<PAGE> 1
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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 DECEMBER 31, 1997
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 0-19538
HYPERION SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1326879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 LONG RIDGE ROAD, STAMFORD, CONNECTICUT 06902
(Address of principal executive offices, including zip code)
(203) 703-3000
(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 February 2, 1998, there were 18,976,436 shares of the Registrant's common
stock, $.01 par value, outstanding.
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<PAGE> 2
Hyperion Software Corporation
Form 10-Q
CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -- December 31, 1997 and June 30, 1997....................2
Condensed Consolidated Statement of Income -- Three Months Ended
December 31, 1997 and 1996; Six Months Ended December 31, 1997 and 1996......................3
Condensed Consolidated Statement of Cash Flows --
Six Months Ended December 31, 1997 and 1996..................................................4
Notes to Condensed Consolidated Financial Statements -- December 31, 1997......................5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.........................................................11
SIGNATURES.......................................................................................12
</TABLE>
(C) 1998 Hyperion Software Operations Inc. All rights reserved. Hyperion,
Hyperion Software, the Hyperion Software Logo, Hyperion Admin, Hyperion Analyst,
Hyperion Assets, Hyperion Financials, Hyperion Forms, Hyperion Ledger, Hyperion
OLAP, Hyperion OnTrack, Hyperion Payables, Hyperion Pillar, Hyperion
Receivables, Hyperion Reporting, Hyperion Retrieve, Hyperion Tools, Business
Intelligence, Financial Intelligence, IMRS, LedgerLink, Micro Control and Pillar
are registered trademarks and Hyperion Analytical Ledger, Hyperion Enterprise,
Hyperion Purchasing, HyperionReady, Build&Link, Business Analytics and Listen to
your business are trademarks of Hyperion Software Operations Inc., a
wholly-owned subsidiary of Hyperion Software Corporation. MARVEL COMICS,
SPIDER-MAN: TM & (C) 1998 Marvel Characters, Inc. All rights reserved. All other
trademarks and company names mentioned are the property of their respective
owners.
For further information, refer to the Hyperion Software
Corporation annual report on Form 10-K for the year ended June 30, 1997.
<PAGE> 3
Hyperion Software Corporation
Condensed Consolidated Balance Sheet
(in thousands, except for share data)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 JUNE 30, 1997
----------------- -------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 89,773 $ 67,059
Accounts receivable--net of allowances of $6,100 and $5,300 67,057 64,831
Prepaid expenses and other current assets 3,172 3,243
Deferred income taxes 5,359 3,811
-------- --------
TOTAL CURRENT ASSETS 165,361 138,944
Property and equipment--at cost, less accumulated depreciation
and amortization of $38,239 and $31,029 54,623 57,853
Product development costs--at cost, less accumulated
amortization of $8,641 and $6,796 8,056 8,526
Product distribution rights, goodwill and other intangible assets--
at cost, less accumulated amortization of $9,469 and $7,631 9,354 11,103
Deposits and other assets 3,682 2,213
-------- --------
Total assets $241,076 $218,639
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 27,517 $ 22,746
Accrued employee compensation and benefits 16,378 19,882
Income taxes payable 9,193 8,898
Deferred revenue 47,003 44,619
Notes payable 509 563
-------- --------
TOTAL CURRENT LIABILITIES 100,600 96,708
Mortgage payable 7,598 7,823
Deferred income taxes 1,071
Stockholders' equity:
Preferred stock--$.01 par value; authorized--1,000,000 shares;
none issued
Common stock--$.01 par value; authorized--50,000,000
shares; issued--23,299,854 and 22,577,437 shares 233 226
Additional paid-in capital 98,230 85,706
Retained earnings 49,835 41,994
Currency translation adjustments (1,907) (1,376)
Treasury stock, at cost--4,344,599 shares (13,513) (13,513)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 132,878 113,037
-------- --------
Total liabilities and stockholders' equity $241,076 $218,639
======== ========
</TABLE>
Note: the balance sheet at June 30, 1997 has been derived from the audited
financial statements at that date.
See accompanying notes.
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<PAGE> 4
Hyperion Software Corporation
Condensed Consolidated Statement of Income (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------- ------- -------- -------
<S> <C> <C> <C> <C>
REVENUES
Software licenses $33,851 $25,372 $ 63,117 $46,278
License renewals and services 35,379 27,324 67,017 52,405
------- ------- -------- -------
Total revenues 69,230 52,696 130,134 98,683
COSTS AND EXPENSES
Cost of revenues:
Software licenses 2,409 1,685 4,412 3,365
License renewals and services 21,703 16,302 40,756 30,837
Sales and marketing 22,607 17,779 42,057 32,398
Product development 9,180 8,031 17,530 15,903
General and administrative 7,159 4,928 14,246 9,209
------- ------- -------- -------
63,058 48,725 119,001 91,712
------- ------- -------- -------
OPERATING INCOME 6,172 3,971 11,133 6,971
Interest income 744 381 1,381 755
Interest expense (104) (91) (190) (174)
------- ------- -------- -------
INCOME BEFORE INCOME TAXES 6,812 4,261 12,324 7,552
Provision for income taxes 2,500 1,625 4,500 2,875
------- ------- -------- -------
NET INCOME $ 4,312 $ 2,636 $ 7,824 $ 4,677
======= ======= ======== =======
EARNINGS PER SHARE
Basic $ .23 $ .15 $ .42 $ .27
Diluted $ .22 $ .14 $ .40 $ .26
AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 18,789 17,240 18,602 17,150
Diluted 19,792 18,509 19,574 18,161
</TABLE>
See accompanying notes.
-3-
<PAGE> 5
Hyperion Software Corporation
Condensed Consolidated Statement of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1997 1996
------- -------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $23,355 $20,305
INVESTING ACTIVITIES
Office improvements and purchases of furniture,
equipment and software (4,802) (8,150)
Product development costs (1,375) (2,167)
Deposits and intangible assets (897) (1,122)
Business acquisitions (7,104)
------- -------
Cash used by investing activities (7,074) (18,543)
FINANCING ACTIVITIES
Principal payments on notes payable (279) (316)
Exercise of stock options by employees 7,243 3,147
------- -------
Cash provided by financing activities 6,964 2,831
Effect of exchange rate changes (531) 450
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 22,714 5,043
Cash and cash equivalents at beginning of period 67,059 42,361
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $89,773 $47,404
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 2,486 $ 872
Interest 162 158
</TABLE>
See accompanying notes.
-4-
<PAGE> 6
Hyperion Software Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 1997
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 six-month periods ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the full year
ending June 30, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the company's annual
report on Form 10-K for the year ended June 30, 1997.
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. All earnings per share amounts for
all periods have been presented and where necessary restated to conform to the
Statement 128 requirements.
The following table sets forth the computation of basic and diluted earnings per
share ("EPS") (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------------ ----------------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 4,312 $ 2,636 $ 7,824 $ 4,677
======= ======= ======= =======
Denominator:
Denominator for basic EPS - weighted-average shares 18,789 17,240 18,602 17,150
Effect of dilutive securities:
Stock option rights 1,003 1,269 972 1,011
------- ------- ------- -------
Denominator for diluted EPS - adjusted weighted-average
shares and assumed conversions
19,792 18,509 19,574 18,161
======= ======= ======= =======
Basic earnings per share $ .23 $ .15 $ .42 $ .27
Diluted earnings per share $ .22 $ .14 $ .40 $ .26
</TABLE>
B. 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.
-5-
<PAGE> 7
Hyperion Software Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
- --------------------------------------------------------------------------------
Founded in 1981, Hyperion Software Corporation provides software solutions for
better business understanding and improved financial performance. The company's
Internet-enabled applications support and enhance enterprise-wide processes,
including planning, budgeting, forecasting, consolidation and business analysis.
Hyperion solutions are used by large organizations worldwide.
The company 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 license renewal fee
entitling customers to routine support and product updates is billed annually.
Hyperion licenses its products throughout the world primarily through a direct
sales force. Products also are licensed through independent distributors and
sales agents, including major accounting firms. 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.
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 $69.2 million
and $4.3 million, respectively, for the second quarter of fiscal 1998, and $60.9
million and $3.5 million, respectively, for the first quarter of fiscal 1998.
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.
-6-
<PAGE> 8
Hyperion Software Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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 those discussed in the
preceding paragraph; whether the accounting products contemplated to be jointly
developed by Baan and Hyperion are developed in a timely fashion and are
accepted by the market (for further details of the strategic alliance with The
Baan Company, see the Hyperion annual report on Form 10-K for the year ended
June 30, 1997, Note B of the financial statements); whether the proposed
coordination of sales prospects between the companies works in practice and
results in increased revenues for the company; whether the strategic advantages
and synergies contemplated to be gained by the parties are actually able to be
realized; and the impact of competitive products and pricing. Additionally, 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 has also
initiated discussions with 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 anticipates that
it will successfully address Year 2000 issues and modifications to its internal
business information systems by the end of fiscal 1999. The cost of the
company's Year 2000 efforts is not expected to be material to the company's
financial position. While the company believes its planning efforts are adequate
to address its Year 2000 concerns, there can be no assurance that there will not
be a delay in, or increase costs associated with, implementation of changes to
address any such issues, which could have a material adverse effect on the
company and its future results of operations. Any forward-looking statements
should be considered in light of these factors as well as other risks as
detailed in the company's annual report on Form 10-K for the year ended June 30,
1997. Further, readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
-7-
<PAGE> 9
Hyperion Software Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
REVENUES
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
December 31, 1997 CHANGE 1996 1997 CHANGE 1996
- ----------------------------- ------------------------------ ------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Software licenses $33,851 33.4% $25,372 $63,117 36.4% $46,278
Percentage of total revenues 48.9% 48.1% 48.5% 46.9%
- ----------------------------- ------------------------------ ------------------------------
License renewals and services $35,379 29.5% $27,324 $67,017 27.9% $52,405
Percentage of total revenues 51.1% 51.9% 51.5% 53.1%
- ----------------------------- ------------------------------ ------------------------------
</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.
Sales of the company's financial management, budgeting, and business analysis
products each grew more than 30% for both the quarter and the half year.
The increase in license renewal and service revenue is mainly attributable to
the year-to-year growth of the company's installed customer base.
Revenues generated from markets outside the United States for the first half of
fiscal 1998 and 1997 were $48.7 million and $34.9 million, or 37.4% and 35.4% of
total revenues, respectively. Revenue growth was particularly strong in Canada,
Germany, Southeast Asia and the United Kingdom.
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. The company believes that the
requirements of this SOP, which supersede the revenue recognition guidance of
SOP 91-1, do not differ significantly from its revenue recognition practices and
policy requirements. Accordingly, adoption of the SOP is not expected to
materially impact the company's results of operations.
COST OF REVENUES
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
December 31, 1997 CHANGE 1996 1997 CHANGE 1996
- ----------------------------- ------------------------------ ------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Software licenses $ 2,409 43.0% $ 1,685 $ 4,412 31.1% $ 3,365
Gross profit percentage 92.9% 93.4% 93.0% 92.7%
- ----------------------------- ------------------------------ ------------------------------
License renewals and services $21,703 33.1% $16,302 $40,756 32.2% $30,837
Gross profit percentage 38.7% 40.3% 39.2% 41.2%
- ----------------------------- ------------------------------ ------------------------------
</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 increase
in the cost of software license revenues principally reflects an increase in
royalty fees related to the increase in the number of software licenses sold.
The increase in the cost of license renewal and service revenues was due
primarily to additional staffing expense for both installation and ongoing
support services.
-8-
<PAGE> 10
Hyperion Software Corporation
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
OPERATING EXPENSES
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
December 31, 1997 CHANGE 1996 1997 CHANGE 1996
- ----------------------------- ------------------------------ ------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales and marketing $22,607 27.2% $17,779 $42,057 29.8% $32,398
Percentage of total revenues 32.7% 33.7% 32.3% 32.8%
- ----------------------------- ------------------------------ ------------------------------
Product development $ 9,180 14.3% $ 8,031 $17,530 10.2% $15,903
Percentage of total revenues 13.3% 15.2% 13.5% 16.1%
- ----------------------------- ------------------------------ ------------------------------
General and administrative $ 7,159 45.3% $ 4,928 $14,246 54.7% $ 9,209
Percentage of total revenues 10.3% 9.4% 10.9% 9.3%
- ----------------------------- ------------------------------ ------------------------------
</TABLE>
The increase in sales and marketing expenses is primarily due to a net increase
in sales-marketing personnel and an increase in commission costs directly
associated with the significant increase in software license revenues.
The increase in product development expenses reflects additional personnel and
third-party development costs associated with research and development
activities. In the first half of fiscal 1998 and 1997, 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 primarily relate to the company's development of
enterprise-wide financial management and analysis solutions for client/server
environments and represented 7.3% and 12% of total product development
expenditures. Capitalized software costs are amortized over the estimated
economic life of the product, but generally not more than four years.
The increase in general and administrative expenses resulted, for the most part,
from increases in personnel and professional services costs incurred to support
the growth of the company's overall operations, as well as estimated costs
associated with additional support required by certain accounting product
customers.
INTEREST INCOME
Interest income grew due to the increase from operations in cash available for
investment.
PROVISION FOR INCOME TAXES
The company's effective income tax rate for the first half, 36.5%, reflects the
company's expectations for the full year ending June 30, 1998.
NET INCOME
As a result of the above factors, net income for the three and six-month periods
ended December 31, 1997 increased to $4.3 million or by 63.6% from $2.6 million
and $7.8 million or by 67.3% from $4.7 million, respectively, for the
corresponding periods of 1996.
To date, the overall impact of inflation on the company has not been material.
-9-
<PAGE> 11
Hyperion Software 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 principally through positive cash
flow from operations and sales of its common stock. For fiscal years 1995, 1996
and 1997, and for the six months ended December 31, 1997, the company generated
positive cash flow from operations of $28.9 million, $34.1 million, $47.1
million and $23.4 million, respectively.
Cash used by investing activities amounted to $7.1 million for the first half of
fiscal 1998, including $4.8 million primarily for purchases of computer
equipment and software, and $2.3 million for deposit and intangible asset costs.
Financing activities in the first half of fiscal 1998, including stock options
exercised by employees and payments of indebtedness, generated cash of $7
million. In connection with the stock options exercised by certain of its
employees (for a total of 722,417 common shares), the company recognized (as a
credit to additional paid-in capital) an income tax benefit of $5.1 million for
the six months ended December 31, 1997.
As of December 31, 1997, the company had cash and cash equivalents of $89.8
million and working capital of $64.8 million, no long-term debt other than the
mortgage loan (currently at an interest rate of 3.7%) for the Stamford,
Connecticut office and research facility, and its ratio of current assets to
current liabilities was 1.6 to 1. Cash equivalents are comprised primarily of
investment-grade U.S. state and political subdivision obligations with varying
terms of three months or less. The company has long-term credit availability of
$25 million under a revolving credit facility. The company anticipates capital
expenditures of approximately $35 million for its 1998 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 funds generated from operations, existing cash
balances and its available credit facility will be sufficient to finance the
company's operations for at least the next two years.
-10-
<PAGE> 12
Hyperion Software Corporation
Part II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibit is included herein: 10.1 - Employment Agreement with James
A. Perakis, dated November 1, 1997.
The company did not file any reports on Form 8-K during the three months ended
December 31, 1997.
-11-
<PAGE> 13
Hyperion Software Corporation
Form 10-Q
for the three-month period ended December 31, 1997
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 Software Corporation
/s/ Michael A. Manto 2/10/98
------------------------------------------------------------
Michael A. Manto Date
Vice President and Corporate Controller
/s/ Lucy Rae Ricciardi 2/10/98
------------------------------------------------------------
Lucy Rae Ricciardi Date
Senior Vice President and Chief Financial Officer
-12-
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 1st day of
November, 1997, between 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 ("Parent").
WHEREAS, the Employee is currently Chairman of the Board of Directors of
the Corporation and Parent.
WHEREAS, the Corporation and the Employee are parties to an Employment
Agreement dated as of August 1, 1993 (the "Previous Agreement").
WHEREAS, the Corporation desires to extend the employment of the Employee
to November 1, 1998, and the Employee desires that his employment with the
Corporation be extended to November 1, 1998, on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and promises of
the parties hereto, the Corporation and the Employee agree as follows:
1. EMPLOYMENT: The Corporation hereby agrees to employ the Employee as its
President and Chief Executive Officer to perform managerial and executive
functions of the Corporation appropriate to those offices as determined by the
Corporation on the terms and conditions hereinafter stated, and the Employee
hereby agrees to perform such services for the Corporation on the terms and
conditions hereinafter stated, subject to the directions of the Board of
Directors of the Corporation.
<PAGE> 2
2. TERM OF EMPLOYMENT: Subject to Section 7 below, the initial term of this
Agreement and the Employee's employment by the Corporation pursuant hereto shall
begin as of November 1, 1997 and shall continue in full force and effect until
November 1, 1998 (the "Initial Term"); provided, however, that this Agreement
and the Employee's employment by the Corporation pursuant hereto shall be
automatically renewed from year to year thereafter for successive one (1) year
terms unless (1) terminated by the Corporation (A) upon 8 months' written
notice, (B) with no notice if the Corporation, in its sole discretion,
determines that the notice provided for in the preceding sentence is not in the
best interests of the Corporation, or (2) by the Employee upon written notice,
which notice must provide that the Employee will remain employed with the
Corporation hereunder until November 1, 1998 or for 90 days after the date of
the notice, whichever is later. Notwithstanding the foregoing, this Agreement
and the Employee's employment by the Corporation pursuant hereto may be sooner
terminated as provided herein. In the event that this Agreement and the
Employee's employment by the Corporation is terminated pursuant to subsection
(1)(A) of this Section 2, then (i) the option to purchase 150,000 shares of
common stock, $0.01 par value, of Parent granted to the Employee on September
19, 1996 (the "Option") shall, at the effective date of Employee's termination,
become fully vested and exercisable in its entirety, and (ii) the Employee shall
be entitled to receive 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 Employee's termination and continuing until the Employee
reaches the age of sixty-five (65). In the event that this Agreement and the
Employee's employment by the Corporation is terminated pursuant to subsection
(1)(B) of this Section 2, then the Employee shall be entitled to receive the
severance and benefits described in Section 7(d) below. In the event that this
Agreement and the
-2-
<PAGE> 3
Employee's employment by the Corporation are terminated pursuant to subsection
(2) of this Section 2, then (i) the Corporation or Parent shall provide the
Employee the opportunity to establish and maintain a Business Relationship (as
that term is defined in the option agreement dated as of September 19, 1996
between the Employee and Parent (the "Option Agreement")) unless and/or until
the Corporation or Parent, as the case may be, determines in its sole discretion
that such Business Relation is contrary to the best interests of the Corporation
or Parent, as the case may be, (ii) the Option will continue to vest so long as
the Employee maintains a Business Relationship with the Parent or the
Corporation in accordance with the terms of the plan(s) and/or agreement(s)
governing the Option and (iii) the Employee shall be entitled to receive the
fringe benefits described in Section 4(b) hereof or, at the discretion of the
Company, a similar alternative, commencing on the effective date of the
Employee's termination and continuing until the Employee reaches the age of
sixty-five (65).
3. COMPENSATION:
(a) The Corporation shall pay the Employee a base salary ("Base
Salary") during the Initial Term equal to $290,000 per annum, payable at the
rate of twelve thousand, eighty three dollars and thirty-four cents ($12,083.34)
on the 15th and last day of each month. This Base Salary may be increased
following the Initial Term 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 except as provided for herein.
(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 goals submitted to and approved by the Board of
Directors. The Employee's annual performance bonus for the Initial Term shall be
targeted at fifty (50%) percent of the Employee's Base Salary for
-3-
<PAGE> 4
such year provided that the Corporation achieves all of the goals relating to
his annual performance bonus established in the annual business plan for the
relevant year.
(c) Notwithstanding the foregoing subsections 3(a) and 3(b), if the
Employee's duties hereunder are modified pursuant to Section 5 so that the
Employee at any time during the term of this Agreement devotes less than one
hundred percent (100%) of his business efforts to his duties either as
Corporation President and/or Chief Executive Officer ("CEO"), which duties may
include, upon the Corporation's Board of Directors' approval, the training of a
successor and/or related transitional duties, then the Employee will be entitled
only to a pro rata share of the Base Salary and bonus provided for above, which
share shall be a percentage of Base Salary and a percentage of bonus equal to
the percentage of the Employee's business time he is then required to devote to
his employment by the Corporation.
4. FRINGE BENEFITS:
During the term of this Agreement and the Employee's employment by the
Corporation pursuant hereto, provided that the Employee remains eligible to
receive such benefits under the relevant plan documents:
(a) The Corporation shall provide the Employee with either all
benefits 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
(until they reach 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
-4-
<PAGE> 5
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.
(d) The Corporation shall provide the Employee with a term insurance
policy on the life of the Employee in the amount of two (2) times the Employee's
current Base Salary. The Employee will be the initial 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
Agreement and/or termination of coverage, the then owner shall have the option
of purchasing such policy from the Corporation at its then current cash
surrender value if any, and in any event 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
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.
-5-
<PAGE> 6
5. DUTIES AND EXTENT OF SERVICES: Throughout the term of this Agreement,
the Employee shall assume the positions of President and CEO of the Corporation,
provided, however, that the Employee may relinquish the positions of President
and/or CEO upon the approval of and under such terms and conditions as may be
set by the Board of Directors. The Corporation shall not change the Employee's
duties or title without the Employee's consent. The Employee shall exert his
best efforts and shall devote his full time and attention to the affairs of the
Corporation, PROVIDED, HOWEVER, that upon approval of the same by the
Corporation's Board of Directors, the Employee may devote less than his full
time and attention to the position of President and/or to the position of CEO at
such times and upon such terms and conditions as the Board of Directors may
approve in connection with retaining successors to the President position and/or
the CEO position. During the term of this Agreement, except as permitted in
Section 9 hereof, Employee shall not, directly or indirectly, alone or as a
member of a partnership, or as an officer, director, shareholder or employee of
any other corporation, be engaged in or concerned with any other employment or
self-employment duties or employment or self-employment pursuits whatsoever
requiring his personal services without the prior written consent of the
Corporation, which consent shall not be unreasonably withheld.
6. VACATION: During each year of the term of this Agreement, the Employee
shall be entitled to six (6) weeks paid vacation per year, subject to the
Corporation's policy attached hereto as Rider B, the time of which shall be as
determined by agreement between the Employee and the Board of Directors of the
Corporation.
7. TERMINATION: This Agreement and the Employee's employment hereunder
shall terminate (i) on November 1, 1998, unless extended or renewed as provided
herein, or (ii) upon the occurrence of any of the following events, and upon any
such termination the Employee will
-6-
<PAGE> 7
have no right to severance pay or salary, bonus or benefit continuation except
as expressly provided in this 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 Agreement and the Employee's employment without notice and
without cause pursuant to this Section 7(d) for a reason not specified in
subparagraphs (a), (b), (c), (e) and/or (h) of this Section 7, then: (A) the
Corporation shall provide to the Employee as severance pay, a total amount equal
to (i) his Base Salary in the year in which such termination occurs, payable in
twelve (12) consecutive monthly installments (without interest) beginning one
(1) month after such termination, plus (ii) 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 7(d) and continuing until the Employee
-7-
<PAGE> 8
reaches the age of sixty-five (65); and (B) the Option shall become fully vested
and exercisable in its entirety.
(e) By either party pursuant to Section 2 hereof, in which case the
Employee will be treated in accordance with the applicable provisions of Section
2.
(f) If the Corporation moves its corporate offices more than fifty
(50) miles from Stamford, Connecticut, the Employee may terminate this Agreement
upon ninety (90) days written notice given within one hundred twenty (120) days
after the Employee receives notice of such relocation. If the Employee
terminates this Agreement pursuant to this subparagraph (f), then the
Corporation shall pay to the Employee the severance benefits described in
Section 7(d)(A) above, provided, however, that in the event that the Employee
gives notice of termination pursuant to this subparagraph (f), that if the move
contemplated by this subparagraph takes place (or is to take place) at the
direction of the Corporation's Board of Directors, and that the Employee recuses
himself from any involvement as a Director of the Corporation in making such
direction, then the Employee will also receive the benefits provided for in
Section 7(d)(B)
(g) For purposes of paragraph 7(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 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 7(b) hereof; provided, however, that
(i) such failure or refusal is material, and (ii) Employee is given reasonable
notice and
-8-
<PAGE> 9
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 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 8, 9 and/or 10 of
this Agreement by the Employee.
(h) (i) If there is a Change in Control of the Corporation (as
hereinafter defined) that occurs prior to the expiration or termination of the
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: (i) 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 (ii) the fringe benefits described in Section 4(b) hereof and
continuing until the Employee reaches 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
Agreement.
-9-
<PAGE> 10
(ii) As used in this Agreement, the following terms have the
meanings set forth below:
(i) "Affiliate" of a person means any person directly or indirectly
controlling, controlled by or under common control with the first
person.
(ii) "Associate" has the meaning ascribed thereto in Rule 12b-2 under
the Exchange Act (as defined below) as in effect on the date hereof.
(iii) "Change in Control" means the occurrence of any of the following
events:
(A) 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;
(B) 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;
-10-
<PAGE> 11
(C) CHANGE IN BENEFICIAL OWNERSHIP. There is a report filed on
Schedule 13D or Schedule 14D-1 (or any successor schedule,
form or 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 13d-3 under the Exchange Act) of
securities representing more than 50% of the Voting Stock of
the Parent;
(D) 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
(E) 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 Agreement solely because
(i) the Corporation or
-11-
<PAGE> 12
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 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.
(iii) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(iv) "Good Reason" means that, following a Change in Control and
without Employee's written consent,
(A) 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
(B) 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
(C) 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
-12-
<PAGE> 13
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 Control.
(i) In the event of any termination pursuant to this Section 7,
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 pursuant to Section 7(c) hereof in which case no
bonus shall be paid or payable) and payment for any accrued unused vacation
time, all less (a) all applicable taxes, (b) any other required withholdings,
and (c) 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 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 Agreement, under any severance plan, practice or policy or
otherwise.
(j) In the event that the Employee's employment with the
Corporation terminates pursuant to any term of this Agreement, then the Employee
agrees to resign from all offices and directorships he may then hold with the
Corporation and/or the Parent immediately upon the Corporation's request.
-13-
<PAGE> 14
8. RESTRICTIONS ON EMPLOYEE: During the period commencing on the date
hereof and 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.
9. 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 more 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
-14-
<PAGE> 15
the Corporation (including its subsidiaries, parents, divisions, affiliates,
successors and assigns). If the covenants set forth in this Section 9 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.
10. PROPRIETARY INFORMATION:
(a) For purposes of this 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
-15-
<PAGE> 16
not to remove from the premises of the Corporation or any 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 10(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
Sections 8, 9 and 10 of this Agreement are being given to Corporation in
connection with the employment of
-16-
<PAGE> 17
the Employee by the Corporation and that such covenants are intended to protect
the Corporation against the 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.
11. 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 8, 9 and 10 of this 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.
12. REPRESENTATION OF EMPLOYEE: The Employee represents and warrants
that neither the execution and delivery of this 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.
13. 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 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 Agreement shall be assignable and transferable by the
Corporation pursuant to (i) the sale of all or
-17-
<PAGE> 18
substantially all of the assets of the Corporation or Parent to any related or
unrelated person, (ii) 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
(iii) a merger or consolidation of the Corporation or Parent with any related or
unrelated person or entity.
14. ENTIRE AGREEMENT: This Agreement and the Option Agreement (as
modified by this 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 and/or the Employee and Parent, including, without
limitation, the Previous Agreement and all other previous representations,
negotiations, commitments, and writings with respect thereto.
15. 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 Agreement on terms commensurate with comparable companies in the
software industry, provided such coverage is available at reasonable rates.
16. AMENDMENT OR ALTERATION: No amendment or alteration of the terms
of this Agreement shall be valid unless made in writing and signed by all of the
parties hereto.
-18-
<PAGE> 19
17. CHOICE OF LAW: This Agreement shall be governed by the laws of the
State of Connecticut without regard to the principles of conflicts of law
thereof.
18. NOTICES: Any notices required or permitted to be given under this
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.
19. WAIVER OF BREACH: The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by any of the parties hereto.
20. BINDING EFFECT: The terms of this 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.
21. SEVERABILITY: In the event that any provision of this Agreement is
held by a court of competent jurisdiction to be illegal or unenforceable, such
provision shall be deleted from this Agreement, which shall otherwise remain in
full force and effect and binding upon the parties hereto.
22. CAPTIONS: The captions contained herein are for convenience only
and shall not affect the interpretation of this Agreement.
23. PAYMENT FOR EXERCISE OF STOCK OPTIONS: With respect to the
Employees 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 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
-19-
<PAGE> 20
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.
-20-
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
CORPORATION:
HYPERION SOFTWARE OPERATIONS INC.
By /s/ Lucy Rae Ricciardi
---------------------------------------
Lucy Rae Ricciardi
Its Senior Vice President & CFO
EMPLOYEE:
/s/ James A. Perakis
------------------------------------------
James A. Perakis
HYPERION SOFTWARE CORPORATION
By /s/ Lucy Rae Ricciardi
---------------------------------------
Lucy Rae Ricciardi
Its Senior Vice President & CFO
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HYPERION SOFTWARE CORPORATION FOR THE
QUARTER ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 89,773
<SECURITIES> 0
<RECEIVABLES> 73,157
<ALLOWANCES> 6,100
<INVENTORY> 0
<CURRENT-ASSETS> 165,361
<PP&E> 92,862
<DEPRECIATION> 38,239
<TOTAL-ASSETS> 241,076
<CURRENT-LIABILITIES> 100,600
<BONDS> 0
0
0
<COMMON> 233
<OTHER-SE> 132,645
<TOTAL-LIABILITY-AND-EQUITY> 241,076
<SALES> 69,230
<TOTAL-REVENUES> 69,230
<CGS> 24,112
<TOTAL-COSTS> 63,058
<OTHER-EXPENSES> 38,946
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 6,812
<INCOME-TAX> 2,500
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,312
<EPS-PRIMARY> .23
<EPS-DILUTED> .22
</TABLE>
