<PAGE> 1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________.
--------------------------------------------------
COMMISSION FILE NUMBER 0-26934
HYPERION SOLUTIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0277772
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1344 CROSSMAN AVENUE, SUNNYVALE, CALIFORNIA 94089
(Address of principal executive offices, including zip code)
(408) 744-9500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
As of May 10, 1999, there were 30,707,456 shares of the Registrant's common
stock, $.001 par value, outstanding.
- --------------------------------------------------------------------------------
<PAGE> 2
Hyperion Solutions Corporation
Form 10-Q
CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -- March 31, 1999 and June
30, 1998.......................................................... 2
Condensed Consolidated Statement of Income -- Three Months Ended
March 31, 1999 and 1998; Nine Months Ended March 31, 1999 and
1998.............................................................. 3
Condensed Consolidated Statement of Cash Flows --
Nine Months Ended March 31, 1999 and 1998......................... 4
Notes to Condensed Consolidated Financial Statements -- March 31,
1999.............................................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 17
Item 5. Other Information............................................ 18
Item 6. Exhibits and Reports on Form 8-K............................. 18
SIGNATURES............................................................. 19
Hyperion, Hyperion Enterprise, Essbase and Hyperion Pillar are
registered trademarks and Hyperion Solutions, Hyperion Reporter,
Essbase-Ready and See the Future First are trademarks of Hyperion Solutions
Corporation.
All other trademarks and company names mentioned are the
property of their respective owners.
For further information, refer to the Hyperion Solutions Corporation
report on Form 8-K filed on October 13, 1998 and its registration statement,
amendment no. 2 to Form S-4 declared effective July 13, 1998.
<PAGE> 3
Hyperion Solutions Corporation
Condensed Consolidated Balance Sheet
(in thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1999 1998
--------- ---------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 238,184 $ 221,868
Short-term investments 35,030 35,479
Accounts receivable--net of allowances of
$10,500 and $8,900 97,720 98,760
Prepaid expenses and other current assets 6,840 7,605
Deferred income taxes 10,123 10,447
--------- ---------
TOTAL CURRENT ASSETS 387,897 374,159
Property and equipment--at cost, less
accumulated depreciation and
amortization of $72,990 and $54,247 78,448 76,142
Product distribution rights and other
intangible assets--at cost, less accumulated
amortization of $26,115 and $19,359 13,026 18,318
Other assets 10,341 8,046
--------- ---------
Total assets $ 489,712 $ 476,665
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 46,145 $ 44,216
Accrued employee compensation and benefits 30,524 31,915
Income taxes payable 2,918 16,271
Deferred revenue 74,004 63,724
--------- ---------
TOTAL CURRENT LIABILITIES 153,591 156,126
Long-term debt 106,868 107,314
Stockholders' equity:
Preferred stock--$.001 par value; 5,000
shares authorized; none issued
Common stock--$.001 par value; 300,000
shares authorized; 30,391 and 29,574
shares issued and outstanding 30 30
Additional paid-in capital 147,934 135,172
Retained earnings 84,237 80,058
Currency translation adjustments (2,948) (2,035)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 229,253 213,225
--------- ---------
Total liabilities and stockholders' equity $ 489,712 $ 476,665
========= =========
</TABLE>
Note: the balance sheet at June 30, 1998 has been derived from the audited
financial statements at that date.
See accompanying notes.
- 2 -
<PAGE> 4
Hyperion Solutions Corporation
Condensed Consolidated Statement of Income (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1999 1998 1999 1998
------------------------- -------------------------
<S> <C> <C> <C> <C>
REVENUES
Software licenses $ 48,024 $ 47,760 $ 153,614 $ 138,345
Maintenance and services 53,622 41,004 159,872 114,671
--------- --------- --------- ---------
Total revenues 101,646 88,764 313,486 253,016
--------- --------- --------- ---------
COSTS AND EXPENSES
Cost of revenues:
Software licenses 1,383 2,231 5,920 7,239
Maintenance and services 28,871 23,594 85,113 67,222
Sales and marketing 41,936 32,665 120,304 92,004
Research and development 16,579 12,297 46,845 34,241
Acquired in-process technology 3,000 3,000
General and administrative 9,953 9,135 28,039 26,798
Merger costs 21,800
--------- --------- --------- ---------
98,722 82,922 308,021 230,504
--------- --------- --------- ---------
OPERATING INCOME 2,924 5,842 5,465 22,512
Interest income 2,556 1,333 8,444 3,431
Interest expense (1,351) (85) (3,965) (346)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 4,129 7,090 9,944 25,597
Provision for income taxes 1,550 3,719 8,650 10,507
--------- --------- --------- ---------
NET INCOME $ 2,579 $ 3,371 $ 1,294 $ 15,090
========= ========= ========= =========
EARNINGS PER SHARE
Basic $ .09 $ .12 $ .04 $ .52
Diluted $ .08 $ .11 $ .04 $ .49
AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 30,337 29,287 30,043 28,995
Diluted 30,728 30,926 30,823 30,641
</TABLE>
See accompanying notes.
- 3 -
<PAGE> 5
Hyperion Solutions Corporation
Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1999 1998
---------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $ 29,560 $ 45,605
INVESTING ACTIVITIES
Office facility improvements and
purchase of equipment, furniture
and software (20,959) (18,257)
Short-term investments, net 449 (1,418)
Intangible and other assets (1,458) (2,416)
Business acquisitions (2,965)
--------- ---------
Cash used by investing activities (21,968) (25,056)
FINANCING ACTIVITIES
Principal payments on notes payable (730) (942)
Exercise of stock options by employees 10,367 10,197
--------- ---------
Cash provided by financing activities 9,637 9,255
Effect of exchange rate changes (913) (760)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 16,316 29,044
Cash and cash equivalents at beginning of
period 221,868 72,706
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 238,184 $ 101,750
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND
NONCASH ACTIVITIES
Cash paid during the period for:
Income taxes $ 22,998 $ 7,989
Interest 4,705 332
Common stock issued in connection
with a business acquisition 3,200
</TABLE>
See accompanying notes.
- 4 -
<PAGE> 6
Hyperion Solutions Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 1999
A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring accruals, considered necessary for a fair presentation
have been included in the accompanying unaudited financial statements. Operating
results for the three- and nine-month periods ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the full year
ending June 30, 1999. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended June 30, 1998
included in the Hyperion Solutions Corporation (the "Company" or "Hyperion")
report on Form 8-K filed on October 13, 1998.
B. MERGER
On August 24, 1998, the Company (the registrant, formerly named Arbor Software
Corporation) issued 18.2 million shares of its common stock in connection with
its merger with Hyperion Software Corporation. Hyperion Software, based in
Stamford, Connecticut, develops, markets and supports comprehensive, packaged
analytic applications. Its products, which are sold to large organizations
worldwide, draw data from multiple sources across an enterprise for applications
such as reporting, ad hoc analysis, consolidation, planning, and budgeting. The
business combination, which qualifies as a tax-free reorganization, has been
accounted for as a pooling of interests. Accordingly, the financial statements
have been restated for all periods presented to include Hyperion Software.
Further, all common share and per share data have been restated for the
pre-merger periods presented.
Hyperion Software had a fiscal year end of June 30, while Arbor used a March 31
year end. In connection with the merger, the Company changed its fiscal year end
from March 31 to June 30 and, accordingly, the accompanying financial
statements, labeled March 31, 1998, reflect the combination of the separate,
historical interim financial statements of Arbor Software and Hyperion Software
for the three- and nine-month periods ended December 31, 1997 and March 31,
1998, respectively. The balance sheet at June 30, 1998 has been derived from the
combination of the audited financial statements of Hyperion Software at that
date and the audited financial statements of Arbor Software as of March 31,
1998. Accordingly, the exclusion of Arbor's net income for the three months
ended June 30, 1998 from stockholders' equity has been adjusted by a $2.9
million credit to retained earnings recorded in the three-month period ended
September 30, 1998.
- 5 -
<PAGE> 7
Hyperion Solutions Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
March 31, 1999
B. MERGER (CONTINUED)
For the pre-merger period indicated, revenues and net income of the Company and
Hyperion Software are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, 1998 March 31, 1998
------------------ -----------------
<S> <C> <C>
Revenues
Hyperion Software $ 67,387 $ 197,521
Arbor Software 21,377 55,495
--------- ---------
$ 88,764 $ 253,016
========= =========
Net income
Hyperion Software $ 3,614 $ 11,438
Arbor Software (243) 3,652
--------- ---------
$ 3,371 $ 15,090
========= =========
</TABLE>
The Company incurred charges to operations related to the merger of $21.8
million, $18.7 million after taxes. These charges include direct transaction
costs primarily for financial advisory services and legal fees of $13.9 million,
and costs of $7.9 million associated with combining the operations of the two
companies, including $5 million for restructuring (more specifically, $3.5
million for the closing of duplicate offices, employee severance and
relocations) and the write down of certain intangible assets. Included in
accounts payable and accrued expenses at March 31, 1999 are unpaid merger costs
of $3.3 million.
C. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. Earnings per share amounts for all
periods have been presented and where necessary restated to conform to the
Statement 128 requirements.
- 6 -
<PAGE> 8
Hyperion Solutions Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
March 31, 1999
C. EARNINGS PER SHARE (CONTINUED)
The following table sets forth the computation of basic and diluted earnings per
share ("EPS") (in thousands, except per share data):
<TABLE>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
------------------- -------------------
<S> <C> <C> <C> <C>
Numerator--net income $ 2,579 $ 3,371 $ 1,294 $15,090
======= ======= ======= =======
Denominator for basic EPS--
weighted-average shares 30,337 29,287 30,043 28,995
Effect of dilutive securities:
Stock option rights 391 1,639 780 1,646
------- ------- ------- -------
Denominator for diluted EPS--
adjusted weighted-average
shares and assumed conversions 30,728 30,926 30,823 30,641
======= ======= ======= =======
Basic earnings per share $ .09 $ .12 $ .04 $ .52
Diluted earnings per share $ .08 $ .11 $ .04 $ .49
</TABLE>
Excluding the $21.8 million ($18.7 million after tax) nonrecurring charge for
merger costs, the Company would have had net income for the nine months ended
March 31, 1999 of $20 million or $.65 per diluted share. Because their effect
would be antidilutive, certain stock option rights for 3.7 million common shares
were excluded from the diluted EPS calculation for the three-month period ended
March 31, 1999. For the same reason, shares of common stock issuable upon
conversion of the convertible subordinated notes due 2005 have also been
excluded from the diluted EPS calculation.
- 7 -
<PAGE> 9
Hyperion Solutions Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
March 31, 1999
D. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components as part of a complete set of
financial statements. Comprehensive income is a measure of all changes in equity
of any enterprise that results from recognized transactions and other economic
events of a period other than transactions with owners in their capacity as
owners. For the periods indicated, comprehensive income of the Company was as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1999 1998 1999 1998
---------------------- ---------------------
<S> <C> <C> <C> <C>
Net income $ 2,579 $ 3,371 $ 1,294 $ 15,090
Currency translation
adjustments, net of tax (1,142) (151) (548) (456)
-------- -------- -------- --------
Comprehensive income $ 1,437 $ 3,220 $ 746 $ 14,634
======== ======== ======== ========
</TABLE>
E. CONTINGENCIES
From time to time, in the normal course of business, various claims are made
against the Company. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position of the Company.
F. SUBSEQUENT EVENT
On May 14, 1999, the Company acquired all of the outstanding shares of Sapling
Corporation, the Toronto-based developer and marketer of business software for
performance measurement and activity-based management. The acquisition was
accounted for as a purchase transaction and, accordingly, the purchase price of
$15.5 million, excluding contingent payments based on certain software sales
targets for the year ending June 30, 2000, was allocated to identifiable
assets and liabilities, based on their estimated fair values, and to goodwill.
Under the purchase method of accounting, the results of operations of Sapling
will be included in the Company's financial statements from the date of
acquisition.
- 8 -
<PAGE> 10
Hyperion Solutions Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
- --------------------------------------------------------------------------------
Hyperion develops, markets and supports comprehensive analytic application
software for the workgroup, division, or extended enterprise. The Company's
offerings include packaged analytic applications that are quickly configured and
deployed, an industry leading OLAP (on-line analytical processing) server used
by IT and end-user departments to build fully customized analytic applications,
and a range of end-user reporting, analysis, and presentation tools. Packaged
analytic applications from Hyperion include the ability to draw data from
multiple sources across the enterprise for tasks such as reporting, ad hoc
analysis, consolidation, planning, and budgeting. The Company's solutions are
used by large organizations worldwide.
Hyperion derives revenues from licensing its software products and providing
related product installation, support and training services. Customers are
billed an initial fee for the software upon delivery. A maintenance fee
entitling customers to routine support and product updates is billed annually.
With operations in twenty-six countries, Hyperion licenses its products
throughout the world primarily through a direct sales force. Products also are
licensed through independent distributors and sales agents, including other
technology and application software companies, and major accounting firms
("channel partners"). The Company includes in revenues its net share of revenues
generated by distributors. When an agent has facilitated the sale and Hyperion
is the licensor, the license revenue is reported gross and a commission charge
is reflected.
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
REVENUES
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
March 31, 1999 CHANGE 1998 1999 CHANGE 1998
- ----------------------------- ------------------------------------ ------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Software licenses $ 48,024 .6% $ 47,760 $ 153,614 11.0% $ 138,345
Percentage of total revenues 47.2% 53.8% 49.0% 54.7%
- ----------------------------- ------------------------------------ ------------------------------------------
Maintenance and services $ 53,622 30.8% $ 41,004 $ 159,872 39.4% $ 114,671
Percentage of total revenues 52.8% 46.2% 51.0% 45.3%
- ----------------------------- ------------------------------------ ------------------------------------------
</TABLE>
Software license revenues rose primarily as a result of an increase in the
number of licenses sold (unit volume) versus, for example, price increases. The
growth in software sales was attributable to the demand for the Company's OLAP
server and tools. However, due primarily to merger related activities, including
sales-marketing execution issues, software sales were less than the Company
plan, particularly in North America. During the December quarter, the two sales
forces were integrated, sales territories were realigned, product links were
announced and time was spent cross training the Company's sales representatives.
The decline in sales productivity, caused by the necessary decision to combine
and cross train the sales forces and other factors, occurred in the December
quarter and has continued in the March quarter and will likely continue at least
into the September 1999 quarter.
- 9 -
<PAGE> 11
Hyperion Solutions Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
The increase in service and annual maintenance revenue is mainly attributable to
the year-to-year growth of the Company's installed customer base.
Revenues, including export sales, generated from markets outside the United
States for the first three quarters of fiscal 1999 and 1998 were $114.1 million
and $87.8 million, or 36.4% and 34.7% of total revenues, respectively. Revenue
growth was particularly strong in France, Germany and Italy.
Revenues derived from channel partners for the three months ended March 31, 1999
and 1998 were 15.9% and 8.8% of total revenues, respectively. For the nine
months ended March 31, 1999 and 1998, partner revenues were 14% and 11% of total
revenues.
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position 97-2, "Software Revenue Recognition" ("SOP"), which
provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions. Effective July 1, 1998, the
Company adopted the SOP, as amended, and the impact on operating results for the
first three quarters was not material. However, should the Company adopt new or
change its current licensing practices, in response to a preference from the
market or otherwise, then the Company's revenue recognition practices may be
subject to significant change to comply with the accounting requirements of the
SOP, as amended.
COST OF REVENUES
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
March 31, 1999 CHANGE 1998 1999 CHANGE 1998
- ---------------------------- --------------------------------------- ---------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Software licenses $ 1,383 (38.0)% $ 2,231 $ 5,920 (18.2)% $ 7,239
Gross profit percentage 97.1% 95.3% 96.1% 94.8%
- ---------------------------- --------------------------------------- ---------------------------------------
Maintenance and services $ 28,871 22.4% $ 23,594 $ 85,113 26.6 % $ 67,222
Gross profit percentage 46.2% 42.5% 46.8% 41.4%
- ---------------------------- --------------------------------------- ---------------------------------------
</TABLE>
Cost of software license revenues consists primarily of the cost of product
packaging and documentation materials, amortization of capitalized software
costs, amortization of certain intangible assets related to business
acquisitions, and royalty expenses. The amortization of capitalized software
costs begins upon the general release of the software to customers. The decrease
in the cost of software license revenues principally reflects a decrease in
royalty fees.
The increase in the cost of maintenance and service revenues was due primarily
to additional staffing expense for both installation and ongoing support
services.
- 10 -
<PAGE> 12
Hyperion Solutions Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
OPERATING EXPENSES
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
March 31, 1999 CHANGE 1998 1999 CHANGE 1998
- ---------------------------- --------------------------------------- ----------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing $ 41,936 28.4% $ 32,665 $ 120,304 30.8% $ 92,004
Percentage of total revenues 41.3% 36.8% 38.4% 36.4%
- ---------------------------- --------------------------------------- ----------------------------------------
Research and development $ 16,579 34.8% $ 12,297 $ 46,845 36.8% $ 34,241
Percentage of total revenues 16.3% 13.9% 14.9% 13.5%
- ---------------------------- --------------------------------------- ----------------------------------------
General and administrative $ 9,953 9.0% $ 9,135 $ 28,039 4.6% $ 26,798
Percentage of total revenues 9.8% 10.3% 8.9% 10.6%
- ---------------------------- --------------------------------------- ----------------------------------------
</TABLE>
The increase in sales and marketing expenses is primarily due to a net increase
in sales-marketing personnel.
The increase in research and development expenses reflects additional personnel
costs associated with expanded product research and development activities. In
the first three quarters of fiscal 1999 and 1998, the Company capitalized $1.4
million and $2.2 million of software development costs, respectively, in
accordance with Statement of Financial Accounting Standards No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed."
The amounts capitalized relate to the Company's development of enterprise-wide,
packaged analytic application solutions for client/server environments and
represented 2.8% and 5.9% of total research and development expenditures.
Capitalized software costs are amortized over the estimated economic life of the
product, but generally not more than three years.
In December 1997, the Company acquired all of the outstanding shares of
Appsource Corporation, the Florida-based developer of Hyperion WIRED for OLAP, a
presentation, analysis and query tool that works with the Hyperion Essbase OLAP
Server. The total acquisition price of $6.7 million was funded from a
combination of the Company's existing working capital and newly issued common
stock. Approximately $3 million of the total purchase price represented the
value of in-process technology that had not yet reached technological
feasibility, had no alternative future uses and was charged to the Company's
operations in the quarter ended March 31 1998. The charge resulting from
in-process technology was not deductible for income tax purposes. The
acquisition was accounted for under the purchase method of accounting.
Accordingly, the results of operations of Appsource are included in the
accompanying financial statements from the date of acquisition.
The increase in general and administrative expenses resulted, for the most part,
from increases in personnel costs incurred to manage and support the growth of
the Company's overall operations. The increase relating to the nine-month
comparison is net of the $1.2 million charge incurred in the September 1997
quarter for additional support required by certain accounting product customers.
- 11 -
<PAGE> 13
Hyperion Solutions Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
The merger of Arbor Software Corporation (former name of the registrant) and
Hyperion Software Corporation was completed on August 24, 1998. In connection
with the business combination, the Company charged $21.8 million, $18.7 million
after taxes, to operations for nonrecurring merger costs incurred. These charges
include direct transaction costs primarily for financial advisory services and
legal fees of $13.9 million, and costs of $7.9 million associated with combining
the operations of the two companies, including $5 million for restructuring
(more specifically, $3.5 million for the closing of duplicate offices, employee
severance and relocations) and the write down of certain intangible assets. For
further details of the merger, see Note B of the accompanying financial
statements.
INTEREST INCOME AND EXPENSE
Net interest income, for the nine-month period, grew due to the increase in
cash available for investment, resulting from the issuance in March 1998 of $100
million of 4.5% convertible subordinated notes and from operations.
PROVISION FOR INCOME TAXES
Excluding the impact of merger costs in fiscal 1999 and the write-off of
acquired in-process technology in fiscal 1998, the Company's effective income
tax rate remained substantially unchanged at approximately 37%. The Company's
expected effective rate for the remainder of the fiscal year is 37%.
NET INCOME
As a result of the above factors, net income for the three-month period ended
March 31, 1999 decreased to $2.6 million, or by 23.5%, from $3.4 million for the
corresponding period of 1998. Including the charge for merger costs, the Company
had net income of $1.3 million for the nine-month period ended March 31, 1999,
compared to net income of $15.1 million for the same period of the prior year.
Excluding the $21.8 million ($18.7 million after tax) nonrecurring charge for
merger costs, the Company would have had net income of $20 million for the nine
months ended March 31, 1999.
To date, the overall impact of inflation on the Company has not been material.
RISK FACTORS, INCLUDING YEAR 2000 COMPLIANCE
Except for the historical information contained in this report on Form 10-Q, the
matters discussed herein are forward-looking statements that involve risks and
uncertainties. Actual events and the Company's future results may vary
significantly based on a number of factors, including, but not limited to, those
discussed in the following paragraphs of this section; whether the process of
effecting the Arbor Software/Hyperion Software business combination can be
effectively managed to realize the synergies anticipated to result therefrom;
whether the merger itself causes uncertainty in the marketplace or customer
hesitation; and the impact of competitive products and pricing. Any
forward-looking statements should be considered in light of these factors as
well as other risks as detailed in the Company's most recent annual report on
Form 10-K, and its proxy statement included in Form S-4 filed with the
Commission on June 18, 1998, as amended. Further, readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof.
- 12 -
<PAGE> 14
Hyperion Solutions Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
YEAR 2000 READINESS DISCLOSURE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
companies' software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" requirements.
State of Readiness of the Company's Year 2000 Issues
The Company has commenced its assessment of both the readiness of its internal
business information systems for handling the Year 2000 and the compliance of
products sold by the Company. The Company has determined that it will need to
modify or replace portions of its internal business information systems so that
the systems will function properly with respect to dates in the Year 2000 and
beyond. The Company anticipates that it will successfully address Year 2000
issues relating to its internal business information systems by the end of
fiscal 1999.
The Company believes that its current products are Year 2000 compliant. However,
prior versions of certain of these products currently installed at certain
customer sites will require upgrading or other modifications to become Year 2000
compliant. The Company believes that it is not legally responsible for costs
incurred by these customers to achieve Year 2000 compliance. However, there can
be no assurance that these customers will not assert claims against the Company
with respect to Year 2000 issues and, in the event such claims are asserted and
adjudicated in favor of these customers, the Company's liability could be
material. The Company is taking steps to identify affected customers, raise
customer awareness related to noncompliance of certain of the Company's older
products and assist its customers in assessing their risks. The Company may
incur increasing costs regarding customer satisfaction related to these actions
over the next few years. Since the Company's customer satisfaction programs are
currently ongoing, the scope of any resulting Year 2000 issues is not fully
known and potential liability resulting from these issues is unclear, the
potential impact on the Company's business, operating results and financial
condition with respect to these matters is not known at this time.
The Company's Hyperion accounting software, a product set formerly offered by
the Company, was not originally Year 2000 compliant. The Company is aware of a
limited number of customers who continue to use this product set. The Company is
obligated under its agreements with certain of these customers to provide
upgrades to this product set which are Year 2000 compliant. In the quarter ended
December 1998, the Company made available to these customers a Year 2000
compliant release of its accounting software. The Company has also made
available to these customers a migration path to a product offered pursuant to
the Company's alliance with Baan/Coda, which the Company believes is Year 2000
compliant. However, there can be no assurance that such product is Year 2000
compliant. The Company does not expect the cost associated with this compliance
effort, including planning, implementation and testing, to be material to its
financial condition, although there can be no assurance that the Company will
not be required to incur significant unanticipated costs in relation to its
compliance obligations. Such unanticipated costs, if incurred, could have a
material adverse effect on the Company's business, operating results and
financial condition.
- 13 -
<PAGE> 15
Hyperion Solutions Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
The Company has also initiated discussions with and received compliance
information from its significant vendors, service providers and large customers
to evaluate Year 2000 issues, if any, relating to the interaction of their
systems with the Company's internal systems. The Company has gathered written
compliance information from a large majority of these third parties and expects
to receive information on all relevant outside system dependencies by June 1999.
At this time, after having carefully reviewed the compliance data relating to
these third parties and their interaction with the Company, and based on
discussions with some of the other third parties, the Company expects to achieve
a sufficient level of Year 2000 compliance regarding these dependencies by
September 1999 without incurring significant costs. However, a failure by these
third parties to address adequately their Year 2000 readiness could have a
material adverse affect on the Company's business, operating results or
financial condition.
Costs Associated with the Company's Year 2000 Issues
To date, the Company has not incurred any material expenditures in connection
with identifying or evaluating Year 2000 compliance issues. Most of its expenses
have related to the opportunity cost of time spent by employees of the Company
evaluating the Company's internal business information systems, the products
sold by the Company and the interaction of the Company's internal business
information systems with the internal systems of third parties. Although the
Company is not aware of any material operational issues or costs associated with
preparing its internal business information systems and its products for the
Year 2000, there can be no assurances that the Company will not experience
serious unanticipated negative consequences and/or material costs caused by
undetected errors or defects in the technology used in the Company's internal
business information systems or products the Company sells. Such unanticipated
negative consequences and/or material costs, if incurred, could have a material
adverse effect on the Company's business, operating results or financial
condition.
Contingency Plan Regarding the Company's Year 2000 Issues
As the Company is not aware of any material Year 2000 compliance issues, it has
not developed a Year 2000-specific contingency plan. If material Year 2000
compliance issues are discovered, the Company will evaluate the need for one or
more contingency plans relating to such issues.
In addition, the Company is aware of the potential for claims against it and
other companies for damages arising from products and services that were not
Year 2000 ready. The Company continues to believe that any such claims against
it would be without merit.
While the Company believes that its planning efforts are adequate to address its
Year 2000 issues on a timely basis, there can be no assurance that there will
not be a delay in, or increased costs associated with, implementation of changes
to address any such issues, which could have a material adverse effect on the
Company's business, operating results or financial condition.
- 14 -
<PAGE> 16
Hyperion Solutions Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
MARKET RISKS
At March 31, 1999, the Company's investment portfolio consisted of
investment-grade debt securities, excluding those classified as cash
equivalents, of $35 million. The portfolio is invested predominantly in
short-term securities to minimize interest rate risk and for liquidity purposes
in the event of immediate cash needs. Accordingly, if market interest rates were
to increase immediately and uniformly by 10% from levels as of March 31, 1999,
the decline in the fair value of the portfolio would not be material.
The Company's long-term debt bears interest, for the most part, at a fixed rate
and, therefore, relative to its long-term debt, an immediate 10% change in
market interest rates would not materially impact the Company's financial
statements.
Approximately one-third of the Company's sales, cost of sales and marketing is
transacted in local currencies. As a result, the Company's operations from
markets outside the United States are subject to foreign exchange rate
fluctuations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company operates with a minimal software licensing backlog. Therefore,
quarterly revenues and operating results are quite dependent on the volume and
timing of the signing of licensing agreements and product deliveries during the
quarter, which are difficult to forecast. The Company's future operating results
may fluctuate due to these and other factors, such as customer buying patterns,
the deferral and/or realization of deferred software license revenues according
to contract terms, the timing of new product introductions and product upgrade
releases, the Company's hiring plans, the scheduling of sales and marketing
programs, new product development by the Company or its competitors and currency
exchange rate movements. A significant portion of the Company's quarterly
software licensing agreements is concluded in the last month of the fiscal
quarter, generally with a concentration of such revenues earned in the final ten
business days of that month. The Company generally has realized lower revenues
in its first (September) and third (March) fiscal quarters than in the
immediately preceding quarters. Total revenues and net income were $101.6
million and $2.6 million, respectively, for the third quarter of fiscal 1999,
and $107 million and $8.6 million, respectively, for the second quarter of
fiscal 1999. The Company believes that these revenue fluctuations are caused by
customer buying patterns, including traditionally slow purchase activity in the
summer months and low purchase activity in the corporate financial applications
market during the March quarter, as many potential customers are busy with their
year-end closing and financial reporting. In any case, due to the relatively
fixed nature of certain costs, including personnel and facilities expenses, a
decline or shortfall in quarterly and/or annual revenues typically results in
lower profitability or may result in losses.
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<PAGE> 17
Hyperion Solutions Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
To date, the Company has financed its business through positive cash flow from
operations and, to a lesser extent, through the issuance of its capital stock
and convertible subordinated notes. For fiscal years 1996, 1997 and 1998, and
for the nine months ended March 31, 1999, the Company generated positive cash
flow from operations of $42.9 million, $49.7 million, $87.6 million and $29.6
million (net of $17 million paid to date for merger costs), respectively.
Cash used by investing activities amounted to $22 million for the first three
quarters of fiscal 1999, including $21 million primarily for purchases of
computer equipment and software. On May 14, 1999, the Company acquired all of
the outstanding shares of Sapling Corporation, the Toronto-based developer and
marketer of business software for performance measurement and activity-based
management. The acquisition was accounted for as a purchase transaction and,
accordingly, the purchase price of $15.5 million, excluding contingent payments
based on certain software sales targets for the year ending June 30, 2000, was
allocated to identifiable assets and liabilities, based on their estimated fair
values, and to goodwill. Under the purchase method of accounting, the results of
operations of Sapling will be included in the Company's financial statements
from the date of acquisition.
Financing activities in the first three quarters of fiscal 1999, including stock
options exercised by employees and payments of indebtedness, generated cash of
$9.6 million. In connection with the stock options exercised by certain of its
employees (for a total of 817 thousand common shares), the Company recognized
(as a credit to additional paid-in capital) an income tax benefit of $2.4
million for the nine months ended March 31, 1999.
As of March 31, 1999, the Company had cash, cash equivalents and short-term
investments of $273.2 million, working capital of $234.3 million, and $106.9
million of long-term debt. Cash equivalents are comprised primarily of
investment-grade commercial paper, U.S. federal, state and political subdivision
obligations with varying terms of three months or less. The Company anticipates
capital expenditures, excluding business acquisitions, of approximately $30
million for its 1999 fiscal year. The Company intends to continue to review
potential acquisitions and business alliances that it believes would enhance its
growth and profitability.
From time to time, in the normal course of business, various claims are made
against the Company. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position of the Company.
The Company believes that its current cash and short-term investment balances,
and the funds generated from its operations, if any, will be sufficient to
finance the Company's business for at least the next year.
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<PAGE> 18
Hyperion Solutions Corporation
Part II. Other Information
ITEM 1. LEGAL PROCEEDINGS
On April 16, 1996, Gentia Software filed an action against the Company in the
United States District Court for the District of Massachusetts (the
"Massachusetts action") seeking a declaratory judgment that U.S. Patent No.
5,359,724 (the "`724 patent"), owned by the Company, is invalid and not
infringed by Gentia Software's products. On April 18, 1996, the Company filed an
action against Gentia Software in the United States District Court for the
Northern District of California (the "California action") alleging that Gentia
Software infringes the `724 patent, and seeking a permanent injunction and
monetary damages, including treble damages. On May 8, 1996, Gentia Software
filed its answer in the California action, including a counterclaim seeking to
declare the `724 patent invalid. Gentia Software also filed a motion to dismiss,
stay or transfer the action to Massachusetts, which the California court denied
on December 12, 1996. On May 13, 1996, the Company filed a motion to transfer
the Massachusetts action to California, which was granted on November 18, 1996.
The Company filed its answer and a counterclaim for patent infringement in the
transferred case on December 12, 1996. On April 7, 1997, the Court consolidated
both actions into a single case pending in the United States District Court for
the Northern District of California.
On July 11, 1997, Gentia Software filed a request for reexamination of the `724
patent with the United States Patent and Trademark Office (the "PTO"). On
September 11, 1997, the PTO granted the request for reexamination. On March 31,
1999, the PTO issued a non-final office action rejecting the claims of the `724
patent. Hyperion's response to this office action is due on May 31, 1999. On
December 11, 1997, the Court ordered that the litigation will not be set for
trial until after completion of the reexamination proceedings, but denied Gentia
Software's request to stay the entire litigation. On February 27, 1998, Gentia
Software filed a request for a second reexamination of the `724 patent with the
PTO. On May 22, 1998, the PTO granted that request for reexamination. The
reexamination proceedings are currently pending.
The fact discovery cut-off for this action was February 20, 1998, and the expert
discovery cut-off was May 15, 1998. Discovery has been completed by both parties
with the exception of three depositions that Hyperion will take of Gentia's
expert witnesses. No additional written discovery can be propounded by either
party, and no depositions can be noticed or subpoenaed. On September 11, 1998,
the Court granted Hyperion's motion to vacate the stay of this action, and
scheduled pre-trial proceedings, including a trial commencing on June 1, 1999.
Pursuant to that schedule, on January 27, 1999, the Court held a claims
construction hearing for the purpose of interpreting certain terms and phrases
used in the claims of the '724 patent. An order has not yet been issued setting
forth the Court's interpretation of those terms and phrases. The parties have
been informed via teleconference with the Court's clerk that the June 1, 1999
trial date has been postponed, but no new date has been set.
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<PAGE> 19
Hyperion Solutions Corporation
Part II. Other Information (continued)
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
Hyperion believes that it has meritorious claims against Gentia Software and
meritorious defenses against Gentia Software's claims that the `724 patent is
invalid, and intends to pursue vigorously its claims and defend against Gentia
Software's claims. The outcomes of the Gentia Software litigation and the patent
reexamination proceedings are uncertain at this time and no assurance can be
given that the outcome of the litigation will be in the Company's favor, or that
the PTO will not declare the `724 patent invalid or narrow the scope of its
claims. Management believes that the outcome of the Gentia Software litigation
or the reexamination will not have a material adverse effect on the Company's
business, operating results or financial condition. However, should the `724
patent be declared invalid or narrowed in scope, competitors may be able to
implement the technology described in the `724 patent, which could result in
increased competition. Increased competition could materially adversely affect
the Company's future business.
The preceding current litigation and any future litigation against the Company
or its employees, regardless of the outcome, is expected to result in
substantial costs and expenses to the Company and significant diversion of
attention by the Company's management personnel.
ITEM 5. OTHER INFORMATION
Proposals of stockholders intended to be presented at the Company's 1999 annual
meeting of stockholders must be received at the Company's principal executive
offices not later than June 17, 1999 in order to be included in the Company's
proxy statement and form of proxy relating to the 1999 annual meeting. Pursuant
to Rule 14a-4(c) of the Securities Exchange Act of 1934, as amended, if a
stockholder who intends to present a proposal at the 1999 annual meeting of
stockholders does not notify the Company of such proposal on or prior to August
31, 1999, then management proxies would be allowed to use their discretionary
voting authority to vote on the proposal when the proposal is raised at the
annual meeting, even though there is no discussion of the proposal in the 1999
proxy statement. At the present time, the Company expects to hold its 1999
annual meeting of stockholders in early November 1999.
On May 17, 1999, the Company filed with the Securities and Exchange Commission a
Current Report on Form 8-K dated May 3, 1999. Such report is incorporated by
reference herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
EXHIBIT NO. DESCRIPTION
10.1 - Employment Agreement with Stephen V. Imbler, dated
February 23, 1999
10.2 - Employment Agreement with William B. Binch, dated February
23, 1999
10.3 - Employment Agreement with William Clark, dated August 24,
1998
10.4 - Amended & Restated Employment Agreement with James A.
Perakis, dated January 1, 1999
The Company did not file any reports on Form 8-K during the three-month period
ended March 31, 1999.
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<PAGE> 20
Hyperion Solutions Corporation
Form 10-Q
for the three-month period ended March 31, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hyperion Solutions Corporation
/s/ MICHAEL A. MANTO 5/17/99
------------------------------------------------------
Michael A. Manto Date
Vice President and Corporate Controller
/s/ STEPHEN V. IMBLER 5/17/99
------------------------------------------------------
Stephen V. Imbler Date
Senior Vice President and Chief
Financial Officer
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<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on February 23, 1999, by and
between Stephen V. Imbler (the "Employee") and HYPERION SOLUTIONS CORPORATION, a
Delaware corporation (the "Company").
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITION. For the term of his employment under this
Agreement ("Employment"), the Company agrees to employ the Employee in the
position of Senior Vice President and Chief Financial Officer or in such other
position as the Company subsequently may assign to the Employee. The Employee
shall report to the Company's President and Chief Executive Officer or to such
other person as the Company subsequently may determine.
(b) OBLIGATIONS TO THE COMPANY. During the term of his
Employment, the Employee shall devote his full business efforts and time to the
Company. During the term of his Employment, without the prior written approval
of the Company (which shall not be unreasonably withheld), the Employee shall
not render services in any capacity to any other person or entity and shall not
act as a sole proprietor, partner or managing member of any other person or
entity or as a shareholder owning more than one percent of the stock of any
other corporation. The foregoing, however, shall not preclude the Employee from
engaging in reasonable community, school or charitable activities. The Employee
shall comply with the Company's policies and rules, as they may be in effect
from time to time during the term of his Employment.
(c) NO CONFLICTING OBLIGATIONS. The Employee represents and
warrants to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Employee represents and warrants that he will not use or
disclose, in connection with his employment by the Company, any trade secrets or
other proprietary information or intellectual property in which he or any other
person has any right, title or interest and that his employment by the Company
as contemplated by this Agreement will not infringe or violate the rights of any
other person. The Employee represents and warrants to the Company that he has
returned all property and confidential information belonging to any prior
employer.
<PAGE> 2
2. CASH AND INCENTIVE COMPENSATION.
(a) SALARY. The Company shall pay the Employee as compensation
for his services a base salary at a gross annual rate of not less than $250,000
(two hundred fifty thousand dollars). Such salary shall be payable in accordance
with the Company's standard payroll procedures. (The annual compensation
specified in this Subsection (a), together with any increases in such
compensation that the Company may grant from time to time, is referred to in
this Agreement as "Base Compensation.").
(b) INCENTIVE BONUSES. The Employee shall be eligible to be
considered for an annual incentive bonus with a target amount of $150,000 (one
hundred fifty thousand dollars). Such bonus (if any) shall be awarded based on
objective or subjective criteria established in advance by the Company's Board
of Directors (the "Board") or its Compensation Committee. The determinations of
the Board or such Committee with respect to such bonus shall be final and
binding.
3. VACATION AND EMPLOYEE BENEFITS. During the term of his Employment,
the Employee shall be eligible for paid vacations in accordance with the
Company's standard policy applicable to all of its employees, as it may be
amended from time to time. During the term of his Employment, the Employee shall
be eligible to participate in any employee benefit plans maintained by the
Company for similarly situated employees, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan.
4. BUSINESS EXPENSES. During the term of his Employment, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies. Any single expenditure in excess of
$5,000 shall require the prior approval of the Company's Chief Executive Officer
or Chief Financial Officer.
5. TERM OF EMPLOYMENT.
(a) BASIC RULE. The Company agrees to continue the Employee's
Employment, and the Employee agrees to remain in Employment with the Company,
from the Effective Time until the earlier of:
(i) The close of the applicable Initial Term or
Renewal Period, as determined under Subsection (b) below; or
(ii) The date when the Employee's Employment
terminates pursuant to Subsection (c) below.
(b) INITIAL TERM AND RENEWAL PERIODS. The initial term of this
Agreement shall end on January 31, 2001 (the "Initial Term"). Thereafter this
Agreement shall
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<PAGE> 3
automatically be renewed for successive 12-month periods (the "Renewal
Periods"), unless either party has given the other party written notice of
non-renewal not less than 90 days prior to the close of the Initial Term or
Renewal Period then in effect.
(c) EARLY TERMINATION. The Employee may terminate his
Employment at any time and for any reason (or no reason) by giving the Company
30 days' advance notice in writing. The Company may terminate the Employee's
Employment at any time and for any reason (or no reason), and with or without
Cause, by giving the Employee 30 days' advance notice in writing. The Company
may also terminate the Employee's active Employment due to Permanent Disability
by giving the Employee notice in writing. For all purposes under this Agreement,
"Permanent Disability" shall mean that the Employee, at the time notice is
given, has failed to perform his duties under this Agreement for 60 or more
consecutive days or for 90 or more days during any 12-month period as the result
of his incapacity due to physical or mental injury, disability or illness. The
Employee's Employment shall terminate automatically in the event of his death.
(d) EMPLOYMENT AT WILL. The Employee's Employment with the
Company shall be "at will." Any contrary representations which may have been
made to the Employee shall be superseded by this Agreement. This Agreement shall
constitute the full and complete agreement between the Employee and the Company
on the "at will" nature of the Employee's Employment, which may only be changed
in an express written agreement signed by the Employee and a duly authorized
officer of the Company.
(e) RIGHTS AND OBLIGATIONS UPON TERMINATION. Except as
expressly provided in Section 6, upon the termination of the Employee's
Employment pursuant to this Section 5, the Employee shall only be entitled to
the compensation, benefits and reimbursements described in Sections 2, 3 and 4
for the period preceding the effective date of the termination. No incentive
bonus under Section 2(b) shall be payable for the year in which the Employee's
Employment terminates, unless the applicable bonus program expressly provides
for the payment of a prorated bonus for such year. The payments under this
Agreement shall fully discharge all responsibilities of the Company to the
Employee. The termination of this Agreement shall not limit or otherwise affect
the Employee's obligations under Section 7.
6. TERMINATION BENEFITS.
(a) GENERAL RELEASE. Any other provision of this Agreement
notwithstanding, Subsections (b) and (c) below shall not apply unless the
Employee (i) has executed a general release (in a form prescribed by the
Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company and (ii) has agreed not to
prosecute any legal action or other proceeding based upon any of such claims.
(b) SEVERANCE PAY. The Company shall pay the Employee his Base
Compensation for a 12-month period following the effective date of the
termination of his Employment (the "Continuation Period") if:
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<PAGE> 4
(i) The Company terminates the Employee's Employment
under Section 5(c) for any reason other than Cause or
Permanent Disability; or
(ii) The Company was subject to a Change in Control
and, within 12 months thereafter, the Employee resigns for
Good Reason.
Base Compensation under this Subsection (b) shall be paid at the rate in effect
at the time of the termination of Employment and in accordance with the
Company's standard payroll procedures.
(c) EMPLOYEE BENEFITS. If Subsection (b) above applies, the
Company shall continue the coverage of the Employee and his dependents
(if applicable) under the employee benefit plans described in Section 3
during the Continuation Period. To the extent that such plans or the
insurance contracts or provider agreements associated with such plans
do not permit the extension of the Employee's coverage following the
termination of his active employment, the Company shall pay the
Employee cash in an amount equal to the cost to the Company of the
coverage that cannot be provided. The cash payments shall be made in
accordance with Subsection (b) above.
(d) COBRA. If Subsection (b) above applies, and if the
Employee elects to continue his health insurance coverage under the
Consolidated Omnibus Budget Reconciliation Act ("COBRA") following the
termination of his Employment, then the date of the "qualifying event"
for purposes of COBRA shall be the Employee's last day of active
employment.
(e) DEFINITION OF "CAUSE." For all purposes under this
Agreement, "Cause" shall mean:
(i) The Employee's failure to perform in a
satisfactory fashion one or more reasonable and lawful duties
assigned to the Employee by the Company under this Agreement,
if such failure continues for 15 days or more after the
Company has given the Employee written notice describing such
failure and advising him of the consequences of such failure
under this Agreement; provided that such notice shall be
required only with respect to the first such failure;
(ii) The Employee's misconduct relating to the
Company's affairs, if such misconduct continues for 15 days or
more after the Company has given the Employee written notice
describing such misconduct and advising him of the
consequences of such misconduct under this Agreement; provided
that such notice shall be required only with respect to the
first occurrence of such misconduct;
(iii) The Employee's conviction of, or a plea of
"guilty" or "no contest" to, a felony under the laws of the
United States or any state thereof;
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<PAGE> 5
(iv) The Employee's failure or refusal to carry out
the reasonable directives of the Company, if such failure
continues for three days or more after the Company has given
the Employee written notice describing such failure and
advising him of the consequences of such failure under this
Agreement; provided that such notice shall be required only
with respect to the first such failure;
(v) Any breach of this Agreement, the Proprietary
Information and Inventions Agreement between the Employee and
the Company, or any other agreement between the Employee and
the Company;
(vi) Threats or acts of violence directed at any
present, former or prospective employee, independent
contractor, vendor, customer or business partner of the
Company; or
(vii) Fraud or embezzlement involving the assets of
the Company or its affiliates, customers or suppliers.
The foregoing shall not be deemed an exclusive list of all acts or omissions
that the Company may consider as grounds for the termination of the Employee's
Employment without Cause.
(f) DEFINITION OF "CHANGE IN CONTROL." For all purposes under
this Agreement, "Change in Control" shall mean:
(i) The consummation of a merger or consolidation of
the Company with or into another entity or any other corporate
reorganization, if persons who were not stockholders of the
Company immediately prior to such transaction own immediately
after such transaction 50% or more of the voting power of the
outstanding securities of each of (A) the continuing or
surviving entity and (B) any direct or indirect parent
corporation of such continuing or surviving entity;
(ii) The sale, transfer or other disposition of all
or substantially all of the Company's assets, if persons who
were not stockholders of the Company immediately prior to such
transaction own immediately after such transaction 50% or more
of the voting power of the outstanding securities of each of
(A) the continuing or surviving entity and (B) any direct or
indirect parent corporation of such continuing or surviving
entity;
(iii) A change in the composition of the Board, as a
result of which fewer than a majority of the incumbent
directors are directors who either (A) had been directors of
the Company on the date 24 months prior to the date of the
event that may constitute a Change in Control (the "original
directors") or (B) were elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of
the aggregate of the original directors who were still
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<PAGE> 6
in office at the time of the election or nomination and the
directors whose election or nomination was previously so
approved;
(iv) Any transaction as a result of which any person
is the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), directly or indirectly, of securities of the Company
representing more than 50% of the total voting power
represented by the Company's then outstanding voting
securities. For purposes of this Paragraph (iv), the term
"person" shall have the same meaning as when used in sections
13(d) and 14(d) of the Exchange Act but shall exclude (A) a
trustee or other fiduciary holding securities under an
employee benefit plan of the Company or of a parent or
subsidiary of the Company and (B) a corporation owned directly
or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the
common stock of the Company; or
(v) Any change in control required to be reported by
Item 1 of Form 8-K of the Securities and Exchange Commission
or by Item 6(e) of Schedule 14A set forth in Rule 14a-101
under the Exchange Act (or by any successor of either).
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(g) DEFINITION OF "GOOD REASON." For all purposes under this
Agreement, "Good Reason" shall mean:
(i) A significant diminution in the nature or scope
of the Employee's authority, duties or responsibilities in
effect immediately prior to the Change in Control;
(ii) Any reduction in the rate of the Employee's Base
Compensation in effect immediately prior to the Change in
Control or a reduction of 25% or more in the value of the
Employee's aggregate compensation and benefits in effect
immediately prior to the Change in Control;
(iii) The relocation of the Employee's principal
place of employment to a site more than 25 miles removed from
his principal place of employment immediately prior to the
Change in Control; or
(iv) An increase of 25% or more in the average amount
of time per month that the Employee is required to be away
from his principal place of employment, relative to the
average amount of time per month that the Employee was
required to be away from his principal place of employment
immediately prior to the Change in Control.
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<PAGE> 7
7. EMPLOYEE'S COVENANTS.
(a) NON-SOLICITATION. During the period commencing on the date
of this Agreement and continuing until the second anniversary of the date when
the Employee's Employment terminated for any reason, the Employee shall not
directly or indirectly, personally or through others, solicit or attempt to
solicit (on the Employee's own behalf or on behalf of any other person or
entity) either (i) the employment of any employee of the Company or any of the
Company's affiliates or (ii) the business of any customer of the Company, or of
any of the Company's affiliates, with whom the Employee had contact during his
Employment. During such period, the Employee shall not encourage or induce, or
take any action that has the effect of encouraging or inducing, any employee of
the Company or any of the Company's affiliates to terminate his or her
employment.
(b) NON-DISCLOSURE. The Employee has entered into a
Proprietary Information and Inventions Agreement with the Company, which is
incorporated herein by reference.
(c) NON-COMPETITION. If Section 6(b) applies, the Employee
during the Continuation Period shall not, directly or indirectly (other than on
behalf of the Company or with the Company's prior written consent), engage in a
Competitive Business Activity in any of the locations listed in Schedule A
attached hereto. The term "Competitive Business Activity" shall mean:
(i) Engaging in, or managing or directing persons
engaged in, any business in which the Company or any of the
Company's affiliates is engaged at the time of the termination
of the Employee's Employment, whether independently or as an
employee, agent, consultant, advisor, independent contractor,
proprietor, partner, officer, director or otherwise;
(ii) Acquiring or having an ownership interest in any
entity that derives more than 15% of its gross revenues from
any business in which the Company or any of the Company's
affiliates is engaged at the time of the termination of the
Employee's Employment, except for ownership of 1% or less of
any entity whose securities are freely tradable on an
established market; or
(iii) Participating in the financing, operation,
management or control of any firm, partnership, corporation,
entity or business described in Paragraph (ii) above.
(d) NON-DISPARAGEMENT. During the period commencing on the
date of this Agreement and continuing until the second anniversary of the date
when the Employee's Employment terminated for any reason, the Employee shall not
directly or indirectly, personally or through others, disparage the Company or
its management.
(e) INJUNCTIVE RELIEF. The Employee acknowledges and agrees
that his failure to perform any of his covenants in this Section 7 would cause
irreparable injury to the
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Company and cause damages to the Company that would be difficult or impossible
to ascertain or quantify. Accordingly, without limiting any other remedies that
may be available with respect to any breach of this Agreement, the Employee
consents to the entry of an injunction to restrain any breach of this Section 7.
(f) SURVIVAL. The covenants in this Section 7 shall survive
any termination or expiration of this Agreement and the termination of the
Employee's Employment with the Company for any reason.
8. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) EMPLOYEE'S SUCCESSORS. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
9. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when (i) personally delivered, (ii) delivered to the U.S. Postal Service
for delivery by registered or certified mail or (iii) delivered to a comparable
private service offering guaranteed deliveries in the ordinary course of its
business. Notice under clauses (ii) and (iii) shall be valid only if delivery
charges have been prepaid and a return receipt will be furnished. In the case of
the Employee, notice under clauses (ii) and (iii) shall be addressed to him at
the home address which he most recently communicated to the Company in writing.
In the case of the Company, notice under clauses (ii) and (iii) shall be
addressed to its corporate headquarters and directed to the attention of its
Secretary.
(b) MODIFICATIONS AND WAIVERS. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. This Agreement supersedes any prior
employment agreement between the Employee and the Company. No other agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with
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respect to the subject matter hereof. This Agreement and the Proprietary
Information and Inventions Agreement between the Employee and the Company
contain the entire understanding of the parties with respect to the subject
matter hereof.
(d) WITHHOLDING TAXES. All payments made under this Agreement
shall be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) CHOICE OF LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California (except their provisions governing the choice of law).
(f) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) ARBITRATION. Subject to Section 7(d), any controversy or
claim arising out of or relating to this Agreement or the breach thereof, or the
Employee's Employment or the termination thereof, shall be settled in Santa
Clara County, California, by arbitration in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association. The decision of the arbitrator shall be final and binding on the
parties, and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. The parties hereby agree that the
arbitrator shall be empowered to enter an equitable decree mandating specific
enforcement of the terms of this Agreement. The Company and the Employee shall
share equally all fees and expenses of the arbitrator; provided, however, that
the Company or the Employee, as the case may be, shall bear all fees and
expenses of the arbitrator and all of the legal fees and out-of-pocket expenses
of the other party if the arbitrator determines that the claim or position of
the Company or the Employee, as the case may be, was without reasonable
foundation. The Employee hereby consents to personal jurisdiction of the state
and federal courts located in the State of California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(h) NO ASSIGNMENT. This Agreement and all rights and
obligations of the Employee hereunder are personal to the Employee and may not
be transferred or assigned by the Employee at any time. The Company may assign
its rights under this Agreement to any entity that assumes the Company's
obligations hereunder in connection with any sale or transfer of all or a
substantial portion of the Company's assets to such entity.
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(i) COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
---------------------------------------
HYPERION SOLUTIONS CORPORATION
By /s/ John M. Dillon
------------------------------------
Title: President and CEO
---------------------------------
Employee:
/s/ Stephen V. Imbler
---------------------------------------
Stephen V. Imbler
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SCHEDULE A
Alabama New York
Alaska North Carolina
Arizona North Dakota
Arkansas Ohio
California Oklahoma
Colorado Oregon
Connecticut Pennsylvania
Delaware Rhode Island
Florida South Carolina
Georgia South Dakota
Hawaii Tennessee
Idaho Texas
Illinois Utah
Indiana Vermont
Iowa Virginia
Kansas Washington
Kentucky West Virginia
Louisiana Wisconsin
Maine Wyoming
Maryland Australia
Massachusetts Brazil
Michigan Canada
Minnesota England
Mississippi France
Missouri Germany
Montana Hong Kong
Nebraska Israel
Nevada Japan
New Hampshire Mexico
New Jersey Netherlands
New Mexico Singapore
United Kingdom
11
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on February 23, 1999, by and between
William B. Binch (the "Employee") and HYPERION SOLUTIONS CORPORATION, a Delaware
corporation (the "Company").
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITION. For the term of his employment under this
Agreement ("Employment"), the Company agrees to employ the Employee in the
position of Senior Vice President of World Wide Sales or in such other position
as the Company subsequently may assign to the Employee. The Employee shall
report to the Company's President and Chief Executive Officer or to such other
person as the Company subsequently may determine.
(b) OBLIGATIONS TO THE COMPANY. During the term of his
Employment, the Employee shall devote his full business efforts and time to the
Company. During the term of his Employment, without the prior written approval
of the Company (which shall not be unreasonably withheld), the Employee shall
not render services in any capacity to any other person or entity and shall not
act as a sole proprietor, partner or managing member of any other person or
entity or as a shareholder owning more than one percent of the stock of any
other corporation. The foregoing, however, shall not preclude the Employee from
engaging in reasonable community, school or charitable activities. The Employee
shall comply with the Company's policies and rules, as they may be in effect
from time to time during the term of his Employment.
(c) NO CONFLICTING OBLIGATIONS. The Employee represents and
warrants to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Employee represents and warrants that he will not use or
disclose, in connection with his employment by the Company, any trade secrets or
other proprietary information or intellectual property in which he or any other
person has any right, title or interest and that his employment by the Company
as contemplated by this Agreement will not infringe or violate the rights of any
other person. The Employee represents and warrants to the Company that he has
returned all property and confidential information belonging to any prior
employer.
<PAGE> 2
2. CASH AND INCENTIVE COMPENSATION.
(a) SALARY. The Company shall pay the Employee as compensation
for his services a base salary at a gross annual rate of not less than $200,000
(two hundred thousand dollars). Such salary shall be payable in accordance with
the Company's standard payroll procedures. (The annual compensation specified in
this Subsection (a), together with any increases in such compensation that the
Company may grant from time to time, is referred to in this Agreement as "Base
Compensation.").
(b) INCENTIVE BONUSES. The Employee shall be eligible to be
considered for an annual incentive bonus with a target amount of $200,000 (two
hundred thousand dollars). Such bonus (if any) shall be awarded based on
objective or subjective criteria established in advance by the Company's Board
of Directors (the "Board") or its Compensation Committee. The determinations of
the Board or such Committee with respect to such bonus shall be final and
binding.
3. VACATION AND EMPLOYEE BENEFITS. During the term of his Employment,
the Employee shall be eligible for paid vacations in accordance with the
Company's standard policy applicable to all of its employees, as it may be
amended from time to time. During the term of his Employment, the Employee shall
be eligible to participate in any employee benefit plans maintained by the
Company for similarly situated employees, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan.
4. BUSINESS EXPENSES. During the term of his Employment, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies. Any single expenditure in excess of
$5,000 shall require the prior approval of the Company's Chief Executive Officer
or Chief Financial Officer.
5. TERM OF EMPLOYMENT.
(a) BASIC RULE. The Company agrees to continue the Employee's
Employment, and the Employee agrees to remain in Employment with the Company,
from the Effective Time until the earlier of:
(i) The close of the applicable Initial Term or
Renewal Period, as determined under Subsection (b) below; or
(ii) The date when the Employee's Employment
terminates pursuant to Subsection (c) below.
(b) INITIAL TERM AND RENEWAL PERIODS. The initial term of this
Agreement shall end on January 31, 2001 (the "Initial Term"). Thereafter this
Agreement shall
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<PAGE> 3
automatically be renewed for successive 12-month periods (the "Renewal
Periods"), unless either party has given the other party written notice of
non-renewal not less than 90 days prior to the close of the Initial Term or
Renewal Period then in effect.
(c) EARLY TERMINATION. The Employee may terminate his
Employment at any time and for any reason (or no reason) by giving the Company
30 days' advance notice in writing. The Company may terminate the Employee's
Employment at any time and for any reason (or no reason), and with or without
Cause, by giving the Employee 30 days' advance notice in writing. The Company
may also terminate the Employee's active Employment due to Permanent Disability
by giving the Employee notice in writing. For all purposes under this Agreement,
"Permanent Disability" shall mean that the Employee, at the time notice is
given, has failed to perform his duties under this Agreement for 60 or more
consecutive days or for 90 or more days during any 12-month period as the result
of his incapacity due to physical or mental injury, disability or illness. The
Employee's Employment shall terminate automatically in the event of his death.
(d) EMPLOYMENT AT WILL. The Employee's Employment with the
Company shall be "at will." Any contrary representations which may have been
made to the Employee shall be superseded by this Agreement. This Agreement shall
constitute the full and complete agreement between the Employee and the Company
on the "at will" nature of the Employee's Employment, which may only be changed
in an express written agreement signed by the Employee and a duly authorized
officer of the Company.
(e) RIGHTS AND OBLIGATIONS UPON TERMINATION. Except as
expressly provided in Section 6, upon the termination of the Employee's
Employment pursuant to this Section 5, the Employee shall only be entitled to
the compensation, benefits and reimbursements described in Sections 2, 3 and 4
for the period preceding the effective date of the termination. No incentive
bonus under Section 2(b) shall be payable for the year in which the Employee's
Employment terminates, unless the applicable bonus program expressly provides
for the payment of a prorated bonus for such year. The payments under this
Agreement shall fully discharge all responsibilities of the Company to the
Employee. The termination of this Agreement shall not limit or otherwise affect
the Employee's obligations under Section 7.
6. TERMINATION BENEFITS.
(a) GENERAL RELEASE. Any other provision of this Agreement
notwithstanding, Subsections (b) and (c) below shall not apply unless the
Employee (i) has executed a general release (in a form prescribed by the
Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company and (ii) has agreed not to
prosecute any legal action or other proceeding based upon any of such claims.
(b) SEVERANCE PAY. The Company shall pay the Employee his Base
Compensation for a 12-month period following the effective date of the
termination of his Employment (the "Continuation Period") if:
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<PAGE> 4
(i) The Company terminates the Employee's Employment
under Section 5(c) for any reason other than Cause or Permanent
Disability; or
(ii) The Company was subject to a Change in Control
and, within 12 months thereafter, the Employee resigns for Good Reason.
Base Compensation under this Subsection (b) shall be paid at the rate in effect
at the time of the termination of Employment and in accordance with the
Company's standard payroll procedures.
(c) EMPLOYEE BENEFITS. If Subsection (b) above applies, the
Company shall continue the coverage of the Employee and his dependents (if
applicable) under the employee benefit plans described in Section 3 during the
Continuation Period. To the extent that such plans or the insurance contracts or
provider agreements associated with such plans do not permit the extension of
the Employee's coverage following the termination of his active employment, the
Company shall pay the Employee cash in an amount equal to the cost to the
Company of the coverage that cannot be provided. The cash payments shall be made
in accordance with Subsection (b) above.
(d) COBRA. If Subsection (b) above applies, and if the
Employee elects to continue his health insurance coverage under the Consolidated
Omnibus Budget Reconciliation Act ("COBRA") following the termination of his
Employment, then the date of the "qualifying event" for purposes of COBRA shall
be the Employee's last day of active employment.
(e) DEFINITION OF "CAUSE." For all purposes under this
Agreement, "Cause" shall mean:
(i) The Employee's failure to perform in a
satisfactory fashion one or more reasonable and lawful duties assigned
to the Employee by the Company under this Agreement, if such failure
continues for 15 days or more after the Company has given the Employee
written notice describing such failure and advising him of the
consequences of such failure under this Agreement; provided that such
notice shall be required only with respect to the first such failure;
(ii) The Employee's misconduct relating to the
Company's affairs, if such misconduct continues for 15 days or more
after the Company has given the Employee written notice describing such
misconduct and advising him of the consequences of such misconduct
under this Agreement; provided that such notice shall be required only
with respect to the first occurrence of such misconduct;
(iii) The Employee's conviction of, or a plea of
"guilty" or "no contest" to, a felony under the laws of the United
States or any state thereof;
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<PAGE> 5
(iv) The Employee's failure or refusal to carry out
the reasonable directives of the Company, if such failure continues for
three days or more after the Company has given the Employee written
notice describing such failure and advising him of the consequences of
such failure under this Agreement; provided that such notice shall be
required only with respect to the first such failure;
(v) Any breach of this Agreement, the Proprietary
Information and Inventions Agreement between the Employee and the
Company, or any other agreement between the Employee and the Company;
(vi) Threats or acts of violence directed at any
present, former or prospective employee, independent contractor,
vendor, customer or business partner of the Company; or
(vii) Fraud or embezzlement involving the assets of
the Company or its affiliates, customers or suppliers.
The foregoing shall not be deemed an exclusive list of all acts or omissions
that the Company may consider as grounds for the termination of the Employee's
Employment without Cause.
(f) DEFINITION OF "CHANGE IN CONTROL." For all purposes under
this Agreement, "Change in Control" shall mean:
(i) The consummation of a merger or consolidation of
the Company with or into another entity or any other corporate
reorganization, if persons who were not stockholders of the Company
immediately prior to such transaction own immediately after such
transaction 50% or more of the voting power of the outstanding
securities of each of (A) the continuing or surviving entity and (B)
any direct or indirect parent corporation of such continuing or
surviving entity;
(ii) The sale, transfer or other disposition of all
or substantially all of the Company's assets, if persons who were not
stockholders of the Company immediately prior to such transaction own
immediately after such transaction 50% or more of the voting power of
the outstanding securities of each of (A) the continuing or surviving
entity and (B) any direct or indirect parent corporation of such
continuing or surviving entity;
(iii) A change in the composition of the Board, as a
result of which fewer than a majority of the incumbent directors are
directors who either (A) had been directors of the Company on the date
24 months prior to the date of the event that may constitute a Change
in Control (the "original directors") or (B) were elected, or nominated
for election, to the Board with the affirmative votes of at least a
majority of the aggregate of the original directors who were still
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<PAGE> 6
in office at the time of the election or nomination and the directors
whose election or nomination was previously so approved;
(iv) Any transaction as a result of which any person
is the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
directly or indirectly, of securities of the Company representing more
than 50% of the total voting power represented by the Company's then
outstanding voting securities. For purposes of this Paragraph (iv), the
term "person" shall have the same meaning as when used in sections
13(d) and 14(d) of the Exchange Act but shall exclude (A) a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or of a parent or subsidiary of the Company and (B) a
corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the
common stock of the Company; or
(v) Any change in control required to be reported by
Item 1 of Form 8-K of the Securities and Exchange Commission or by Item
6(e) of Schedule 14A set forth in Rule 14a-101 under the Exchange Act
(or by any successor of either).
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(g) DEFINITION OF "GOOD REASON." For all purposes under this
Agreement, "Good Reason" shall mean:
(i) A significant diminution in the nature or scope
of the Employee's authority, duties or responsibilities in effect
immediately prior to the Change in Control;
(ii) Any reduction in the rate of the Employee's Base
Compensation in effect immediately prior to the Change in Control or a
reduction of 25% or more in the value of the Employee's aggregate
compensation and benefits in effect immediately prior to the Change in
Control;
(iii) The relocation of the Employee's principal
place of employment to a site more than 25 miles removed from his
principal place of employment immediately prior to the Change in
Control; or
(iv) An increase of 25% or more in the average amount
of time per month that the Employee is required to be away from his
principal place of employment, relative to the average amount of time
per month that the Employee was required to be away from his principal
place of employment immediately prior to the Change in Control.
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<PAGE> 7
7. EMPLOYEE'S COVENANTS.
(a) NON-SOLICITATION. During the period commencing on the date
of this Agreement and continuing until the second anniversary of the date when
the Employee's Employment terminated for any reason, the Employee shall not
directly or indirectly, personally or through others, solicit or attempt to
solicit (on the Employee's own behalf or on behalf of any other person or
entity) either (i) the employment of any employee of the Company or any of the
Company's affiliates or (ii) the business of any customer of the Company, or of
any of the Company's affiliates, with whom the Employee had contact during his
Employment. During such period, the Employee shall not encourage or induce, or
take any action that has the effect of encouraging or inducing, any employee of
the Company or any of the Company's affiliates to terminate his or her
employment.
(b) NON-DISCLOSURE. The Employee has entered into a
Proprietary Information and Inventions Agreement with the Company, which is
incorporated herein by reference.
(c) NON-COMPETITION. If Section 6(b) applies, the Employee
during the Continuation Period shall not, directly or indirectly (other than on
behalf of the Company or with the Company's prior written consent), engage in a
Competitive Business Activity in any of the locations listed in Schedule A
attached hereto. The term "Competitive Business Activity" shall mean:
(i) Engaging in, or managing or directing persons
engaged in, any business in which the Company or any of the Company's
affiliates is engaged at the time of the termination of the Employee's
Employment, whether independently or as an employee, agent, consultant,
advisor, independent contractor, proprietor, partner, officer, director
or otherwise;
(ii) Acquiring or having an ownership interest in any
entity that derives more than 15% of its gross revenues from any
business in which the Company or any of the Company's affiliates is
engaged at the time of the termination of the Employee's Employment,
except for ownership of 1% or less of any entity whose securities are
freely tradable on an established market; or
(iii) Participating in the financing, operation,
management or control of any firm, partnership, corporation, entity or
business described in Paragraph (ii) above.
(d) NON-DISPARAGEMENT. During the period commencing on the
date of this Agreement and continuing until the second anniversary of the date
when the Employee's Employment terminated for any reason, the Employee shall not
directly or indirectly, personally or through others, disparage the Company or
its management.
(e) INJUNCTIVE RELIEF. The Employee acknowledges and agrees
that his failure to perform any of his covenants in this Section 7 would cause
irreparable injury to the
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<PAGE> 8
Company and cause damages to the Company that would be difficult or impossible
to ascertain or quantify. Accordingly, without limiting any other remedies that
may be available with respect to any breach of this Agreement, the Employee
consents to the entry of an injunction to restrain any breach of this Section 7.
(f) SURVIVAL. The covenants in this Section 7 shall survive
any termination or expiration of this Agreement and the termination of the
Employee's Employment with the Company for any reason.
8. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) EMPLOYEE'S SUCCESSORS. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
9. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated
by this Agreement shall be in writing and shall be deemed to have been duly
given when (i) personally delivered, (ii) delivered to the U.S. Postal Service
for delivery by registered or certified mail or (iii) delivered to a comparable
private service offering guaranteed deliveries in the ordinary course of its
business. Notice under clauses (ii) and (iii) shall be valid only if delivery
charges have been prepaid and a return receipt will be furnished. In the case of
the Employee, notice under clauses (ii) and (iii) shall be addressed to him at
the home address which he most recently communicated to the Company in writing.
In the case of the Company, notice under clauses (ii) and (iii) shall be
addressed to its corporate headquarters and directed to the attention of its
Secretary.
(b) MODIFICATIONS AND WAIVERS. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. This Agreement supersedes any prior
employment agreement between the Employee and the Company. No other agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with
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respect to the subject matter hereof. This Agreement and the Proprietary
Information and Inventions Agreement between the Employee and the Company
contain the entire understanding of the parties with respect to the subject
matter hereof.
(d) WITHHOLDING TAXES. All payments made under this Agreement
shall be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) CHOICE OF LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California (except their provisions governing the choice of law).
(f) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) ARBITRATION. Subject to Section 7(d), any controversy or
claim arising out of or relating to this Agreement or the breach thereof, or the
Employee's Employment or the termination thereof, shall be settled in Santa
Clara County, California, by arbitration in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association. The decision of the arbitrator shall be final and binding on the
parties, and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. The parties hereby agree that the
arbitrator shall be empowered to enter an equitable decree mandating specific
enforcement of the terms of this Agreement. The Company and the Employee shall
share equally all fees and expenses of the arbitrator; provided, however, that
the Company or the Employee, as the case may be, shall bear all fees and
expenses of the arbitrator and all of the legal fees and out-of-pocket expenses
of the other party if the arbitrator determines that the claim or position of
the Company or the Employee, as the case may be, was without reasonable
foundation. The Employee hereby consents to personal jurisdiction of the state
and federal courts located in the State of California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
(h) NO ASSIGNMENT. This Agreement and all rights and
obligations of the Employee hereunder are personal to the Employee and may not
be transferred or assigned by the Employee at any time. The Company may assign
its rights under this Agreement to any entity that assumes the Company's
obligations hereunder in connection with any sale or transfer of all or a
substantial portion of the Company's assets to such entity.
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(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
HYPERION SOLUTIONS CORPORATION
By /s/ Stephen V. Imbler
---------------------------------------
Title: Sr. Vice President and CFO
-----------------------------------
Employee:
/s/ William B. Binch
------------------------------------------
William B. Binch
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SCHEDULE A
Alabama New York
Alaska North Carolina
Arizona North Dakota
Arkansas Ohio
California Oklahoma
Colorado Oregon
Connecticut Pennsylvania
Delaware Rhode Island
Florida South Carolina
Georgia South Dakota
Hawaii Tennessee
Idaho Texas
Illinois Utah
Indiana Vermont
Iowa Virginia
Kansas Washington
Kentucky West Virginia
Louisiana Wisconsin
Maine Wyoming
Maryland Australia
Massachusetts Brazil
Michigan Canada
Minnesota England
Mississippi France
Missouri Germany
Montana Hong Kong
Nebraska Israel
Nevada Japan
New Hampshire Mexico
New Jersey Netherlands
New Mexico Singapore
United Kingdom
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on August 24, 1998, by and between
WILLIAM CLARK (the "Employee") and HYPERION SOLUTIONS CORPORATION, a Delaware
corporation (the "Company").
1. EFFECTIVE DATE.
This Agreement shall be effective at the effective time (the
"Effective Time") of the merger (the "Merger") contemplated by the Agreement and
Plan of Merger dated May 25, 1998, among Hyperion Software Corporation
("Hyperion"), the Company and HSC Merger Corp. This Agreement shall be null and
void if the Merger does not occur.
2. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITION. For the term of his employment under this
Agreement ("Employment"), the Company agrees to employ the Employee in the
position of Vice President-Product Marketing or in such other vice president
position as the Company subsequently may assign to the Employee. The Employee
shall report to the Company's Senior Vice President of Marketing or to such
other person as the Company subsequently may determine.
(b) OBLIGATIONS TO THE COMPANY. During the term of his
Employment, the Employee shall devote his full business efforts and time to the
Company. During the term of his Employment, without the prior written approval
of the Company's Senior Vice President of Marketing, the Employee shall not
render services in any capacity to any other person or entity and shall not act
as a sole proprietor or partner of any other person or entity or as a
shareholder owning more than five percent of the stock of any other corporation.
The Employee shall comply with the Company's policies and rules, as they may be
in effect from time to time during the term of his Employment.
(c) NO CONFLICTING OBLIGATIONS. The Employee represents and
warrants to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Employee represents and warrants that he will not use or
disclose, in connection with his employment by the Company, any trade secrets or
other proprietary information or intellectual property in which he or any other
person has any right, title or interest and that his employment by the Company
as contemplated by this Agreement will not infringe or violate the rights of any
other person. The Employee represents and warrants to the Company that he has
returned all property and confidential information belonging to any prior
employer.
3. CASH AND INCENTIVE COMPENSATION.
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(a) SALARY. The Company shall pay the Employee as compensation
for his services a base salary at a gross annual rate of not less than $190,000.
Such salary shall be payable in accordance with the Company's standard payroll
procedures. (The annual compensation specified in this Subsection (a), together
with any increases in such compensation that the Company may grant from time to
time, is referred to in this Agreement as "Base Compensation.") The rate of Base
Compensation specified in this Subsection (a) shall be effective as of July 1,
1998. Within five business days after the Effective Time, the Company shall pay
the Employee a lump sum equal to the difference between the Base Compensation
specified in this Subsection (a) and the base salary actually received by the
Employee for the period from July 1, 1998, to the Effective Time from Hyperion
Software Operations Inc.
(b) INCENTIVE BONUSES. The Employee shall be eligible to be
considered for an annual incentive bonus with a target amount equal to 40% of
his Base Compensation. Such bonus (if any) shall be awarded based on objective
or subjective criteria established in advance by the Company's Board of
Directors (the "Board"). The determinations of the Board with respect to such
bonus shall be final and binding. The foregoing notwithstanding, the incentive
bonus for the period from July 1, 1998, to June 30, 1999, shall in no event be
less than $76,000.
(c) RELOCATION EXPENSES. The Company shall pay for up to five
round trips for the Employee and up to three round trips for the Employee's
family between the Stamford area and the Silicon Valley area to facilitate the
Employee's search for a home. The Company shall reimburse the reasonable
expenses, not to exceed $25,000, that the Employee incurs for the customary
closing costs in connection with the sale of his home in the Stamford area and
in moving himself, his family and his household from the Stamford area to the
Silicon Valley area. The Company shall reimburse the Employee for customary
commissions paid in connection with the sale of his home in the Stamford area in
an amount up to six percent (6%) of the sale price of his home and for the
reasonable and customary closing costs in connection with the purchase of a home
in the Silicon Valley area, including mortgage points not to exceed three points
but excluding prepaid interest, taxes or insurance and similar prepaid items.
The Company shall reimburse the Employee for one month's reasonable and
customary temporary living expenses up to $4,500. To the extent that the
Company's payments under this Subsection (c) are includible in the Employee's
taxable income, the Company shall increase such payments by an additional amount
calculated to ensure that the Employee's net proceeds, after paying federal and
state income taxes on such payments and such additional amount, are equal to the
Employee's expenses described in this Subsection (c).
(d) STOCK OPTIONS. The Employee acknowledges that Hyperion has
granted him options to purchase 20,000 shares of its Common Stock, contingent
upon the consummation of the Merger. Pursuant to the Merger, such options will
be converted into 19,000 options to purchase shares of the Common Stock of the
Company.
4. HOME LOAN.
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(a) AMOUNT AND TERMS OF LOAN. Upon the Employee's request at any
time after the Effective Time, the Company shall extend a loan to the Employee
in an amount not to exceed $200,000 (the "Loan"). The Loan shall not bear
interest. The term of the Loan shall be 10 years, except that the Loan shall be
payable in full in the event that the Employee resigns his Employment or his
Employment is terminated by the Company for Cause (as defined in Subsection (d)
below). Subject to Subsection 4(b) below, the Loan shall be forgiven, in part or
in full, in the event that:
(i) The Company is subject to a Change in Control (as
defined in Subsection (e) below), not including the Merger, within five
years after the Effective Time; and
(ii) The Employee is subject to an Involuntary
Termination (as defined in Subsection (f) below) within 12 months after
such Change in Control; or
(iii) The Employee is terminated without Cause (as defined
in Subsection (d) below) within five years after the Effective Time.
To the extent that the forgiveness of the Loan, in part or in full, under this
Subsection (a) results in taxable income to the Employee, the Company shall pay
to the Employee an additional amount as is necessary (after taking into account
all federal, state and local income taxes payable by the Employee as a result of
the forgiveness of the Loan, in part or in full) to place the Employee in the
same after-tax position (including federal, state and local taxes) as the
Employee would have been in had no such tax been paid or incurred.
No payments shall be required under the Loan during the first five years of its
term. The Loan shall be fully repaid in 60 equal monthly installments during the
sixth through tenth years of its term. Loan payments shall be due on the first
day of each month at the Company's principal executive offices. The Loan shall
be secured by a deed of trust on the Employee's principal residence. Such deed
of trust shall be subordinated only to a first deed of trust. The Employee
hereby represents that he will itemize deductions for federal and state income
tax purposes during the term of the Loan.
(b) LOAN FORGIVENESS. The Loan shall be forgiven, in part or
in full, pursuant to Subsections 4(a)(i) and (ii) or Subsection 4(a)(iii) above
only if the sum of the following amounts is less than $200,000:
(i) The after-tax amount (less applicable taxes) equal
to the fair market value of the Employee's principal residence less the
Employee's basis in such residence (as calculated for tax purposes); plus
(ii) The Employee's aggregate after-tax gain (less
applicable taxes) from the stock options described in Section 3(d)
(together, the "After-Tax Gain").
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The Loan shall be forgiven as to an amount equal to the excess of the
outstanding balance of the Loan (on the date of termination under Subsections
4(a)(i) and (ii) or Subsection 4(a)(iii) above) over the After-Tax Gain,
provided that in no event shall the Loan be forgiven as to an amount that is
greater than the outstanding balance of the Loan at the relevant termination
date. For example, if the sum of Subsections 4(b)(i) and (ii) is equal to
$150,000 and the outstanding Loan balance is equal to $200,000, then the Loan
shall be forgiven as to $50,000 ($200,000-150,000).
The fair market value of the Employee's residence shall be determined by a
qualified professional real estate appraiser satisfactory to the Employee and
the Company. In the event that the Employee sells his principal residence and
purchases another principal residence or in the event that the Employee improves
his principal residence, his basis shall be calculated pursuant to the rules
that would apply to the calculation of the taxable gain from the sale of such
residence. In the event that the fair market value of the Employee's residence
is less than the Employee's basis in such residence, calculated according to the
procedure above, then such depreciation shall be considered a negative amount
for Subsection 4(b)(i) to be added to the amount in Subsection 4(b)(ii). The
Employee's aggregate gain from the stock options described in Section 3(d) shall
be deemed to be equal to the excess of the market value of the underlying shares
over the exercise price, measured on the date when such excess is greatest
during the Measurement Period for each vested installment of options. The
"Measurement Period" shall commence on the earliest date when a particular
installment of such options is vested and shall end on the date of the
Employee's termination pursuant to Subsections 4(a)(i) and (ii) or 4(a)(iii), as
applicable.
(c) RENEGOTIATION. The Loan shall be renegotiated in good faith
within a reasonable time following the fifth anniversary of the Effective Time
if, as of such anniversary, the sum of the following amounts is less than
$200,000:
(i) The after-tax amount (less applicable taxes) equal
to the fair market value of the Employee's principal residence less the
Employee's basis in such residence (as calculated for tax purposes); plus
(ii) The Employee's aggregate after-tax gain (less
applicable taxes) from the stock options described in Section 3(d)
(together, the "After-Tax Gain").
The Loan shall be renegotiated as to an amount equal to the excess of the
outstanding balance of the Loan (on the fifth anniversary of the Effective Time)
over the After-Tax Gain, provided that in no event shall the Loan be
renegotiated as to an amount that is greater than the outstanding balance of the
Loan at the relevant anniversary date. For example, if the sum of Subsections
4(c)(i) and (ii) is equal to $150,000 and the outstanding Loan balance is equal
to $200,000, then the Loan shall be renegotiated as to $50,000
($200,000-150,000).
The fair market value of the Employee's residence shall be determined by a
qualified professional real estate appraiser satisfactory to the Employee and
the Company. In the event that the Employee sells his principal residence and
purchases another principal residence or in the event that the Employee improves
his principal residence, his basis shall be calculated pursuant to the rules
that
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would apply to the calculation of the taxable gain from the sale of such
residence. In the event that the fair market value of the Employee's residence
is less than the Employee's basis in such residence, calculated according to the
procedure above, then such depreciation shall be considered a negative amount
for Subsection 4(c)(i) to be added to the amount in Subsection 4(c)(ii). The
Employee's aggregate gain from the stock options described in Section 3(d) shall
be deemed to be equal to the excess of the market value of the underlying shares
over the exercise price, measured on the date when such excess is greatest
during the Measurement Period for each vested installment of options. The
"Measurement Period" shall commence on the earliest date when a particular
installment of such options is vested and shall end on the fifth anniversary of
the Effective Time.
(d) DEFINITION OF "CAUSE." For all purposes under this Agreement,
"Cause" shall mean:
(i) Unauthorized use or disclosure of the confidential
information or trade secrets of the Company;
(ii) Any breach of this Agreement, the Proprietary
Information and Inventions Agreement between the Employee and the Company,
or any other agreement between the Employee and the Company;
(iii) Conviction of, or a plea of "guilty" or "no contest"
to, a felony under the laws of the United States or any state thereof;
(iv) Threats or acts of violence directed at any present,
former or prospective employee, independent contractor, vendor, customer or
business partner of the Company;
(v) The sale, possession or use of illegal drugs on the
premises of the Company;
(vi) Misappropriation of the assets of the Company or
other acts of dishonesty;
(vii) Illegal or unethical business practices;
(viii) Misconduct or gross negligence in the performance of
duties assigned to the Employee under this Agreement;
(ix) Failure to perform reasonable duties assigned to the
Employee under this Agreement; or
(x) Failure to comply with the Company's policies or
rules, as they may be in effect from time to time during the term of the
Employee's Employment.
The foregoing shall not be deemed an exclusive list of all acts or omissions
that the Company may consider as grounds for the termination of the Employee's
Employment.
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(e) DEFINITION OF "CHANGE IN CONTROL." For all purposes under
this Agreement, "Change in Control" shall mean:
(i) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization,
if more than 50% of the combined voting power of the continuing or
surviving entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger,
consolidation or other reorganization;
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets;
(iii) A change in the composition of the Board, as a
result of which fewer than 50% of the incumbent directors are directors who
either (A) had been directors of the Company on the date 36 months prior to
the date of the event that may constitute a Change in Control (the
"original directors") or (B) were elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the
aggregate of the original directors who were still in office at the time of
the election or nomination and the directors whose election or nomination
was previously so approved; or
(iv) Any transaction as a result of which any person is
the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of securities of
the Company representing at least 50% of the total voting power represented
by the Company's then outstanding voting securities. For purposes of this
Paragraph (iv), the term "person" shall have the same meaning as when used
in sections 13(d) and 14(d) of such Act but shall exclude (A) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or of a parent or subsidiary of the Company and (B) a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the common stock
of the Company.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(f) DEFINITION OF "INVOLUNTARY TERMINATION." For all purposes
under this Agreement, "Involuntary Termination" shall mean the termination of
the Employee's Employment by reason of:
(i) The involuntary discharge of the Employee by the
Company for reasons other than Cause; or
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(ii) The voluntary resignation of the Employee following
a change in his position with the Company that materially reduces his level
of authority or responsibility or a material demotion in his title and
position.
5. VACATION AND EMPLOYEE BENEFITS. During the term of his
Employment, the Employee shall be eligible for 20 days of paid vacation per
fiscal year subject to the provisions of the Company's standard policy, as it
may be amended from time to time. During the term of his Employment, the
Employee shall be eligible to participate in any employee benefit plans
maintained by the Company for similarly situated employees, subject in each case
to the generally applicable terms and conditions of the plan in question and to
the determinations of any person or committee administering such plan.
6. BUSINESS EXPENSES. During the term of his Employment, the
Employee shall be authorized to incur necessary and reasonable travel,
entertainment and other business expenses in connection with his duties
hereunder. The Company shall reimburse the Employee for such expenses upon
presentation of an itemized account and appropriate supporting documentation,
all in accordance with the Company's generally applicable policies.
7. TERM OF EMPLOYMENT.
(a) BASIC RULE. The Company agrees to continue the Employee's
Employment, and the Employee agrees to remain in Employment with the Company,
from the Effective Time until the date when the Employee's Employment terminates
pursuant to Subsection (b) or (c) below. The Employee's Employment with the
Company shall be "at will." Any contrary representations which may have been
made to the Employee shall be superseded by this Agreement. This Agreement shall
constitute the full and complete agreement between the Employee and the Company
on the "at will" nature of the Employee's Employment, which may only be changed
in an express written agreement signed by the Employee and a duly authorized
officer of the Company.
(b) TERMINATION. The Company may terminate the Employee's
Employment at any time and for any reason (or no reason), and with or without
Cause, by giving the Employee notice in writing. The Employee may terminate his
Employment by giving the Company 14 days' advance notice in writing. The
Employee's Employment shall terminate automatically in the event of his death.
(c) PERMANENT DISABILITY. The Company may terminate the
Employee's active Employment due to Permanent Disability by giving the Employee
notice in writing. For all purposes under this Agreement, "Permanent Disability"
shall mean that the Employee, at the time notice is given, has failed to perform
his duties under this Agreement for not less than 60 consecutive days, or not
less than 90 days in the aggregate during any 12-month period, as the result of
his incapacity due to physical or mental injury, disability or illness.
(d) RIGHTS UPON TERMINATION. Except as expressly provided in
Section 8, upon the termination of the Employee's Employment pursuant to this
Section 7, the Employee shall only be entitled to the compensation, benefits and
reimbursements described in
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Sections 3, 5 and 6 for the period preceding the effective date of the
termination. The payments under this Agreement shall fully discharge all
responsibilities of the Company to the Employee.
(e) TERMINATION OF AGREEMENT. This Agreement shall terminate
when all obligations of the parties hereunder have been satisfied. The
termination of this Agreement shall not limit or otherwise affect any of the
Employee's obligations with respect to the loan described in Section 4 or the
Employee's obligations under Section 9.
8. TERMINATION BENEFITS.
(a) GENERAL RELEASE. Any other provision of this Agreement
notwithstanding, Subsections (b) and (c) below shall not apply unless the
Employee (i) has executed a general release (in a form prescribed by the
Company) of all known and unknown claims that he may then have against the
Company or persons affiliated with the Company and (ii) has agreed not to
prosecute any legal action or other proceeding based upon any of such claims.
(b) SEVERANCE PAY. If, the Company terminates the Employee's
Employment for any reason other than Cause or Permanent Disability, then the
Company shall pay the Employee his Base Compensation less any compensation
received from another employer or as a self-employed consultant or similar
position for a period following the termination of his Employment (the
"Continuation Period"). The Continuation Period shall be equal to twelve (12)
months. Such Base Compensation shall be paid at the rate in effect at the time
of the termination of Employment and in accordance with the Company's standard
payroll procedures.
(c) HEALTH INSURANCE. If Subsection (b) above applies, and if
the Employee elects to continue his health insurance coverage under the
Consolidated Omnibus Budget Reconciliation Act ("COBRA") following the
termination of his Employment, then the Company shall pay the Employee's monthly
premium under COBRA until the close of the Continuation Period.
9. EMPLOYEE'S COVENANTS.
(a) NON-SOLICITATION. During the period commencing on the date of
this Agreement and continuing until the second anniversary of the date when the
Employee's Employment terminated for any reason, the Employee shall not directly
or indirectly, personally or through others, solicit or attempt to solicit (on
the Employee's own behalf or on behalf of any other person or entity) either (i)
the employment of any employee of the Company or any of the Company's affiliates
or (ii) the business of any customer of the Company or any of the Company's
affiliates with whom the Employee had contact during his Employment. During such
period, the Employee shall not encourage or induce, or take any action that has
the effect of encouraging or inducing, any employee of the Company or any of the
Company's affiliates to terminate his or her employment.
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(b) NON-DISCLOSURE. The Employee has entered into a Proprietary
Information and Inventions Agreement with the Company, which is incorporated
herein by reference.
(c) NON-COMPETITION. If Section 8(b) applies, the Employee
during the Continuation Period shall not, directly or indirectly (other than on
behalf of the Company or with the Company's prior written consent), engage in a
Competitive Business Activity. The term "Competitive Business Activity" shall
mean:
(i) Engaging in, or managing or directing persons
engaged in, any business in which the Company or any of the Company's
affiliates is engaged at the time of the termination of the Employee's
Employment, whether independently or as an employee, agent, consultant,
advisor, independent contractor, proprietor, partner, officer, director or
otherwise;
(ii) Acquiring or having an ownership interest in any
entity that derives more than 15% of its gross revenues from any business
in which the Company or any of the Company s affiliates is engaged at the
time of the termination of the Employee's Employment, except for ownership
of one percent or less of any entity whose securities are freely tradable
on an established market; or
(iii) Participating in the financing, operation,
management or control of any firm, partnership, corporation, entity or
business described in Paragraph (ii) above.
10. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) EMPLOYEE'S SUCCESSORS. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
11. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered mail, return receipt
requested and postage prepaid. In the case of the Employee, mailed
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notices shall be addressed to him at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
(b) MODIFICATIONS AND WAIVERS. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. This Agreement supersedes any prior
employment agreement between the Employee and the Company, Hyperion or a
subsidiary of Hyperion. No other agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof. This Agreement and the Proprietary
Information and Inventions Agreement contain the entire understanding of the
parties with respect to the subject matter hereof.
(d) WITHHOLDING TAXES. All payments made under this Agreement
shall be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) CHOICE OF LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California (except their provisions governing the choice of law).
(f) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, or the Employee's Employment
or the termination thereof, shall be settled in Santa Clara County, California,
by arbitration in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association. The decision of the
arbitrator shall be final and binding on the parties, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The parties hereby agree that the arbitrator shall be empowered to
enter an equitable decree mandating specific enforcement of the terms of this
Agreement. The Company and the Employee shall share equally all fees and
expenses of the arbitrator; provided, however, that the Company or the Employee,
as the case may be, shall bear all fees and expenses of the arbitrator and all
of the legal fees and out-of-pocket expenses of the other party if the
arbitrator determines that the claim or position of the Company or the Employee,
as the case may be, was without reasonable foundation. The Employee hereby
consents to personal jurisdiction of the state and federal courts located in the
State of California for any action or proceeding arising from or relating to
this Agreement or relating to any arbitration in which the parties are
participants.
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(h) NO ASSIGNMENT. This Agreement and all rights and obligations
of the Employee hereunder are personal to the Employee and may not be
transferred or assigned by the Employee at any time. The Company may assign its
rights under this Agreement to any entity that assumes the Company's obligations
hereunder in connection with any sale or transfer of all or a substantial
portion of the Company's assets to such entity.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
--------------------------------------
HYPERION SOLUTIONS CORPORATION
By /s/ Stephen V. Imbler
-----------------------------------
Title: Sr. Vice President and CFO
--------------------------------
Employee:
/s/ William Clark
--------------------------------------
William Clark
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EXHIBIT 10.4
AMENDED & RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Agreement dated as of the 1st day of January, 1999
amends and restates an EMPLOYMENT AGREEMENT (the "Original Employment
Agreement") made as of the 1st day of November, 1997, among JAMES A. PERAKIS of
Wilton, Connecticut, (the "Employee") and Hyperion Software Operations Inc., a
Delaware corporation with offices in Stamford, Connecticut (the "Corporation")
and Hyperion Software Corporation, a Delaware corporation (as amended and
restated, the "Amended Agreement").
WHEREAS, Hyperion Solutions Corporation, a Delaware corporation,
(hereinafter referred to as "Parent") has become the beneficial owner of all the
issued and outstanding shares of Hyperion Software Corporation ("HSC");
WHEREAS, the Corporation, HSC and Parent desire to amend and restate
the terms and conditions of the employment of the Employee effective January 1,
1999, and the Employee desires that the terms and conditions of his employment
with the Corporation be amended and restated effective January 1, 1999, on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and promises of
the parties hereto, the Corporation, HSC, Parent and Employee agree as follows:
1. Employment: Effective January 1, 1999, the Employee shall serve as a
Senior Advisor to the President of the Corporation, performing such executive
functions appropriate to that position as determined by the Corporation on the
terms and conditions hereinafter stated.
2. Term of Employment: Subject to Section 6 below, the term of this
Amended Agreement and the Employee's employment by the Corporation pursuant
hereto shall begin as of January 1, 1999 and shall continue in full force and
effect through September 30, 1999.
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Notwithstanding the above, however, from and after September 30, 1999, except in
the event this Amended Agreement is terminated for cause pursuant to Section
6(c), the Employee, his spouse and each of his children (in each case until such
child reaches age twenty-one (21)) shall be entitled to receive the fringe
benefits described in Section 4(b) hereof or, at the discretion of the
Corporation, a similar alternative, continuing until the Employee reaches, or in
the event of the Employee's prior death, until the Employee otherwise would have
reached, the age of sixty-five (65).
3. Compensation:
(a) The Corporation shall pay the Employee a base salary
("Base Salary") during the term of his employment hereunder equal to $145,000
per annum, payable at the rate of six thousand, forty one dollars and
sixty-seven cents ($6,041.67) on the 15th and last day of each month. This Base
Salary may be increased in an amount to be determined by the Board of Directors
in its sole discretion, but may not be decreased from its then current level.
(b) As additional compensation, the Corporation, in the sole
discretion of the Board of Directors, shall pay to Employee an annual
performance bonus based upon objectives proposed by the President and approved
by the Board of Directors. The Employee's annual performance bonus for the term
hereof shall be targeted at fifty (50%) percent of the Employee's Base Salary
for such nine month period provided that the Corporation achieves all of the
goals relating to his annual performance bonus.
4. Fringe Benefits: During the term of this Amended Agreement and the
Employee's employment by the Corporation pursuant hereto:
(a) The Corporation shall provide the Employee with either all
benefits
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provided to its senior executives generally or to its employees generally, on
the same terms and conditions as applicable thereto, whichever is more favorable
to the Employee.
(b) The Corporation shall provide the Employee with basic
major medical and dental insurance for the Employee, his spouse and his children
(in each case until such child reaches the age of twenty-one (21)) which will be
at least equivalent to the Corporation's current medical and dental insurance
plans and in no event be less favorable than the more favorable of either the
medical and dental insurance, respectively, provided to the Corporation's senior
executives generally or its employees generally.
(c) The Employee is authorized to incur on behalf of the
Corporation reasonable expenses in connection with the business of the
Corporation. The Corporation will reimburse the Employee for all reasonable
expenses incurred in connection with the business of the Corporation upon the
presentation by the Employee, from time to time, of an itemized account of such
expenditures, which itemized account shall be in conformity with Section 274(d)
of the Internal Revenue Code of 1986, as amended. The Corporation hereby
authorizes the Employee to fly business or first class on any business flights
of over two hours and agrees to reimburse the Employee therefor.
(d) The Corporation shall provide the Employee with a term
insurance policy on the life of the Employee in the amount of four (4) times the
Employee's current Base Salary. The Employee will be the owner of said policy
and select the beneficiary thereof and the owner shall have the right to
transfer or change the ownership and/or beneficiary designation. Upon
termination of this Amended Agreement and/or termination of coverage, the then
owner shall have the option to assume the benefits (where such assumption is
permitted under the terms of the relevant policy and/or plan) and obligations
under such policy upon termination of this
3
<PAGE> 4
Amended Agreement and/or termination of coverage and thereafter the Corporation
shall not be required to make premium payments.
(e) The Corporation shall provide the Employee with a monthly
automobile allowance equal to $1,000.
(f) The Corporation shall continue to maintain its sponsorship
of the Employee's current disability insurance coverage.
(g) The Corporation shall provide Employee with and/or
reimburse Employee for his reasonable costs incurred in obtaining, technical
services and equipment and administrative services for an office at the
Employee's home. Employee shall be entitled to use the services of his present
administrative assistant provided at the Corporation's offices for so long as
practicable.
5. Duties and Extent of Services: Throughout the term of the Employee's
employment under this Amended Agreement, the Employee shall assume the position
of Senior Advisor to the President of the Corporation. The Corporation shall not
change the Employee's duties or title without the Employee's consent. The
Corporation recognizes and acknowledges that this is a part-time position and
that the Employee shall be required to devote no more than an average of ten
(10) business days per month to the affairs of the Corporation. Reflecting the
part-time nature of his employment hereunder, during the term of this Amended
Agreement, Employee may, subject to the terms of the covenant not to compete in
Section 8 hereof, be engaged in or concerned with other employment or
self-employment duties or pursuits, without the prior written consent of the
Corporation. Nothing herein nor in Section 8 hereof, shall prohibit Employee
from serving on the board of directors of a corporation, which at some time in
future competes with the Corporation or the Parent, provided that such
corporation, did not, at the time
4
<PAGE> 5
Employee joined that corporation's board of directors, compete with the Company
or the Parent or, to the best knowledge of Employee after due inquiry, intend to
compete with the Company or the Parent in the future.
6. Termination: This Amended Agreement and the Employee's employment
hereunder shall terminate (i) on September 30, 1999, or if first, (ii) upon the
occurrence of any of the following events, and upon any such termination the
Employee will have no right to severance pay or salary, bonus or benefit
continuation except as expressly provided in this Amended Agreement:
(a) The Employee's death.
(b) The termination of the Employee's employment hereunder by
the Corporation, at its option, to be exercised by written notice from the
Corporation to the Employee after the Employee's incapacity or inability to
further perform his services as contemplated herein for a period of six (6)
consecutive months due to the fact that his physical or mental health shall have
become impaired so as to make it impossible or impractical for him to perform
the duties and responsibilities contemplated for him hereunder as evidenced by
the written medical report of a doctor reasonably acceptable to the Corporation
and the Employee.
(c) The termination for cause (as hereinafter defined) of the
Employee's employment hereunder by Corporation, at its option, to be exercised
by written notice from Corporation to the Employee.
(d) At any time without cause and without notice. If the
Corporation terminates this Amended Agreement and the Employee's employment
without notice and without cause pursuant to this Section 6(d) for a reason not
specified in subparagraphs (a), (b), (c), and/or (f) of this Section 6, then:
(i) the Corporation shall provide to the Employee as severance pay, a
5
<PAGE> 6
total amount equal to (A) his Base Salary, payable in twelve (12) consecutive
monthly installments (without interest) beginning one (1) month after such
termination, plus (B) the fringe benefits described in Section 4(b) hereof, or
at the discretion of the Corporation, a similar alternative, commencing on the
effective date of the Employee's termination by the Corporation pursuant to this
Section 6(d) and continuing until the Employee reaches the age of sixty-five
(65) or, should he have died earlier, until the Employee otherwise would have
reached the age of sixty-five (65); and (ii) the option to purchase 150,000
shares of common stock, $.01 par value, of HSC granted to Employee under the
option agreement dated September 19, 1996 between Employee and HSC (the "Option
Agreement"), as converted into an option to purchase 142,500 shares of common
stock, $.001 par value, of Parent pursuant to the merger effected under the
Agreement and Plan of Merger dated May 25, 1998 among Arbor Software
Corporation, HSC and HSC Merger Corp. (the "Option"), shall become fully vested
and exercisable in its entirety.
(e) For purposes of paragraph 6(c) the term "cause" shall
include only the following:
(i) Employee's failure or refusal (even after notice of
termination is given by either party pursuant to this Amended Agreement) to
perform the services specified herein, or to carry out any reasonable and lawful
directions of the Board of Directors of the Corporation with respect to the
services to be rendered hereunder or the manner of rendering such services other
than by reason of his disability as described in Section 6(b) hereof; provided,
however, that (A) such failure or refusal is material, and (B) Employee is given
reasonable notice and explanation of each refusal or failure, and reasonable
opportunity to cure such refusal or failure, and no cure has been effected
within a reasonable time after notice;
(ii) Conviction of a felony which can reasonably be
expected to have a
6
<PAGE> 7
material adverse impact on the Corporation's business or reputation;
(iii) Fraud or embezzlement involving the assets of the
Corporation, its customers, suppliers or affiliates; or
(iv) Violation of the provisions of Sections 7, 8,
and/or 9 of this Amended Agreement by the Employee.
(f) (i) If there is a Change in Control of the Corporation (as
hereinafter defined) that occurs during the term of employment described in this
Amended Agreement but prior to the expiration or termination of this Amended
Agreement and, within twelve (12) months after the Change in Control, Employee
terminates his employment for Good Reason (as hereinafter defined), then the
Corporation shall provide to the Employee: (A) as severance pay a total amount
equal to twice the Employee's annual Base Salary at the time of the Change in
Control payable in twenty-four (24) equal consecutive installments in accordance
with the Corporation's normal payroll practices (without interest) beginning on
the first regularly scheduled payday after such termination (the period during
which employee receives severance pay hereinafter referred to as the "Severance
Period"), plus (B) the fringe benefits described in Section 4(b) hereof and
continuing until the Employee reaches the age of sixty-five (65) or, should he
have died earlier, until the Employee otherwise would have reached the age of
sixty-five (65). It is expressly understood that nothing in the foregoing will
prevent either party from taking such legal action as may be necessary to
enforce the terms of this Amended Agreement.
(ii) As used in this Amended Agreement, the following
terms have the meanings set below:
(A) "Affiliate" of a person means any person
directly or indirectly controlling, controlled by or under
common control with the first
7
<PAGE> 8
person.
(B) "Associate" has the meaning ascribed
thereto in Rule 12b-2 under the Exchange Act (as defined
below) as in effect on the date hereof.
(C) "Change in Control" means the
occurrence of any of the following events:
(I) Merger, Consolidation, Etc. The
Corporation or Parent is merged or consolidated or reorganized
into or with another corporation or other legal person, and as
a result of such merger, consolidation or reorganization less
than a majority of the combined voting power of the
then-outstanding securities of such surviving, resulting or
reorganized corporation or person immediately after such
transaction is held in the aggregate by the holders of the
then-outstanding securities entitled to vote generally in the
election of directors of the Corporation or Parent ("Voting
Stock"), as the case may be, immediately prior to such
transaction;
(II) Sale of Assets. The
Corporation or Parent sells or otherwise transfers all or
substantially all of its assets to any other corporation or
other legal person, and as a result of such sale or transfer
less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such sale or transfer is held in the
aggregate by the holders of Voting Stock of the Corporation or
Parent immediately prior to such sale or transfer;
(III) Change in Beneficial
Ownership. There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or
8
<PAGE> 9
report), each as promulgated pursuant to the Exchange Act (as
hereinafter defined), disclosing that any "person" (as such
term is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the "beneficial owner" (as such term
is used in Rule 13 d-3 under the Exchange Act) of securities
representing more than 50% of the Voting Stock of the Parent;
(IV) Filing of Certain Reports of
Change of Control. The Parent files a report or proxy
statement with the Securities and Exchange Commission pursuant
to the Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or report or
item therein) that a change in control of the Parent has
occurred; or
(V) Change in Board Composition. If
during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Board cease
for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the
Parent's stockholders, of each director of the Parent first
elected during such period was approved by a vote of at least
a majority of the directors then still in office who were
directors of the Parent at the beginning of any such period;
provided, however, that a "Change in Control" shall not be
deemed to have occurred for purposes of this Amended Agreement
solely because (i) the Corporation or Parent, (ii) an entity
in which the Corporation or Parent directly or indirectly
beneficially owns 50% or more of the voting securities, or
(iii) any Corporation or Parent-sponsored employee stock
ownership plan or any other employee benefit plan of the
Corporation or Parent, either files or becomes obligated to
file a report or a proxy statement under or in
9
<PAGE> 10
response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule
14A (or any successor schedule, form or report) under the
Exchange Act, disclosing beneficial ownership by it of shares
of Voting Stock or because the Corporation or Parent reports
that a change in control of the Corporation or Parent has
occurred by reason of such beneficial ownership.
(D) "Exchange Act" means the Securities
Exchange Act of 1934, as amended from time to time.
(E) "Good Reason" means that, following a
Change in Control and without Employee's written consent:
(I) there has been a significant
diminution in the nature or scope of Employee's authority,
duties or responsibilities in effect immediately prior to the
Change in Control; or
(II) there has been a reduction in
Employee's annual Base Salary in effect immediately prior to
the Change in Control or an adverse change in Employee's total
compensation such that Employee's compensation and benefits in
the aggregate are 25% below his aggregate compensation and
benefits in effect immediately prior to the Change in Control;
or
(III) the principal place of
Employee's employment is relocated to a place that is more
than 25 miles from the principal place of Employee's
employment immediately prior to the Change in Control or
Employee is required to be away from his office in the course
of discharging his duties and responsibilities 25% more than
was required prior to the Change in
10
<PAGE> 11
Control.
(g) In the event of any termination pursuant to this Section
6, the Corporation shall pay to the Employee such portion of his Base
Salary as has been earned by the Employee as of the date such
termination becomes effective, a pro rata portion of any bonus due
Employee through the date of his termination (unless Employee is
terminated for cause pursuant to Section 6(c) hereof in which case no
bonus shall be paid or payable) and payment for any accrued unused
vacation time, all less (i) all applicable taxes, (ii) any other
required withholdings, and (iii) any other amounts the Employee may owe
to the Corporation, and thereafter the Employee shall have no claim for
any further compensation from the Corporation (including its parents,
subsidiaries, division, affiliates, successors and assigns) except as
otherwise expressly provided for herein. The Employee's receipt of such
amounts and/or any severance payments provided for by this Amended
Agreement, will constitute a full accord and satisfaction (and in the
case of severance pay and Option acceleration, liquidated damages) in
full and final settlement of any and all amounts owed by the
Corporation (including its subsidiaries, parents, divisions,
affiliates, successors and assigns) to the Employee under this Amended
Agreement or under the Original Employment Agreement , under any
severance plan, practice or policy or otherwise.
(h) The Employee hereby waives and releases any rights or
claims he may have or have had under Section 7(f) or 7(h) of the
Original Employment Agreement.
(i) In the event that the Employee's employment with the
Corporation terminates pursuant to any term of this Amended Agreement,
then the Employee agrees to resign from all officers and directorships
he may then hold with the Corporation and/or Parent (other than
membership of the board of directors of Parent) immediately upon the
Corporation's request
7. Restrictions On Employee: During the period commencing on the date
hereof and
11
<PAGE> 12
ending two (2) years after the termination of the Employee's employment with the
Corporation for any reason, the Employee shall not (a) directly or indirectly
induce or attempt to induce any of the employees of the Corporation (including
its subsidiaries, parents, divisions, affiliates, successors and assigns) to
leave the employ of the Corporation (including its subsidiaries, parents,
divisions, affiliates, successors and assigns), or (b) hire, or assist any other
entity or person in the recruitment or hiring of, any employees of the
Corporation (including its subsidiaries, parents, divisions, affiliates,
successors and assigns). Following the termination of the Employee's employment
with the Corporation for any reason, the Employee also shall not make any
defamatory, slanderous and/or libelous statements whatsoever concerning the
Corporation or its affiliated companies and/or their businesses, operations,
technologies, products, services, marketing strategies, pricing policies,
management, affairs, financial condition, directors, shareholders, officers,
employees and/or agents.
8. Covenant Not to Compete: During the period commencing on the date
hereof, and ending two (2) years after the termination of the Employee's
employment for any reason, (a) the Employee shall not, except as a passive
investor in publicly held companies (i.e., owning or holding beneficially or of
record 1% or less of the voting shares of an entity), engage in, or own or
control any interest in, or act as principal, director, officer or employee of,
or consultant to, any firm, corporation, entity or person which is in
competition with the Corporation or its Parent in the states/locations listed in
Rider A, attached hereto; and (b) the Employee shall not, on behalf of any firm,
corporation, entity or person which is in competition with the Corporation
and/or the Parent, solicit or do business with any customer of the Corporation
(including its subsidiaries, parents, divisions, affiliates, successors and
assigns) or any potential customer of the Corporation (including its
subsidiaries, parents, divisions, affiliates, successors and assigns).
12
<PAGE> 13
If the covenants set forth in this Section 8 are determined by a court of
competent jurisdiction to be overbroad in duration or geographic scope, then the
provisions will not be invalidated or rendered unenforceable but rather will be
deemed enforceable to the maximum extent permitted by law.
9. Proprietary Information:
(a) For purposes of this Amended Agreement, "proprietary
information" shall mean any information relating to the business of the
Corporation (including its parents, subsidiaries, affiliates, successors and
assigns) or any entity in which the Corporation (including its parents,
subsidiaries, affiliates, successors and assigns) has a controlling interest
that has not previously been publicly released by duly authorized
representatives of the Corporation and shall include (but shall not be limited
to) confidential information encompassed in all proposals, marketing and sales
plans, financial information, costs, pricing information, computer programs
(including without limitation source code, object code, algorithms and models),
customer information, customer lists, and all methods, concepts, know-how or
ideas in or reasonably related to the business of the Corporation (including its
parents, subsidiaries, affiliates, successors and assigns) or any entity in
which the Corporation (including its parents, subsidiaries, affiliates,
successors and assigns) has a controlling interest. The Employee agrees to
regard and preserve as confidential all proprietary information, whether he has
such information in his memory or in writing or other tangible or intangible
form. The Employee will not, without written authority from the Corporation to
do so, directly or indirectly, use for his benefit or purposes, nor disclose to
others, either during the term of his employment hereunder or thereafter, except
as required by the conditions of his employment hereunder, any proprietary
information. The Employee agrees not to remove from the premises of the
Corporation or any
13
<PAGE> 14
subsidiary or affiliate of the Corporation, except as an employee of the
Corporation in pursuit of the business of the Corporation or any of its
subsidiaries, affiliates or any entity in which the Corporation has a
controlling interest, or except as specifically permitted in writing by the
Corporation, any document or object containing or reflecting any proprietary
information. The Employee recognizes that all such documents and objects,
whether developed by him or by someone else, are the exclusive property of the
Corporation. The restrictions set forth in this Section 9(a) shall not apply to
information which (i) was known to the Employee at the time he was told of it by
the Corporation, (ii) is known to the industry or public generally, (iii) was
subsequently disclosed to the Employee by a third party having the right to do
so, or (iv) is required to be disclosed by law.
(b) All proprietary information and all of the Employee's
interest in trade secrets, trademarks, computer programs, customer information,
customer lists, employee lists, products, procedure, copyrights, patents and
developments hereafter to the end of the period of employment hereunder
developed by the Employee as a result of or in connection with, his employment
hereunder, shall belong to the Corporation; and, without further compensation,
but at the Corporation's expense, forthwith upon request of the Corporation,
Employee shall execute any and all such assignments and other documents and take
any and all such assignments and other documents and take any and all other
action as Corporation may reasonably request in order to vest in Corporation all
the Employee's right, title and interest in and to all of the aforesaid items,
free and clear of liens, charges and encumbrances.
(c) The Employee expressly agrees that the covenants set forth
in Section 7, 8, and 9 of this Amended Agreement are being given to the
Corporation in connection with the employment of the Employee by the Corporation
and that such covenants are intended to protect
14
<PAGE> 15
the Corporation against competition by the Employee, within the terms stated, to
the fullest extent deemed reasonable and permitted in law and equity. In the
event that the foregoing limitations upon the conduct of the Employee are beyond
those permitted by law, such limitations, both as to time and geographical area,
shall be, and be deemed to be, reduced in scope and effect to the maximum effect
permitted by law.
10. Injunctive Relief: The Employee acknowledges that the injury to the
Corporation resulting from any violation by him of any of the covenants
contained in Sections 7, 8, and 9 of this Amended Agreement will be of such a
character that it cannot be adequately compensated by money damages, and,
accordingly, the Corporation may, in addition to pursuing its other remedies,
obtain an injunction from any court having jurisdiction of the matter
restraining any such violation; and no bond or other security shall be required
in connection with such injunction.
11. Representation of Employee: The Employee represents and warrants
that neither the execution and delivery of this Amended Agreement nor the
performance of his duties hereunder violates the provisions of any other
agreement to which he is a party or by which he is bound.
12. Parties; Non-Assignability by Employee: As used herein, the term
"Corporation" shall mean and include the Corporation and any parent or
subsidiary thereof and any successor thereto unless the context indicates
otherwise. Except as otherwise provided and except with respect to the
Employee's rights with respect to the common stock or options to purchase common
stock owned or to be received by the Employee, this Amended Agreement and all
rights hereunder are personal to the Employee and shall not be assignable by him
and any purported assignment shall be null and void and shall not be binding on
the Corporation. This Amended Agreement shall be assignable and transferable by
the Corporation pursuant to (a) the sale of all
15
<PAGE> 16
or substantially all of the assets of the Corporation or Parent to any related
or unrelated person, (b) the sale of 50% or more of the voting stock of the
Corporation or Parent to any related or unrelated person or entity in a single
transaction or series of related transactions within a six (6) month period, or
(c) a merger or consolidation of the Corporation or Parent with any related or
unrelated person or entity.
13. Entire Agreement: This Amended Agreement, the Original Employment
Agreement (through the period ending December 31, 1998) and the Option Agreement
(as modified by the Original Employment Agreement) contain the entire agreement
between the parties hereto with respect to the transactions contemplated herein
and supersede all other prior agreements and understandings, oral or written,
between the Employee and the Corporation, the Employee and HSC and/or the
Employee and Parent, and all other previous representations, negotiations,
commitments, and writings with respect thereto.
14. Indemnification; D&O Coverage:
(a) The Corporation agrees that it will not, without the
consent of the Employee, which consent will not be unreasonably withheld,
conditioned or delayed, amend or alter the provisions of its Certificate of
Incorporation relating to indemnification of officers and directors if the
effect of such amendment or alteration would materially reduce the protection
presently provided to the Employee by such provisions.
(b) The Corporation agrees that it will continue to maintain
directors and officers liability insurance coverage for the Employee during the
term of this Amended Agreement on terms commensurate with comparable companies
in the software industry, provided such coverage is available at reasonable
rates.
15. Amendment or Alteration: No amendment or alteration of the terms of
this
16
<PAGE> 17
Amended Agreement shall be valid unless made in writing and signed by all of the
parties hereto.
16. Choice of Law: This Amended Agreement shall be governed by the laws
of the State of Connecticut without regard to the principles of conflicts of law
thereof.
17. Notices: Any notices required or permitted to be given under this
Amended Agreement shall be sufficient if in writing, and if sent by registered
mail to the residence of the Employee, or to the principal office of the
Corporation, respectively.
18. Waiver of Breach: The waiver by any party hereto of a breach of any
provision of this Amended Agreement shall not operate or be construed as a
waiver of any subsequent breach by any of the parties hereto.
19. Binding Effect: The terms of this Amended Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
personal representatives, heirs, administrators, successors, and permitted
assigns.
20. Severability: In the event that any provision of this Amended
Agreement is held by a court of competent jurisdiction to be illegal or
unenforceable, such provision shall be deleted from this Amended Agreement,
which shall otherwise remain in full force and effect and binding upon the
parties hereto.
21. Captions: The captions contained herein are for convenience only
and shall not affect the interpretation of this Amended Agreement.
22. Payment for Exercise of Stock Options: With respect to the
Employee's vested and exercisable option rights to purchase shares of Parent's
common stock, the Corporation will, upon the Employee's request, seek all
approval necessary to permit the option exercise price for
17
<PAGE> 18
such rights (and any applicable withholding tax) to be paid by delivery of
shares of Parent's common stock having an aggregate fair market value equal as
of the date of exercise to such option exercise price (and any applicable
withholding tax), in accordance with the terms of the plan(s) and/or
agreement(s) governing such option rights.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Amended Agreement as
of the day and year first above written.
EMPLOYEE:
/s/ James A. Perakis
------------------------------------
James A. Perakis
CORPORATION:
HYPERION SOFTWARE OPERATIONS INC.
By /s/ Stephen V. Imbler
---------------------------------
Stephen V. Imbler
Its Senior Vice President & CFO
HYPERION SOFTWARE CORPORATION
By /s/ Stephen V. Imbler
---------------------------------
Stephen V. Imbler
Its Senior Vice President & CFO
HYPERION SOLUTIONS CORPORATION
By: /s/ Stephen V. Imbler
---------------------------------
Stephen V. Imbler
Its Senior Vice President & CFO
19
<PAGE> 20
RIDER A
Alabama Oregon
Alaska Pennsylvania
Arizona Rhode Island
Arkansas South Carolina
California South Dakota
Colorado Tennessee
Connecticut Texas
Delaware Utah
Florida Vermont
Georgia Virginia
Hawaii Washington
Idaho West Virginia
Illinois Wisconsin
Indiana Wyoming
Iowa Australia
Kansas Brazil
Kentucky Canada
Louisiana England
Maine France
Maryland Germany
Massachusetts Hong Kong
Michigan Israel
Minnesota Japan
Mississippi Mexico
Missouri Netherlands
Montana Republic of Ireland
Nebraska Singapore
Nevada United Kingdom
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HYPERION SOLUTIONS CORPORATION FOR THE
QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 238,184
<SECURITIES> 35,030
<RECEIVABLES> 108,220
<ALLOWANCES> 10,500
<INVENTORY> 0
<CURRENT-ASSETS> 387,897
<PP&E> 151,438
<DEPRECIATION> 72,990
<TOTAL-ASSETS> 489,712
<CURRENT-LIABILITIES> 153,591
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> 229,223
<TOTAL-LIABILITY-AND-EQUITY> 489,712
<SALES> 101,646
<TOTAL-REVENUES> 101,646
<CGS> 30,254
<TOTAL-COSTS> 98,722
<OTHER-EXPENSES> 68,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,351
<INCOME-PRETAX> 4,129
<INCOME-TAX> 1,550
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,579
<EPS-PRIMARY> .09
<EPS-DILUTED> .08
</TABLE>
