerd, Hallmark, Internet
Shopping Network and Lancome. We expect our Retail.com network offering to
extend our target market by making our solutions available to small and
mid-sized retailers and their trading partners.

INDUSTRY BACKGROUND

     According to Euromonitor, worldwide retailer-to-consumer sales exceeded
$6.5 trillion in 1997. We estimate that the market for business-to-business
commerce is even larger than retailer-to-customer sales, and involves, according
to Dunn & Bradstreet, over 3 million retail, wholesale and supplier
organizations operating in the global marketplace, with sales, distribution and
manufacturing typically involving multiple organizations in many countries.

     We believe the Internet is beginning to change the way this market
operates. Not only does the Internet provide a new distribution channel for
conducting commerce with customers, it provides an even larger opportunity for
retail businesses to communicate and transact commerce with their supply chain.
According to Forrester Research, business-to-business electronic commerce is
expected to grow from $43 billion in 1998 to $1.3 trillion in 2003, accounting
for more than 90% of the dollar value of electronic commerce in the United
States. The market for software solutions for business-to-business electronic
commerce is estimated by Forrester Research to grow from $171 million in 1998 to
$3.1 billion in 2001, a market that is estimated to be more than five times the
size of the business-to-consumer electronic commerce software market.

     By providing a means for streamlining and making more efficient the process
of collaboration between trading partners, the Internet can facilitate better
decision-making and help reduce the transaction costs of business-to-business
commerce. For example, the Internet enables:

     -  Real-time collaboration among organizations on production
        priorities.  This means that retailers can identify today's sale trends
        at the point-of-sale and use this information to direct production
        priorities in the manufacturing facility. Retailers can use this
        information to reduce production of products that are in lesser demand
        and eliminate the cost of manufacturing, moving, holding and eventually
        marking down the price of these products.

     -  Collaboration on the design of new products in "virtual design
        studios."  By giving all parties involved in the design process
        real-time input and access to information, the Internet can reduce the
        time-to-market for new product offerings and help increase the
        likelihood of developing a product offering that is responsive to
        specific customer needs.

     -  Real-time communication among all members of the supply chain.  This
        means that new information from one part of the supply chain can be
        easily communicated throughout the chain.

                                       38
<PAGE>   40

       A delay in a scheduled delivery can, for instance, be quickly announced
       and broadly disseminated. Actions to address the delay can then be
       quickly implemented. This real-time communication helps reduce the
       disruption and costs that arise when new information must be incorporated
       among a diverse and disparate supply chain.

     Most large and mid-sized retailers have historically relied upon
custom-built systems, typically developed internally, to manage their
interactions with trading partners. Many of these systems use 1970s mainframe
technology, are not web-based, and do not permit collaboration among members of
the supply chain. More recently, retailers have begun to purchase packaged
solutions with a specific retail industry focus. These products typically lack
the scalability required by larger retailers and are not web-based. Enterprise
resource planning systems have also been adopted on a limited scale. These
complex systems are expensive to implement and maintain, typically lack the
scalability required by retailers, and do not have a specific retail industry
focus. Recently introduced business-to-business electronic commerce products do
not offer specific retail industry focus and typically lack the scalability
required by retailers.

     We believe that a market opportunity exists to provide retailers with a
business-to-business software solution that is web-based, collaborative and
designed specifically for the retail industry. This solution should be
easy-to-use, leverage a retailer's existing investments in information
technology and be flexible enough to meet the specific needs of a particular
retail sectors, such as fashion, mass merchandise, grocery and drug stores. In
addition, the solution should be highly scalable to process and analyze vast
amounts of customer sales and supplier performance data unique to the retail
industry.

RETEK SOLUTION

     We have developed and deployed web-based, business-to-business software
solutions that enable retailers to manage the entire retail supply chain. The
key features of our software solutions are:

     -  Collaborative retail supply chain.  Our solutions electronically link
        retailers with their trading partners to facilitate collaboration across
        all aspects of the supply chain, from the initial prediction of customer
        demand through product design and manufacturing to inventory management.
        We believe that by facilitating this collaboration, we will enable
        retailers to reduce unnecessary costs and time-to-market, while
        increasing product quality and improving margins.

     -  Robust, predictive and analytic technologies.  Our solutions provide
        advanced predictive tools to process and analyze the vast amounts of
        data available to retailers. Our unique, proprietary technologies enable
        retailers to identify patterns in data that may not otherwise be
        visible. This information helps our customers reduce inventories,
        increase marketing effectiveness and improve customer satisfaction.

     -  Web-based, easy-to-use and rapidly deployable solutions.  Our web-based
        software solutions are easy to use and rapidly deployable. Retailers and
        their trading partners can access our software from any desktop with a
        web interface, and our software can be made available to all employees.
        Furthermore, because our software solutions are web-based, their
        deployment can reduce capital infrastructure and maintenance costs.

     -  Highly scalable and retail sector focused.  Our web-based solutions are
        built specifically to address the unique scalability requirements of the
        retail industry. In addition, we have developed solutions that meet the
        specific requirements of particular retail sectors, including fashion,
        mass merchandise, grocery and drug stores.

STRATEGY

     Our objective is to be the leading provider of web-based,
business-to-business software solutions for retailers and their trading
partners. As the retail supply chain evolves into an electronic network, we will

                                       39
<PAGE>   41

seek to further enable our customers to better manage, organize and drive
efficiencies through this network. Key elements of our strategy include:

     - Extending our web-based, business-to-business collaborative software
       solution, principally through the introduction of our Retail.com
       network.  By leveraging our technological advantages, customer base and
       retail expertise, we intend to make Retail.com the electronic commerce
       network for business-to-business commerce among retailers and their
       trading partners. Retail.com will provide a single point of access for
       all members of the retail supply chain and offer a broad range of
       software solutions that enable a rich and collaborative information
       exchange between retailers and their trading partners. This web-based,
       retail focused, business-to-business software solution will permit
       interactive collaboration on the wide range of supply and demand chain
       issues that retailers encounter.

     - Introducing existing customers to a broader offering of our software
       solutions.  We intend to expand the use of our products within existing
       client accounts. We have sold our software solutions products to more
       than 100 retailers, primarily large companies, across a range of retail
       sectors. We intend to further penetrate these accounts by cross-selling
       our other software solutions or suites of software solutions, all of
       which are independently deployable, and by introducing clients to the new
       collaborative software solution offering at Retail.com.

     - Leveraging our experience in retail.  We will continue to leverage our
       expertise in providing solutions to retailers. We have developed and
       deployed software solutions designed specifically for retailers since our
       formation. Our solutions address the need of retailers to process and
       track the millions of transactions they complete with their consumers and
       to communicate and transact business with their large, geographically
       diverse supply chain members. This focus on the retail industry permits
       us to constantly update and expand our offerings and to effectively
       develop new technologies to address the specific needs of the retail
       industry.

     - Expanding our relationship with implementation and hosting partners.  We
       have established relationships with large, international system
       integrators and consulting firms, such as Andersen Consulting and KPMG.
       These firms provide sales leads, implementation expertise and valuable
       third party endorsement of our software solutions. We plan to expand
       these relationships to increase our capacity to sell and implement our
       solutions. Systems integrators and consulting firms have a strong
       influence on software purchasing decisions within large companies, and
       they are increasingly seeking web-based collaborative software solutions
       that allow them to satisfy their clients' needs more rapidly than they
       can through customized product development. In addition, we intend to
       continue to offer our software solutions through web-based applications
       service providers for retailers that want a third party to host their
       solutions. We believe that the application service provider option will
       be particularly attractive to pure electronic commerce retail companies,
       as well as to small and mid-sized retailers that typically have limited
       internal information technology resources.

     - Extending our technological leadership.  We intend to increase our
       technological and product leadership by enhancing our products' core
       functionality and high performance analytic features. We believe that our
       software solutions, derived from the proprietary analytic and predictive
       technology of HNC and enhanced by our research scientists, provide us
       with a first mover advantage and an essential basis for the comprehensive
       Internet solution of Retail.com. We intend to continue to devote
       substantial resources to the development of new and innovative web-based
       products for business-to-business retail solutions and to continue to
       incorporate emerging web technologies. In addition, by implementing and
       actively promoting new industry standards, we intend to facilitate
       widespread adoption of our solutions by retailers.

                                       40
<PAGE>   42

RETEK PRODUCTS

     We have developed and deployed web-based, business-to-business software
solutions that address the entire retail operation. Our software solutions allow
retailers to effectively manage their demand and supply chain processes, getting
the right product in the right place at the right time at the right price. Our
principal software solutions consist of four integrated, but independently
deployable, components, which are accessed via a web browser and can be hosted
by an individual organization or applications service provider.

TRANSACTION SOLUTION

     Our Transaction Solution is a core suite of retail business applications
providing comprehensive operational management tools. This suite of software
solutions provides the foundation of operational support and process execution
across the retail enterprise, with the scalability needed to support the
mission-critical operations of many of the world's large retailers. The
web-based design of these solutions helps reduce the cost of supporting store
employees, while improving customer service. In addition, our Transaction
Solution is designed to ensure the integrity of the data used by our decision
support and predictive solutions.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
            PRODUCTS                                        FEATURES
<S>                               <C>
----------------------------------------------------------------------------------------------
 Retek Merchandising System       -  Provides the core inventory control and merchandise
                                     management functions that support the retail process
 Retek Trade Management           -  Enables retailers to manage the global import process
 Retek Distribution Management    -  Automates the entire warehousing process
 Retek Store Operations           -  Electronically links store employees to corporate data
                                     through radio-frequency hand-held devices and high-speed
                                     intranets
----------------------------------------------------------------------------------------------
</TABLE>

DECISION SUPPORT SOLUTION

     Our Decision Support Solution is a suite of job-specific data analysis and
exception management tools. This suite of software solutions supports flexible,
multidimensional access to built-in, retail-specific performance measures.
Retailers can analyze large volumes of customer sales and supplier performance
data by using the packaged data warehouse software, which allows rapid
deployment and return on investment. This suite of solutions generates
rule-based reports that highlight unusual or novel information, permitting
retailers to develop business solutions quickly.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
            PRODUCTS                                        FEATURES
<S>                               <C>
----------------------------------------------------------------------------------------------
 Retek Data Warehouse             -  Provides flexible, job-specific tools to assist retailers
                                     in utilizing and analyzing their data to effectively
                                     manage their business and share key information with
                                     suppliers
 Active Retail Intelligence       -  Generates and distributes rule-based exception reports
                                     and enables responses, including automated responses, to
                                     the exceptions to produce rapid resolution of performance
                                     problems
----------------------------------------------------------------------------------------------
</TABLE>

PREDICTIVE SOLUTION

     Our Predictive Solution is a suite of predictive technologies designed to
analyze the huge volume of customer sales and supplier performance data,
optimizing the demand and supply chains to minimize inventory costs and maximize
sales. By applying advanced algorithms to the mass of data processed by
retailers each day, our Predictive Solution is able to identify high value
information which supports one-to-one customer marketing, helps manage customer
relationships and optimize supply chain management. Analysis of the combinations
of products bought in each retail customer transaction can assist retailers in

                                       41
<PAGE>   43

identifying opportunities for increasing sales and the effectiveness of
promotions and reducing the cost of mark-downs and unnecessary inventory.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
            PRODUCTS                                        FEATURES
<S>                               <C>
----------------------------------------------------------------------------------------------
 Retek Behavior Profiler          -  Enables retailers to cluster and segment their customer
                                     and market basket data, uncovering meaningful and
                                     valuable relationships between products and customers
 Retek Demand Forecasting         -  Moves beyond traditional time-series techniques to tie
                                     events and causal factors, such as promotions, to daily
                                     forecasts of individual product demand at each store or
                                     selling channel
 Retek Replenishment              -  Uses optimization and simulation techniques to set up and
   Optimization                      maintain efficient inventory replenishment systems
----------------------------------------------------------------------------------------------
</TABLE>

BUSINESS-TO-BUSINESS COLLABORATIVE SOLUTION

     Our Business-to-Business Collaborative Solution is a suite of software
solutions that supports specific retail business processes and that will be
provided on Retail.com, a business-to-business electronic commerce network that
we will begin operating in the second half of 1999. We believe that Retail.com
will be the first electronic commerce network for the retail trading community.
The network will provide a single point of access for all members of the retail
supply chain and offer a broad range of software solutions that enable a rich
and collaborative information exchange between retailers and their trading
partners. Our solution is designed to allow organizations to increase the speed
and effectiveness of complex processes by providing a new collaborative approach
to traditional retail challenges. Using this solution, which is available for
immediate use with no implementation, support or hardware costs, retailers can
quickly realize potential performance improvement and bottom line impact.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
            PRODUCTS                                        FEATURES
<S>                               <C>
----------------------------------------------------------------------------------------------
 WebTrak Critical Path            -  Enables users to publish and share a critical path on the
                                     Internet, effectively shortening time scales and reducing
                                     costs
 Portfolio Private Label          -  Allows web-based collaboration to improve the new product
                                     design and development process
----------------------------------------------------------------------------------------------
</TABLE>

RETEK SERVICES

     We provide our customers with implementation and product support services,
conduct customer sponsored research and development and, on occasion, assist in
customizing our products to a client's specific needs. Our services range from
technical and implementation support to business benefit realization consulting,
which assists retailers in utilizing our software solutions to optimize their
potential benefits. We offer high-quality, timely, technical support to
customers via phone, e-mail and the Internet. Additionally, we publish online
versions or manuals, release notes and updates to existing documentation. We
provide a number of training programs in the United States. Courses cover topics
such as technical architecture, business use of the merchandizing functionality
and development standards and methodology.

CUSTOMERS

     We market our software solutions primarily to retailers who sell to their
customers via traditional retail stores, catalogs and/or web store fronts.
Historically, we have focused on organizations with gross sales in excess of
$500 million a year. We market across all formats of retailing, including
fashion, department stores, catalog and consumer direct, specialty retailers,
mass merchandise retailers and grocery, drug and convenience stores. We expect
the recent launch of our Retail.com network to extend our target market,
allowing small and mid-sized retailers and suppliers of all sizes to take
advantage of our solutions.

                                       42
<PAGE>   44

     The following is a representative list of companies that have agreed to
purchase at least $100,000 of our products and services:

<TABLE>
<S>                                        <C>
FASHION RETAILERS                          SPECIALTY RETAILERS
  AnnTaylor                                Chapters
  BHS                                        Container Store
  Brooks Brothers                            Cracker Barrel
  Mothercare                                 Disney Stores
  Reitmans                                   Hallmark
  Stage Stores                               Lancome USA
                                             Zale Corporation
DEPARTMENT STORES                          MASS MERCHANDISE RETAILERS
  El Palacio                               Family Dollar
  Hudson's Bay Company                       Pamida
  Selfridges                                 ShopKo
GROCERY, DRUG & CONVENIENCE STORES         CATALOG AND CONSUMER DIRECT
  Circle K, USA                            Home Shopping Network
  Eckerd                                     Internet Shopping Network
  Matahari                                   Littlewoods
  The Northwest Company
  NTUC Fairprice
  RiteAid
</TABLE>

SELECTED CUSTOMER APPLICATIONS

     The following examples span the full range of our software solutions and
illustrate how organizations are relying on us to provide high-value retail
solutions for their businesses.

<TABLE>
<CAPTION>
      CUSTOMER                                 APPLICATIONS
<S>                    <C>
Lancome USA            Lancome USA, a leader in prestige perfume, skin care and
                       cosmetics, has been using Retek Demand Forecasting to
                       optimize the allocation of its 800 stock keeping units,
                       commonly known as SKUs, in the stores on its Vendor Managed
                       Inventory program. Since the deployment of this application,
                       Lancome estimates that it has been able to drastically
                       decrease out-of-stock items from levels as high as 12% down
                       to 2.5% (some key products have been reduced to below 1%),
                       driving up sales and customer service, without increasing
                       overall inventory cost.
ShopKo                 ShopKo, a $2.4 billion specialty discount retailer with 300
                       stores and 100,000 SKUs, has been using the Retek
                       Merchandising System since 1996. According to ShopKo, the
                       annual growth rate, inventory turns, revenue, earnings and
                       comparable store sales have increased since then. Customer
                       satisfaction levels are also increasing as ShopKo provides
                       more of the products customers want, when they want them.
</TABLE>

                                       43
<PAGE>   45

<TABLE>
<CAPTION>
      CUSTOMER                                 APPLICATIONS
<S>                    <C>
Reitmans               Canada-based women's wear retailer Reitmans Ltd. watched its
                       profits increase after undergoing a major systems overhaul,
                       including implementing the Retek Merchandising System. In
                       the first six months of 1998, Reitmans saw a profit of $7.2
                       million, as opposed to a pre-tax loss of $2.6 million for
                       the same period the year before. Store sales have increased
                       as well. According to President Jeremy Reitman, improvements
                       in operating earnings have been a result of a reduction in
                       store operating costs and the containment of overhead
                       expenses. The new data and distribution technology,
                       including the Retek Merchandising System, is helping to cut
                       errors and collect valuable, timely information about
                       merchandise in each of the 619 stores. Mr. Reitman expects
                       better results next year with the implementation of the
                       Retek Data Warehouse.
Chapters               Chapters, Inc., Canada's largest book retailer, began using
                       the Retek Merchandising System in 1997 for its 250
                       traditional mall stores, 63 superstores and one university
                       bookstore. With the implementation of our solutions,
                       Chapters moved from two platforms to one integrated system.
                       In addition to the benefits of one point of data entry for
                       all stores, according to Chapters, it has also attained
                       improved in-stock position and greater efficiencies in
                       inventory management with our solution.
AnnTaylor              AnnTaylor, a U.S. fashion retailer with annual revenues of
                       $780 million and 360 stores, licensed the Retek
                       Merchandising System, Retek Demand Forecasting, Retek Active
                       Retail Intelligence, Retek Trade Management and Retek
                       Distribution Management. "We chose Retek because we wanted
                       an integrated core merchandising solution," says Wollaston
                       Morin, AnnTaylor's Senior Vice President of Information
                       Services. "We currently have several systems patched
                       together so we really wanted a solution where all the pieces
                       fit together seamlessly. Retek will give us this smooth
                       integration, we looked at a number of vendors, and felt that
                       Retek was the best fit."
</TABLE>

TECHNOLOGY CHARACTERISTICS

     We seek to develop innovative software solutions by combining our retail
industry and application knowledge and our strategy of partnering with
technology market leaders. Although we make extensive use of a broad range of
technologies, we take advantage of two key technologies:

     Web Architecture.  The Oracle toolset provides us with a web-based,
     scalable foundation for our software solutions. By leveraging our
     applications framework into a unified architecture, we are able to focus on
     creating additional business functionality in our solutions, rather than
     building and maintaining complex infrastructure code. As a global alliance
     partner of Oracle, our core development team works very closely with the
     Oracle technology group to take advantage of the latest features of the 8i
     database, the developer toolset, and the advances being driven by the
     Oracle mobile computing group. In addition, our use of Sun Microsystems'
     Java programming language allows us to deliver software that is portable
     and efficient, as well as easy to internationalize and reconfigure.

     Predictive Algorithms.  Our team of research scientists has expanded and
     tailored HNC's predictive technologies to fit the retail world. These
     technologies are able to analyze vast amounts of retail data, recognize and
     model complicated and sometimes subtle patterns, and apply these models to
     predicting and understanding the retail environment. Though the mathematics
     behind the predictive algorithms may be quite complex, software solutions
     that use them are carefully crafted to fit seamlessly into the

                                       44
<PAGE>   46

     retailers' business processes. These solutions enable retailers to optimize
     their supply chain, target store assortments, maximize advertising payback,
     minimize mark-downs and raise customer loyalty and satisfaction. The
     predictive algorithms we rely on to achieve these results include:

     -  Hybrid Forecasting Models.  The solution to many retail problems relies
        on good forecasting. Forecasting enhances such functions as store and
        warehouse replenishment, promotional planning, supplier collaboration,
        mark-down reduction, merchandise and assortment planning and labor
        scheduling. Our hybrid forecasting models were designed specifically for
        retail problems, and use hybrids of standard techniques, as well as
        internally developed methods. The models use hierarchical time series
        techniques, filtering techniques, regression-based causal forecasting,
        and exception management to provide a platform that may be applied to
        all of the previous functions.

     -  Context Vectors.  Context vectors can automatically categorize
        unstructured information, providing insight from a previously
        inaccessible data source. This allows our solutions to extract different
        dimensions from a retailer's data, allowing actionable information to be
        unlocked in the key areas of store profiling, single-customer
        transaction analysis and customer segmentation.

     -  Simulation.  Simulations are used to model systems that are too complex
        for basic mathematical algorithms. We use simulation to optimize store
        and warehouse replenishment. Unlike textbook generalizations and
        assumptions, the modeling provided by our solutions simulates the entire
        replenishment process, enabling us to optimize the variables that affect
        the replenishment process.

STRATEGIC ALLIANCES

     We have worked with Oracle to establish Oracle Retail(TM), which provides a
single source of technology products, implementation services and support to
target the world's largest retailers. Oracle Retail(TM) combines our solutions
with Oracle's financial applications to provide customers with a scalable
web-based solution for the retail industry worldwide. Oracle has established a
dedicated sales team of approximately 30 employees to sell and market these
products worldwide, in addition to the thousands of general sales
representatives at Oracle who are knowledgeable about Oracle Retail(TM).

     We have developed strategic relationships with various system integrators
who provide a range of services to our customers, including project
implementation services and first-line technical support. Additionally, these
system integrators assist us with sales lead generation. We have certified and
trained approximately 650 consultants from our system integrators for the
implementation and operation of our solutions. Some of our systems integration
partners include Andersen Consulting, Deloitte & Touche, IBM, and KPMG.

     In addition to providing implementation and support services for our
software solutions, Andersen Consulting has dedicated approximately 150
full-time consultants to help us in research and development and custom
modifications. This allows us to rapidly expand our research and development
efforts without the costs associated with internally hiring additional staff.

SALES, MARKETING AND DISTRIBUTION

     We market and sell our software solutions worldwide through a combination
of a direct sales force, resellers and distributors. Our worldwide direct sales,
marketing and business development organizations consisted of 68 individuals as
of August 31, 1999.

     Our sales, marketing and distribution approaches are designed to help
customers understand both the business and technical benefits of our software
solutions. We conduct a variety of marketing programs worldwide to educate our
target market, create awareness and generate leads for our solutions. To achieve
these goals, we have engaged in marketing activities including e-business
seminars, direct mailings, print and online advertising campaigns and trade
shows. These programs are targeted at key information technology executives and
business users, as well as chief information officers and other senior
executives.
                                       45
<PAGE>   47

     Markets outside the United States are currently served by our direct sales
offices in the United Kingdom, France, Germany, Australia, Japan and South
Africa. In addition, we have established distribution relationships with CTC and
KPMG, which distribute our software solutions in Japan and Australia,
respectively.

RESEARCH AND DEVELOPMENT

     Our research and development group has been a critical component of our
overall success. We believe that we have built a reputation for delivering on
our solution commitments in a timely manner. As of August 31, 1999, the research
and development group was comprised of 170 individuals in Cincinnati, Atlanta,
and Minneapolis. In addition, we have developed close alliances with a number of
consulting companies to provide additional staffing. These relationships allow
us to increase our development capacity as quickly as necessary to address new
market and product demand.

     The majority of our research and development group is organized around
product offerings. Each of these groups is responsible for the product
management processes, strategy and release path, delivery, and support of their
respective applications. In addition to these groups, a centralized enterprise
team within research and development is responsible for maintaining consistency
across these products teams with respect to quality assurance and testing
processes, documentation, application architecture, and methodology.

     The success of the research and development group is based on a consistent
and well-defined development methodology. This methodology enables the delivery
of high-quality products in a timely and predictable manner. It involves the
traditional checkpoints of development processes such as business requirements,
functional and technical specifications, unit, string and integration test
plans, and regression analysis. In addition, we use a highly interactive review
process to engage future users of the product in the product release cycle
through iterative prototypes to ensure the application design goal is met.

     In addition to the predictable delivery cycles, speed to market is critical
to our success. We believe that we have effectively used build, buy, and partner
strategies over the past several years to expand our solution offering. The key
in using each of these strategies is the consistency in the underlying
technologies and an overall application architecture that allows modular design
and development.

     Research and development expenses were $9.5 million in 1997, $12.9 million
in 1998 and $9.7 million in the six months ended June 30, 1999. We believe that
significant investments in research and development are required to remain
competitive. As a consequence, we intend to continue to increase the absolute
amount of our research and development expenditure.

COMPETITION

     The market for business-to-business software solutions is new, intensely
competitive and rapidly evolving. We expect competition to continue to increase
both from existing competitors and new market entrants. We encounter current
competition from a number of different sources, including such providers of
supply chain software products as SAP, IBM, Manhattan and JDA Software Group,
and, as we develop our global business-to-business electronic commerce network,
we expect to face potential competition from business-to-business electronic
commerce companies, including Ariba, Broadvision, Commerce One and i2
Technologies. We believe that our ability to compete depends on many factors
both within and beyond our control, including:

     -  the ease of use, performance, features, price and reliability of our
        solutions as compared to those of our competitors;

     -  the timing and market acceptance of new solutions and enhancements to
        existing solutions developed by us and our competitors;

                                       46
<PAGE>   48

     -  the quality of our customer service; and

     -  the effectiveness of our sales and marketing efforts.

PROPRIETARY RIGHTS AND LICENSING

     Our success and ability to compete are dependent in part on our ability to
develop and maintain the proprietary aspects of our technology. We rely on a
combination of patent, trademark, trade secret, and copyright law and
contractual restrictions to protect the proprietary aspects of our technology.
We seek to protect our source code for our software, documentation and other
written materials under trade secret and copyright laws. We license our software
under signed license agreements, which impose restrictions on the licensee's
ability to utilize the software. Finally, we seek to avoid disclosure of our
intellectual property by requiring employees and consultants with access to our
proprietary information to execute confidentiality agreements with us and by
restricting access to our source code.

     We rely on technology that we license from third parties, including
software that is integrated with internally developed software and used in our
line of products to perform key functions. For example, we license the ACUMATE
Import 2000 component software from Lucent and the DSS Web from MicroStrategy.
In addition, we will enter into a technology license agreement with HNC, giving
us a license to specified HNC predictive technology. If we are unable to
continue to license any of this software, we will face delays in releases of our
software until equivalent technology can be identified, licensed or developed,
and integrated into our current product. These delays, if they occur, could
seriously harm our business.

     There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
software solutions infringe on their intellectual property. We expect that
software product developers and providers of electronic commerce products will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. Any claims, with or without merit, could
be time-consuming, result in costly litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on terms acceptable to us or at
all, which could seriously harm our business.

LEGAL PROCEEDINGS

     From time to time we have been subject to legal proceedings and claims in
the ordinary course of business. Although we are not currently involved in any
material legal proceedings.

EMPLOYEES

     At August 31, 1999, we had a total of 350 employees, 322 of whom were based
in the United States and 28 of whom were based in Europe, Asia and Australia. Of
the total, 170 were in research and development, 68 were engaged in sales,
marketing and business development, 76 were engaged in consulting services,
customer support and training, and 36 were in administration and finance. None
of our employees are subject to a collective bargaining agreement and we believe
that our relations with our employees are good.

FACILITIES

     Our principal administrative, sales, marketing, and research and
development facility occupies approximately 69,971 square feet in Minneapolis,
Minnesota under a lease that expires on August 31, 2004. We also have regional
offices located in Atlanta, Georgia, Chicago, Illinois, Cincinnati, Ohio,
Australia, France and the United Kingdom. We believe that our existing
facilities are adequate for our current needs and that suitable additional or
alternative space will be available in the future on commercially reasonable
terms as needed.

                                       47
<PAGE>   49

                                   MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

     Our executive officers and directors and other key employees, and their
ages as of July 31, 1999, are as follows:

<TABLE>
<CAPTION>
NAME                                   AGE   POSITION
----                                   ---   --------
<S>                                    <C>   <C>
John Buchanan........................  42    Chairman, Chief Executive Officer and Director
Gordon Masson........................  44    President
John L. Goedert......................  34    Senior Vice President, Research & Development and
                                             Director
Gregory A. Effertz...................  37    Vice President, Finance & Administration, Chief
                                             Financial Officer, Treasurer, Secretary and Director
David A. J. Bagley...................  34    Vice President, Product Strategy & Marketing
Victor Holysh........................  40    Vice President, Services
Duncan B. Angove.....................  33    Vice President, E-Business
</TABLE>

     John Buchanan joined us in May 1995 and is currently our Chairman and Chief
Executive Officer. From October 1991 to May 1995, he served as President of
Transpacific Information Systems Inc., a technology investment company
principally involved in introducing internationally developed software products
into North America. Mr. Buchanan holds a Bachelor of Commerce degree in
Accounting and Computer Systems from the University of Otago, New Zealand.

     Gordon Masson has been our President since July 1999. He served as our
Senior Vice President, Sales since August 1995. Prior to joining Retek from 1983
to 1995, he was with Comshare, Inc., a decision support software company,
serving most recently as Vice-President. Mr. Masson holds a BACC degree in
accounting and law from Glasgow University and he is a certified chartered
accountant.

     John L. Goedert joined us in June 1996 as our Senior Vice President,
Research and Development. From 1987 to 1996, Mr. Goedert was with Andersen
Consulting's Consumer Products Practice, specifically in retail and
distribution, serving most recently as Senior Manager. Mr. Goedert holds a
Bachelor of Business Administration in Finance from Iowa State University.

     Gregory A. Effertz joined us in March 1997 as our Vice President, Finance
and Administration and Chief Financial Officer. From 1988 to 1997, Mr. Effertz
was with American Paging, Inc., a paging service provider, serving most recently
as Executive Director, Sales and Marketing, Corporate Controller and Treasurer.
Mr. Effertz is a certified public accountant certificate holder and holds a
Bachelor of Business Administration in Accounting and Management Information
Systems from the University of Wisconsin -- Eau Claire.

     David A. J. Bagley joined us in May 1997 as Vice President, Services and is
currently Vice President, Product Strategy and Marketing. From 1989 to 1997, Mr.
Bagley was with Andersen Consulting's Consumer Products Practice, serving most
recently as Senior Manager. Mr. Bagley holds a Master of Arts in Classics from
St. Anne's College, Oxford University.

     Victor Holysh joined us in June 1998 as our Vice President, Services. Prior
to joining us, Mr. Holysh was a partner at Sierra Systems Consultants, Inc. in
Toronto, Canada, a systems integration and implementation firm. From 1988 to
1996, Mr. Holysh was with SFG Technologies Inc., a software and related services
company for local government applications, where he served in several
capacities, including Chief Financial Officer and Managing Director of SFG New
Zealand. Mr. Holysh holds a Bachelor of Science in Computer Science and a
Masters of Business Administration from the University of Toronto. He is a
member of the Canadian Institute of Chartered Accountants and is a Certified
Management Consultant.

     Duncan B. Angove joined us in September 1997 and is currently Vice
President, E-Business. Prior to joining Retek from 1994 to 1997, he served as a
consultant with Andersen Consulting's Consumer

                                       48
<PAGE>   50

Products Practice, specifically in retail and distribution, and from 1991 to
1994 as Information Technology Manager of TaiTai Retail Import Export, a
furniture import/export company. Mr. Angove holds a BSC Economics degree from
the University College London.

BOARD OF DIRECTORS

     Currently, our board of directors is made up of Mr. Buchanan and Mr.
Effertz. Prior to the completion of this offering, Mr. Effertz will resign and
our board of directors will have seven members, including our chairman and chief
executive officer, Mr. Buchanan, three individuals who are currently executive
officers and directors of HNC, and three independent directors. Our board of
directors will be divided into three classes serving staggered terms. Directors
in each class will be elected to serve for three year terms and until their
successors are elected or qualified. Each year, the directors of one class will
stand for election as their terms of office expire. The Class I directors will
have terms of office expiring in 2000; the Class II directors will have terms of
office expiring in 2001; and the Class III directors will have terms of office
expiring in 2002.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee

     The responsibilities of the audit committee include recommending to the
board of directors the independent public accountants to be selected to conduct
the annual audit of our accounts; reviewing the proposed scope of such audit and
approving the audit fees to be paid; and reviewing the adequacy and
effectiveness of our internal auditing, accounting and financial controls with
the independent public accountants and our financial and accounting staff. The
members of the audit committee will be one independent director and one director
appointed by HNC.

Compensation Committee

     The compensation committee is responsible for establishing certain
compensation policies consistent with corporate objectives and stockholder
interests. The compensation committee has responsibility for approving and/or
recommending to the board of directors levels of compensation for our senior
executives. The compensation committee also administers certain grants under the
Company's stock-based and other performance-based incentive compensation plans
and adopts and/or recommends to the board of directors new plans or changes in
compensation programs. No member of the compensation committee may be an
employee of Retek, HNC or any Retek subsidiary. The members of the compensation
committee will be one independent director and one director appointed by HNC.

     The board of directors may, from time to time, establish certain other
committees to facilitate the management of Retek.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

     All of our common stock is currently owned by HNC, and thus none of our
officers or directors owns any of our common stock. To the extent our directors
and officers own shares of HNC common stock at the time of the distribution,
they will participate in the distribution on the same terms as other holders of
HNC common stock.

     The following table sets forth the number of shares of HNC common stock
beneficially owned on June 30, 1999 by each director, each of the executive
officers named in the Summary Compensation Table in the "-- Executive
Compensation" section below, and all of our directors and executive officers as
a group. Except as otherwise noted, the individual director or executive officer
or their family members had

                                       49
<PAGE>   51

sole voting and investment power with respect to such securities. The total
number of shares of HNC common stock outstanding as of June 30, 1999 was
24,064,061.

<TABLE>
<CAPTION>
                                                                   SHARES OF HNC
                                                                 BENEFICIALLY OWNED
                                                              ------------------------
                  NAME OF BENEFICIAL OWNER                    NUMBER        PERCENTAGE
                  ------------------------                    ------        ----------
<S>                                                           <C>           <C>
John Buchanan(1)............................................   63,128           *
Gordon Masson(2)............................................   27,670           *
John L. Goedert(3)..........................................   31,392           *
David A. J. Bagley(4).......................................   15,636           *
Gregory A. Effertz(5).......................................   15,127           *
All directors and executive officers as a group (seven
  persons)(6)...............................................  162,110           *
</TABLE>

-------------------------
 *  Represents holdings of less than one percent.

(1) Includes 62,500 shares issuable upon exercise of stock options exercisable
    within 60 days of June 30, 1999.

(2) Includes 26,875 shares issuable upon exercise of stock options exercisable
    within 60 days of June 30, 1999.

(3) Includes 31,392 shares issuable upon exercise of stock options exercisable
    within 60 days of June 30, 1999.

(4) Includes 14,500 shares issuable upon exercise of stock options exercisable
    within 60 days of June 30, 1999.

(5) Includes 14,500 shares issuable upon exercise of stock options exercisable
    within 60 days of June 30, 1999.

(6) See notes 1 through 5. Also includes 2,500 shares issuable upon exercise of
    stock options held by Duncan B. Angove and 6,250 shares issuable upon
    exercise of stock options held by Victor Holysh exercisable within 60 days
    of June 30, 1999.

COMPENSATION COMMITTEE

     In the fiscal year ended December 31, 1998, we did not have a compensation
committee or any other committee serving a similar function. Decisions as to the
compensation of our executive officers were made by the compensation committee
or the board of directors of HNC.

DIRECTOR COMPENSATION

     Directors who are not employees of Retek or HNC are referred to as
independent directors and will be reimbursed for reasonable expenses incurred in
attending board of director or committee meetings. In addition, our independent
directors will be granted options to purchase 25,000 shares of our common stock
pursuant to our 1999 Directors Stock Option Plan (described below) upon their
initial election to our board of directors and annual grants of options to
purchase 7,500 shares of our common stock so long as they remain on our board.

                                       50
<PAGE>   52

EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

     The following table sets forth information regarding compensation for the
fiscal year ended December 31, 1998 paid for services rendered by our chairman
and chief executive officer and our four other highest-paid executive officers
who earned more than $100,000 during the fiscal year ended December 31, 1998. We
collectively refer to these individuals as the named executive officers.

<TABLE>
<CAPTION>
                                                                                         LONG-TERM
                                                                ANNUAL COMPENSATION     COMPENSATION
                                                               ----------------------   ------------
                                                                                         NUMBER OF
                                                                                         SECURITIES
                                                                 SALARY       BONUS      UNDERLYING
NAME AND PRINCIPAL POSITIONS                                      ($)          ($)       OPTIONS(1)
----------------------------                                   ----------   ---------   ------------
<S>                                                            <C>          <C>         <C>
John Buchanan
  Chairman and Chief Executive Officer......................    200,000       97,500       30,000
Gordon Masson
  President.................................................    150,000      170,035       37,500
John L. Goedert
  Senior Vice President, Development........................    150,000       90,000       35,000
David A. J. Bagley
  Vice President, Product Strategy and Marketing............    130,000       85,000        8,000
Gregory A. Effertz
  Vice President, Finance & Administration, Treasurer,
  Secretary
  and Chief Financial Officer...............................    120,000       60,000        8,000
</TABLE>

-------------------------

(1) This reflects options to acquire shares of HNC common stock. We will offer
    our employees the opportunity to either cancel their HNC options which are
    projected to be unvested as of March 31, 2000 and to receive grants of
    options to purchase our common stock or to retain their HNC options. Under
    the current HNC option plan, unvested HNC options will be canceled at the
    date of the distribution or at any time that HNC owns less than 50% of our
    common stock.

                     HNC STOCK OPTION GRANTS IN FISCAL 1998

     The following table sets forth information regarding stock options covering
HNC common stock granted to the named executive officers during the fiscal year
ended December 31, 1998. The dollar amounts under these columns are the result
of calculations at the 5% and 10% rates required by the Securities and Exchange
Commission for the option term and therefore are not intended to and may not
accurately forecast possible future appreciation, if any, of HNC's common stock
price.

<TABLE>
<CAPTION>
                                                    INDIVIDUAL GRANTS(1)
                                    ----------------------------------------------------    POTENTIAL REALIZABLE
                                                  % OF TOTAL                                  VALUE AT ASSUMED
                                     NUMBER OF     OPTIONS                                  ANNUAL RATES OF STOCK
                                    SECURITIES    GRANTED TO                               PRICE APPRECIATION FOR
                                    UNDERLYING    EMPLOYEES      EXERCISE                        OPTION TERM
                                      OPTIONS     IN FISCAL    PRICE ($ PER   EXPIRATION   -----------------------
NAME                                  GRANTED        YEAR         SHARE)         DATE       5% ($)       10% ($)
----                                -----------   ----------   ------------   ----------   ---------   -----------
<S>                                 <C>           <C>          <C>            <C>          <C>         <C>
John Buchanan.....................    30,000(2)       .90          32.00       2/23/08      603,840     1,530,240
Gordon Masson.....................    37,500(2)      1.13          32.00       2/23/08      754,800     1,912,800
John L. Goedert...................    35,000(2)      1.05          32.00       2/23/08      704,480     1,785,280
David A. J. Bagley................     8,000(2)       .24          32.00       2/23/08      161,024       408,064
Gregory A. Effertz................     8,000(2)       .24          32.00       2/23/08      161,024       408,064
</TABLE>

-------------------------

(1) We will offer our employees the opportunity to either cancel their HNC
    options which are projected to be unvested as of March 31, 2000 and to
    receive grants of options to purchase our common stock or to retain their
    HNC options. Under the current HNC option plan, unvested HNC options will be
    canceled at the date of the distribution or at any time that HNC owns less
    than a 50% of our common stock.
                                       51
<PAGE>   53

(2) The options became exercisable with respect to one-fourth of the shares
    covered thereby on February 23, 1999 and will become exercisable with
    respect to one-fourth of the shares covered thereby on each of February 23,
    2000, 2001 and 2002.

 AGGREGATED HNC OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES

     The following table sets forth information with respect to the named
executive officers concerning unexercised stock options to purchase HNC common
stock held as of December 31, 1998. The "value realized" figures are based on
the fair market value of HNC stock at the exercise date, minus the per share
exercise price, multiplied by the number of shares exercised. The "value of
unexercised in-the-money options at December 31, 1998" figures in the right-hand
column are based on the market value of HNC stock at December 31, 1998 of
$40.438 per share, minus the per share exercise price, multiplied by the number
of shares issued upon exercise of the option.

<TABLE>
<CAPTION>
                                                                   NUMBER OF SECURITIES
                                       NUMBER OF SHARES           UNDERLYING UNEXERCISED       VALUE OF UNEXERCISED IN-
                                     ACQUIRED ON EXERCISE               OPTIONS AT               THE-MONEY OPTIONS AT
                                 ----------------------------        DECEMBER 31, 1998             DECEMBER 31, 1998
                                                    VALUE       ---------------------------   ---------------------------
NAME                             EXERCISED (#)   REALIZED ($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                             -------------   ------------   -----------   -------------   -----------   -------------
<S>                              <C>             <C>            <C>           <C>             <C>           <C>
John Buchanan.................           0                 0      55,000         85,000         546,590        799,730
Gordon Masson.................      27,344         1,120,512      12,500         60,000         157,975        630,030
John L. Goedert...............      12,000           432,000      14,261         59,261         359,344        810,304
David A. J. Bagley............           0                 0       6,250         26,750          61,331        251,498
Gregory A. Effertz............           0                 0       6,250         26,750          92,581        345,248
</TABLE>

TREATMENT OF OUTSTANDING STOCK OPTIONS

     In connection with our separation from HNC, our executive officers and
other employees will be given the opportunity to receive options to purchase our
common stock in exchange for their agreeing to cancel their outstanding options
to purchase HNC common stock which are scheduled to be unvested as of March 31,
2000. Unvested options to purchase HNC common stock held by our participating
employees which are not canceled pursuant to this option exchange will continue
to vest through March 31, 2000 and those options which are vested as of March
31, 2000 will continue to be exercisable for 90 days following the completion of
our separation from HNC, at which time they will terminate. Options to purchase
our common stock which are granted in exchange for the cancellation of options
to purchase HNC common stock will be granted under our 1999 Equity Incentive
Plan, which is described below at an exercise price to be determined. It is
anticipated that these options will vest 25% on the first anniversary of the
date of grant and thereafter at the rate of 1/48 of the amount of the original
grant on a monthly basis for 36 months.

CERTAIN ARRANGEMENTS INVOLVING STOCK OPTIONS

     If HNC has received a written ruling from the Internal Revenue Service that
the distribution qualifies for tax-free treatment under Section 355 of the
Internal Revenue Code, and HNC fails to complete the distribution within 120
days after the first date that HNC is eligible to effect the tax-free
distribution, John Buchanan and three other executive officers to be chosen by
Mr. Buchanan, will receive a 12-month credit to the vesting schedule of their
Retek stock options. In addition, if at the time of this accelerated vesting,
Mr. Buchanan and the three other chosen executives execute two-year non-compete
agreements with Retek, their vesting schedules will be credited by an additional
12 months.

                                       52
<PAGE>   54

EMPLOYMENT AGREEMENT

     We have an employment agreement with Mr. Buchanan that expires on November
29, 1999. The employment agreement provides that Mr. Buchanan serve as chief
executive officer at an initial annual salary of $120,000 plus a possible annual
bonus. Pursuant to his employment agreement, Mr. Buchanan was granted an option
to purchase up to 110,000 shares of HNC common stock at an exercise price equal
to fair market value on the date of grant. The options vest over a four-year
period at the rate of 25% per year. Mr. Buchanan is also eligible to participate
in HNC's employee benefit plans.

     If Mr. Buchanan's employment is terminated by the company without cause or
due to his death or disability, he is entitled (1) to continue to be paid his
then-current base salary for the lesser of six months or the remainder of the
term of the employment agreement and (2) to be paid any unpaid bonus that is
both due and payable to him and which is not subject to any unsatisfied
conditions or contingencies.

     Mr. Buchanan also is subject to an employee invention assignment and
confidentiality agreement.

EMPLOYEE BENEFIT PLANS

     RETEK 1999 EQUITY INCENTIVE PLAN

     We intend to adopt, and we expect our current sole shareholder HNC to
approve, the 1999 Equity Incentive Plan in order to provide grants of stock
options, stock appreciation rights, restricted stock and stock bonuses to
employees, officers, directors, consultants, independent contractors and
advisors of Retek or any parent, subsidiary or affiliate of Retek. A total of
9,000,000 shares of our common stock will be reserved for issuance under the
equity incentive plan, with an annual increase to be added on January 1 of each
year, commencing January 2001, equal to the least of: (a) 4% of the total
outstanding shares as of such January 1, (b) 2,000,000 shares, or (c) an amount
of shares determined by the board of directors.

     Administration of the Equity Incentive Plan

     The compensation committee of the board of directors will administer the
equity incentive plan. The committee will have the power to construe, interpret
and correct any defects in the equity incentive plan or any related document;
prescribe, amend and rescind rules and regulations relating to the equity
incentive plan; determine the form and terms of the awards made under the equity
incentive plan, including selecting persons eligible to receive such awards,
whether such awards have been earned and the number of shares or other
consideration subject to such awards; and grant waivers of any plan or award
conditions and vary the terms of the award.

     Options

     The compensation committee will determine the exercise price of each option
when the option is granted. The exercise price may not be less than 85% of the
fair market value of our common stock on the date of grant. With respect to
options intended to qualify as "incentive stock options" within the meaning of
section 422 of the Internal Revenue Code, the exercise price must be at least
equal to the fair market value of our common stock on the date of grant. The
term of the options may not be more than ten years.

     Options granted under the equity incentive plan are forfeited within three
months (or a shorter or longer period as determined by the compensation
committee) of the optionee's termination as an employee of our company for
reasons other than death or disability. If termination of employment is due to
death or disability, the options will be forfeited within 12 months of such
termination. In no event will the options be exercisable later than their
expiration date. If an option holder's employment is terminated for "cause," all
of that individual's options will expire.

     The aggregate fair market value of shares with respect to which incentive
stock options are exercisable for the first time by an optionee during a
calendar year may not exceed $100,000.
                                       53
<PAGE>   55

     Stock Appreciation Rights

     Stock appreciation rights may be granted alone, in addition to other awards
or in tandem with stock options. The compensation committee will fix the
exercise price per share covered by stock appreciation rights at the time of
grant in accordance with the method it specifies at the time of grant. The
exercise price may not be less than 85% of the fair market value of our common
stock on the date of the grant. If granted in tandem with a stock option, stock
appreciation rights will cover the same number of shares as covered by the stock
option (or less if so determined by the compensation committee), shall be
exercisable at the same time or times and to the extent as the related stock
option will be exercisable and shall have the same term and exercise price as
the related stock option. Upon exercise of a stock appreciation right granted in
tandem with an option, the related option will be canceled automatically to the
extent of the number of shares covered by such exercise. Likewise, upon exercise
of a stock appreciation right, the tandem option associated with that stock
appreciation right will be canceled.

     Restricted Stock

     Restricted stock will be offered to participants at a purchase price to be
determined by and subject to the terms and conditions established by the
compensation committee. Such shares will be subject to restrictions on transfer
and other incidents of ownership for such periods of time, and to such
conditions of vesting, as determined by the compensation committee and set forth
in the award agreement. The share certificates representing the appropriate
number of shares granted to the participant will be registered in the name of
the participant but held by us. We may take any actions we deem necessary to
restrict the transfer of such unvested restricted stock. Other than these
restrictions on transfer and other restrictions as determined by the
compensation committee and set forth in the award agreement, a participant will
have the rights of a stockholder, including the right to receive dividends and
to vote.

     Stock Bonuses

     Stock bonuses may be performance based. The compensation committee will
have the discretion to determine the number of shares to be awarded, whether
such award should be in the form of restricted stock, the nature, length and
starting date of the relevant performance periods, the performance criteria and
the number of shares to be granted to a participant. The earned portion of a
stock bonus may be paid currently or on a deferred basis with such interest or
dividend equivalent as determined by the compensation committee. If employment
of a participant is terminated during a performance period for any reason, such
participant will be entitled to payment with respect to the stock bonus only to
the extent earned as of the date of termination in accordance with the relevant
performance stock bonus agreement, unless the compensation committee determines
otherwise.

     Non-Transferability of Awards

     Awards granted under the equity plan are generally not transferable by the
grantee and each award is exercisable during the lifetime of the grantee only by
such grantee. Any elections regarding the awards may be made only by the
grantee.

     Adjustments upon Merger or Change in Control

     The equity incentive plan provides that, in the event of a change in
control we may provide for the assumption or substitution in or conversion or
replacement of awards under the equity incentive plan. The plan defines change
in control to include the dissolution or liquidation of our company, a merger or
consolidation in which our company is not the surviving corporation, a merger in
which our company is the surviving corporation but after which our stockholders
cease to own their shares or other equity interests in our company, the sale of
all or substantially all the assets of our company and the acquisition, sale or
transfer of more than 50% of the outstanding shares of our company's common
stock by tender offer or

                                       54
<PAGE>   56

similar transaction. In the event of a transaction involving a change in
control, the compensation committee may accelerate the vesting of any and all
awards prior to such change in control and any options not exercised prior to
the consummation of the change in control shall expire. If a participant's
employment by our company or any subsidiary or affiliate is terminated other
than for cause within 24 months after a change in control, all such
participant's options and stock appreciation rights will become immediately
exercisable, all restrictions and conditions of awards of restricted stock and
stock bonuses held by such participant will lapse and all performance criteria
applicable to any award will be deemed to be fully achieved.

     Amendment and Termination of the 1999 Equity Incentive Plan

     Unless terminated sooner, the equity incentive plan will terminate
automatically ten years from the date of its adoption by the board of directors
or, if earlier, from the date of stockholder approval. The board of directors
may at any time terminate or amend the plan or any related document, except that
the board of directors may not make any amendments that would require
stockholder approval without such approval.

     RETEK 1999 EMPLOYEE STOCK PURCHASE PLAN

     We intend to adopt, and we expect our sole shareholder HNC to approve, the
1999 Employee Stock Purchase Plan in order to provide an additional incentive
for our employees to invest in our common stock. A total of 700,000 shares of
our common stock will be reserved for issuance under the purchase plan, with an
annual increase to be added on January 1 of each year beginning January 1, 2001,
equal to the lesser of: (a) 1.0% of the total outstanding shares as of such
January 1, (b) 600,000 shares or (c) an amount of shares determined by the board
of directors.

     Administration of the Purchase Plan

     A committee of the board of directors will administer the purchase plan.
All questions of interpretation and application of the purchase plan will be
determined by the board of directors.

     Eligibility to Participate

     All employees of our company and participating subsidiaries will be
eligible to participate, except that the following individuals may not
participate in the plan:

     (1) employees who are not employed by our company or a participating
        subsidiary ten days before the beginning of an offering period (defined
        as a period of 24 months' duration commencing on November 1 and May 1 of
        each year and ending on October 31 and April 30, respectively), except
        those employees who are employed on the effective date of this
        registration statement;

     (2) employees who are customarily employed for less than 20 hours per week;

     (3) employees who are customarily employed for less five months in a
        calendar year;

     (4) employees who own stock or options to purchase stock possessing five
        percent or more of the total combined voting power or value of all
        classes of stock of our company or any of its participating
        subsidiaries; and

     (5) independent contractors.

                                       55
<PAGE>   57

     Purchases

     Enrollment by an eligible employee in the purchase plan with respect to an
offering period will constitute a grant to such employee of an option to
purchase on the purchase date (defined as the last day of any of the four
six-month purchase periods which constitute an offering period) up to that
number of shares, subject to certain maximum limits, obtained by dividing: (1)
the amount accumulated in such employee's payroll deduction account during such
purchase period; by (2) the lower of: (a) 85% of the fair market value of a
share of our common stock on the first business day of any offering period, or
(b) 85% of the fair market value of a share of our common stock on the purchase
date. The price of stock purchased under the purchase plan will be 85% of the
lower of: (1) the fair market value on the first business day of any offering
period; and (2) the fair market value on the purchase date. The purchase price
will be paid through payroll deductions.

     Restrictions

     For any particular calendar year, no employee may purchase stock under the
purchase plan at a rate which, when aggregated with such employee's right to
purchase stock under all other purchase plans of our company or our parent or
subsidiaries, exceeds $25,000 in fair market value as of the first business day
of any offering period. A maximum of 200% of the number of shares determined by
using 85% of the fair market value of share as of the first business day of any
offering period as the denominator may be purchased by an employee on a single
purchase date. No employee may purchase more than a maximum number of shares
fixed by the committee on a single purchase date.

     End of Participation

     If an employee's employment terminates for any reason, including
retirement, death or the employee fails to remain an eligible employee, that
employee may no longer participate in the plan. If an employee's participation
in the purchase plan ends, we will promptly distribute all accrued employee
contributions without interest. A withdrawing employee will not be able to
participate in the purchase plan until the offering period commencing on the
next date after such withdrawal.

     Adjustments upon Merger of Change in Control

     The purchase plan will provide that if we are liquidated or dissolved, the
committee may terminate the plan immediately. In the event of a merger or
consolidation in which our company is not the surviving corporation, a merger in
which our company is the surviving corporation but after which our stockholders
cease to own their shares or other equity interests in our company, the sale of
all or substantially all the assets of our company or the acquisition, sale or
transfer of more than 50% of the outstanding shares of our common stock by
tender offer or similar transaction, the purchase plan will continue with regard
to the offering periods that commenced prior to the closing of the proposed
transaction and shares will be purchased based on the fair market value of the
surviving corporation's stock.

     Non-Assignability of Rights

     An employee may not transfer rights granted under the purchase plan other
than by will or the laws of descent and distribution.

     Amendment and Termination of the Purchase Plan

     Unless terminated sooner, the purchase plan will terminate automatically
ten years from the date of its adoption by the board of directors. The board of
directors has the authority to amend or terminate the purchase plan at any time.

                                       56
<PAGE>   58

     RETEK 1999 DIRECTOR STOCK OPTION PLAN

     We intend to adopt the 1999 Directors Stock Option Plan to provide grants
of non-qualified stock options to our directors who are not our employees, or
employees of HNC, it subsidiaries or affiliates. A maximum of 400,000 shares of
our common stock may be issued to the under the directors stock option plan.

     Administration of the 1999 Directors Stock Option Plan

     A committee of our board of directors, or the board of directors acting as
the committee, will administer the directors stock option plan. The committee
has the authority to interpret and construe the provisions of the directors
stock option plan.

     Terms and Conditions of Options

     The exercise price of the options will equal the fair market value of our
common stock on the date of grant. The term of the options may not be more than
ten years. The directors stock option plan provides for an initial grant of
25,000 to be made on the later of:

     -  the effective date of the plan; and

     -  the date a director first becomes a member of our board of directors.

Succeeding grants of options to buy 7,500 shares of our common stock will be
made on each anniversary date of the initial grant. The optionees have the
option to defer the receipt of shares otherwise deliverable upon the exercise of
an option. Options vest entirely at the end of a period of one year from the
date of grant.

     All unvested options held by a director will be forfeited upon the
director's termination of service. In the event of termination of service due to
reasons other than death or disability, all vested options must be exercised
within seven months of such termination. In the event of termination of service
due to death or disability, all vested options must be exercised within 12
months of such termination. In no event will the options be exercisable later
than their expiration date.

     Non-Transferability of Options

     Options granted under the directors stock option plan are generally not
transferable by the optionee and each award is exercisable during the life time
of the optionee only by such optionee or by the optionee's guardian or legal
representative, unless otherwise determined by the committee.

     Adjustments upon Merger or Change in Control

     The directors stock option plan provides that in the event of:

     -  our dissolution or liquidation;

     -  a merger or consolidation in which we are not the surviving corporation;

     -  a merger in which we are the surviving corporation, but after which our
        stockholders cease to own share or other equity interests in us;

     -  the sale of all or substantially all of our assets; or

     -  an acquisition, sale or transfer of more than 50% of the outstanding
        shares of our common stock by tender offer or similar transaction,

                                       57
<PAGE>   59

the vesting of all options granted pursuant to the directors stock option plan
will accelerate and the options will become exercisable in full prior to the
consummation of such event, at such time and on such conditions as the committee
determines.

     Amendment and Termination of the 1999 Directors Stock Option Plan

     Unless terminated sooner, the directors stock option plan will terminate
automatically ten years from its effective date. Our board of directors may at
any time terminate or amend this plan.

                                       58
<PAGE>   60

                              CERTAIN TRANSACTIONS

     We have set forth below a summary description of the separation agreement
and the key related agreements that we expect to enter into with HNC prior to
this offering. This description, which summarizes the material terms of such
agreements, is not complete. You should read the full text of these agreements,
which will be filed with the Securities and Exchange Commission as exhibits to
the registration statement of which this prospectus is a part.

     We intend to enter into agreements with HNC that provide for the separation
of our business from HNC. In particular, we intend to enter into a separation
agreement, a corporate rights agreement, a services agreement, a technology
license agreement and a tax sharing agreement with HNC necessary to effect the
separation. These agreements will not be conditioned upon the consummation of
the distribution and govern, among other things, our respective rights and
duties with respect to specified offerings of our common stock and other
securities, including this offering, and specified matters relating to the
distribution. These agreements will also set forth specified covenants that we
will agree to for various periods following this offering. Although HNC has
announced that, subject to the satisfaction of specified conditions, it
currently plans to complete the distribution, and although we intend to agree to
cooperate with HNC to complete the distribution if HNC elects to do so, HNC will
not be obligated to carry out the distribution. Thus, we cannot assure you as to
whether or not the distribution will occur, when it would occur or what the
terms of the distribution will be if it occurs.

SEPARATION AGREEMENT

     The separation agreement will cover the principal corporate transactions
required to effect the transfer of assets and the assumptions of liabilities
necessary to separate our company from HNC and certain other agreements
governing our relationship after the separation.

     Transfer of assets and assumption of liabilities.  HNC will transfer, or
agree to transfer, all of the shares of the outstanding common stock of Retek
Information Systems and other assets to us and we will assume or agree to
assume, and will agree to pay, perform, satisfy and discharge on a timely basis
specified liabilities in accordance with their terms. Except as expressly stated
in the separation agreement or in any related agreement, HNC will not make any
representation or warranty to us with respect to any asset and the assets are
being transferred to us on an "as is, where is" basis.

     Offerings of securities of Retek and the distribution.  We intend to agree
that we will cooperate with HNC in all respects to accomplish:

     -  any primary offerings of our common stock and other securities prior to
        the distribution; and

     -  the distribution.

     We will also agree that, at HNC's direction, we will promptly take all
actions necessary or desirable to effect these transactions. HNC will have the
sole discretion to decide whether or not to proceed with the distribution and to
determine all terms of the distribution, including the form, structure and terms
of any transaction and/or offering to effect the distribution and the timing of
and conditions to the completion of the distribution.

     Covenants and indemnification regarding the distribution. The separation
agreement will contain provisions that restrict our ability to take specified
actions following the distribution that, if taken, would cause the distribution
to become taxable to HNC or its stockholders. In particular, under the
separation agreement, we will agree on behalf of ourselves and our affiliates
not to, generally during the two-year period immediately following completion of
the distribution:

     -  sell a substantial portion of our assets;

     -  voluntarily dissolve or liquidate;

                                       59
<PAGE>   61

     -  Fail to maintain the active conduct of our business

     -  solicit any person to make a tender offer for any of our equity
        securities;

     -  participate in or support any unsolicited tender offer for our equity
        securities;

     -  approve any proposed business combination or any transaction which would
        result in any person or persons acquiring in the aggregate, directly or
        indirectly, a 50% or greater interest (within the meaning of Section
        355(e) of the Internal Revenue Code) in us;

     -  issue any equity securities (except pursuant to the exercise of employee
        stock options) that, including the shares of common stock sold in this
        offering would result in the acquisition in the aggregate, directly or
        indirectly, by any person or persons of a 50% or greater interest
        (within the meaning of Section 355(e) of the Internal Revenue Code) in
        us;

     -  take any action that violates or is inconsistent with the information,
        representations or covenants contained in the initial ruling submission
        or any supplemental ruling submission filed with the Internal Revenue
        Service regarding the distribution;

     -  engage in any agreement, understanding, arrangement or negotiation,
        directly or indirectly with any person or persons with respect to any of
        the actions described above;

unless (1) HNC expressly consents in writing to such actions, which consent may
be withheld by HNC in its sole discretion taking into account solely the
preservation of the tax-free treatment of the distribution or (2) HNC obtains a
supplemental ruling from the Internal Revenue Service that the action will not
affect the tax-free nature of the distribution.

     Under the terms of the separation agreement, we will be required to
indemnify HNC, on an after-tax basis, from any taxes imposed on HNC with respect
to the distribution as a result of our taking any of the above actions, or any
transaction or event occurring after the distribution that involves the stock,
assets or business of us or any of our affiliates, whether or not those actions
are consented to or addressed in a supplemental ruling.

     The limitations on the issuance of shares of our capital stock and other
restrictions discussed above could have a negative impact on our financial
flexibility following a tax-free distribution.

     Indemnification. We intend to agree to indemnify and hold harmless HNC and
its affiliates and their respective officers, directors, employees, and other
related parties against any liabilities, damages, claims and expenses arising
out of or relating to:

     -  our past, present and future assets, businesses and operations and other
        assets, businesses and operations managed by us or by persons previously
        associated with us; and

     -  payments, expenses and costs paid by HNC to a third party associated
        with the transfer of our assets, businesses and operations from HNC
        entities to Retek and its subsidiaries.

     HNC will similarly agree to indemnify us, some of our affiliates and our
officers, directors, employees and other related parties against any
liabilities, damages, claims and expenses arising from HNC's past, present and
future assets, businesses and operations, except for assets, businesses and
operations for which we have agreed to indemnify HNC. In addition, the corporate
rights agreement and the tax sharing agreement referred to below will provide
for indemnification between us and HNC relating to the substance of those
agreements.

     Indemnification relating to this offering and other offerings. We will
agree to indemnify HNC and some of its affiliates against all liabilities
arising out of any material untrue statements and omissions in any prospectus or
registration statement filed with the SEC relating to this offering or any other
offering of our common stock or our other securities prior to the date of the
distribution or other similar transaction.

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However, our indemnification of HNC will not apply to liability arising from
information supplied by HNC in writing, excluding information relating to us.
HNC will agree to indemnify us for material untrue statements and omissions
contained in HNC-supplied information, subject to some limitations.

     Release relating to actions by HNC related to HNC's and our assets,
businesses and operations. Except for the rights and obligations of HNC and us
arising from the agreements between us relating to this offering or the
distribution, we will release HNC and its subsidiaries and affiliates and their
respective officers, directors, employees and other related parties for all
losses for any and all past actions and failures to take actions relating to
HNC's and our assets, businesses and operations. HNC will similarly release us.

     Expenses. In general, unless otherwise provided for in the separation
agreement or any other agreement, we will pay the costs and expenses incurred in
connection with any offering of our securities prior to the distribution or
other similar transaction, including this offering, and the distribution.

     Access to information. Generally, we and HNC will agreed, for a specified
time period, to provide each other, upon request and subject to specified
conditions, with access to information relating to our respective assets,
business and operations. We and HNC will also agree to keep our books and
records for a specified period of time. Also, we and HNC will agree to cooperate
with each other with respect to any claims brought against the other relating to
the conduct of our business prior to completion of the distribution.

CORPORATE RIGHTS AGREEMENT

     We intend to enter into a corporate rights agreement with HNC which will
set forth certain covenants we will agree to for various time periods following
this offering and will and provide HNC with certain registration rights relating
to the shares of our common stock it holds.

     HNC options to purchase additional shares.  We will grant to HNC a
continuing option, assignable to any of its subsidiaries and some of its
affiliates, to purchase additional shares of our common stock under specified
circumstances. These options may be exercised immediately prior to the issuance
of any of our equity securities, other than in this offering or upon the
exercise of the underwriters' over-allotment option, and only to the extent
necessary for HNC and its affiliates to maintain:

     -  control of us (within the meaning of Section 368(c) of the Internal
        Revenue Code of 1986), provided such status has previously been
        maintained;

     -  our status as a member of the affiliated group of corporations (within
        the meaning of Section 1504 of the Internal Revenue Code) of which HNC
        is the common parent, provided such status has previously been
        maintained;

     -  HNC's then-existing ownership percentage of our equity value; and

     -  ownership of shares of our non-voting capital stock (if any) to the
        extent, and only to the extent, necessary to own 80% of each outstanding
        class of such stock.

     The purchase price of the shares of common stock purchased upon any
exercise of the options, subject to specified exceptions, will be based on the
then current market price of our common stock. These options will terminate when
HNC owns less than 50% of our equity value.

     Registration rights.  We intend to grant HNC registration rights that will
require us, upon HNC's request, to use our best efforts to register under the
applicable federal and state securities laws any shares of our common stock or
other equity securities owned by HNC for sale in accordance with HNC's intended
method of disposition and to take other actions as necessary to permit the sale
of that stock in other jurisdictions, subject to specified limitations. HNC will
also have the right to include the shares of our stock or other equity
securities it beneficially owns in other registrations of these equity
securities that we initiate under the Securities Act and state securities laws.
Subject to specified limitations, these

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registration rights will be assignable by HNC and its assigns. The corporate
rights agreement will also contain specified indemnification and contribution
provisions pursuant to which we and HNC will agree to indemnify each other and
certain related parties for specified liabilities arising from registrations of
our securities that HNC or its assigns participate in (or, if such indemnity is
unavailable, to contribute to each other's liability).

     Corporate governance.  We will be governed by a board of directors
consisting of at least seven members, and for so long as HNC maintains
beneficial ownership of at least 25% of the total number of our outstanding
shares of capital stock, we have agreed that at least three of those directors
will be designees of HNC. In addition, under the terms of the corporate rights
agreement, we will agree that the following corporate actions, including those
taken by our subsidiary Retek Information Systems, will require the approval of
at least two of the HNC board designees:

     -  any acquisition or merger by us with or into another entity;

     -  the sale of all or substantially all of our assets;

     -  material change in the scope of our business;

     -  our liquidation or dissolution;

     -  any transaction that would decrease HNC's equity ownership in us;

     -  incurrence of annual capital expenditures in excess of $          above
        budgeted amounts approved by HNC;

     -  any issuance of capital stock by us, other than in connection with the
        offering or employee stock option plan previously approved by HNC;

     -  any incurrance of debt by us in excess of $          ;

     -  the sale or purchase of any business or asset having a value of
        $          above budgeted amounts approved by HNC;

     -  the formation and structure of the committees of our board;

     -  the amendment or adoption by us of any employee benefit or stock option
        plan, other than those previously approved by HNC;

     -  any material change in the annual budget we submit to HNC;

     -  any amendment to our certificate of incorporation or bylaws that would
        adversely affect HNC's rights as our majority stockholder; and

     -  the commencement or settlement by us of any litigation, except where
        potential liabilities and expenses are expected to exceed $          .

     In addition, certain of the above listed matters will require the approval
of HNC.

     The approval of the HNC board designees will no longer be required when HNC
owns less than 50% of the outstanding shares of our capital stock.

     Covenants.  We will agree that, for so long as HNC maintains beneficial
ownership of a majority of the total number of our outstanding shares of common
stock, we will, among other things:

     -  provide HNC with financial information regarding our company and our
        subsidiaries;

     -  provide HNC copies of all quarterly and annual financial information and
        other reports and documents we intend to file with the SEC prior to the
        filing, as well as final copies upon filing; and

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     -  cooperate with HNC and provide it with financial and other information
        about us to enable HNC to timely prepare and file reports and filings it
        is required to make under applicable securities laws that require HNC to
        incorporate financial and other information about us.

     Other covenants.  The corporate rights agreement will also provide that for
so long as HNC maintains beneficial ownership of a majority of the total number
of our outstanding shares of common stock, we may not take any action or enter
into any commitment or agreement that may reasonably be anticipated to result in
a default by HNC of:

     -  any provision of HNC's certificate of incorporation or bylaws;

     -  any credit agreement or other material instrument binding upon HNC; or

     -  any judgment, order or decree of any governmental body, agency or court
        having jurisdiction over HNC or any of its assets.

SERVICES AGREEMENT

     We also intend to enter into a services agreement with HNC under which HNC
will agree to provide to us certain accounting, financial and tax services and
employee benefit plan and insurance administration. These services may be
changed upon agreement between HNC and us. We will pay HNC a fee for these
services equal to HNC's cost in providing these services. The fee will be
payable monthly in arrears, 30 days after the close of each month. The services
agreement will expire one year after its effective date and any and all services
can be earlier terminated by us upon 30 days' advance notice or upon other
specified conditions. We cannot assure you that we will be able to provide these
services internally or find a third party provider on acceptable terms, if at
all, after the expiration of the services agreement.

LICENSE AGREEMENT

     We and HNC will enter into a technology license agreement under which HNC
will provide us with the use of specific items of HNC's predictive software
technology. The license will be non-exclusive, perpetual, world-wide and
royalty-free and will limit our use of this HNC technology to develop and market
products and services to retailers and their trading partners. Under the terms
of the license agreement, HNC will not be obligated to provide us any updates to
their predictive software technology. The license agreement will contain certain
other provisions including prohibitions against transfer of, and sublicensing of
specified rights with respect to, HNC's technology.

TAX SHARING AGREEMENT

     Following this offering, we and our subsidiaries will continue to be
included in the consolidated group of HNC for US federal income tax purposes and
the combined, consolidated or unitary group of HNC for various state and local
income tax purposes, or the consolidated group. Prior to the completion of this
offering, we and HNC will enter into a tax sharing agreement. For taxable years
and portions of taxable years prior to the date of this offering, HNC will pay
all taxes for the consolidated group including any liability resulting from
adjustments to tax returns relating to those taxable years or portions of those
taxable years. We and our subsidiaries will continue to be liable for all taxes
that are imposed on a separate return basis or on a combined, consolidated or
unitary basis on a group of companies that includes only us and our
subsidiaries. The tax sharing agreement will require us and HNC to make payments
to each other equal to the amount of income taxes which would be paid by us,
subject to some adjustments, as if we and each of our subsidiaries included in
the consolidated group were to file our own separate, combined, consolidated or
unitary, federal, state and local income tax returns for any taxable year or
portion of any taxable year beginning after the date of this offering in which
we are included in HNC's consolidated group.

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TREATMENT OF OUTSTANDING STOCK OPTIONS

     In connection with our separation from HNC, our executive officers and
other employees will be given the opportunity to receive options to purchase our
common stock in exchange for their agreeing to cancel their outstanding options
to purchase HNC common stock which are scheduled to be unvested as of March 31,
2000. Unvested options to purchase HNC common stock held by our participating
employees which are not canceled pursuant to this option exchange will continue
to vest through March 31, 2000 and those options which are vested as of March
31, 2000 will continue to be exercisable for 90 days following the completion of
our separation from HNC, at which time they will terminate. Options to purchase
our common stock which are granted in exchange for the cancellation of options
to purchase HNC common stock will be granted under our 1999 Equity Incentive
Plan, which is described below at an exercise price to be determined. It is
anticipated that these options will vest 25% on the first anniversary of the
date of grant and thereafter at the rate of 1/48 of the amount of the original
grant on a monthly basis for 36 months.

CERTAIN ARRANGEMENTS INVOLVING STOCK OPTIONS

     If HNC has received a written ruling from the Internal Revenue Service that
the distribution qualifies for tax-free treatment under Section 355 of the
Internal Revenue Code, so that HNC and HNC's stockholders will not recognize
income for federal tax purposes as a result of the distribution, and HNC fails
to complete the distribution within 120 days after the first date that HNC is
eligible to effect the tax-free distribution, John Buchanan and three other
executive officers to be chosen by Mr. Buchanan, will receive a 12-month credit
to the vesting schedule of their Retek stock options. In addition, if at the
time of this accelerated vesting, Mr. Buchanan and the three other chosen
executives execute two-year non-compete agreements with Retek, the vesting
schedules will be credited by an additional 12 months.

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                             PRINCIPAL STOCKHOLDER

     Prior to this offering, all of the shares of our common stock issued and
outstanding were beneficially owned by HNC. Immediately after completion of this
offering, HNC will beneficially own           shares of our common stock, which
will represent approximately      % of our then outstanding common stock (     %
if the underwriters' over-allotment option is exercised in full). HNC's address
is 15935 Cornerstone Court West, San Diego 92121.

     Except for HNC, we are not aware of any person or group that will
beneficially own more than 5% of the outstanding shares of our common stock
following this offering.

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                          DESCRIPTION OF CAPITAL STOCK

     We will file our amended and restated certificate of incorporation
immediately prior to the completion of this offering. The following description
of our capital stock is intended as a summary only and is qualified in its
entirety by reference to our amended and restated certificate of incorporation
filed with the registration statement of which this prospectus forms a part.

GENERAL

     Upon the completion of this offering, we will be authorized to issue
          shares of common stock, par value $0.01 per share, and
shares of undesignated preferred stock, par value $0.01 per share. After this
offering there will be           shares of our common stock outstanding, and
            shares if the underwriters exercise their over-allotment option in
full.

COMMON STOCK

     The holders of shares of our common stock will be entitled to one vote for
each share on all matters voted on by stockholders, including elections of
directors and, except as otherwise required by law or provided in any resolution
adopted by our board of directors with respect to any series of preferred stock,
the holders of such shares will possess all voting power. Our certificate of
incorporation does not provide for cumulative voting in the election of
directors. Subject to any preferential rights of any outstanding series of
preferred stock created by our board of directors from time to time, holders of
shares of our common stock will be entitled to such dividends as may be declared
from time to time by our board of directors from funds legally available
therefore; and upon liquidation will be entitled to receive pro rata all of our
assets available for distribution to such holders. Holders of shares of common
stock will have no liability to further calls or assessment by us, and have no
conversion, redemption or preemptive rights to purchase additional shares of any
class of our shares, except that HNC will have certain rights to purchase
additional shares of common stock as described under "Certain
Transactions -- Corporate Rights Agreement."

PREFERRED STOCK

     There are no shares of preferred stock outstanding. The preferred stock is
issuable either as a class without series or in one or more series and with such
designations, rights, privileges, restrictions and conditions for each class or
series as is stated in the resolutions providing for designation and issue of
each such series adopted by our board of directors. Our board of directors is
authorized to determine, among other things, the voting, dividend, redemption,
conversion and liquidation powers, rights and preferences and the limitations
thereon of such series. We believe that the ability of our board of directors to
issue one or more series of preferred stock will provide us with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs that may arise. The authorized shares of preferred stock will be
available for issuance without further action by stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which our securities may be listed or traded.

     Although our board of directors has no present plans to issue any preferred
stock, it could issue a series of preferred stock that could, depending on the
terms of such series, impede the completion of a merger, tender offer or other
takeover attempt. Our board of directors will make any determination to issue
such shares based on its judgment as to our best interests and the best
interests of our stockholders. Our board of directors could issue preferred
stock with voting and other rights that could adversely effect the voting power
of the holders of our common stock, and that could discourage an acquisition
attempt through which an acquiror may be able to change the composition of our
board of directors, including a tender offer or other transaction that some, or
a majority, of our stockholders might believe to be in their

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<PAGE>   68

best interests or in which stockholders might receive a premium for their stock
over the then current market price of such stock.

CORPORATE OPPORTUNITIES

     Our certificate of incorporation will provide that HNC will have no duty to
refrain from engaging in the same or similar activities or lines of business as
we are engaged, and neither HNC nor any officer or director thereof (except as
provided below), will be liable to us or our stockholders for breach of any
fiduciary duty by reason of any such activities of HNC. Pursuant to our
certificate of incorporation, in the event that HNC acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both
HNC and us, HNC will have no duty to communicate or offer such corporate
opportunity to us and will not be liable to us or our stockholders for breach of
any fiduciary duty as one of our stockholders by reason of the fact that HNC
pursues or acquires such corporate opportunity for itself, directs such
corporate opportunity to another person, or does not communicate information
regarding such corporate opportunity to us.

     Pursuant to our certificate of incorporation, if one of our directors or
officers who is also a director or officer of HNC acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both us
and HNC, our director or officer will have fully satisfied and fulfilled the
fiduciary duty of such director or officer to us and our stockholders with
respect to such corporate opportunity if such director or officer acts in a
manner consistent with the following policy:

     -  a corporate opportunity offered to any person who is one of our
        officers, and who is also a director but not an officer of HNC, will
        belong to us;

     -  a corporate opportunity offered to any person who is a director but not
        one of our officers, and who is also a director or officer of HNC, will
        belong to us if such opportunity is expressly offered to such person
        solely in his or her capacity as one of our directors, and otherwise it
        will belong to HNC; and

     -  a corporate opportunity offered to any person who is an officer of both
        us and HNC will belong to us if such opportunity is expressly offered to
        such person solely in his or her capacity as one of our officers, and
        otherwise it will belong to HNC.

     For purposes of the foregoing:

     -  any of our directors who is chairman of our board of directors or one of
        its committees thereof will not be deemed to be one of our officers by
        reason of holding such position (without regard to whether such position
        is deemed an office under our by-laws), unless such person is one of our
        full-time employees; and

     -  the terms "we", "us" and "our" mean Retek Inc. and all corporations,
        partnerships, joint ventures, associations and other entities in which
        it beneficially owns (directly or indirectly) 50% or more of the
        outstanding voting stock, voting power, partnership interest or similar
        voting interests, and

     -  the term "HNC" means HNC Software Inc. and all corporations,
        partnerships, joint ventures, associations and other entities (other
        than us) in which HNC beneficially owns (directly or indirectly) 50% or
        more of the outstanding voting stock, voting power, partnership
        interests or similar voting interests.

     These provisions will expire on the date that HNC ceases to own
beneficially our common stock representing at least 50% of the total voting
power of all of our outstanding common stock and no person who is one of our
directors or officers is also a director or officer of HNC or any of its
subsidiaries (other than us).

     In addition to any vote of the stockholders required by our certificate of
incorporation, until the time that HNC ceases to own beneficially our common
stock representing at least 50% of the total voting power

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of all classes of our outstanding common stock, the affirmative vote of the
holders of more than 80% of the total voting power of all classes of outstanding
common stock is required to alter, amend or repeal in a manner adverse to the
interests of HNC and its subsidiaries (other than us), or adopt any provision
adverse to the interests of HNC and its subsidiaries (other than us), or
inconsistent with, the corporate opportunity provisions described above.

     Any person purchasing or otherwise acquiring our common stock will be
deemed to have notice of, and to have consented to, the foregoing provisions
regarding corporate opportunities.

CHARTER PROVISIONS AND DELAWARE LAWS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT

     Certain provisions of our certificate of incorporation and bylaws
summarized below may be deemed to have an anti-takeover effect and may delay,
discourage or prevent a tender offer or takeover attempt that a stockholder
might consider to be in its best interest, including attempts that might result
in a premium being paid over the market price of our common stock.

     BOARD OF DIRECTORS

     Number of directors.  The board of directors consists of not less than five
and not more than 10 directors, with the exact number to be determined by the
board of directors. We will have a board of directors with seven members at the
time of this offering. The directors, other than those elected by the holders of
preferred stock, will be classified, with respect to the time they hold office,
into three classes, as nearly equal in number as possible. Each director will
hold office until such person's successor is duly elected and qualified.

     Filling vacancies.  Our certificate of incorporation by-laws provide that,
subject to any rights of holders of preferred stock, and unless our board of
directors otherwise determines, newly created directorships resulting from any
increase in the number of directors shall be filled by the vote of the majority
of the directors then in office, provided that following such appointment, at
least three of the directors are nominees of HNC. Any director so elected or
appointed shall hold office for the remainder of the full term of the class of
director in which the new directorship was created and until his or her
successor is elected and qualified.

     Any vacancies on our board of directors created by the death, resignation,
disqualification or removal of a director may be filled by the vote of the
majority of the directors then in office elected by, or appointed on behalf of,
the same class of stock that elected that director whose death, resignation or
removal created the vacancy, unless there are no such directors, in which case
such vacancy may be filled by the vote of the majority of all directors then in
office, even if less than a quorum, or by the sole remaining director. Any
vacancy on our board of directors created by the death, resignation,
disqualification or removal of a director elected by (or appointed on behalf of)
the holders of a class of stock may also be filled by a vote of the holders of
such class of stock, unless there are no outstanding shares of such class of
stock, in which case any such vacancy may be filled by a vote of the holders of
the remaining class of stock. Any director elected to fill any such vacancy will
hold office for the remainder of the full term of the director whose vacancy is
being filled and until his or her successor is elected and qualified. No
decrease in the number of directors shall shorten the term of any incumbent
director.

     The provisions of the corporate documents described above would preclude a
third-party from removing incumbent directors and simultaneously gaining control
of our board of directors by filling the vacancies created by removal with its
own nominees. Under the classified board provision described above, it would
take at least two elections of directors for any individual or group to gain
control of our board of directors. Accordingly, these provisions could
discourage a third party from initiating a proxy contest, making a tender offer
or otherwise attempting to gain control of us.

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     NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETING

     As of the time at which HNC and its affiliates cease to beneficially own an
aggregate of at least 50% of the then outstanding shares of our common stock, or
Trigger Date, any action required or permitted to be taken by the stockholders
may be effected only at a duly called annual or special meeting of stockholders
and may not be effected by a written consent in lieu of such a meeting.
Effective as of the Trigger Date, except as otherwise required by law and
subject to the rights of the holders of any preferred stock, special meetings of
stockholders for any purpose may be called only by certain of our specified
officers or by any officer at the request in writing of a majority of our board
of directors and the power of stockholders to call a special meeting is
specifically denied. Prior to the Trigger Date, we will call a special meeting
of stockholders promptly upon the request of HNC.

     These provisions may have the effect of delaying consideration of a
stockholder proposal until the next annual meeting unless a special meeting is
called by our board of directors or certain specified officers.

     ADVANCE NOTICE PROCEDURES

     An advance notice procedure for the nomination, other than by or at the
direction of our board of directors, of candidates for election as directors, as
well as for other stockholder proposals, to be considered at annual meetings of
stockholders, must be followed to take such actions. In general, notice of
intent to nominate a director or raise matters at such meetings will have to be
received in writing by us not less than 60 nor more than 90 days prior to the
anniversary of the previous year's annual meeting of stockholders, and must
contain certain information concerning the person to be nominated or the matters
to be brought before the meeting and concerning the stockholder submitting the
proposal. If the chairman of a meeting determines that an individual was not
nominated, or other business was not brought before the meeting, in accordance
with the advance notice procedures, such individual will not be eligible for
election as a director, or such business will not be conducted at such meeting,
as the case may be.

     The advance notice procedures do not apply to HNC and its affiliates prior
to the Trigger Date.

     CHARTER AMENDMENTS

     Our certificate of incorporation will provide that the affirmative vote of
the holders of at least 80% of the outstanding shares of our common stock is
required to amend, repeal or adopt any provision inconsistent with the foregoing
charter provisions. Our certificate of incorporation further provides that
certain provisions of our bylaws may be altered, amended or repealed by the
affirmative vote of directors constituting not less than a majority of our
entire board of directors (if effected by action of our board of directors) or
by the affirmative vote of the holders of at least 80% of the voting power of
all classes of outstanding capital stock, voting together as a single class (if
effected by action of the stockholders). In addition, under the terms of the
corporate rights agreement, we will agree that until the Trigger Date, any
changes to our certificate of incorporation or bylaws that would harm HNC's
rights must be approved by HNC as our majority stockholder.

     SECTION 203 OF DELAWARE GENERAL CORPORATION LAW

     Section 203 of the Delaware General Corporation Law provides that, subject
to certain exceptions specified therein, an "interested stockholder" of a
Delaware corporation shall not engage in any business combination, including
mergers or consolidations or acquisitions of additional shares of the
corporation, with the corporation for a three-year period following the date
that such stockholder becomes an interested stockholder unless:

     -  prior to such date, the board of directors of the corporation approved
        either the business combination or the transaction which resulted in the
        stockholder becoming an interested stockholder,

     -  upon consummation of the transaction which resulted in the stockholder
        becoming an interested stockholder, the interested stockholder owned at
        least 85% of the voting stock of the corporation outstanding at the time
        the transaction commenced (excluding certain shares), or

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     -  on or subsequent to such date, the business combination is approved by
        the board of directors of the corporation and authorized at an annual or
        special meeting of stockholders by the affirmative vote of at least
        66 2/3% of the outstanding voting stock of the corporation which is not
        owned by the interested stockholder.

     Except as otherwise specified in Section 203, an interested stockholder is
defined to include:

     -  any person that is the owner of 15% or more of the outstanding voting
        securities of the corporation, or is an affiliate or associate of the
        corporation and was the owner of 15% or more of the outstanding voting
        stock of the corporation at any time within three years immediately
        prior to the date of determination and

     -  the affiliates and associates of any such person.

     Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. We have not elected to
be exempt from the restrictions imposed under Section 203. However, HNC and its
affiliates are excluded from the definition of "interested stockholder" pursuant
to the terms of Section 203. The provisions of Section 203 may encourage persons
interested in acquiring us to negotiate in advance with our board of directors,
since the stockholder approval requirement would be avoided if a majority of the
directors then in office approves either the business combination or the
transaction which results in any such person becoming an interested stockholder.
Such provisions also may have the effect of preventing changes in our
management. It is possible that such provisions could make it more difficult to
accomplish transactions which our stockholders may otherwise deem to be in their
best interests.

LIMITATION OF LIABILITY

     Our certificate of incorporation provides that none of our directors will
be personally liable to us or our stockholders for monetary damages for breach
of fiduciary duty as a director, except, if required by the DGCL as amended from
time to time, for liability

     -  for breach of the director's duty of loyalty to us or our stockholders,

     -  for acts or omissions not in good faith or which involve intentional
        misconduct or a knowing violation of law,

     -  under Section 174 of the DGCL, which concerns unlawful payments of
        dividends, stock purchases or redemptions, or

     -  for any transaction from which the director derived an improper personal
        benefit.

     Neither the amendment or repeal of such provision will eliminate or reduce
the effect of such provision in respect of any matter occurring, or any cause of
action, suit or claim that, but for such provision, would accrue or arise prior
to such amendment or repeal. While our certificate of incorporation provides
directors with protection from monetary damages for breaches from their duty of
care, it does not eliminate such duty. Accordingly, our certificate of
incorporation will have no effect on the availability of equitable remedies such
as an injunction or rescission based on a director's breach of his or her duty
of care.

LISTING

     We have applied for listing our common stock on The Nasdaq National Market
under the symbol "RETK."

TRANSFER AGENT AND REGISTRANT

     The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services located at 85 Challenger Rd., Ridgefield Park, New Jersey
07660. Its phone number is (201) 296-4000.

                                       70
<PAGE>   72

                        SHARES ELIGIBLE FOR FUTURE SALE

     Prior to this offering, there has been no market for our common stock. A
significant public market for our common stock may not develop or be sustained
after this offering. Future sales of substantial amounts of our common stock in
the public market following this offering, including shares issued upon exercise
of outstanding options or options that may be granted after this offering, could
harm market prices and could impair our ability to raise capital through sale of
our equity securities. As described below, less than      % of our shares
currently outstanding will be available for sale immediately after this offering
because of contractual restrictions on resale. Sales of substantial amounts of
our common stock in the public market after the restrictions lapse could
adversely affect the prevailing market price of our common stock and our ability
to raise equity capital in the future.

     Upon completion of this offering, we will have outstanding           shares
of common stock, or           shares if the underwriters exercise in full their
over-allotment option, which will be freely tradable without restriction under
the Securities Act, except for shares purchased by our "affiliates," as that
term is defined in Rule 144 under the Securities Act. The shares purchased by
our affiliates generally may be sold in compliance with Rule 144 as described
below.

     The           shares of our common stock held by HNC after this offering
will constitute "restricted securities" within the meaning of Rule 144. The
shares held by HNC will be subject to contractual restrictions on resale based
on the lock-up agreements described below. Further, since the shares held by HNC
will constitute restricted securities, HNC may not sell them unless they are
registered under the Securities Act or an exemption from registration is
available.

     HNC, Retek and our officers and directors have entered into lock-up
agreements or other contractual restrictions providing that the stockholder will
not offer, sell, contract to sell or otherwise dispose of any shares of our
common stock for a period of 180 days after the date of this prospectus, without
the prior written consent of Credit Suisse First Boston Corporation. As a result
of these lock-up agreements and other contractual restrictions, notwithstanding
possible earlier eligibility for sale under the provisions of Rule 144, none of
these shares will be resellable until 181 days after the date of this
prospectus.           shares of our common stock are subject to lock-up
agreements. Credit Suisse First Boston Corporation may, in its sole discretion
and at any time without notice, release any portion of the securities subject to
lock-up agreements or other contractual restrictions.

     In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year, including the holding period of any prior owner
except an affiliate of us, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:

     -  1% of the number of shares of our common stock then outstanding, which
        will equal approximately           shares immediately after this
        offering; or

     -  the average weekly trading volume of our common stock during the four
        calendar weeks preceding the filing of a Form 144 in connection with the
        sale.

     Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us. Under Rule 144(k), a person who is not deemed to have been an
affiliate of ours at any time during the three months preceding a sale, and who
has beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except an affiliate, is entitled
to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.

     Within 90 days following the effectiveness of this offering, we will file a
registration statement on Form S-8 to register shares of our common stock
subject to outstanding options or reserved for future issuance under our stock
plans. As of           , 1999, options to purchase a total of           shares
were outstanding and           shares were reserved for future issuance under
our stock plan. The common
                                       71
<PAGE>   73

stock issued upon exercise of outstanding vested options, other than common
stock issued to our affiliates, will be available for immediate resale in the
open market.

REGISTRATION RIGHTS

     At any time more than six months after the closing of this offering, HNC
and certain of its affiliates, who are holders of           shares of our common
stock, will be entitled to rights with respect to the registration of those
shares under the Securities Act. Registration of those shares under the
Securities Act would result in those shares becoming freely tradable without
restriction under the Securities Act, except for shares purchased by affiliates,
immediately upon effectiveness of registration.

                                       72
<PAGE>   74

                       MATERIAL UNITED STATES FEDERAL TAX
                   CONSEQUENCES TO NON-UNITED STATES HOLDERS

GENERAL

     The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of common
stock that may be relevant to you if you are a non-United States holder. In
general, a "non-United States Holder" is a person or entity that is, for United
States federal income tax purposes, a foreign corporation, a nonresident alien
individual, a foreign partnership or a foreign estate or trust. This discussion
is based on current law, which is subject to change, possibly with retroactive
effect, or different interpretations. This discussion is limited to non-United
States Holders who hold shares of common stock as capital assets. Moreover, this
discussion is for general information only and does not address all of the tax
consequences that may be relevant to you in light of your personal
circumstances, nor does it discuss special tax provisions which may apply to you
if you relinquished United States citizenship or residence.

     If you are an individual, you may, in many cases, be deemed to be a
resident alien, as opposed to a nonresident alien, by virtue of being present in
the United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to United States federal income tax as if they were United States citizens.

     EACH PROSPECTIVE PURCHASER OF OUR COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY UNITED STATES STATE,
MUNICIPALITY OR OTHER TAXING JURISDICTION.

DIVIDENDS

     If dividends are paid, as a non-United States Holder, you will be subject
to withholding of United States federal income tax at a 30% rate or a lower rate
as may be specified by an applicable income tax treaty. To claim the benefit of
a lower rate under an income tax treaty, you must properly file with the payor
an IRS Form 1001, or successor form, claiming an exemption from or reduction in
withholding under the applicable tax treaty.

     If dividends are considered effectively connected with the conduct of a
trade or business by you within the United States and, where a tax treaty
applies, are attributable to a United States permanent establishment of yours,
those dividends will not be subject to withholding tax, but instead will be
subject to United States federal income tax on a net basis at applicable
graduated individual or corporate rates, provided an IRS Form 4224, or successor
form, is filed with the payor. If you are a foreign corporation, any effectively
connected dividends may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or a lower rate as may be
specified by an applicable income tax treaty.

     Unless the payor has knowledge to the contrary, dividends paid prior to
January 1, 2001 to an address outside the United States are presumed to be paid
to a resident of such country for purposes of the withholding discussed above
and for purposes of determining the applicability of a tax treaty rate. However,
recently finalized Treasury Regulations pertaining to United States federal
withholding tax provide that you must comply with certification procedures, or,
in the case of payments made outside the United States with respect to an
offshore account, certain documentary evidence procedures, directly or under
certain circumstances through an intermediary, to obtain the benefits of a
reduced rate under an income tax treaty with respect to dividends paid after
December 31, 2000. In addition, these regulations will require you, if you
provide an IRS Form 4224 or successor form, as discussed above, to provide your
identification number.

                                       73
<PAGE>   75

     If you are eligible for a reduced rate of United States withholding tax
pursuant to an income tax treaty, you may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

     As a non-United States Holder, you generally will not be subject to United
States federal income tax on any gain recognized on the sale or other
disposition of common stock unless:

     (1)  the gain is considered effectively connected with the conduct of a
          trade or business by you within the United States and, where a tax
          treaty applies, is attributable to a United States permanent
          establishment of yours (and, in which case, if you are a foreign
          corporation, you may be subject to an additional branch profits tax
          equal to 30% or a lower rate as may be specified by an applicable
          income tax treaty);

     (2)  you are an individual who holds the common stock as a capital asset
          and are present in the United States for 183 or more days in the
          taxable year of the sale or other disposition and other conditions are
          met; or

     (3)  we are or have been a "United States real property holding
          corporation," or a USRPHC, for United States federal income tax
          purposes. We believe that we are not currently, and are likely not to
          become, a USRPHC. If we were to become a USRPHC, then gain on the sale
          or other disposition of common stock by you generally would not be
          subject to United States federal income tax provided:

        -  the common stock was "regularly traded" on an established securities
           market; and

        -  you do not actually or constructively own more than 5% of the common
           stock during the shorter of the five-year period preceding the
           disposition or your holding period.

FEDERAL ESTATE TAX

     If you are an individual, common stock held at the time of your death will
be included in your gross estate for United States federal estate tax purposes,
and may be subject to United States federal estate tax, unless an applicable
estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

     We must report annually to the Internal Revenue Service and to each of you
the amount of dividends paid to you and the tax withheld with respect to those
dividends, regardless of whether withholding was required. Copies of the
information returns reporting those dividends and withholding may also be made
available to the tax authorities in the country in which you reside under the
provisions of an applicable income tax treaty or other applicable agreements.

     Backup withholding is generally imposed at the rate of 31% on certain
payments to persons that fail to furnish the necessary identifying information
to the payor. Backup withholding generally will not apply to dividends paid
prior to January 1, 2001 to a Non-United States Holder at an address outside the
United States, unless the payor has knowledge that the payee is a United States
person. In the case of dividends paid after December 31, 2000, the recently
finalized Treasury Regulations provide that you generally will be subject to
withholding tax at a 31% rate unless you certify your non-United States status.

     The payment of proceeds of a sale of common stock effected by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless you provide the payor with your name and address
and you certify your non-United States status or you otherwise establish an
exemption. In general, backup withholding and information reporting will not
apply to the payment of the

                                       74
<PAGE>   76

proceeds of a sale of common stock by or through a foreign office of a broker.
If, however, such broker is, for United States federal income tax purposes, a
United States person, a controlled foreign corporation, or a foreign person that
derives 50% or more of its gross income for certain periods from the conduct of
a trade or business in the United States, or, in addition, for periods after
December 31, 2000, a foreign partnership that at any time during its tax year
either is engaged in the conduct of a trade or business in the United States or
has as partners one or more United States persons that, in the aggregate, hold
more than 50% of the income or capital interest in the partnership, such
payments will be subject to information reporting, but not backup withholding,
unless such broker has documentary evidence in its records that you are a
non-United States Holder and certain other conditions are met or you otherwise
establish an exemption.

     Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against the United States federal income tax
liability, provided the required information is furnished in a timely manner to
the IRS.

                                       75
<PAGE>   77

                                  UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated          , 1999, we have agreed to sell to the underwriters
named below, for whom Credit Suisse FirstBoston Corporation, BancBoston
Robertson Stephens Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives, the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
                                                              Number of
Underwriter                                                     Shares
-----------                                                   ----------
<S>                                                           <C>
Credit Suisse First Boston Corporation......................
BancBoston Robertson Stephens Inc...........................
U.S. Bancorp Piper Jaffray Inc..............................
                                                              ----------
  Total.....................................................
                                                              ==========
</TABLE>

     The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or this
offering of common stock may be terminated.

     We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to           additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.

     The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $     per share. The
underwriters and selling group members may allow a discount of $     per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

     The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
                                                         PER SHARE                           TOTAL
                                              -------------------------------   -------------------------------
                                                 WITHOUT            WITH           WITHOUT            WITH
                                              OVER-ALLOTMENT   OVER-ALLOTMENT   OVER-ALLOTMENT   OVER-ALLOTMENT
                                              --------------   --------------   --------------   --------------
<S>                                           <C>              <C>              <C>              <C>
Underwriting discounts and
  commissions payable by us.................   $                $                $                $
Expenses payable by us......................   $                $                $                $
</TABLE>

     The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

     We, our officers and directors and our stockholder have agreed that we and
they will not offer, sell, contract to sell, announce an intention to sell,
pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the Securities
Act relating to any additional shares of our common stock or securities
convertible into or exchangeable or exercisable for any of our common stock, or
publicly disclose the intention to make any such offer, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
in our case for issuances pursuant to the exercise of employee stock options
outstanding on the date hereof.

                                       76
<PAGE>   78

     We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.

     We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "RETK."

     Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors that will be considered
in determining the public offering price include:

     - the information set forth in this prospectus and otherwise available to
       the underwriters;

     - the history and the prospects for the industry in which we will compete;

     - the ability of our management;

     - the prospects for our future earnings;

     - the present state of our development and our current financial condition;

     - the general condition of the securities markets at the time of this
       offering; and

     - the recent market prices of, and the demand for, publicly traded common
       stock of generally comparable companies.

     The representatives on behalf of the underwriters may engage in
overallotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

     -  Overallotment involves syndicate sales in excess of this offering size,
        which creates a syndicate short position.

     -  Stabilizing transactions permit bids to purchase the underlying security
        so long as the stabilizing bids do not exceed a specified maximum.

     -  Syndicate covering transactions involve purchases of the common stock in
        the open market after the distribution has been completed in order to
        cover syndicate short positions.

     -  Penalty bids permit the representatives to reclaim a selling concession
        from a syndicate member when the common stock originally sold by the
        syndicate member is purchased in a syndicate covering transaction to
        cover syndicate short positions.

     These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

                                       77
<PAGE>   79

                          NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

     The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or under a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the common
stock.

REPRESENTATION OF PURCHASERS

     Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (1) the purchaser is entitled under
applicable provincial securities laws to purchase common stock without the
benefit of a prospectus qualified under the securities laws, (2) where required
by law, that the purchaser is purchasing as principal and not as agent, and (3)
the purchaser has reviewed the text above the text under "Resale Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

     The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

     All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer and these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

     A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

     Canadian purchasers of common stock should consult with their own legal and
tax advisors with respect to the tax consequences of an investment in our common
stock in their particular circumstances and with respect to the eligibility of
our common stock for investment by the purchaser under relevant Canadian
legislation.
                                       78
<PAGE>   80

                                 LEGAL MATTERS

     The validity of the common stock offered hereby will be passed upon for
Retek by Shearman & Sterling, Menlo Park, California. Certain legal matters will
be passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.

                                    EXPERTS

     The combined financial statements of Retek Logistics, Inc. and Retek
Information Systems, Inc. as of December 31, 1997 and 1998, and June 30, 1999
and for each of the three years in the period ended December 31, 1998, and for
the six months ended June 30, 1999 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given upon the authority of such firm as experts in auditing and
accounting.

                                       79
<PAGE>   81

                         WHERE TO FIND MORE INFORMATION

     We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules which are part of the registration statement. For further
information with respect to Retek and the common stock we are offering,
reference is made to the registration statement and the exhibits filed as a part
of the registration statement. Statements contained in this prospectus
concerning the contents of any contract or any other document referred to may be
only summaries of these documents. The exhibits to this registration statement
should be referenced for the complete contents of these contracts and documents.
Each statement is qualified in all respects by reference to the exhibit. The
registration statement, including the exhibits, may be inspected without charge
at the public reference facilities maintained by the Commission in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and the Commission's regional
offices located in New York, New York and Chicago, Illinois. Copies of all or
any part may be obtained from these offices after payment of fees prescribed by
the Commission. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. The Commission also maintains a Web
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.

     Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act and, in
accordance with this law, will file periodic reports, proxy statements and other
information with the SEC. These periodic reports, proxy statements and other
information will be available for inspection and copying at the SEC's public
reference rooms, our web site and the web site of the SEC referred to above.

                                       80
<PAGE>   82

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                 PAGE
                                                                ------
<S>                                                             <C>
RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.:
Report of Independent Accountants...........................       F-2
Combined Balance Sheet as of December 31, 1997 and 1998, and
  June 30, 1999.............................................       F-3
Combined Statement of Income for the years ended December
  31, 1996, 1997 and 1998, for the six months ended June 30,
  1998 (unaudited) and for the six months ended June 30,
  1999......................................................       F-4
Combined Statement of Cash Flows for the years ended
  December 31, 1996, 1997 and 1998, for the six months ended
  June 30, 1998 (unaudited) and for the six months ended
  June 30, 1999.............................................       F-5
Combined Statement of Changes in Stockholder's Equity and
  Comprehensive Income for the years ended December 31,
  1996, 1997 and 1998, and for the six months ended June 30,
  1999......................................................       F-6
Notes to Combined Financial Statements......................       F-7
RETEK LOGISTICS, INC.:
Report of Independent Accountants...........................      F-21
Balance Sheet as of December 31, 1996 and 1997, and March
  31, 1998..................................................      F-22
Statements of Operations for the years ended December 31,
  1996 and 1997, and for the three months ended March 31,
  1997 (unaudited) and for the three months ended March 31,
  1998......................................................      F-23
Statements of Cash Flows for the years ended December 31,
  1996 and 1997, and for the three months ended March 31,
  1997 (unaudited) and for the three months ended March 31,
  1998......................................................      F-24
Statement of Changes in Stockholders' Equity and
  Comprehensive Income for the years ended December 31, 1996
  and 1997 and for the three months ended March 31, 1998....      F-25
Notes to Financial Statements...............................      F-26
PRO FORMA COMBINED FINANCIAL INFORMATION OF RETEK LOGISTICS,
  INC. AND RETEK INFORMATION SYSTEMS, INC.:
Pro Forma Combined Statement of Income for the year ended
  December 31, 1998.........................................      F-33
Notes to Pro Forma Combined Statement of Income.............      F-34
</TABLE>

                                       F-1
<PAGE>   83

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
  RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

     In our opinion, the accompanying combined balance sheet and the related
combined statements of income, of cash flows and of changes in stockholder's
equity and comprehensive income present fairly, in all material respects, the
combined financial position of Retek Logistics, Inc. and Retek Information
Systems, Inc. (the "Company") at December 31, 1997 and 1998, and June 30, 1999
and the combined results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, and the six months in the
period ended June 30, 1999, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
September 9, 1999

                                       F-2
<PAGE>   84

           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

                             COMBINED BALANCE SHEET
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                ------------------    JUNE 30,
                                                                 1997       1998        1999
                                                                -------    -------    --------
<S>                                                             <C>        <C>        <C>
                                            ASSETS
Current assets:
  Cash and cash equivalents.................................    $ 2,469    $   415    $   930
  Accounts receivable, net..................................     11,972     22,050     28,346
  Current portion of deferred income taxes..................      2,706      2,972      3,627
  Other current assets......................................      1,158      2,706      1,541
                                                                -------    -------    -------
     Total current assets...................................     18,305     28,143     34,444
Deferred income taxes, less current portion.................     15,455     13,960     13,511
Property and equipment, net.................................      3,006      4,887      6,634
Intangible assets, net......................................      1,130      4,010      3,143
Other assets................................................         --        283         33
                                                                -------    -------    -------
                                                                $37,896    $51,283    $57,765
                                                                =======    =======    =======
                             LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accounts payable..........................................    $ 3,212    $ 3,289    $ 4,842
  Accrued liabilities.......................................      2,140      2,970      3,246
  Deferred revenue..........................................      1,446      3,064      2,629
  Payable to HNC Software Inc...............................      6,491      5,944      7,927
                                                                -------    -------    -------
     Total current liabilities..............................     13,289     15,267     18,644
Commitments and contingencies (Notes 3 and 7)
Stockholder's equity:
  Retek Logistics, Inc.:
     Common stock, no par value -- 5,000,000 shares
       authorized; and 2,237,683 shares issued and
       outstanding..........................................         --      6,564      6,564
  Retek Information Systems, Inc.:
     Common stock, $1.00 par value -- 1,000 shares
       authorized; and 100 shares issued and outstanding....         --         --         --
     Paid-in capital........................................     19,230     20,290     20,327
  Accumulated other comprehensive loss......................        (95)      (188)      (580)
  Retained earnings.........................................      5,472      9,350     12,810
                                                                -------    -------    -------
     Total stockholder's equity.............................     24,607     36,016     39,121
                                                                -------    -------    -------
                                                                $37,896    $51,283    $57,765
                                                                =======    =======    =======
</TABLE>

            See accompanying notes to combined financial statements.
                                       F-3
<PAGE>   85

           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

                          COMBINED STATEMENT OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                   SIX MONTHS ENDED
                                                     YEAR ENDED DECEMBER 31,           JUNE 30,
                                                   ---------------------------   ---------------------
                                                    1996      1997      1998        1998        1999
                                                   -------   -------   -------   -----------   -------
                                                                                 (UNAUDITED)
<S>                                                <C>       <C>       <C>       <C>           <C>
Revenue:
  License and maintenance.......................   $ 9,740   $28,895   $42,753     $19,847     $27,314
  Services and other............................     3,693     2,028    12,280       5,466      10,376
                                                   -------   -------   -------     -------     -------
     Total revenue..............................    13,433    30,923    55,033      25,313      37,690
                                                   -------   -------   -------     -------     -------
Cost of revenue:
  License and maintenance.......................     1,797     2,747     4,349       1,815       3,258
  Services and other............................     2,082       898     9,503       3,897       7,462
                                                   -------   -------   -------     -------     -------
     Total cost of revenue......................     3,879     3,645    13,852       5,712      10,720
                                                   -------   -------   -------     -------     -------
     Gross profit...............................     9,554    27,278    41,181      19,601      26,970
Operating expenses:
  Research and development......................     4,829     9,485    12,918       6,066       9,737
  Sales and marketing...........................     1,892     8,261    14,075       7,021       8,374
  General and administrative....................     1,415     2,913     3,921       2,117       2,551
  Acquired in-process research and
     development................................        --        --     1,750       1,750          --
  Acquisition related amortization of
     intangibles................................        --        --       429         143         516
                                                   -------   -------   -------     -------     -------
     Total operating expenses...................     8,136    20,659    33,093      17,097      21,178
                                                   -------   -------   -------     -------     -------
Operating income................................     1,418     6,619     8,088       2,504       5,792
Other income, net...............................        --        24        11          --          14
                                                   -------   -------   -------     -------     -------
  Income before income tax (benefit)
     provision..................................     1,418     6,643     8,099       2,504       5,806
Income tax (benefit) provision..................      (815)    3,167     4,221       1,936       2,346
                                                   -------   -------   -------     -------     -------
  Net income....................................   $ 2,233   $ 3,476   $ 3,878     $   568     $ 3,460
                                                   =======   =======   =======     =======     =======
Pro forma unaudited basic and diluted net income
  per common share (Note 1).....................                       $  1.73                 $  1.55
                                                                       -------                 -------
Shares used in computing pro forma unaudited
  basic and diluted net income per common share
  (Note 1)......................................                         2,238                   2,238
                                                                       =======                 =======
</TABLE>

            See accompanying notes to combined financial statements.
                                       F-4
<PAGE>   86

           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

                        COMBINED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                   SIX MONTHS ENDED
                                                     YEAR ENDED DECEMBER 31,           JUNE 30,
                                                   ---------------------------   ---------------------
                                                    1996      1997      1998        1998        1999
                                                   -------   -------   -------   -----------   -------
                                                                                 (UNAUDITED)
<S>                                                <C>       <C>       <C>       <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income....................................   $ 2,233   $ 3,476   $ 3,878     $   568     $ 3,460
  Adjustments to reconcile net income to net
     cash provided by (used in) operating
     activities:
  Provision for doubtful accounts...............       309       212     1,652         283       1,491
  Depreciation and amortization.................       804     1,266     2,420         953       1,873
  Acquired in-process research and
     development................................        --        --     1,750       1,750          --
  Deferred income tax expense...................    (1,255)    1,971       753         515        (206)
  Tax benefit from stock option transactions....        18       815     1,060         530          37
  Changes in assets and liabilities:
     Accounts receivable........................    (3,632)   (5,915)  (10,814)     (9,488)     (8,165)
     Other assets...............................      (430)     (869)   (1,736)        849       1,415
     Accounts payable...........................     1,000     1,567       185        (633)      1,552
     Accrued liabilities........................     1,118       726       532          59         276
     Deferred revenue...........................       848       580     1,205         908        (435)
     Other liabilities..........................      (279)       --        --           6          --
                                                   -------   -------   -------     -------     -------
       Net cash provided by (used in) operating
          activities............................       734     3,829       885      (3,700)      1,298
                                                   -------   -------   -------     -------     -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash purchased in business acquisition........        --        --       559         559          --
  Acquisitions of property and equipment........      (281)   (3,101)   (2,938)     (1,105)     (2,753)
                                                   -------   -------   -------     -------     -------
       Net cash used in investing activities....      (281)   (3,101)   (2,379)       (546)     (2,753)
                                                   -------   -------   -------     -------     -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of debt.............................    (1,464)       --                    --          --
  Payable to HNC Software Inc...................     1,950       294      (547)      3,730       1,983
                                                   -------   -------   -------     -------     -------
  Net cash provided by (used in) financing
     activities.................................       486       294      (547)      3,730       1,983
                                                   -------   -------   -------     -------     -------
Effect of exchange rate changes on cash.........        (3)      (12)      (13)        (30)        (13)
                                                   -------   -------   -------     -------     -------
Net increase (decrease) in cash and cash
  equivalents...................................       936     1,010    (2,054)       (546)        515
Cash and cash equivalents at beginning of
  period........................................       523     1,459     2,469       2,469         415
                                                   -------   -------   -------     -------     -------
Cash and cash equivalents at end of period......   $ 1,459   $ 2,469   $   415     $ 1,923     $   930
                                                   =======   =======   =======     =======     =======
SIGNIFICANT NON-CASH INVESTING AND FINANCING
  ACTIVITIES:
  Assets purchased through issuance of debt.....   $ 4,710   $    --   $    --     $    --     $    --
                                                   =======   =======   =======     =======     =======
  Repayment of debt by HNC Software Inc.........   $ 3,246   $    --   $    --     $    --     $    --
                                                   =======   =======   =======     =======     =======
  Net assets acquired through issuance of HNC
     Software Inc. stock........................   $    --   $    --   $ 6,564     $ 5,088     $    --
                                                   =======   =======   =======     =======     =======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
  Income taxes paid.............................   $    --   $     3   $    67     $     5     $   146
                                                   =======   =======   =======     =======     =======
</TABLE>

            See accompanying notes to combined financial statements.
                                       F-5
<PAGE>   87

           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             COMBINED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
                            AND COMPREHENSIVE INCOME
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                      RETEK            RETEK INFORMATION
                                 LOGISTICS, INC.         SYSTEMS, INC.
                                 ---------------   -------------------------    ACCUMULATED    (ACCUMULATED
                                  COMMON STOCK      COMMON STOCK                   OTHER         DEFICIT)         TOTAL
                                 ---------------   ---------------   PAID-IN   COMPREHENSIVE     RETAINED     STOCKHOLDER'S
                                 SHARES   AMOUNT   SHARES   AMOUNT   CAPITAL   INCOME (LOSS)     EARNINGS        EQUITY
                                 ------   ------   ------   ------   -------   -------------   ------------   -------------
<S>                              <C>      <C>      <C>      <C>      <C>       <C>             <C>            <C>
BALANCE AT DECEMBER 31, 1995...     --    $  --      --     $  --    $             $             $  (237)        $  (237)

Tax benefit from stock
  options......................                                           18                                          18
Tax benefit from taxable
  pooling (Note 4).............                                       18,397                                      18,397
Foreign currency translation
  adjustment...................                                                       58                              58
Net income.....................                                                                    2,233           2,233
                                 -----    ------    ---     ------   -------       -----         -------         -------
BALANCE AT DECEMBER 31, 1996...     --               --        --     18,415          58           1,996          20,469
Tax benefit from stock
  options......................                                          815                                         815
Foreign currency translation
  adjustment...................                                                     (153)                           (153)
Net income.....................                                                                    3,476           3,476
                                 -----    ------    ---     ------   -------       -----         -------         -------
BALANCE AT DECEMBER 31, 1997...     --               --        --     19,230         (95)          5,472          24,607
Acquisition of Retek Logistics,
  Inc. by HNC Software Inc.....  2,238    6,564                                                                    6,564
Tax benefit from stock
  options......................                                        1,060                                       1,060
Foreign currency translation
  adjustment...................                                                      (93)                            (93)
Net income.....................                                                                    3,878           3,878
                                 -----    ------    ---     ------   -------       -----         -------         -------
BALANCE AT DECEMBER 31, 1998...  2,238    6,564      --        --     20,290        (188)          9,350          36,016
Tax benefit from stock
  options......................                                           37                                          37
Foreign currency translation
  adjustment...................                                                     (392)                           (392)
Net income.....................                                                                    3,460           3,460
                                 -----    ------    ---     ------   -------       -----         -------         -------
BALANCE AT JUNE 30, 1999.......  2,238    $6,564     --     $  --    $20,327       $(580)        $12,810         $39,121
                                 =====    ======    ===     ======   =======       =====         =======         =======

<CAPTION>

                                 COMPREHENSIVE
                                    INCOME
                                 -------------
<S>                              <C>
BALANCE AT DECEMBER 31, 1995...
Tax benefit from stock
  options......................
Tax benefit from taxable
  pooling (Note 4).............
Foreign currency translation
  adjustment...................     $    58
Net income.....................       2,233
                                    -------
BALANCE AT DECEMBER 31, 1996...     $ 2,291
                                    =======
Tax benefit from stock
  options......................
Foreign currency translation
  adjustment...................     $  (153)
Net income.....................       3,476
                                    -------
BALANCE AT DECEMBER 31, 1997...     $ 3,323
                                    =======
Acquisition of Retek Logistics,
  Inc. by HNC Software Inc.....
Tax benefit from stock
  options......................
Foreign currency translation
  adjustment...................     $   (93)
Net income.....................       3,878
                                    -------
BALANCE AT DECEMBER 31, 1998...     $ 3,785
                                    =======
Tax benefit from stock
  options......................
Foreign currency translation
  adjustment...................     $  (392)
Net income.....................       3,460
                                    -------
BALANCE AT JUNE 30, 1999.......     $ 3,068
                                    =======
</TABLE>

            See accompanying notes to combined financial statements.
                                       F-6
<PAGE>   88

           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

The Company

     Retek Logistics, Inc. (formerly Practical Control Systems Technologies,
Inc.) and Retek Information Systems, Inc. (collectively referred to as the
"Company" or "Retek") are wholly owned subsidiaries of HNC Software Inc.
("HNC"). Retek Logistics, Inc. was acquired by HNC in March 1998 in a
transaction that was accounted for under the purchase method of accounting by
HNC. Retek Information Systems, Inc. was acquired by HNC in November 1996 in a
transaction that was accounted for under the pooling-of-interests method of
accounting by HNC. In April 1997, Neil Thall Associates, Inc. ("NTA"), formerly
a wholly owned subsidiary of HNC, which was formed in 1991, was merged with the
business of Retek Information Systems, Inc. Retek Logistics, Inc. and Retek
Information Systems, Inc. are headquartered in Minneapolis, Minnesota.

     Retek Logistics, Inc. develops warehouse management software solutions.
Retek Information Systems, Inc., markets and supports management decision
software products for retailers and their vendors. These predictive software
solutions employ proprietary neural-network predictive decision engines,
profiles, traditional statistical modeling, business models, expert rules and
context vectors to convert existing data and business experiences into
meaningful recommendations and actions.

Basis of Presentation

     The combined financial statements reflect the combined financial position,
results of operations and cash flows of the companies as if Retek Logistics, Inc
and Retek Information Systems, Inc. were combined. The combined financial
statements include the accounts of Retek Logistics, Inc. for the periods after
its acquisition by HNC in March 1998 and the accounts of Retek Information
Systems, Inc. for all periods presented. The combined financial statements also
include the financial position, results of operations and cash flows of NTA for
all periods presented. The financial statements have been prepared using HNC's
historical basis in the assets and liabilities and historical results of
operations of each of the entities which comprise the Company's business. All
significant intercompany transactions and balances have been eliminated.

     General corporate overhead related to HNC's corporate headquarters and
common support divisions have been allocated to the Company based on the
proportion of the Company's revenues and headcount to HNC's consolidated
revenues and headcount. Management believes these allocations reasonably
approximate the costs incurred by HNC on behalf of the Company's operations.
However, the costs as allocated to the Company are not necessarily indicative of
the costs that would have been incurred if the Company had performed these
functions as a stand-alone entity. Subsequent to the sale of a minority interest
in the Company through a public offering, the Company expects to have its own
staff perform necessary functions using its own resources or purchased services
and will be responsible for the costs and expenses associated with the
management of a separate publicly held corporation.

     The Company's financing activities are represented by cash transactions
with HNC and are reflected in the payable to HNC Software Inc. Activity in the
payable to HNC Software Inc. primarily relates to cash activity with HNC as well
as cost allocations and other intercompany charges to the Company from HNC.

     The financial information included herein may not necessarily reflect the
combined results of operations, financial position, results of operations and
cash flows of the Company in the future or what it would have been had it been a
separate, stand-alone entity from HNC during the periods presented.

                                       F-7
<PAGE>   89
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     The following unaudited pro forma information presents the combined results
of operations of the Company as if the Retek Logistics, Inc. acquisition by HNC
had occurred on January 1, 1997 and 1998, and includes acquired in-process
research and development expense of $1,750 during each of the years ended
December 31, 1997 and 1998.

<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                                ------------------
                                                                 1997       1998
                                                                -------    -------
<S>                                                             <C>        <C>
Total revenues..............................................    $36,009    $56,264
Total net income............................................    $ 1,105    $ 3,234
Pro forma basic and diluted net income per common share.....    $    --    $  1.45
</TABLE>

     The above unaudited pro forma information is not necessarily indicative of
the combined results of operations that would have occurred had the purchase
been made at the beginning of the periods presented or the future results of the
combined operations.

Financial Statement Preparation

     The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Cash Equivalents

     Cash equivalents are highly liquid investments and consist of investments
in money market accounts and commercial paper purchased with maturities of three
months or less.

Property and Equipment

     Property and equipment are recorded at cost. The Company recognizes
depreciation and amortization expense using the straight-line method over the
estimated useful lives of the assets of three to seven years. The Company
amortizes leasehold improvements over the shorter of their estimated useful
lives or the remaining term of the related lease. Repair and maintenance costs
are charged to expense as incurred. Depreciation and amortization expense of
property and equipment was $162, $569 and $1,268 for the years ended December
31, 1996, 1997 and 1998, respectively, and $547 and $1,006 for the six months
ended June 30, 1998 (unaudited) and June 30, 1999, respectively.

Capitalized Software

     Development costs for software to be licensed or sold that are incurred
from the time technological feasibility is established until the product is
available for general release to customers are capitalized and reported at the
lower of cost or net realizable value. Through June 30, 1999, no significant
amounts were expended subsequent to reaching technological feasibility.

                                       F-8
<PAGE>   90
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Intangible Assets

     Retek Logistics, Inc. was acquired by HNC in exchange for 143 shares of HNC
common stock, 14 of which are subject to an escrow to secure certain
indemnification obligations of the former stockholders plus the contingent
right, subject to the achievement of certain financial objectives during
calendar 1998 and 1999, to receive certain additional shares of HNC common
stock. In April 1999, HNC issued an additional 45 shares of HNC common stock for
the achievement of these financial objectives during calendar 1998, which was
recorded as an addition to goodwill of $1,476 in the combined financial
statements in 1998. HNC may issue additional shares in conjunction with this
contingent right for calendar 1999. The application of the purchase method of
accounting for the acquisition resulted in an excess of cost over net assets
acquired of approximately $6,564, of which $4,814 has been allocated to
intangible assets and $1,750 has been allocated to in-process research and
development.

     In conjunction with the purchase, the Company recorded various intangible
assets. Intangible assets are comprised of purchased software and other rights
that are stated at lower of cost or net realizable value. Intangible assets are
amortized as follows:

<TABLE>
<CAPTION>
                                                                ESTIMATED
                                                               USEFUL LIFE     AMORTIZATION METHOD
                                                              -------------    -------------------
<S>                                                           <C>              <C>
Purchased software costs..................................    Straight-line     36 to 42 months
Assembled work force......................................    Straight-line         3 years
Customer base.............................................    Straight-line         5 years
Trademarks................................................    Straight-line         5 years
Goodwill..................................................    Straight-line         5 years
</TABLE>

     Amortization expense of intangible assets was $642, $809, and $1,152 for
the years ended December 31, 1996, 1997 and 1998, respectively, and $406 and
$866 the six months ended June 30, 1998 (unaudited) and June 30, 1999,
respectively.

Long-Lived Assets

     The Company investigates potential impairments of long-lived assets,
certain identifiable intangibles and associated goodwill when events or changes
in circumstances have made recovery of an asset's carrying value unlikely. An
impairment loss would be recognized if the sum of the expected future net cash
flows were less than the carrying amount of the asset. No such impairments of
long-lived assets existed through June 30, 1999.

Revenue Recognition

     The Company recognizes software license revenue upon meeting each of the
following criteria: execution of a written purchase order, license agreement or
contract; delivery of software and authorization keys; the license fee is fixed
and determinable; collectibility of the proceeds is assessed as being probable;
and vendor specific objective evidence exists to allocate the total fee to
elements of the arrangement. Vendor-specific objective evidence is based on the
price charged when an element is sold separately, or if not yet sold separately,
is established by authorized management. All elements of each order are valued
at the time of revenue recognition. For sales made through distributors,
resellers and original equipment manufacturers, the Company recognizes revenue
at the time these partners report to the Company that they have sold the
software to the end user and all revenue recognition criteria have been met.
Service revenue includes maintenance revenue, which is deferred and recognized
ratably over the maintenance
                                       F-9
<PAGE>   91
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

period, and revenue from consulting and training services, which is recognized
as services are performed. Consulting services are customarily billed at a fixed
daily rate plus out-of-pocket expenses.

     The Company's revenue from contract development services is generally
recognized as the services are performed using the percentage of completion
method based on costs incurred to date compared to total estimated costs at
completion. Amounts received under contracts in advance of performance are
recorded as deferred revenue and are generally recognized within one year from
receipt. Contract losses are recorded as a charge to income in the period such
losses are first identified. Unbilled accounts receivable are stated at
estimated realizable value.

     Deferred revenue consists primarily of deferred maintenance revenue.

     During the first quarter of 1998, the Company adopted Statement of Position
No. 97-2 ("SOP 97-2"), "Software Revenue Recognition." SOP 97-2 provides
guidance for software revenue recognition. The adoption of SOP 97-2 did not have
a significant impact on the Company's combined financial position or results of
operations. During the second quarter of 1998, the Company adopted Statement of
Position No. 98-4 ("SOP 98-4"), "Deferral of the Effective Date of a Provision
of SOP 97-2, Software Revenue Recognition." This SOP defers for one year the
application of several passages in SOP 97-2. The adoption of SOP 98-4 did not
have a significant impact on the Company's combined financial position or
results of operations.

Income Taxes

     The taxable income or loss of the Company is included in the consolidated
tax return of HNC. Income taxes are computed on a stand-alone basis under the
provisions of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." In accordance with HNC's policy, the current tax receivable or payable
is included in the amount due to or due from HNC. A deferred income tax asset or
liability is computed for the expected future impact of differences between the
financial reporting and tax bases of assets and liabilities as well as the
expected future tax benefit to be derived from tax loss and tax credit
carryforwards. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount "more likely than not" to be realized in
future tax returns. Tax rate changes are reflected in income during the period
such changes are enacted.

Foreign Currency Translation

     The combined financial statements of the Company's international operations
are translated into U.S. dollars using period-end exchange rates for assets and
liabilities and average exchange rates during the period for revenues and
expenses. Cumulative translation gains and losses are excluded from the combined
results of operations and are recorded as a separate component of stockholder's
equity. Gains and losses resulting from foreign currency transactions
(transactions denominated in a currency other than the entity's local currency)
are included in the combined statement of income and are not material.

Diversification of Credit Risk

     The Company's financial instruments that are subject to concentrations of
credit risk consist primarily of cash equivalents and accounts receivable, which
are generally not collateralized. The Company's policy is to place its cash and
cash equivalents with high credit quality financial institutions in order to
limit the amount of its credit exposure. The Company's software license and
installation agreements and commercial

                                      F-10
<PAGE>   92
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

development contracts are primarily with large customers in the retail
industries. The Company maintains allowances for potential credit losses.

Disclosures about Fair Value of Financial Instruments

     The carrying amounts of cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of the short-term
maturities of these financial instruments.

Comprehensive Income

     During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 ("FAS 130"), "Reporting Comprehensive
Income." FAS 130 requires the Company to report in the combined financial
statements, in addition to net income, comprehensive income and its components
including foreign currency items and unrealized gains and losses on certain
investments in debt and equity securities. Comprehensive income is defined as
"the change in equity (net assets) of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners.

Segment Reporting

     For the year ended December 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131 ("FAS 131"), "Disclosures about Segments
of an Enterprise and Related Information" (see Note 6). This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Under FAS 131, operating segments are to
be determined consistent with the way that management organizes and evaluates
financial information internally for making operating decisions and assessing
performance.

New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Accounting Standards No. 133 ("FAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. This statement
establishes a new model for accounting for derivatives and hedging activities.
Under FAS 133, all derivatives must be recognized as assets and liabilities and
measured at fair value. In July 1999, the FASB issued Statement of Accounting
Standards No. 137 "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133" which
defers the effective date to all fiscal quarters of fiscal years beginning after
June 15, 2000. The adoption of FAS 133 is not expected to have a significant
impact on the Company's combined financial position or results of operations.

     In January 1999, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-9 ("SOP 98-9"), "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." This SOP
retains the limitations of SOP 97-2 on what constitutes vendor-specific
objective evidence of fair value. SOP 98-9 will be effective for transactions
entered into in fiscal years beginning after March 15, 1999. The adoption of SOP
98-9 is not expected to have a significant impact on the Company's combined
financial position or results of operations.

                                      F-11
<PAGE>   93
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Pro Forma Net Income Per Share (unaudited)

     Pro forma net income per share (unaudited) are calculated based upon the
shares outstanding of Retek Logistics, Inc. at June 30, 1999 as if Retek
Information Systems, Inc. became a wholly owned subsidiary of Retek Logistics,
Inc. on January 1, 1998. Historical net income per share is not presented
because such amounts are not determinable due to the presentation of the
combined capital structures of two entities in these financial statements.

Interim Results (unaudited)

     The accompanying combined statement of income and the related combined
statement of cash flows for the six months ended June 30, 1998 are unaudited. In
the opinion of management, these combined statements have been prepared on the
same basis as the audited combined financial statements included herein and
include all adjustments, consisting of only normal recurring adjustments,
necessary for the fair statement of results of the interim periods. The data
disclosed in these notes to combined financial statements for those periods are
also unaudited.

NOTE 2 -- COMPOSITION OF CERTAIN COMBINED FINANCIAL STATEMENT CAPTIONS

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                ------------------    JUNE 30,
                                                                 1997       1998        1999
                                                                -------    -------    --------
<S>                                                             <C>        <C>        <C>
Accounts receivable, net:
  Billed....................................................    $ 9,167    $18,735    $28,559
  Unbilled..................................................      3,187      4,886      2,764
                                                                -------    -------    -------
                                                                 12,354     23,621     31,323
Less allowance for doubtful accounts........................       (382)    (1,571)    (2,977)
                                                                -------    -------    -------
                                                                $11,972    $22,050    $28,346
                                                                =======    =======    =======
</TABLE>

     The following is a rollforward of the activity within the allowance for
doubtful accounts:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                            -----------------------    JUNE 30,
                                                            1996    1997      1998       1999
                                                            ----    -----    ------    --------
<S>                                                         <C>     <C>      <C>       <C>
Balance at beginning of period..........................    $ --    $ 299    $  382     $1,571
Provisions..............................................     309      212     1,652      1,491
Write-offs..............................................     (10)    (129)     (463)       (85)
                                                            ----    -----    ------     ------
Balance of end of period................................    $299    $ 382    $1,571     $2,977
                                                            ====    =====    ======     ======
</TABLE>

                                      F-12
<PAGE>   94
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     Unbilled accounts receivable represent revenue recorded in excess of
amounts billable pursuant to contract provisions and generally become billable
at contractually specified dates or upon the attainment of milestones. Unbilled
amounts are expected to be collected within one year.

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                ------------------    JUNE 30,
                                                                 1997       1998        1999
                                                                -------    -------    --------
<S>                                                             <C>        <C>        <C>
Other current assets:
  Other receivables.........................................    $   864    $ 1,976    $   803
  Prepaid expenses..........................................        136        484        573
  VAT tax receivable........................................        158        246        165
                                                                -------    -------    -------
                                                                $ 1,158    $ 2,706    $ 1,541
                                                                =======    =======    =======
Property and equipment, net:
  Computer equipment........................................    $ 1,236    $ 3,093    $ 3,971
  Furniture and fixtures....................................      1,878      2,943      4,408
  Leasehold improvements....................................        532        749      1,134
                                                                -------    -------    -------
                                                                  3,646      6,785      9,513
Less accumulated depreciation and amortization..............       (640)    (1,898)    (2,879)
                                                                -------    -------    -------
                                                                $ 3,006    $ 4,887    $ 6,634
                                                                =======    =======    =======
Intangible assets, net:
  Purchased software costs..................................    $ 2,472    $ 3,572    $ 3,572
  Goodwill..................................................        109      2,362      2,362
  Other.....................................................         --        570        570
                                                                -------    -------    -------
                                                                  2,581      6,504      6,504
Less accumulated amortization...............................     (1,451)    (2,494)    (3,361)
                                                                -------    -------    -------
                                                                $ 1,130    $ 4,010    $ 3,143
                                                                =======    =======    =======
Accrued liabilities:
  Payroll and related benefits..............................    $ 1,842    $ 2,875    $ 3,144
  Other.....................................................        298         95        102
                                                                -------    -------    -------
                                                                $ 2,140    $ 2,970    $ 3,246
                                                                =======    =======    =======
</TABLE>

NOTE 3 -- COMMITMENTS

     At June 30, 1999, the Company was obligated through 2004 under
noncancelable operating leases for its facilities and certain equipment as
follows:

<TABLE>
<CAPTION>
                                                                                       NET FUTURE
                                                   FUTURE MINIMUM    LESS SUBLEASE    MINIMUM LEASE
                                                   LEASE PAYMENTS       INCOME          PAYMENTS
                                                   --------------    -------------    -------------
<S>                                                <C>               <C>              <C>
1999...........................................        $  684            $540            $  144
2000...........................................         1,188              --             1,188
2001...........................................           996              --               996
2002...........................................           982              --               982
2003...........................................           742              --               742
2004...........................................           475              --               475
</TABLE>

                                      F-13
<PAGE>   95
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     The lease for the Company's headquarters provides for two options to extend
the term for five years each with certain changes to the terms of the lease
agreement. Rent expense under operating leases for the years ended December 31,
1996, 1997 and 1998 was approximately $132, $229 and $758, respectively, and for
the six months ended June 30, 1998 (unaudited) and June 30, 1999 was
approximately $307 and $527, respectively, net of sublease income of $0, $261,
and $886, for the years ended December 31, 1996, 1997 and 1998, respectively,
and $411 and $527 for the six months ended June 30, 1998 (unaudited) and June
30, 1999, respectively.

NOTE 4 -- INCOME TAXES

     Income before income tax (benefit) provision was taxed under the following
jurisdictions:

<TABLE>
<CAPTION>
                                                                             SIX MONTHS ENDED
                                              YEAR ENDED DECEMBER 31,            JUNE 30,
                                            ---------------------------    ---------------------
                                             1996       1997      1998        1998         1999
                                            -------    ------    ------    -----------    ------
                                                                           (UNAUDITED)
<S>                                         <C>        <C>       <C>       <C>            <C>
Domestic................................    $(1,796)   $5,631    $6,276      $1,593       $5,015
Foreign.................................      3,214     1,012     1,823         911          791
                                            -------    ------    ------      ------       ------
                                            $ 1,418    $6,643    $8,099      $2,504       $5,806
                                            =======    ======    ======      ======       ======
</TABLE>

     The income tax (benefit) provision is summarized as follows:

<TABLE>
<CAPTION>
                                                                             SIX MONTHS ENDED
                                              YEAR ENDED DECEMBER 31,            JUNE 30,
                                            ---------------------------    ---------------------
                                             1996       1997      1998        1998         1999
                                            -------    ------    ------    -----------    ------
                                                                           (UNAUDITED)
<S>                                         <C>        <C>       <C>       <C>            <C>
CURRENT:
  Federal...............................    $   389    $  795    $2,258      $  900       $1,669
  State.................................         --       168       699         266          482
  Foreign...............................         51       233       511         255          401
DEFERRED:
  Federal...............................       (743)    1,070       489         289          (62)
  State.................................       (215)      722       144         144          (10)
  Foreign...............................       (297)      179       120          82         (134)
                                            -------    ------    ------      ------       ------
                                            $  (815)   $3,167    $4,221      $1,936       $2,346
                                            =======    ======    ======      ======       ======
</TABLE>

                                      F-14
<PAGE>   96
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     Deferred tax assets are summarized as follows:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,       JUNE 30,
                                                                ------------------    --------
                                                                 1997       1998        1999
                                                                -------    -------    --------
<S>                                                             <C>        <C>        <C>
Taxable pooling-of-interests basis difference...............    $17,085    $15,857    $15,243
Net operating loss carryforwards............................        185         31        178
Tax credit carryforwards....................................        786        344        344
Allowance for doubtful accounts.............................        142        631      1,179
Depreciation................................................         --       (175)      (172)
Intangible assets...........................................         --       (462)      (462)
Bonus accrual...............................................         --        306        322
Commission advances.........................................         --        277        270
Other.......................................................        (37)       123        236
                                                                -------    -------    -------
  Net deferred tax asset....................................    $18,161    $16,932    $17,138
                                                                =======    =======    =======
</TABLE>

     During 1996, the Company released its deferred tax asset valuation
allowance of $121 that existed at December 31, 1995 related to the Company's
deferred tax based on management's assessment that it was more likely than not
that the Company would realize those assets in future periods due to
improvements in its operating results.

     During 1996, the Company made an Internal Revenue Code Section 338 election
for federal and state tax purposes, resulting in the treatment of the
acquisition of Retek Information Systems, Inc. by HNC as a taxable transaction,
whereby the tax bases of the acquired assets and liabilities were adjusted to
their fair values as of the date of the acquisition. As the purchase price
exceeded the carrying value of the net assets acquired by approximately $46,000,
the Company recorded a deferred tax asset in the amount of $18,397.

     A reconciliation of the income tax (benefit) provision to the amount
computed by applying the statutory federal income tax rate to income before
income tax (benefit) provision is summarized as follows:

<TABLE>
<CAPTION>
                                                                               SIX MONTHS ENDED
                                                     YEAR ENDED DECEMBER 31,       JUNE 30,
                                                     -----------------------   -----------------
                                                     1996     1997     1998     1998      1999
                                                     -----   ------   ------   -------   -------
<S>                                                  <C>     <C>      <C>      <C>       <C>
Amounts computed at statutory federal rate........   $ 482   $2,259   $2,754   $  851    $1,974
  State income taxes, net of federal benefit......    (142)     791      740      309       346
  Tax credit carryforwards generated..............     (89)    (116)    (429)    (251)     (251)
  Release of valuation allowance..................    (121)
  Non-deductible acquired technology and other
     non-deductible acquisition costs.............      --       --    1,004      906       176
  Foreign income taxes............................    (950)      68       11       26        (3)
  Other, net......................................       5      165      141       94       104
                                                     -----   ------   ------   ------    ------
Income tax provision (benefit)....................   $(815)  $3,167   $4,221   $1,935    $2,346
                                                     =====   ======   ======   ======    ======
</TABLE>

     The Company had foreign net operating loss carryforwards of approximately
$76 at December 31, 1998 and $445 at June 30, 1999. The Company also has
approximately $344 of foreign tax credit carryforwards.

                                      F-15
<PAGE>   97
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 5 -- ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

     In connection with the acquisition of Retek Logistics, Inc. by HNC,
acquired in-process research and development of $1,750 was charged to operations
on the acquisition date. The Company's products may be classified into two
categories: Nautilus, an off-the-shelf warehouse management software system
designed to provide the tools needed to control the course of warehouse
operations and Nautilus CBT, an operational tutorial database which guides the
user through Nautilus operations. The classification of the technology as
complete or under development was made in accordance with the guidelines of
Statement of Financial Accounting Standards No. 86, Statement of Financial
Accounting Standards No. 2 and Financial Accounting Standards Board
Interpretation No. 4. At the time of acquisition, Retek Logistics, Inc. had a
number of new software products under development including Nautilus Versions
6.0 and 7.0 and Nautilus CBT. Nautilus Version 6.0 and Nautilus CBT were both
completed during 1998 and Nautilus Version 7.0 was completed during 1999.

NOTE 6 -- SEGMENT INFORMATION

     The Company operates in one reportable segment as defined in FAS 131. The
operations of the Company are primarily conducted in the United States, the
Company's country of domicile. Geographic data, determined by references to the
location of the Company's operations for the years ended December 31, 1996, 1997
and 1998 and for the six months ended June 30, 1998 (unaudited) and June 30,
1999 are as follows:

<TABLE>
<CAPTION>
                                                                             SIX MONTHS ENDED
                                            YEAR ENDED DECEMBER 31,              JUNE 30,
                                         -----------------------------    ----------------------
                                          1996       1997       1998         1998         1999
                                         -------    -------    -------    -----------    -------
                                                                          (UNAUDITED)
<S>                                      <C>        <C>        <C>        <C>            <C>
Revenue by geographic area:
  United States......................    $ 7,717    $17,070    $29,183      $11,039      $20,196
  Canada.............................        990        860      6,310        5,581        1,281
  United Kingdom.....................      1,491      3,835      4,224        2,015        7,243
  France.............................         --      3,358      1,546          293          762
  Germany............................         --         --      1,837           --        4,322
  South Africa.......................      2,628      2,476      2,706          781          933
  Other..............................        607      3,324      9,227        5,604        2,953
                                         -------    -------    -------      -------      -------
     Total revenue...................    $13,433    $30,923    $55,033      $25,313      $37,690
                                         =======    =======    =======      =======      =======
</TABLE>

     The following is long-lived asset information by geographic area:

<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                         -----------------------------                   JUNE 30,
                                          1996       1997       1998                       1999
                                         -------    -------    -------                   --------
<S>                                      <C>        <C>        <C>        <C>            <C>
Long-lived assets by geographic area:
  United States......................    $ 2,174    $ 3,850    $ 8,987                   $ 9,673
  Foreign............................        114        286        193                       137
                                         -------    -------    -------                   -------
     Total long-lived assets.........    $ 2,288    $ 4,136    $ 9,180                   $ 9,810
                                         =======    =======    =======                   =======
</TABLE>

                                      F-16
<PAGE>   98
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     The Company's foreign sales represent revenues from export sales and
international operations. Export sales include sales from the United States to
foreign countries. Export sales were $394, $2,643 and $12,414 for the years
ended December 31, 1996, 1997 and 1998, respectively, and $8,654 and $6,131 for
the six months ended June 30, 1998 (unaudited) and June 30, 1999, respectively.
International operations include sales by foreign operations.

NOTE 7 -- EMPLOYEE BENEFIT PLANS

     During 1995, HNC adopted the 1995 Equity Incentive Plan (the "Incentive
Plan") and the 1995 Employee Stock Purchase Plan (the "Purchase Plan"). For
purposes of the discussion contained in the two paragraphs below, "fair market
value" means the closing price of HNC's common stock on the Nasdaq National
Market on the grant date.

     The Incentive Plan provides for the issuance of up to 5,250 shares of HNC's
common stock in the form of nonqualified or incentive stock options, restricted
stock or stock bonuses to employees of HNC and its affiliates including Retek
Logistics, Inc. and Retek Information Systems, Inc. Nonqualified stock options
and restricted stock may be awarded at a price not less than 85% of the fair
market value of the stock at the date of the award. Incentive stock options must
be awarded at a price not less than 100% of the fair market value of the stock
at the date of the award. Options granted under the Incentive Plan may have a
term of up to ten years. The Company has the discretion to provide for
restrictions and the lapse thereof in respect of restricted stock awards.
Options typically vest at the rate of 25% of the total grant per year over a
four-year period; however, the Company may, at its discretion, implement a
different vesting schedule with respect to any new stock option grant. At
December 31, 1998, 217 shares were exercisable.

     The Purchase Plan provides for the issuance of a maximum of 400 shares of
common stock to employees of HNC and its affiliates, including Retek Logistics,
Inc. and Retek Information Systems, Inc. Each purchase period, eligible
employees may designate between 2% and 10% of their cash compensation, subject
to certain limitations, to be deducted from their compensation for the purchase
of common stock under the Purchase Plan. The purchase price of the shares under
the Purchase Plan is equal to 85% of the lesser of the fair market value per
share on the first date of the twelve-month offering period or the last day of
each six-month purchase period. Approximately 31% of eligible employees have
participated in the Purchase Plan in the last three years.

     During 1998, HNC adopted the 1998 Stock Option Plan ("1998 Plan"). The 1998
Plan provides for the issuance of up to 1,000 shares of HNC's common stock in
the form of nonqualified stock options to employees, officers, consultants and
independent advisors of HNC and its affiliates including Retek Logistics, Inc.
and Retek Information Systems, Inc. Options granted under the 1998 Plan may have
a term of up to ten years. Options typically vest at the rate of 25% of the
total grant per year over a four-year period; however, the Company may, at its
discretion, implement a different vesting schedule with respect to any new stock
option grant. At December 31, 1998, there were no shares exercisable under the
1998 Plan.

     All Retek Information Systems, Inc. options, outstanding on the date of the
acquisition in 1996, were converted into options to purchase HNC's common stock
and adjusted to give effect to the acquisition exchange ratio. Retek Information
Systems, Inc. stock options are administered by HNC's Board of Directors. No
changes were made to the terms of the Retek Information Systems, Inc. options in
connection with the exchange. Those options granted vest ratably over periods
from one to four years and have a term of up to ten years. At December 31, 1998,
options to purchase 13 shares were exercisable.

                                      F-17
<PAGE>   99
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     Transactions relating to employees of the Company under HNC's stock option
and purchase plans during the years ended December 31, 1996, 1997 and 1998,
including options converted from the Retek Logistics, Inc. stock option plan,
are summarized as follows:

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                         ---------------------------------------------------------------------------
                                                  1996                      1997                      1998
                                         -----------------------   -----------------------   -----------------------
                                                     WEIGHTED                  WEIGHTED                  WEIGHTED
                                                     AVERAGE                   AVERAGE                   AVERAGE
                                         SHARES   EXERCISE PRICE   SHARES   EXERCISE PRICE   SHARES   EXERCISE PRICE
                                         ------   --------------   ------   --------------   ------   --------------
<S>                                      <C>      <C>              <C>      <C>              <C>      <C>
Outstanding at beginning of year.......     249       $ 2.34          494       $21.19          981       $28.89
  Options granted......................     423        27.11          624        32.13          743        35.36
  Options exercised....................    (115)        0.70          (71)        8.94         (108)       16.56
  Options canceled.....................     (63)       23.62          (66)       23.23         (238)       31.96
                                         ------                    ------                    ------
Outstanding at end of year.............     494        21.19          981        28.89        1,378        32.81
                                         ======                    ======                    ======
Options exercisable at end of year.....      34                        93                       233
Weighted average fair value of options
  granted during the year..............  $19.69                    $19.50                    $21.50
</TABLE>

     The following table summarizes information about employee stock options
relating to employees of the Company outstanding at December 31, 1998:

<TABLE>
<CAPTION>
                                                    OPTIONS OUTSTANDING
                                        -------------------------------------------      OPTIONS EXERCISABLE
                                                            WEIGHTED                  -------------------------
                                            NUMBER           AVERAGE       WEIGHTED       NUMBER       WEIGHTED
                                        OUTSTANDING AT      REMAINING      AVERAGE    OUTSTANDING AT   AVERAGE
               RANGE OF                  DECEMBER 31,      CONTRACTUAL     EXERCISE    DECEMBER 31,    EXERCISE
           EXERCISE PRICES                   1998        LIFE (IN YEARS)    PRICE          1998         PRICE
           ---------------              --------------   ---------------   --------   --------------   --------
<S>                                     <C>              <C>               <C>        <C>              <C>
$ 0.92 to $29.75......................        283             8.01          $24.04          97          $23.08
 30.13 to  31.25......................        204             8.53           30.42          63           30.52
 31.44 to  32.56......................        222             9.14           32.04           5           31.73
 32.63 to  35.81......................        207             8.98           34.51          27           34.83
 35.88 to  37.75......................        218             9.17           37.43          12           37.28
 37.88 to  41.38......................        202             9.12           39.46          26           38.80
 42.19 to  46.75......................         42             9.25           43.33           3           45.25
                                            -----                                                       ------
  0.92 to  46.75......................      1,378             8.80           32.81         233           29.40
                                            =====                                                       ======
</TABLE>

     The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock-based compensation. No compensation
expense has been recognized for its employee stock option grants, which are
fixed in nature, as the options have been granted at fair market value. No
compensation expense has been recognized for the Purchase Plan. Had compensation
cost for the Company's stock-based compensation awards issued during 1998 and
1997 been determined based on the fair value at the grant dates of awards
consistent with the method of Financial Accounting Standards

                                      F-18
<PAGE>   100
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Board Statement No. 123 ("FAS 123"), the Company's net income and basic and
diluted pro forma net income per common share would have been reduced to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                               1996     1997     1998
                                                              ------   ------   -------
<S>                                                           <C>      <C>      <C>
Net income (loss):
  As reported...............................................  $2,233   $3,476   $ 3,878
  Pro forma.................................................   1,743     (893)   (2,758)
Basic and diluted net income per common share:
  As reported...............................................                    $  1.73
  Pro forma.................................................                    $ (1.23)
Diluted net income per common share:
  As reported...............................................      --       --      1.55
  Pro forma.................................................      --       --     (1.46)
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumption used for grants during the years ended December 31, 1996, 1997 and
1998, respectively, dividend yield of 0.0% for all three years, risk-free
interest rates of 6.03%, 6.10% and 5.14%, expected volatilities of 70%, 65% and
65% (0% for options granted by Retek Information Systems, Inc. prior to its
acquisition by HNC), and expected lives of 3.5, 3.0 and 3.0 years. The fair
value of the employees' purchase rights pursuant to the Purchase Plan is
estimated using the Black-Scholes model with the following assumptions: dividend
yield of 0.0% for all three years, risk-free interest rates of 5.36%, 5.32% and
5.23%, expected volatilities of 70%, 65% and 65%, and an expected life of six
months for all three years. The weighted average fair value of those purchase
rights granted in 1996, 1997 and 1998 was $8.73, $14.23 and $16.32,
respectively.

NOTE 8 -- CONTINGENCIES

     Various claims arising in the course of business, seeking monetary damages
and other relief are pending. The amount of the liability, if any, from such
claims cannot be determined with certainty; however, in the opinion of
management, the ultimate liability for such claims will not have a material
adverse effect on the Company's combined financial position, results of
operations or cash flows.

NOTE 9 -- RELATED PARTY TRANSACTIONS

     As described in Note 1, the combined financial statements include
significant transactions with HNC for services such as treasury, cash
management, employee benefits, taxes, financial reporting, legal, corporate
marketing and general corporate services. HNC charged the Company $465, $1,448
and $912 for such expenses during the years ended December 31, 1996, 1997, 1998,
respectively, and $850 and $1,044 for the six months ended June 30, 1998
(unaudited) and June 30, 1999, respectively. These charges were principally
included in sales and marketing expenses and general and administrative
expenses.

     Beginning in 1998, the Company utilized research and development services
of HNC. HNC charged the Company $1,404 for such expenses during the year ended
December 31, 1998, and $100 and $79 for the six months ended June 30, 1998
(unaudited) and June 30, 1999, respectively.

     Certain of the Company's employees participate in the HNC Purchase Plan.
Amounts included in the payable to HNC Software Inc. related to the Purchase
Plan were $38, $181 and $526 as of December 31, 1996, 1997 and 1998,
respectively, and $206 and $442 as of June 30, 1998 (unaudited) and June 30,
1999, respectively.

                                      F-19
<PAGE>   101
           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     In conjunction with the acquisition of Retek Information Systems, Inc. in
1996, HNC repaid $3,246 of debt to a third party on Retek Information System
Inc.'s behalf.

     Employees of the Company also participate in an HNC-sponsored 401(k) plan.
The Company matched employee contributions up to the lesser of 50% of the
employee contribution or eight hundred dollars. Contributions were $0, $60 and
$120 for the years ended December 31, 1996, 1997 and 1998, respectively, and $60
and $136 for the six months ended June 30, 1998 (unaudited) and June 30, 1999,
respectively.

     HNC also provides a treasury service for affiliated companies, and cash
transferred between companies is recorded in receivable from or payable to HNC.

NOTE 10 -- SUBSEQUENT EVENTS

     In September 1999, HNC approved an Agreement and Plan of Merger and
Reorganization whereby Retek Logistics, Inc. was merged with and into a newly
incorporated Delaware corporation, Retek Inc., which is the surviving
corporation. In conjunction with the merger, each share of Retek Logistics,
Inc.'s common stock were exchanged for approximately .000447 share of Retek
Inc.'s common stock.

     In September 1999, HNC assigned to Retek Information Systems, Inc. its
rights and interests in, to and under an option agreement (Agreement) by and
between HNC and Webtrak Limited (Webtrak), a United Kingdom Company. Upon
assignment, the Agreement provides Retek Information Systems, Inc. with the
option to purchase either (i) all assets of Webtrak, or (ii) all the issued and
outstanding shares of Webtrak. The purchase price under the option is the
greater of $8.0 million or 2.7 times gross revenues, as defined, of Webtrak for
the twelve months preceding the exercise of the option. The purchase option is
exercisable by Retek Inc. during the period September 30, 1999 to December 31,
1999.

                                      F-20
<PAGE>   102

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
  RETEK LOGISTICS, INC.

     In our opinion, the accompanying balance sheet and the related statements
of operations, of cash flows and of changes in stockholders' equity and
comprehensive income present fairly, in all material respects, the financial
position of Retek Logistics, Inc. (formerly Practical Control Systems
Technologies, Inc.) at December 31, 1996 and 1997, and March 31, 1998, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1997, and the three months in the period ended March
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICEWATERHOUSECOOPERS LLP

San Diego, California
September 9, 1999

                                      F-21
<PAGE>   103

                             RETEK LOGISTICS, INC.

                                 BALANCE SHEET
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,      MARCH 31,
                                                                ----------------    ---------
                                                                 1996      1997       1998
                                                                ------    ------    ---------
<S>                                                             <C>       <C>       <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents.................................    $  388    $  413     $  559
  Accounts receivable, net..................................       560     1,061        997
  Accounts receivable, affiliates...........................        14        --         --
  Current portion of deferred income taxes..................         9        13         13
  Other current assets......................................         2        47         37
                                                                ------    ------     ------
     Total current assets...................................       973     1,534      1,606
Property and equipment, net.................................       380       247        211
Software development costs, net.............................     1,211     1,181      1,232
Graphic design costs, net...................................       382       183        133
Other assets................................................        33        55         58
                                                                ------    ------     ------
                                                                $2,979    $3,200     $3,240
                                                                ======    ======     ======
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................    $   27    $   79     $  126
  Accounts payable, affiliates..............................       194       178         --
  Accrued liabilities.......................................       249       250        352
  Deferred revenue..........................................       106       323        412
  Notes payable.............................................       180        --         --
                                                                ------    ------     ------
     Total current liabilities..............................       756       830        890
Deferred income taxes.......................................       457       493        514
Stockholders' equity:
  Common stock, without par value -- 5,000,000 shares
     authorized:
     2,237,683 shares issued and outstanding................         1         1          1
  Paid-in capital...........................................     2,238     2,238      2,238
  Retained earnings.........................................      (410)     (299)      (340)
  Treasury stock at cost, 144 shares........................       (63)      (63)       (63)
                                                                ------    ------     ------
     Total stockholders' equity.............................     1,766     1,877      1,836
                                                                ------    ------     ------
                                                                $2,979    $3,200     $3,240
                                                                ======    ======     ======
</TABLE>

                See accompanying notes to financial statements.
                                      F-22
<PAGE>   104

                             RETEK LOGISTICS, INC.

                            STATEMENT OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                          YEAR ENDED        THREE MONTHS ENDED
                                                         DECEMBER 31,            MARCH 31,
                                                       ----------------    ---------------------
                                                        1996      1997        1997         1998
                                                       ------    ------    -----------    ------
                                                                           (UNAUDITED)
<S>                                                    <C>       <C>       <C>            <C>
Licensing and other revenue........................    $5,108    $5,086      $  957       $1,231
Operating expenses:
  Cost of sales....................................     1,662     1,880         297          431
  Selling, general and administrative..............     3,812     2,813         723          670
                                                       ------    ------      ------       ------
     Total operating expenses......................     5,474     4,693       1,020        1,101
                                                       ------    ------      ------       ------
     (Loss) income from operations.................      (366)      393         (63)         130
                                                       ------    ------      ------       ------
Other income (expense), net........................       129      (211)         (1)        (104)
Interest expense...................................        49        10          --           --
                                                       ------    ------      ------       ------
     (Loss) income before income taxes.............      (286)      172         (64)          26
                                                       ------    ------      ------       ------
Income tax expense (benefit).......................       448        61         (24)          67
                                                       ------    ------      ------       ------
     Net (loss) income.............................    $ (734)   $  111      $  (40)      $  (41)
                                                       ======    ======      ======       ======
</TABLE>

                See accompanying notes to financial statements.
                                      F-23
<PAGE>   105

                             RETEK LOGISTICS, INC.

                            STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                            YEAR ENDED          THREE MONTHS
                                                           DECEMBER 31,       ENDED MARCH 31,
                                                          ---------------   --------------------
                                                           1996     1997       1997        1998
                                                          ------   ------   -----------   ------
                                                                            (UNAUDITED)
<S>                                                       <C>      <C>      <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income....................................   $ (734)  $  111     $  (40)     $  (41)
  Adjustments to reconcile net (loss) income to net
     cash provided (used in) by operating activities:
  Depreciation and amortization........................      509      634        153         155
  Loss on disposition of property and equipment........       --       38         --          --
  Increase in bad debts provision......................       --       15         --          --
  Deferred income taxes................................      448       31        (23)         21
  Changes in operating assets and liabilities:
     Accounts receivable, trade........................       85     (516)        59          64
     Accounts receivable, affiliates...................       12       14         --          --
     Other assets......................................      107      (57)      (163)       (113)
     Accounts payable..................................     (100)      53        105          47
     Accounts payable, affiliates......................      156      (16)      (194)       (178)
     Unearned revenue..................................      (92)     216        (10)         89
     Accrued expenses..................................       42        1       (214)        102
                                                          ------   ------     ------      ------
       Net cash provided by (used in) operating
          activities...................................      433      524       (327)        146
                                                          ------   ------     ------      ------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Software development costs...........................     (309)    (236)        --          --
  Acquisition of non-compete agreement and related
     assets............................................       --      (61)        --          --
  Purchase of property and equipment...................      (73)     (32)        (2)         --
  Proceeds from sale of property and equipment.........       --       10         --          --
                                                          ------   ------     ------      ------
       Net cash used in investing activities...........     (382)    (319)        (2)         --
                                                          ------   ------     ------      ------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Line of credit.......................................     (923)      --        185          --
  Payments on debt.....................................      (43)      --         --          --
  Payments on note payable, affiliate..................      (16)    (180)       (48)         --
  Distributions to stockholders........................     (125)      --         --          --
  Issuance of common stock.............................    1,303       --         --          --
                                                          ------   ------     ------      ------
       Net cash provided by (used in) financing
          activities...................................      196     (180)       137          --
                                                          ------   ------     ------      ------
Net increase in cash...................................      247       25       (192)        146
Cash balance, beginning of year........................      141      388        388         413
                                                          ------   ------     ------      ------
Cash balance, end of year..............................   $  388   $  413     $  196      $  559
                                                          ======   ======     ======      ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for interest...............   $   49   $    9     $    3      $   --
                                                          ======   ======     ======      ======
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Note payable to affiliate for purchase of equipment,
     furniture and fixtures............................   $  196   $   --     $   --      $   --
                                                          ======   ======     ======      ======
  Distribution of rental property to stockholders......   $  115   $   --     $   --      $   --
                                                          ======   ======     ======      ======
</TABLE>

                See accompanying notes to financial statements.
                                      F-24
<PAGE>   106

                             RETEK LOGISTICS, INC.

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                    (ACCUMULATED
                                                              COMMON STOCK                            DEFICIT)         TOTAL
                                                             ---------------   PAID-IN   TREASURY     RETAINED     STOCKHOLDERS'
                                                             SHARES   AMOUNT   CAPITAL    STOCK       EARNINGS        EQUITY
                                                             ------   ------   -------   --------   ------------   -------------
<S>                                                          <C>      <C>      <C>       <C>        <C>            <C>
BALANCE AT DECEMBER 31, 1995...............................    375    $   1    $  262      $(63)       $1,237         $1,437
Issuance of common stock, net of issuance costs............  1,863              1,303                                  1,303
Distributions to stockholders..............................                                              (240)          (240)
PCS contribution to capital................................                       673                    (673)            --
Net and comprehensive loss.................................                                              (734)          (734)
                                                             -----    ------   ------      ----        ------         ------
BALANCE AT DECEMBER 31, 1996...............................  2,238        1     2,238       (63)         (410)         1,766
Net and comprehensive income...............................                                               111            111
                                                             -----    ------   ------      ----        ------         ------
BALANCE AT DECEMBER 31, 1997...............................  2,238        1     2,238       (63)         (299)         1,877
Net and comprehensive income...............................                                               (41)           (41)
                                                             -----    ------   ------      ----        ------         ------
BALANCE AT MARCH 31, 1998..................................  2,238    $   1    $2,238      $(63)       $ (340)        $1,836
                                                             =====    ======   ======      ====        ======         ======
</TABLE>

                See accompanying notes to financial statements.
                                      F-25
<PAGE>   107

                             RETEK LOGISTICS, INC.

                         NOTES TO FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

The Company

     Retek Logistics, Inc. (formerly Practical Control Systems Technologies,
Inc.), an Ohio corporation (the "Company"), is a supplier of fully integrated
distribution center management software products that address the distribution
needs of the retail, wholesale and manufacturing industries.

     In March 1998, the Company's stockholders approved an agreement between the
Company and HNC Software Inc. ("HNC") pursuant to which the Company's
stockholders exchanged all issued and outstanding capital stock of the Company
for HNC stock.

Use of Estimates

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Income Taxes

     On June 1, 1996, the Company terminated its S Corporation status and
recognized deferred tax assets and liabilities based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the years in which the differences are expected to
reverse. The Company's current income tax expense is the amount of income taxes
expected to be payable for the current year. A deferred income tax asset or
liability is computed for the expected future impact of differences between the
financial reporting and tax bases of assets and liabilities as well as the
expected future tax benefit to be derived from tax loss and tax credit
carryforwards. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount "more likely than not" to be realized in
future tax returns. Tax rate changes are reflected in income during the period
such changes are enacted.

Revenue Recognition

     On certain systems development contracts, the percentage of completion
method is used to recognize the revenues. The Company measures a contract's
progress based on actual costs incurred to date compared to total estimated
contract costs. A contract is considered complete once formal acceptance from a
customer has been obtained. Because the percentage of completion method requires
estimates of costs to complete contracts, it is possible that estimated costs to
complete contracts will be revised in the near term. Revenues from software
maintenance agreements are deferred and are recognized over the maintenance
period. Software licensing revenues are recognized when delivery of the software
occurs if the Company does not have to provide additional significant service
under the contract. All other revenues are recognized when the services are
performed.

     Included in accounts receivable are unbilled accounts receivable, which
represent revenue recognized in excess of amounts billed. From time to time,
depending upon billing terms, cash may be received in advance of the performance
of services or providing systems. When this occurs, these amounts are recorded
as unearned revenue.

                                      F-26
<PAGE>   108
                             RETEK LOGISTICS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Cash Equivalents

     The Company considers its investments with an original maturity of three
months or less to be cash equivalents. The Company invests excess funds in
reverse repurchase agreements for U.S. government securities. At December 31,
1996 and 1997, respectively, the Company had purchased $537 and $455 of U.S.
government securities under agreements to resell. Generally, the maturity date
of the Company's reverse repurchase agreements is the next day of business. Due
to the short-term nature of the agreements, the Company does not take possession
of the securities, which are instead held at the Company's principal bank from
which it purchases the securities. The carrying value of the agreements
approximates fair market value because of the short maturity of the investments
and the Company believes that it is not exposed to any significant risk on its
investments in reverse repurchase agreements.

Software Development Costs

     Costs incurred internally in creating computer software products are
charged to expense until technological feasibility of the software has been
established. Thereafter, all software production costs are capitalized.
Capitalization of computer software costs is discontinued when the product is
available for sale to customers. The costs capitalized include the direct labor
costs of those involved with the software development effort, their supervision
and indirect costs of overhead relating to those employees, the facilities they
occupy and equipment they utilize.

     The ultimate realization of these costs requires considerable judgment from
management related to the estimated useful life and anticipated future sales.
Computer software costs are amortized by the straight-line method over the
estimated useful life of the products developed, which is five years.
Amortization expense related to software development costs was $234 and $265 for
the years ended December 31, 1996 and 1997, and $64 and $69 for the three months
ended March 31, 1997 (unaudited) and March 31, 1998, respectively.

Graphic Design Costs

     Costs associated with the production of graphic design applications include
computer programs to assist in the sale of the Company's product. These costs
have been capitalized and are being amortized by the straight-line method over
the asset's estimated useful life of three years. Amortization of graphic design
costs was $200 and $199 for the years ended December 31, 1996 and 1997 and $50
for both the three months ended March 31, 1997 (unaudited) and March 31, 1998.

Property and Equipment

     Property and equipment are recorded at cost. The Company computes
depreciation using the straight-line method over the estimated useful lives of
the assets of three to seven years. The Company amortizes leasehold improvements
over the shorter of their estimated useful lives or the remaining term of the
related lease. Repair and maintenance costs are charged to expense as incurred.
In 1996, rental property with a net book value of $115 was distributed to the
principal stockholders in a non-cash distribution. Depreciation expense was $75
and $169 for the years ended December 31, 1996 and 1997, respectively, and $41
and $35 for the three months ended March 31, 1997 (unaudited) and March 31,
1998, respectively.

                                      F-27
<PAGE>   109
                             RETEK LOGISTICS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Long-Lived Assets

     The Company investigates potential impairments of long-lived assets,
certain identifiable intangibles and associated goodwill when events or changes
in circumstances have made recovery of an asset's carrying value unlikely. An
impairment loss would be recognized if the sum of the expected future net cash
flows were less than the carrying amount of the asset. No such impairments of
long-lived assets existed through March 31, 1998.

Diversification of Credit Risk

     The Company had approximately 45% and 42%, of its sales for the years ended
December 31, 1996 and 1997, respectively, and 49% and 29% for the three months
ended March 31, 1997 (unaudited) and March 31, 1998, respectively, to
international customers in South America, Africa, and Asia. The same five
customers comprised 81% of revenues for the years ended December 31, 1996 and
1997 and 87% and 91% of the revenues for the three months ended March 31, 1997
(unaudited) and March 31, 1998.

Disclosures about Fair Value of Financial Instruments

     The carrying amounts of cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of the short-term
maturities of these financial instruments.

Comprehensive Income

     During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("FAS
130"). FAS 130 requires the Company to report in the financial statements, in
addition to net income, comprehensive income and its components including
foreign currency items and unrealized gains and losses on certain investments in
debt and equity securities. Comprehensive income is defined as "the change in
equity (net assets) of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources. It includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners."

New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board "FASB" issued
Statement of Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133") which is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. This statement establishes a new
model for accounting for derivatives and hedging activities. Under FAS 133, all
derivatives must be recognized as assets and liabilities and measured at fair
value. In July 1999, the FASB issued Statement of Accounting Standard No. 137
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of FASB Statement No. 133" ("FAS 137") which defers the effective
date to all fiscal quarters of fiscal years beginning after June 15, 2000. The
adoption of FAS 133 is not expected to have a significant impact on the
Company's combined financial position or results of operations.

     In January 1999, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-9 ("SOP 98-9"), "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." This SOP
retains the limitations of SOP 97-2 on what constitutes vendor-specific

                                      F-28
<PAGE>   110
                             RETEK LOGISTICS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

objective evidence of fair value. SOP 98-9 will be effective for transactions
entered into in fiscal years beginning after March 15, 1999. The adoption of SOP
98-9 is not expected to have a significant impact on the Company's combined
financial position or results of operations.

Interim Results (unaudited)

     The accompanying statement of operations and of cash flows for the three
months ended March 31, 1997 are unaudited. In the opinion of management, these
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting of only normal recurring
adjustments, necessary for the fair statement of results of the interim periods.
The data disclosed in these notes to combined financial statements for those
periods are also unaudited.

NOTE 2 -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                ----------------    MARCH 31,
                                                                 1996      1997       1998
                                                                ------    ------    ---------
<S>                                                             <C>       <C>       <C>
Accounts receivable, net
  Billed....................................................    $  577    $1,090     $  743
  Unbilled..................................................         1         4        296
                                                                ------    ------     ------
                                                                   578     1,094      1,039
Less allowance for doubtful accounts........................       (18)      (33)       (42)
                                                                ------    ------     ------
                                                                $  560    $1,061     $  997
                                                                ======    ======     ======
Property and equipment, net
  Equipment.................................................    $  264    $  308     $  307
  Furniture and fixtures....................................        29        28         28
  Leasehold improvements....................................       105        77         77
  Purchased software........................................       121       122        122
                                                                ------    ------     ------
                                                                   519       535        534
Less accumulated depreciation and amortization..............      (139)     (288)      (323)
                                                                ------    ------     ------
                                                                $  380    $  247     $  211
                                                                ======    ======     ======
Software development costs, net
  Software development costs................................    $1,445    $1,680     $1,800
  Less accumulated amortization.............................      (234)     (499)      (568)
                                                                ------    ------     ------
                                                                $1,211    $1,181     $1,232
                                                                ======    ======     ======
Graphic design costs, net
  Software development costs................................    $  598    $  598     $  598
  Less accumulated amortization.............................      (216)     (415)      (465)
                                                                ------    ------     ------
                                                                $  382    $  183     $  133
                                                                ======    ======     ======
</TABLE>

NOTE 3 -- RELATED PARTY TRANSACTIONS

     During 1996 and 1997, one of the principal stockholders of the Company had
a majority stock ownership in Professional Contract Systems Technical Services,
Inc. ("Technical Services"), a provider of contract engineering services. Also
during 1996 and 1997, another principal stockholder of the Company

                                      F-29
<PAGE>   111
                             RETEK LOGISTICS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

had a majority stock ownership in PCS Computers, Inc. ("Computers"), a company
engaged in the design and sale of specialized computer systems and electrical
components for industrial computer applications. In October 1997, one of the
principal stockholders sold his interest in the Company to the other principal
stockholder and, subsequently, in November 1997, terminated his employment with
the Company.

     Operating expenses include the following amounts from related parties:

<TABLE>
<CAPTION>
                                                           FOR THE YEAR
                                                              ENDING        FOR THE THREE MONTHS
                                                           DECEMBER 31,        ENDED MARCH 31,
                                                          --------------    ---------------------
                                                          1996     1997         1997        1998
                                                          ----    ------    ------------    -----
                                                                            (UNAUDITED)
<S>                                                       <C>     <C>       <C>             <C>
Technical services....................................    $146    $  483        $43         $ 83
Computers.............................................     679       541         10          315
                                                          ----    ------        ---         ----
  Total...............................................    $825    $1,024        $53         $398
                                                          ====    ======        ===         ====
</TABLE>

     The Company leases office space from a company owned by one the Company's
previous principal stockholders under an agreement expiring December 31, 2002.
Rent expense related to this agreement for the years ended December 31, 1996 and
1997 was $259 and $252, respectively, and the three months ended March 31, 1997
(unaudited) and March 31, 1998 was $66 and $51, respectively. At March 31, 1998,
the Company was obligated under non-cancelable operating leases for its
facilities as follows:

<TABLE>
<S>                                                           <C>
1998......................................................    $  155
1999......................................................       212
2000......................................................       218
2001......................................................       225
2002......................................................       231
                                                              ------
                                                              $1,041
                                                              ======
</TABLE>

     The Company purchased equipment, furniture and fixtures in 1996 for
consideration equal to an 8.25% note payable to Technical Services in the amount
of $196. Monthly principal and interest payments were paid through November
1997. The note was repaid during 1997. The equipment, furniture and fixtures had
previously been leased from Technical Services. Rent expense in 1996 includes
$109 related to the lease.

NOTE 4 -- LINE OF CREDIT

     In 1996, the Company negotiated a line of credit agreement with a bank that
is collateralized by substantially all corporate assets and was payable on
demand. The line of credit allows borrowings of up to $500,000 with an interest
rate equal to the bank's prime rate. No outstanding borrowings existed at
December 31, 1996, 1997 or at March 31, 1998.

                                      F-30
<PAGE>   112
                             RETEK LOGISTICS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 5 -- INCOME TAXES

     Prior to June 1, 1996 the Company was taxed as an S Corporation. Income tax
expense for 1996 includes a net deferred tax liability of $512 recorded in
connection with the termination of the Company's S Corporation status. Income
tax expense for the years-ended December 31, 1996 and 1997 and the three months
ended March 31, 1997 (unaudited) and March 31, 1998 is summarized as follows:

<TABLE>
<CAPTION>
                                                              YEAR ENDED     THREE MONTHS ENDED
                                                             DECEMBER 31,         MARCH 31,
                                                             ------------    -------------------
                                                             1996    1997       1997        1998
                                                             ----    ----    -----------    ----
                                                                             (UNAUDITED)
<S>                                                          <C>     <C>     <C>            <C>
Current..................................................    $ --    $30        $ --        $45
Deferred.................................................     448     31         (24)        22
                                                             ----    ---        ----        ---
                                                             $448    $61        $(24)       $67
                                                             ====    ===        ====        ===
</TABLE>

     The components of the Company's net deferred tax liability are as follows:

<TABLE>
<CAPTION>
                                                          YEAR ENDED       THREE MONTHS ENDED
                                                         DECEMBER 31,          MARCH 31,
                                                        --------------    --------------------
                                                        1996     1997        1997        1998
                                                        -----    -----    -----------    -----
                                                                          (UNAUDITED)
<S>                                                     <C>      <C>      <C>            <C>
Deferred tax assets:
  Net operating loss carryforwards..................    $  64    $  --       $  40       $  --
  Accounts receivable...............................        7       12          12          17
  State taxes
  Other.............................................        2        1           6           2
                                                        -----    -----       -----       -----
     Gross deferred tax assets......................       73       13          58          19
Deferred tax liabilities:
  Capitalized software..............................     (514)    (478)       (467)       (501)
  Property and equipment............................       (7)     (15)        (15)        (13)
  Other.............................................                                        (6)
                                                        -----    -----       -----       -----
     Gross deferred tax liability...................     (521)    (493)       (482)       (520)
                                                        -----    -----       -----       -----
       Net deferred tax liability...................    $(448)   $(480)      $(424)      $(501)
                                                        =====    =====       =====       =====
</TABLE>

                                      F-31
<PAGE>   113
                             RETEK LOGISTICS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

     A reconciliation of the income tax provision (benefit) to the amount
computed by applying the statutory federal income tax rate to income before
income tax provision is summarized as follows:

<TABLE>
<CAPTION>
                                                                 YEAR ENDED        THREE MONTHS
                                                                DECEMBER 31,      ENDED MARCH 31,
                                                                ------------    -------------------
                                                                1996    1997       1997        1998
                                                                ----    ----    -----------    ----
                                                                                (UNAUDITED)
<S>                                                             <C>     <C>     <C>            <C>
Amounts computed at statutory federal rate..................    $(97)   $59        $(22)       $ 9
  State income taxes, net of federal benefit................      47     13          (2)        27
  Tax credit carryforwards generated........................                                    (7)
  Non-deductible purchased technology and other
     non-deductible acquisition costs.......................                                    37
  S-corp termination deferred balances......................     501
  Other, net................................................      (3)   (11)                     1
                                                                ----    ---        ----        ---
Income tax provision (benefit)..............................    $448    $61        $(24)       $67
                                                                ====    ===        ====        ===
</TABLE>

NOTE 6 -- PROFIT SHARING PLANS

     The Corporation has a Sec. 401(k) profit sharing plan covering all eligible
employees who desire to participate in the plan. Company matching contributions
are based on a percentage of the employees' contributions. Company matching
contributions were $14 and $12 during the years ended December 31, 1996, 1997,
and $0 for both the three months ended March 31, 1997 (unaudited) and March 31,
1998. Additionally, the Company may, at its option, contribute a portion of
annual profits to the plan. The Company did not make such a contribution during
the years ended December 31, 1996, 1997 or the three months ended March 31,
1998.

NOTE 7 -- SUBSEQUENT EVENTS

     On March 24, 1998, the Company's stockholders approved an agreement between
the Company and HNC Software Inc. ("HNC") pursuant to which the Company's
stockholders would exchange all issued and outstanding capital stock of the
Company for HNC stock.

     On March 31, 1998, the Company's stockholders received 143 shares of HNC
common stock in exchange for all of the issued and outstanding shares of the
Company.

                                      F-32
<PAGE>   114

           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

                     PRO FORMA COMBINED STATEMENT OF INCOME
                                  (UNAUDITED)

     On March 31, 1998, HNC Software Inc. ("HNC") completed its acquisition of
Retek Logistics, Inc. in a transaction accounted for under the purchase method
of accounting by HNC. Under the purchase method, the aggregate purchase price is
required to be allocated to the tangible and identifiable intangible assets
acquired and liabilities assumed on the basis of their fair values on the
acquisition date. The pro forma unaudited combined statement of income is based
on the audited combined statement of income of Retek Logistics, Inc. and Retek
Information Systems, Inc. for the year ended December 31, 1998, which includes
the accounts of Retek Logistics, Inc. for the period from March 31, 1998 through
December 31, 1998, and the financial statements for Retek Logistics, Inc. for
the period from January 1, 1998 through March 31, 1998. Adjustments have been
made to such information to give effect to the acquisition of Retek Logistics,
Inc. as if the acquisition had occurred on January 1, 1998.

     The information has been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission and is provided for
comparative purposes only. The pro forma information does not purport to be
indicative of the results that actually would have occurred had the acquisition
been effected at the beginning of the period presented.
<PAGE>   115

           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

                     PRO FORMA COMBINED STATEMENT OF INCOME
                                  (UNAUDITED)
                      (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                  YEAR ENDED
                                               DECEMBER 31, 1998
                                             ---------------------
                                                   COMBINED              THREE MONTHS                       YEAR ENDED
                                             RETEK LOGISTICS, INC.      ENDED MARCH 31,                    DECEMBER 31,
                                                      AND                    1998                              1998
                                               RETEK INFORMATION     ---------------------    PRO FORMA    ------------
                                                 SYSTEMS, INC.       RETEK LOGISTICS, INC.   ADJUSTMENTS    PRO FORMA
                                             ---------------------   ---------------------   -----------   ------------
<S>                                          <C>                     <C>                     <C>           <C>
Revenue....................................         $55,033                 $1,231             $    --       $56,264
Cost of revenue............................          13,852                    431                  --        14,283
                                                    -------                 ------             -------       -------
Gross profit...............................          41,181                    800                  --        41,981
Operating expenses:
  Research and development.................          12,918                     --                  --        12,918
  Selling, general and administrative......          17,996                    670                  --        18,666
  Acquisition related amortization of
    intangible.............................             429                     --                 603(A)      1,032
  Acquired in-process research and
    development............................           1,750                     --              (1,750)(B)        --
                                                    -------                 ------             -------       -------
    Total operating expenses...............          33,093                    670              (1,147)       32,616
                                                    -------                 ------             -------       -------
Operating income...........................           8,088                    130               1,147         9,365
Other income (expense), net................              11                   (104)                 --           (93)
                                                    -------                 ------             -------       -------
Income before income tax provision.........           8,099                     26               1,147         9,272
Income tax provision.......................           4,221                     67                  --         4,288
                                                    -------                 ------             -------       -------
Net income (loss)..........................         $ 3,878                 $  (41)            $ 1,147       $ 4,984
                                                    =======                 ======             =======       =======
Pro forma unaudited basic and diluted net
  income per common share (Note 3).........         $  1.73                                                  $  2.23
                                                    -------                                                  -------
Pro forma unaudited weighted average
  shares -- basic and diluted (Note 3).....           2,238                                                    2,238
                                                    -------                                                  -------
</TABLE>

(A)(B) See Note 4 to Pro Forma Combined Statement of Income

       See accompanying notes to pro forma combined statement of income.
                                      F-33
<PAGE>   116

           RETEK LOGISTICS, INC. AND RETEK INFORMATION SYSTEMS, INC.

                NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME
                                 (IN THOUSANDS)
                                  (UNAUDITED)

NOTE 1--BASIS OF PRESENTATION

     In March 1998 HNC acquired Retek Logistics, Inc. (formerly Practical
Control Technologies, Inc.) which develops warehouse management software
solutions.

     The pro forma unaudited combined statement of income presented is not
necessarily indicative of the future combined operating results of Retek
Logistics, Inc. and Retek Information Systems, Inc. (the "Company") or the
combined operating results that would have resulted had the acquisition taken
place on January 1, 1998. The unaudited pro forma combined statement of income
for the year ended December 31, 1998 reflects the effects of the acquisition,
assuming the acquisition occurred on January 1, 1998.

NOTE 2--PURCHASE PRICE ALLOCATION:

     The unaudited pro forma combined financial statements reflect a total
purchase price of $6,564 consisting of the initial purchase price of $5,088 and
the additional consideration of $1,476 paid by HNC related to the achievement of
financial objectives by Retek Logistics, Inc. in 1998. HNC has a contingent
obligation to issue additional shares of HNC common stock upon the achievement
of certain financial objectives during 1999. This additional consideration will
not be reflected in the Company's financial position or results of operations in
the future.

     The Company's allocation of Retek Logistics, Inc.'s aggregate purchase
price to the tangible and identifiable intangible assets acquired in connection
with this acquisition was based on fair values as determined by independent
appraisers. The allocation is summarized below:

<TABLE>
<S>                                                           <C>
Goodwill....................................................  $2,360
Acquired in-process research and development................   1,750
Purchased software costs....................................   1,100
Customer base...............................................     300
Assembled work force........................................     200
Trademarks..................................................      70
Net assets..................................................     784
                                                              ------
     Total purchase price...................................  $6,564
                                                              ======
</TABLE>

     The goodwill, customer base and trademarks are being amortized on a
straight-line basis over the estimated period of benefit of five years. The
purchased software costs is being amortized on a straight-line basis over the
estimated period of benefit of thirty-six to forty-two months. The assembled
work force is being amortized on a straight-line basis over the estimated period
of benefit of two years.

NOTE 3--PRO FORMA UNAUDITED COMBINED NET INCOME PER SHARE

     Pro forma unaudited net income per share is calculated based upon the
outstanding shares of Retek Logistics, Inc. of 2,238 at December 31, 1998, as if
Retek Information Systems, Inc. became a wholly-owned subsidiary of Retek
Logistics, Inc. on January 1, 1998.

                                      F-34
<PAGE>   117
         NOTES TO PRO FORMA COMBINED STATEMENT OF INCOME -- (CONTINUED)
                                 (IN THOUSANDS)
                                  (UNAUDITED)

NOTE 4--PURCHASE ADJUSTMENTS:

     The following adjustment was applied to the combined financial statements
of Retek Logistics, Inc. and Retek Information Systems, Inc. and the financial
statements of Retek Logistics, Inc. to arrive at the pro forma combined
statement of operations:

     (A) To record annual amortization of goodwill and other identifiable
         intangible assets that is being amortized over the estimated period of
         benefit of three to five years.

                                      F-36
<PAGE>   118

                                   [RETEK LOGO]
<PAGE>   119

                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale and distribution of the common stock being registered. All amounts
are estimated, except the Securities and Exchange Commission Registration Fee,
the NASD Filing Fee and the Nasdaq National Market Filing Fee:

<TABLE>
<CAPTION>
ITEM                                                             AMOUNT
----                                                            --------
<S>                                                             <C>
Securities and Exchange Commission Registration Fee.........    $ 25,896
NASD Filing Fee.............................................
Nasdaq National Market Filing Fee...........................
Blue Sky Fees and Expenses..................................
Accounting Fees and Expenses................................
Legal Fees and Expenses.....................................
Transfer Agent and Registrar Fees...........................
Printing and Engraving......................................
Miscellaneous...............................................
                                                                --------
  Total.....................................................    $
                                                                ========
</TABLE>

-------------------------

* To be provided by amendment

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer or director of such corporation or is or was
serving at the request of such corporation as a director, officer, employer or
agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such officer or director acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, in the case of criminal proceedings, had
no reasonable cause to believe his or her conduct was illegal. A Delaware
corporation may indemnify officers and directors against expenses (including
attorneys' fees) in connection with the defense or settlement of an action by or
in the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against expenses
which such officer or director actually and reasonably incurred. The Certificate
of Incorporation of the Registrant provides for indemnification of the officers
and directors of the Registrant to the full extent permitted by applicable law.

     In accordance with Delaware law, the Certificate of Incorporation of the
Registrant contains, and the Amended and Restated Certificate of Incorporation
of the Registrant will contain, a provision to limit the personal liability of
directors of the Registrant for violations of their fiduciary duty. This
provision eliminates each director's liability to the Registrant or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Registrant or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law,

                                      II-1
<PAGE>   120

(iii) under Section 174 of the DGCL, providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions or (iv)
for any transaction from which a director derived an improper personal benefit.
The effect of this provision is to eliminate the personal liability of directors
for monetary damages for actions involving a breach of their fiduciary duty of
care, including any such actions involving gross negligence.

     Pursuant to the underwriting agreement between the Registrant and the
underwriters filed as an exhibit to this Registration Statement, the
underwriters, a party thereto, have agreed to indemnify each officer and
director of the Registrant and each person, if any, who controls the Registrant
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), against certain liabilities, including liabilities under said Act.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     In connection with the incorporation in Delaware of Retek Inc., the
Registrant issued           shares of its common stock to HNC Software Inc. The
Registrant believes that this issuance was exempt from registration under
Section 4(2) of the Securities Act as a transaction not involving any public
offering.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (A)  EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO.                                DESCRIPTION
-------                            -----------
<C>        <S>                                                           <C>
  1.1*     Form of Underwriting Agreement.
  2.1      Agreement and Plan of Merger and Reorganization between
           Retek Logistics, Inc. and Registrant.
  2.2*     Form of Separation Agreement.
  2.3*     Form of Licensing Agreement.
  2.4*     Form of Tax Sharing Agreement.
  2.5*     Form of Services Agreement.
  2.6*     Form of Corporate Rights Agreement.
  3.1      Certificate of Incorporation of the Registrant as currently
           in effect.
  3.2      Bylaws of the Registrant as currently in effect.
  3.3*     Form of Amended and Restated Certificate of Incorporation of
           the Registrant as in effect immediately prior to the closing
           of this offering.
  3.4*     Form of Amended and Restated Bylaws of the Registrant as in
           effect immediately prior to the closing of this offering.
  4.1*     Specimen Common Stock Certificate.
  5.1*     Opinion of Shearman & Sterling.
 10.1      Employment Agreement of John Buchanan.
 10.2*+    Industry Solutions Initiative Master Agreement between
           Oracle Corporation and Retek Information Systems, Inc.
 10.3*     Assignment of Option Agreement relating to Webtrak Limited
           between HNC Software Inc. and Retek Information Systems,
           Inc.
 10.4*+    Option Agreement between HNC Software Inc., Webtrak Limited
           and the shareholders of Webtrak Limited.
 21.1*     Schedule of Subsidiaries of Registrant.
 23.1      Consent of PricewaterhouseCoopers LLP.
 23.2      Consent of PricewaterhouseCoopers LLP.
 23.3*     Consent of Shearman & Sterling (included in Exhibit 5.1).
 24.1      Power of Attorney (included on signature page).
 27.1      Financial Data Schedule.
 27.2      Financial Data Schedule.
 27.3      Financial Data Schedule.
 27.4      Financial Data Schedule.
</TABLE>

-------------------------
* To be filed by amendment.

+ The Registrant intends to apply for confidential treatment of portions of this
  Exhibit. Accordingly, portions thereof will be omitted and filed separately.

     (B)  FINANCIAL STATEMENT SCHEDULES

                                      II-2
<PAGE>   121

ITEM 17.  UNDERTAKINGS

     (a)  The Registrant hereby undertakes to provide to the underwriters at the
          closing specified in the underwriting agreement certificates in such
          denominations and registered in such names as required by the
          underwriters to permit prompt delivery to each purchaser.

     (b)  Insofar as indemnification for liabilities arising under the
          Securities Act may be permitted to directors, officers and controlling
          persons of the Registrant pursuant to the provisions described in Item
          14 or otherwise, the Registrant has been advised that in the opinion
          of the Securities and Exchange Commission such indemnification is
          against public policy as expressed in the Securities Act and is,
          therefore, unenforceable. In the event that a claim for
          indemnification against such liabilities (other than payment by the
          Registrant of expenses incurred or paid by a director, officer or
          controlling person of the Registrant in the successful defense of any
          action, suit or proceeding) is asserted by such director, officer or
          controlling person in connection with the securities being registered,
          the Registrant will, unless in the opinion of its counsel the matter
          has been settled by controlling precedent, submit to a court of
          appropriate jurisdiction the question of whether such indemnification
          by it is against public policy as expressed in the Securities Act and
          will be governed by the final adjudication of such issue.

     (c)  The undersigned Registrant hereby undertakes that:

        (1)  for purposes of determining any liability under the Securities Act,
             the information omitted from the form of prospectus filed as part
             of this registration statement in reliance upon Rule 430A and
             contained in a form of prospectus filed by the Registrant pursuant
             to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
             be deemed to be part of this registration statement as of the time
             it was declared effective; and

        (2)  for purposes of determining any liability under the Securities Act,
             each post-effective amendment that contains a form of prospectus
             shall be deemed to be a new registration statement relating to the
             securities offered therein and this offering of such securities at
             that time shall be deemed to be the initial bona fide offering
             thereof.

                                      II-3
<PAGE>   122

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on September   , 1999.

                                          RETEK INC.
                                              /s/ JOHN BUCHANAN
                                          By:
                                          --------------------------------------

                                              Name: John Buchanan
                                              Title: Chairman, Chief Executive
                                                     Officer
                                                     and Director

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John Buchanan and Greg Effertz, and each of them,
his attorneys-in-fact, each with the power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and to each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                  SIGNATURE                                   TITLE                        DATE
                  ---------                                   -----                        ----
<C>                                            <S>                                  <C>
              /s/ JOHN BUCHANAN                Chairman, Chief Executive Officer    September   , 1999
---------------------------------------------  and Director (Principal Executive
                John Buchanan                  Officer)

              /s/ GREG EFFERTZ                 Vice President, Finance and          September   , 1999
---------------------------------------------  Administration, Chief Financial
             Gregory A. Effertz                Officer, Treasurer, Secretary and
                                               Director (Principal Financial and
                                               Accounting Officer)
</TABLE>
<PAGE>   123
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
NO.                                DESCRIPTION
-------                            -----------
<C>        <S>                                                           <C>
  1.1*     Form of Underwriting Agreement.
  2.1      Agreement and Plan of Merger and Reorganization between
           Retek Logistics, Inc. and Registrant.
  2.2*     Form of Separation Agreement.
  2.3*     Form of Licensing Agreement.
  2.4*     Form of Tax Sharing Agreement.
  2.5*     Form of Services Agreement.
  2.6*     Form of Corporate Rights Agreement.
  3.1      Certificate of Incorporation of the Registrant as currently
           in effect.
  3.2      Bylaws of the Registrant as currently in effect.
  3.3*     Form of Amended and Restated Certificate of Incorporation of
           the Registrant as in effect immediately prior to the closing
           of this offering.
  3.4*     Form of Amended and Restated Bylaws of the Registrant as in
           effect immediately prior to the closing of this offering.
  4.1*     Specimen Common Stock Certificate.
  5.1*     Opinion of Shearman & Sterling.
 10.1      Employment Agreement of John Buchanan.
 10.2*+    Industry Solutions Initiative Master Agreement between
           Oracle Corporation and Retek Information Systems, Inc.
 10.3*     Assignment of Option Agreement relating to Webtrak Limited
           between HNC Software Inc. and Retek Information Systems,
           Inc.
 10.4*+    Option Agreement between HNC Software Inc., Webtrak Limited
           and the shareholders of Webtrak Limited.
 21.1*     Schedule of Subsidiaries of Registrant.
 23.1      Consent of PricewaterhouseCoopers LLP.
 23.2      Consent of PricewaterhouseCoopers LLP.
 23.3*     Consent of Shearman & Sterling (included in Exhibit 5.1).
 24.1      Power of Attorney (included on signature page).
 27.1      Financial Data Schedule.
 27.2      Financial Data Schedule.
 27.3      Financial Data Schedule.
 27.4      Financial Data Schedule.
</TABLE>

-------------------------
* To be filed by amendment.

+ The Registrant intends to apply for confidential treatment of portions of this
  Exhibit. Accordingly, portions thereof will be omitted and filed separately.