The joint proxy statement states that, at an HNC board meeting held on April 9, 2002, the Finance Committee of HNC's board advised the other HNC directors that Fair, Isaac might withdraw from negotiations if HNC did not satisfy Fair, Isaac's desire to conclude the due diligence process and reach an agreement promptly.
In estimating the present value of the stand-alone, unlevered after-tax free cash flows that HNC could generate over calendar years 2002 through 2007, Credit Suisse First Boston assumed revenue growth decreasing from 16% in calendar year 2003 to 10% in calendar year 2007, operating margins increasing from 13% in calendar year 2003 to 17% in calendar year 2007, and a constant tax rate of 37.
Pursuant to the terms of the Merger Agreement between HNC and Fair, Isaac, Fair, Isaac has agreed, effective upon completion of the Merger, to add two new directors to its board of directors who are either members of HNC's board of directors or other individuals designated by Fair, Isaac who are reasonably acceptable to HNC.
As disclosed in the joint proxy statement, if the Merger occurs, certain executive officers of HNC will become entitled to receive full acceleration of the vesting of all their outstanding unvested HNC stock options.
Estimated Value of Stock Options to HNC Executive Officers if the Merger Occurs
The following table summarizes the estimated value of certain benefits that will accrue to certain HNC executive officers, based on the assumptions and estimates explained in the footnotes following this table:
number of HNC shares that become exercisable as a result of
the exchange ratio at which outstanding HNC options are to be
exercise price per HNC share of the accelerated HNC option
the accelerated portion of an HNC option under which the right
to purchase 10,000 HNC shares at an exercise price of $14.
per HNC share accelerated, would be deemed to have a value of