1
Execution Copy
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AGREEMENT AND PLAN OF MERGER
among
HYPERION SOFTWARE CORPORATION
ARBOR SOFTWARE CORPORATION
and
HSC MERGER CORP.
May 25, 1998
2
TABLE OF CONTENTS
Page
ARTICLE I -- THE MERGER.......................................................2
Section 1.01 Effective Time of the Merger..................................2
Section 1.02 Closing.......................................................2
Section 1.03 Effects of the Merger.........................................2
Section 1.04 Directors and Officers of Newco...............................2
Section 1.05 Charter and Bylaws of Newco...................................3
ARTICLE II -- CONVERSION OF SECURITIES........................................4
Section 2.01 Conversion of Capital Stock...................................4
Section 2.02 Exchange of Certificates......................................4
ARTICLE III -- REPRESENTATIONS AND WARRANTIES
OF ARBOR AND SUB.............................................8
Section 3.01 Organization of Arbor and Sub.................................8
Section 3.02 Arbor Capital Structure.......................................9
Section 3.03 Authority; No Conflict; Required Filings and Consents........10
Section 3.04 SEC Filings; Financial Statements............................12
Section 3.05 No Undisclosed Liabilities...................................12
Section 3.06 Absence of Certain Changes or Events.........................12
Section 3.07 Taxes........................................................13
Section 3.08 Properties...................................................15
Section 3.09 Intellectual Property........................................15
Section 3.10 Agreements, Contracts and Commitments........................16
Section 3.11 Litigation...................................................16
Section 3.12 Environmental Matters........................................16
Section 3.13 Employee Benefit Plans.......................................17
Section 3.14 Compliance With Laws.........................................18
Section 3.15 Accounting and Tax Matters...................................18
Section 3.16 Registration Statement; Proxy Statement/Prospectus...........18
Section 3.17 Labor Matters................................................19
Section 3.18 Insurance; Risk Management...................................19
Section 3.19 No Existing Discussions......................................20
Section 3.20 Opinion of Financial Advisor.................................20
Section 3.21 Section 203 of the DGCL Not Applicable.......................20
Section 3.22 Insider Trading Policies and Practices.......................20
Section 3.23 Interim Operations of Sub....................................20
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ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF HYPERION.....................21
Section 4.01 Organization of Hyperion.....................................21
Section 4.02 Hyperion Capital Structure...................................22
Section 4.03 Authority; No Conflict; Required Filings and Consents........23
Section 4.04 SEC Filings; Financial Statements............................24
Section 4.05 No Undisclosed Liabilities...................................25
Section 4.06 Absence of Certain Changes or Events.........................25
Section 4.07 Taxes........................................................25
Section 4.08 Properties...................................................27
Section 4.09 Intellectual Property........................................27
Section 4.10 Agreements, Contracts and Commitments........................28
Section 4.11 Litigation...................................................28
Section 4.12 Environmental Matters........................................28
Section 4.13 Employee Benefit Plans.......................................29
Section 4.14 Compliance With Laws.........................................30
Section 4.15 Accounting and Tax Matters...................................30
Section 4.16 Registration Statement; Proxy Statement/Prospectus...........30
Section 4.17 Labor Matters................................................31
Section 4.18 Insurance; Risk Management...................................31
Section 4.19 No Existing Discussions......................................31
Section 4.20 Opinion of Financial Advisor.................................31
Section 4.21 Section 203 of the DGCL Not Applicable.......................32
Section 4.22 Insider Trading Policies and Practices.......................32
Section 4.23 Rights Agreement.............................................32
ARTICLE V -- CONDUCT OF BUSINESS.............................................32
Section 5.01 Covenants of Arbor and Hyperion..............................32
Section 5.02 Cooperation..................................................34
Section 5.03 Arbor Rights Plan............................................34
ARTICLE VI -- ADDITIONAL AGREEMENTS..........................................35
Section 6.01 No Solicitation..............................................35
Section 6.02 Proxy Statement/Prospectus; Registration Statement...........36
Section 6.03 Nasdaq Quotation.............................................37
Section 6.04 Access to Information........................................37
Section 6.05 Stockholders' Meetings.......................................37
Section 6.06 Legal Conditions to Merger...................................38
Section 6.07 Public Disclosure............................................40
Section 6.08 Tax-Free Reorganization......................................40
Section 6.09 Pooling Accounting...........................................40
Section 6.10 Affiliate Agreements.........................................40
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Section 6.11 Nasdaq Quotation.............................................40
Section 6.12 Stock Plans..................................................41
Section 6.13 Brokers or Finders...........................................42
Section 6.14 Indemnification..............................................42
Section 6.15 Letter of Hyperion's Accountants.............................43
Section 6.16 Letter of Arbor's Accountants................................43
Section 6.17 Schedules....................................................43
ARTICLE VII -- CONDITIONS TO MERGER..........................................44
Section 7.01 Conditions to Each Party's Obligation To Effect the Merger...44
Section 7.02 Additional Conditions to Obligations of Hyperion.............45
Section 7.03 Additional Conditions to Obligations of Arbor and Sub........46
ARTICLE VIII -- TERMINATION AND AMENDMENT....................................46
Section 8.01 Termination..................................................46
Section 8.02 Effect of Termination........................................48
Section 8.03 Fees and Expenses............................................48
Section 8.04 Amendment....................................................50
Section 8.05 Extension; Waiver............................................50
ARTICLE IX -- MISCELLANEOUS..................................................50
Section 9.01 Nonsurvival of Representations, Warranties and Agreements....50
Section 9.02 Notices......................................................51
Section 9.03 Interpretation...............................................52
Section 9.04 Counterparts.................................................52
Section 9.05 Entire Agreement; No Third Party Beneficiaries...............52
Section 9.06 Governing Law................................................53
Section 9.07 Assignment...................................................53
Exhibit A - Hyperion Stock Option Agreement
Exhibit B - Arbor Stock Option Agreement
Exhibit C - Director and Officer Designees
Exhibit D - Affiliate Agreements
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TABLE OF DEFINED TERMS
Acquisition Proposal............................................ Section 6.01(a)
Affiliate....................................................... Section 6.10
Affiliate Agreement............................................. Section 6.10
Agreement....................................................... Preamble
Alternative Transaction......................................... Section 8.03(g)
Antitrust Laws.................................................. Section 6.06(b)
Arbor........................................................... Preamble
Arbor Affiliated Group.......................................... Section 3.07(b)
Arbor Affiliated Period......................................... Section 3.07(b)
Arbor Balance Sheet............................................. Section 3.04(b)
Arbor Charter Amendment........................................ Section 6.05(a)
Arbor Common Stock.............................................. Section 2.01(b)
Arbor Designees................................................. Section 1.04(a)
Arbor Disclosure Schedule....................................... Article III
Arbor Employee Plans............................................ Section 3.13(a)
Arbor Intellectual Property Rights.............................. Section 3.09(a)
Arbor Material Contracts........................................ Section 3.10
Arbor Material Adverse Effect................................... Section 3.01
Arbor Notes..................................................... Section 3.02(a)
Arbor Preferred Stock........................................... Section 3.02(a)
Arbor SEC Reports............................................... Section 3.04(a)
Arbor Stock Option Agreement.................................... Preamble
Arbor Stock Plans............................................... Section 3.02(a)
Arbor Stockholders' Meeting..................................... Section 3.16
Arbor Third Party Intellectual Property......................... Section 3.09(b)
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Arbor Voting Proposals......................................... Section 6.05(a)
Bankruptcy and Equity Exception................................ Section 3.03(a)
Certificate of Merger.......................................... Section 1.01
Certificates................................................... Section 2.02(b)
Closing........................................................ Section 1.02
Closing Date................................................... Section 1.02
Code........................................................... Preamble
Confidentiality Agreement...................................... Section 6.01(a)
Constituent Corporations....................................... Section 1.03
Costs.......................................................... Section 6.14(a)
DGCL........................................................... Section 1.01
Effective Time................................................. Section 1.01
Environmental Law.............................................. Section 3.12(b)
ERISA.......................................................... Section 3.13(a)
ERISA Affiliate................................................ Section 3.13(a)
Exchange Act................................................... Section 3.03(c)
Exchange Agent................................................. Section 2.02(a)
Exchange Fund.................................................. Section 2.02(a)
Exchange Ratio................................................. Section 2.01(c)
GAAP........................................................... Section 3.04(b)
Governmental Entity............................................ Section 3.03(c)
Hazardous Substance............................................ Section 3.12(c)
HSR Act........................................................ Section 3.03(c)
Hyperion....................................................... Preamble
Hyperion Affiliated Group...................................... Section 4.07(a)
Hyperion Affiliated Period..................................... Section 4.07(a)
Hyperion Balance Sheet......................................... Section 4.04(b)
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Hyperion Common Stock.......................................... Section 2.01(b)
Hyperion Designees............................................. Section 1.04(a)
Hyperion Disclosure Schedule................................... Article IV
Hyperion Employee Plans........................................ Section 4.13(a)
Hyperion Intellectual Property Rights.......................... Section 4.09(a)
Hyperion Third Party Intellectual Property Rights.............. Section 4.09(b)
Hyperion Material Adverse Effect............................... Section 4.01
Hyperion Material Contracts.................................... Section 4.10
Hyperion Preferred Stock....................................... Section 4.02(a)
Hyperion Rights................................................ Section 4.02(b)
Hyperion Rights Plan........................................... Section 4.02(b)
Hyperion SEC Reports........................................... Section 4.04(a)
Hyperion Stock Option.......................................... Section 6.12(a)
Hyperion Stock Option Agreement................................ Preamble
Hyperion Stock Plans........................................... Section 4.02(a)
Hyperion Stockholders' Meeting................................. Section 3.16
Hyperion Balance Sheet......................................... Section 4.04(b)
Indemnified Parties............................................ Section 6.14(a)
IRS............................................................ Section 3.07(b)
Joint Proxy Statement.......................................... Section 3.16
Merger......................................................... Preamble
Newco.......................................................... Preamble
Newco Board.................................................... Section 1.04(a)
Order.......................................................... Section 6.06(b)
Outside Date................................................... Section 8.01(b)
Registration Statement......................................... Section 3.16
Rule 145....................................................... Section 6.10
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SEC............................................................ Section 3.03(c)
Second Request................................................. Section 6.06(b)
Securities Act................................................. Section 3.04(a)
Stock Option Agreements........................................ Preamble
Sub............................................................ Preamble
Subsidiary..................................................... Section 3.01
Superior Proposal.............................................. Section 6.01(a)
Surviving Corporation.......................................... Section 1.03
Tax............................................................ Section 3.07(a)
Taxes.......................................................... Section 3.07(a)
Tax Returns.................................................... Section 3.07(a)
Third Party.................................................... Section 8.03(g)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 25, 1998,
by and among Hyperion Software Corporation, a Delaware corporation ("Hyperion"),
Arbor Software Corporation, a Delaware corporation ("Arbor"), and HSC Merger
Corp., a Delaware corporation and a direct, wholly-owned subsidiary of Arbor
("Sub").
WHEREAS, the Boards of Directors of Hyperion and Arbor deem it advisable
and in the best interests of each corporation and its respective stockholders
that Hyperion and Arbor combine in order to advance the long-term business
interests of Hyperion and Arbor;
WHEREAS, the combination of Hyperion and Arbor shall be effected by the
terms of this Agreement through a merger in which the stockholders of Hyperion
will become stockholders of Arbor (the "Merger");
WHEREAS, upon the closing of the Merger, the name of Arbor shall be changed
to "Hyperion Solutions Corporation" (Arbor, from and after the Merger, being
sometimes hereinafter referred to as "Newco");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Hyperion's and Arbor's willingness to
enter into this Agreement, Hyperion and Arbor have entered into (a) a Stock
Option Agreement dated as of the date of this Agreement and attached hereto as
EXHIBIT A (the "Hyperion Stock Option Agreement"), pursuant to which Arbor
granted Hyperion an option to purchase shares of common stock of Arbor under
certain circumstances, and (b) a Stock Option Agreement dated as of the date of
this Agreement and attached hereto as EXHIBIT B (the "Arbor Stock Option
Agreement" and, together with the Hyperion Stock Option Agreement, the "Stock
Option Agreements"), pursuant to which Hyperion granted Arbor an option to
purchase shares of common stock of Hyperion under certain circumstances;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
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ARTICLE I
THE MERGER
Section 1.01 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, a certificate of merger in such form as is required by the
relevant provisions of the Delaware General Corporation Law ("DGCL") (the
"Certificate of Merger") shall be duly prepared, executed and acknowledged by
the Surviving Corporation (as defined in Section 1.03) and thereafter delivered
to the Secretary of State of the State of Delaware, for filing, as provided in
the DGCL, as soon as practicable on or after the Closing Date (as defined in
Section 1.02). The Merger shall become effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware or at
such time thereafter as is provided in the Certificate of Merger (the "Effective
Time").
Section 1.02 CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., California Time, on a date to be specified by Hyperion and
Arbor, which shall be no later than the second business day after satisfaction
of the latest to occur of the conditions set forth in Sections 7.01, 7.02 and
7.03 (the "Closing Date"), at the offices of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, 155 Constitution Drive, Menlo Park, California,
unless another date, place or time is agreed to in writing by Hyperion and
Arbor.
Section 1.03 EFFECTS OF THE MERGER. At the Effective Time (i) the separate
existence of Sub shall cease and Sub shall be merged with and into Hyperion (Sub
and Hyperion are sometimes referred to below as the "Constituent Corporations"
and Hyperion is sometimes referred to below as the "Surviving Corporation"),
(ii) the Certificate of Incorporation of Hyperion shall be amended so that
Article IV of such Certificate of Incorporation reads in its entirety as
follows: "The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,000, all of which shall consist
of Common Stock, par value $.01 per share," and, as so amended, such Certificate
of Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation, (iii) the Bylaws of the Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, (iv) all the
property, rights, privileges, powers and franchises and duties of Sub and
Hyperion shall vest in the Surviving Corporation, and (v) all debts, liabilities
and duties of Hyperion and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
Section 1.04 DIRECTORS AND OFFICERS OF NEWCO.
(a) Arbor shall take all actions necessary to cause the directors
comprising the full Board of Directors of Arbor at the Effective Time (the
"Newco Board") to be
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comprised of seven directors. Initially, four of such directors shall be
designated by Hyperion (the "Hyperion Designees") and three of such directors
shall be designated by Arbor (the "Arbor Designees"). Hyperion hereby designates
the persons listed as such on EXHIBIT C-1 hereto as the initial Hyperion
Designees. Arbor hereby designates the persons listed as such on EXHIBIT C-2
hereto as the initial Arbor Designees. Each class of directors of Newco shall
consist, at the Effective Time, of the Hyperion Designees and the Arbor
Designees as set forth on EXHIBIT C-3. If, prior to the Effective Time, any of
the Hyperion Designees or Arbor Designees shall decline or be unable to serve as
a Hyperion Designee or an Arbor Designee, Hyperion (if such person was so
designated by Hyperion) or Arbor (if such person was so designated by Arbor)
shall designate another person to serve in such person's stead, which person
shall be reasonably acceptable to the other party.
(b) At the Effective Time, Arbor shall cause the persons listed on EXHIBIT
C-4 to be named as officers of Newco, holding the positions therein indicated;
provided, that if any such persons are unwilling or unable to serve in such
capacities, their replacements shall be selected by the Newco Board as
constituted at the Effective Time. Newco shall also have such other officers as
may be elected by the Newco Board.
(c) The foregoing officers and directors of Newco shall hold their
positions until their resignation or removal or the election or appointment of
their successors in the manner provided by Newco's charter documents and
applicable law.
Section 1.05 CHARTER AND BYLAWS OF NEWCO.
(a) At the Arbor Stockholders' Meeting (as defined in Section 3.16), Arbor
shall, in accordance with Section 6.05, propose, among other things, that its
Certificate of Incorporation be amended to: (i) change the name of Arbor to
"Hyperion Solutions Corporation," (ii) increase the authorized number of shares
of Arbor Common Stock to 300,000,000 shares, (iii) create a staggered Board of
Directors, and (iv) incorporate into its Certificate of Incorporation
indemnification provisions in substantially the form set forth in Arbor's
current Bylaws.
(b) Arbor shall amend its Bylaws so that the Bylaws of Newco, upon the
Effective Time, shall be as set forth as an Exhibit to Section 1.05 to the Arbor
Disclosure Schedule (as defined in Article III below).
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ARTICLE II
CONVERSION OF SECURITIES
Section 2.01 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Hyperion Common Stock or capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the capital
stock of Sub shall be converted into and become one fully paid and nonassessable
share of Common Stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND ARBOR-OWNED STOCK. All shares of
Common Stock of Hyperion ("Hyperion Common Stock") that are owned by Hyperion as
treasury stock and any shares of Hyperion Common Stock owned by Arbor, Sub or
any other wholly-owned Subsidiary (as defined in Section 3.01) of Arbor shall be
canceled and retired and shall cease to exist and no stock of Arbor or other
consideration shall be delivered in exchange therefor. All shares of Common
Stock, par value $.001 per share, of Arbor ("Arbor Common Stock") owned by
Hyperion shall be unaffected by the Merger.
(c) EXCHANGE RATIO FOR HYPERION COMMON STOCK. Subject to Section 2.02, each
issued and outstanding share of Hyperion Common Stock (other than shares to be
canceled in accordance with Section 2.01(b)) shall be converted into the right
to receive .95 shares (the "Exchange Ratio") of Arbor Common Stock. All such
shares of Hyperion Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the shares
of Arbor Common Stock and any cash in lieu of fractional shares of Arbor Common
Stock to be issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 2.02, without interest.
(d) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Arbor
Common Stock or Hyperion Common Stock), reorganization, recapitalization or
other like change with respect to Arbor Common Stock or Hyperion Common Stock
occurring after the date hereof and prior to the Effective Time.
Section 2.02 EXCHANGE OF CERTIFICATES. The procedures for exchanging
outstanding shares of Hyperion Common Stock for Arbor Common Stock pursuant to
the Merger are as follows:
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(a) EXCHANGE AGENT. As of the Effective Time, Arbor shall deposit with a
bank or trust company designated by Hyperion and Arbor (the "Exchange Agent"),
for the benefit of the holders of shares of Hyperion Common Stock, for exchange
in accordance with this Section 2.02, through the Exchange Agent, (i)
certificates representing the shares of Arbor Common Stock (such shares of Arbor
Common Stock, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.01 in exchange for outstanding shares of Hyperion Common Stock, and
(ii) cash in an amount sufficient to permit payment of cash in lieu of
fractional shares pursuant to Section 2.02(e).
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, but not later than ten business days thereafter, the Exchange
Agent shall mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Hyperion Common Stock (the "Certificates") whose shares were converted pursuant
to Section 2.01 into the right to receive shares of Arbor Common Stock (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Hyperion and Arbor may reasonably specify) and (ii) instructions
for effecting the surrender of the Certificates in exchange for certificates
representing shares of Arbor Common Stock (plus cash in lieu of fractional
shares, if any, of Arbor Common Stock as provided below). Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Hyperion and Arbor, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Arbor Common Stock which such holder has the right to receive pursuant
to the provisions of this Article II and payment in lieu of fractional shares
which the holder of such Certificate has the right to receive pursuant to
Section 2.02(e), and the Certificate so surrendered shall immediately be
canceled. In the event of a transfer of ownership of Hyperion Common Stock which
is not registered in the transfer records of Hyperion, a certificate
representing the proper number of shares of Arbor Common Stock may be issued to
a transferee if the Certificate representing such Hyperion Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer or other applicable taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Arbor Common Stock and cash in
lieu of any fractional shares of Arbor Common Stock as contemplated by this
Section 2.02.
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(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other
distributions declared or made after the Effective Time with respect to Arbor
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Arbor
Common Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to subsection (e) below until
the holder of record of such Certificate shall surrender such Certificate.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Arbor Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Arbor Common Stock to which such holder
is entitled pursuant to subsection (e) below and the amount of dividends or
other distributions with a record date after the Effective Time previously paid
with respect to such whole shares of Arbor Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Arbor
Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN HYPERION COMMON STOCK. All shares of
Arbor Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to subsection
(c) or (e) of this Section 2.02) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Hyperion Common Stock,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which may have been declared or made by Hyperion on such shares of Hyperion
Common Stock in accordance with the terms of this Agreement (to the extent
permitted under Section 5.01) prior to the date hereof and which remain unpaid
at the Effective Time, and from and after the Effective Time there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Hyperion Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Section 2.02.
(e) NO FRACTIONAL SHARES. No certificate or scrip representing fractional
shares of Arbor Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Arbor.
Notwithstanding any other provision of this Agreement, each holder of shares of
Hyperion Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Arbor Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Arbor Common Stock multiplied by the average of the last reported
sales prices of Arbor Common
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Stock, as reported on the Nasdaq National Market, on each of the ten trading
days immediately preceding the Closing Date.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the stockholders of Hyperion for 180 days after the
Effective Time shall be delivered to Arbor, upon demand, and any stockholders of
Hyperion who have not previously complied with this Section 2.02 shall
thereafter look only to Arbor for payment of their claim for Arbor Common Stock,
any cash in lieu of fractional shares of Arbor Common Stock and any dividends or
distributions with respect to Arbor Common Stock.
(g) NO LIABILITY. To the extent permitted by applicable law, neither Arbor
nor Hyperion shall be liable to any holder of shares of Arbor Common Stock or
Hyperion Common Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(h) WITHHOLDING RIGHTS. Each of Arbor and the Surviving Corporation shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Hyperion Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Surviving Corporation or
Arbor, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Hyperion Common Stock in respect of which such deduction and withholding was
made by the Surviving Corporation or Arbor, as the case may be.
(i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the shares
of Arbor Common Stock and any cash in lieu of fractional shares, and unpaid
dividends and distributions on shares of Arbor Common Stock deliverable in
respect thereof pursuant to this Agreement.
(j) AFFILIATES. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in Section
6.10) of Hyperion shall not be exchanged until Arbor has received an Affiliate
Agreement (as defined in Section 6.10) from such Affiliate.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ARBOR AND SUB
Arbor and Sub represent and warrant to Hyperion that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure schedule delivered by Arbor to Hyperion prior to the
execution and delivery of this Agreement (the "Arbor Disclosure Schedule"). The
Arbor Disclosure Schedule shall be arranged in sections and paragraphs
corresponding to the numbered and lettered sections and paragraphs contained in
this Article III and the disclosure in any section or paragraph shall qualify
other sections and paragraphs in this Article III only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other sections and paragraphs.
Section 3.01 ORGANIZATION OF ARBOR AND SUB. Each of Arbor and Sub and
Arbor's other Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power to own, lease and operate its
property and to carry on its business as now being conducted and as proposed to
be conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have an Arbor Material Adverse Effect (as defined below). Except as set
forth in the Arbor SEC Reports (as defined in Section 3.04) filed prior to the
date hereof, neither Arbor nor any of its Subsidiaries directly or indirectly
owns any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any corporation, partnership, joint venture or
other business association or entity, excluding securities in any publicly
traded company held for investment by Arbor and comprising less than five
percent (5%) of the outstanding stock of such company. As used in this
Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (a) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (b) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries. As used in this Agreement, any
reference to a party's "knowledge" means, with respect to a matter, such party's
actual knowledge after due and diligent inquiry of officers, directors and other
employees of such party and its Subsidiaries reasonably believed to have
knowledge of such matter. For purposes of this Agreement, the term "Arbor
Material Adverse Effect" means any effect that is, or would reasonably be
expected to be, materially adverse to the business, properties, financial
condition or results of
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operations of Arbor and its Subsidiaries, taken as a whole; provided, however,
that (i) any adverse change, event or effect that is demonstrated to be
primarily caused by conditions affecting the United States economy generally or
the economy of any nation or region in which Arbor or any of its Subsidiaries
conducts business that is material to the business of Arbor and its
Subsidiaries, taken as a whole, shall not be taken into account in determining
whether there has been or would be an "Arbor Material Adverse Effect" on or with
respect to Arbor and its Subsidiaries, taken as a whole, (ii) any adverse
change, event or effect that is demonstrated to be primarily caused by
conditions generally affecting the enterprise software industry shall not be
taken into account in determining whether there has been or would be an "Arbor
Material Adverse Effect" on or with respect to Arbor and its Subsidiaries, taken
as a whole, (iii) any adverse change, event or effect that is demonstrated to be
primarily caused by the announcement or pendency of the Merger shall not be
taken into account in determining whether there has been or would be an "Arbor
Material Adverse Effect" on or with respect to Arbor and its Subsidiaries, taken
as a whole, and (iv) any adverse change in the stock price of Arbor as quoted on
the Nasdaq National Market shall not be taken into account in determining
whether there has been or would be an "Arbor Material Adverse Effect" on or with
respect to Arbor and its Subsidiaries, taken as a whole.
Section 3.02 ARBOR CAPITAL STRUCTURE.
(a) The authorized capital stock of Arbor consists of 50,000,000 shares of
Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001
par value ("Arbor Preferred Stock"). As of March 31, 1998, (i) 11,402,591 shares
of Arbor Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) 1,774,402 shares of Arbor Common
Stock were reserved for issuance upon conversion of Arbor's 4 1/2% Convertible
Subordinated Notes Due 2005 in the original principal amount of $100,000,000
(the "Arbor Notes") and (iii) no shares of Arbor Common Stock were held in the
treasury of Arbor or by Subsidiaries of Arbor. Section 3.02 of the Arbor
Disclosure Schedule shows the number of shares of Arbor Common Stock reserved
for future issuance pursuant to stock options granted and outstanding as of
March 31, 1998 and the plans under which such options were granted (together
with the Arbor Employee Stock Purchase Plan, the "Arbor Stock Plans"). No
material change in such capitalization has occurred between March 31, 1998 and
the date of this Agreement. As of the date of this Agreement, none of the shares
of Arbor Preferred Stock is issued and outstanding. All shares of Arbor Common
Stock subject to issuance as specified above are duly authorized and, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be validly issued, fully paid and nonassessable.
There are no obligations, contingent or otherwise, of Arbor or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Arbor
Common Stock or the capital stock of any Subsidiary or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
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otherwise) in any such Subsidiary or any other entity other than guarantees of
bank obligations of Subsidiaries entered into in the ordinary course of
business. All of the outstanding shares of capital stock of each of Arbor's
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and all such shares (other than directors' qualifying shares in the case of
foreign Subsidiaries) are owned by Arbor or another Subsidiary free and clear of
all security interests, liens, claims, pledges, agreements, limitations in
Arbor's voting rights, charges or other encumbrances of any nature.
(b) Except as set forth in this Section 3.02 or as reserved for future
grants of options and issuances of shares of Common Stock under the Arbor Stock
Plans, the Arbor Notes or the Hyperion Stock Option Agreement, there are no
equity securities of any class of Arbor or any of its Subsidiaries, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as set forth in the Arbor SEC
Reports filed prior to the date hereof, in the Hyperion Stock Option Agreement
or disclosed in Section 3.02 of the Arbor Disclosure Schedule, there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which Arbor or any of its Subsidiaries is a party or by
which it is bound obligating Arbor or any of its Subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock of Arbor or any of its Subsidiaries or obligating Arbor or any of its
Subsidiaries to grant, extend, accelerate the vesting of, change the price of,
or otherwise amend or enter into any such option, warrant, equity security,
call, right, commitment or agreement. To the best knowledge of Arbor, there are
no voting trusts, proxies or other voting agreements or understandings with
respect to the shares of capital stock of Arbor.
Section 3.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Each of Arbor and Sub has all requisite corporate power and authority
to enter into this Agreement and the Hyperion Stock Option Agreement and to
consummate the transactions contemplated by this Agreement and the Hyperion
Stock Option Agreement. The execution and delivery of this Agreement and the
Hyperion Stock Option Agreement and the consummation of the transactions
contemplated by this Agreement and the Hyperion Stock Option Agreement by Arbor
have been duly authorized by all necessary corporate action on the part of each
of Arbor and Sub (including the approval of the Merger by Arbor as the sole
stockholder of Sub), subject only to the approval of the Arbor Voting Proposals
(as defined in Section 6.05) by Arbor's stockholders. This Agreement and the
Hyperion Stock Option Agreement have been duly executed and delivered by Arbor
and, in the case of this Agreement, Sub, and constitute the valid and binding
obligations of Arbor and, in the case of this Agreement, Sub, enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization,
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moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles (the "Bankruptcy and Equity
Exception").
(b) The execution and delivery of this Agreement and the Hyperion Stock
Option Agreement by Arbor and, in the case of this Agreement, Sub, does not, and
the consummation of the transactions contemplated by this Agreement and the
Hyperion Stock Option Agreement will not, (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of Incorporation or
Bylaws of Arbor or Sub, each as amended to date, (ii) result in any violation
of, or default under or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Arbor or any of its Subsidiaries is
a party or by which any of them or any of their properties or assets may be
bound, or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Arbor or any of its Subsidiaries or any of its or their properties
or assets, except in the case of clauses (ii) and (iii) for any such conflicts,
violations, defaults, terminations, cancellations or accelerations that are not,
individually or in the aggregate, reasonably likely to have an Arbor Material
Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Arbor or any of its Subsidiaries in connection
with the execution and delivery of this Agreement and the Hyperion Stock Option
Agreement or the consummation of the transactions contemplated hereby or
thereby, except for (i) the filing of a pre-merger notification report under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Registration Statement (as defined in Section 3.16
below) with the Securities and Exchange Commission (the "SEC") in accordance
with the Securities Act, (iii) the filing of the Certificate of Merger with the
Secretary of State of Delaware, (iv) the filing of the Joint Proxy Statement (as
defined in Section 3.16 below) with the SEC in accordance with the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the National
Association of Securities Dealers, Inc., and any clearance thereof by the SEC,
(v) the filing with the Nasdaq National Market of a Notification Form for
Listing of Additional Shares, (vi) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the laws of any foreign country and (vii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not be reasonably likely to have an Arbor
Material Adverse Effect.
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Section 3.04 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Arbor has filed and made available to Hyperion all forms, reports and
documents required to be filed by Arbor with the SEC since April 1, 1995 other
than registration statements on Form S-8 (collectively, the "Arbor SEC
Reports"). The Arbor SEC Reports (i) at the time filed or, with respect to
registration statements filed with the SEC under the Securities Act, as of the
effective date thereof, complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Arbor SEC Reports or necessary in order to make the statements in such Arbor SEC
Reports, in the light of the circumstances under which they were made, not
misleading. None of Arbor's Subsidiaries is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the Arbor SEC Reports complied as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto, was prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and fairly presented the consolidated financial position of Arbor and
its Subsidiaries as of the dates and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
unaudited balance sheet of Arbor as of March 31, 1998 is referred to herein as
the "Arbor Balance Sheet."
Section 3.05 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Arbor
SEC Reports filed prior to the date hereof, and except for normal or recurring
liabilities incurred since March 31, 1998 in the ordinary course of business
consistent with past practices, Arbor and its Subsidiaries do not have any
liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with GAAP), and whether due
or to become due, which individually or in the aggregate are reasonably likely
to have an Arbor Material Adverse Effect.
Section 3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Arbor SEC Reports filed prior to the date hereof, during the period
commencing on the date of the Arbor Balance Sheet and ending on the date of this
Agreement, Arbor and its Subsidiaries have conducted their businesses only in
the ordinary course and
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in a manner consistent with past practice and, during such period, there has not
been (i) any change in the financial condition, results of operations, business
or properties of Arbor and its Subsidiaries, taken as a whole, which has had or
could reasonably be expected to have an Arbor Material Adverse Effect; (ii) any
damage, destruction or loss (whether or not covered by insurance) with respect
to Arbor or any of its Subsidiaries having an Arbor Material Adverse Effect;
(iii) any material change by Arbor in its accounting methods, principles or
practices to which Hyperion has not previously consented in writing; (iv) any
revaluation by Arbor of any of its assets having an Arbor Material Adverse
Effect; or (v) any other action or event that would have required the consent of
Hyperion pursuant to Section 5.01 of this Agreement had such action or event
occurred after the date of this Agreement and that, in the case of this clause
(v), individually or in the aggregate, has had or is reasonably likely to have
an Arbor Material Adverse Effect.
Section 3.07 TAXES.
(a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes"
means any and all material federal, state, local and foreign taxes, assessments
and other governmental charges, duties, impositions and liabilities, including
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, gains, franchise,
withholding, payroll, recapture, employment, excise, unemployment insurance,
social security, business license, occupation, business organization, stamp,
environmental and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts and any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity. "Tax Returns"
means all reports, returns, declarations, statements or other information
required to be supplied to a taxing authority in connection with Taxes.
(b) Each of Arbor and its Subsidiaries has filed all Tax Returns that it
was required to file, and, except to the extent that a reserve for Taxes was
reflected on the Arbor Balance Sheet (exclusive of any accruals for "deferred
taxes" or similar items that reflect timing differences between Tax and
financial accounting principles), all such Tax Returns were correct and
complete. Each group of corporations with which Arbor or any Subsidiary has
filed (or was required to file) consolidated, combined, unitary or similar Tax
Returns (an "Arbor Affiliated Group") has filed all such Tax Returns that it was
required to file with respect to any period in which Arbor or a Subsidiary was a
member of such Arbor Affiliated Group (an "Arbor Affiliated Period"), and,
except to the extent that a reserve for Taxes was reflected on the Arbor Balance
Sheet (exclusive of any accruals for "deferred taxes" or similar items that
reflect timing differences between Tax and financial accounting principles), all
such Tax Returns were correct and complete. Except to the extent that a reserve
for Taxes was reflected on the Arbor Balance Sheet (exclusive of any accruals
for "deferred taxes" or similar items that reflect timing differences between
Tax and financial
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accounting principles), each of Arbor and its Subsidiaries has paid all Taxes
(whether or not shown on such Tax Returns) that were due and payable, and each
Arbor Affiliated Group has paid all Taxes (whether or not shown on such Tax
Returns) that were due and payable with respect to all Arbor Affiliated Periods
and with respect to which Arbor or any of its Subsidiaries may be liable by
operation of law or otherwise. The unpaid Taxes of Arbor and the Subsidiaries
for Tax periods through the date of the Arbor Balance Sheet do not exceed the
accruals and reserves for Taxes set forth on the Arbor Balance Sheet (exclusive
of any accruals for "deferred taxes" or similar items that reflect timing
differences between Tax and financial accounting principles). The unpaid Taxes
of Arbor and the Subsidiaries for Tax periods from the date of the Arbor Balance
Sheet through the Closing Date are attributable solely to the conduct of their
businesses in the ordinary course and in a manner consistence with past
practices. All Taxes that Arbor or any Subsidiary is or was required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity. Each of the
representations contained in this Section 3.07(b) shall be limited in its
application to items which are reasonably likely, individually or in the
aggregate, to have an Arbor Material Adverse Effect.
(c) Arbor is not and never has been a party to or bound by any Tax
indemnity, Tax sharing or Tax allocation agreement (whether written or unwritten
or arising under operation of federal law as a result of being a member of a
group filing consolidated Tax Returns, under operation of certain state laws as
a result of being a member of a unitary group, or under comparable laws of other
states or foreign jurisdictions) which includes a party other than Arbor nor
does Arbor owe any amount under any such agreement. No examination or audit by
any Governmental Entity of any Tax Return of Arbor, any of its Subsidiaries or
any Arbor Affiliated Group with respect to an Arbor Affiliated Period is
currently in progress or, to the knowledge of Arbor and its Subsidiaries,
threatened or contemplated, in each case, which involve claims that individually
or in the aggregate are reasonably likely to have an Arbor Material Adverse
Effect. Neither Arbor nor any of its Subsidiaries has been informed by any
jurisdiction that the jurisdiction believes that Arbor or any of its
Subsidiaries was required to file any Tax Return that was not filed which
failure or failures individually, or in the aggregate, are reasonably likely to
have an Arbor Material Adverse Effect.
(d) Neither Arbor nor any of its Subsidiaries is a "consenting corporation"
within the meaning of Section 341(f) of the Code, and none of the assets of
Arbor or the Subsidiaries are subject to an election under Section 341(f) of the
Code.
(e) Neither Arbor nor any of its Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
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(f) Neither Arbor nor any of its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that will be an "excess parachute payment"
under Code Section 280G.
Section 3.08 PROPERTIES.
(a) Arbor does not own of record any real property.
(b) All material real property leases of Arbor and its Subsidiaries are in
good standing, valid and effective in accordance with their respective terms,
and neither Arbor nor any of its Subsidiaries is in default under any of such
leases, except where the lack of such good standing, validity or effectiveness
or the existence of such default would not be reasonably likely to have an Arbor
Material Adverse Effect.
Section 3.09 INTELLECTUAL PROPERTY.
(a) Arbor and its Subsidiaries own, or are licensed or otherwise possess
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and mask works, any applications for and registrations of such
patents, trademarks, trade names, service marks, copyrights and mask works, and
all processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of Arbor and
its Subsidiaries as currently conducted, or planned to be conducted, the absence
of which would be reasonably likely to have an Arbor Material Adverse Effect
(the "Arbor Intellectual Property Rights").
(b) Neither Arbor nor any of its Subsidiaries is, or will as a result of
the execution and delivery of this Agreement or the performance of Arbor's
obligations under this Agreement or otherwise be, in breach of any license,
sublicense or other agreement relating to the Arbor Intellectual Property
Rights, or any material licenses, sublicenses and other agreements as to which
Arbor or any of its Subsidiaries is a party and pursuant to which Arbor or any
of its Subsidiaries is authorized to use any third party patents, trademarks or
copyrights ("Arbor Third Party Intellectual Property Rights"), including
software that is used in the manufacture of, incorporated in, or forms a part of
any product sold by or expected to be sold by Arbor or any of its Subsidiaries,
the breach of which would be reasonably likely to have an Arbor Material Adverse
Effect.
(c) All patents, registered trademarks, service marks and copyrights which
are held by Arbor or any of its Subsidiaries and which are material to the
business of Arbor and its Subsidiaries, taken as a whole, are valid and
subsisting. Arbor (i) has
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not been sued in any suit, action or proceeding, or received in writing any
claim or notice, which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or violation of any trade secret or other
proprietary right of any third party; and (ii) has no knowledge that the
manufacturing, marketing, licensing or sale of its products infringes any
patent, trademark, service mark, copyright, trade secret or other proprietary
right of any third party, which infringement would reasonably be expected to
have an Arbor Material Adverse Effect.
Section 3.10 AGREEMENTS, CONTRACTS AND COMMITMENTS. Arbor has not breached,
or received in writing any claim or notice that it has breached, any of the
terms or conditions of any agreement, contract or commitment filed as an exhibit
to the Arbor SEC Reports ("Arbor Material Contracts") in such a manner as,
individually or in the aggregate, are reasonably likely to have an Arbor
Material Adverse Effect. Each Arbor Material Contract that has not expired by
its terms is in full force and effect.
Section 3.11 LITIGATION. Except as described in the Arbor SEC Reports filed
prior to the date hereof, there is no action, suit or proceeding, claim,
arbitration or investigation against Arbor or any of its Subsidiaries pending or
as to which Arbor or any such Subsidiary has received any written notice of
assertion, which, individually or in the aggregate, is reasonably likely to have
an Arbor Material Adverse Effect or a material adverse effect on the ability of
Arbor to consummate the transactions contemplated by this Agreement.
Section 3.12 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the Arbor SEC Reports filed prior to the date
hereof and except for such matters that, individually or in the aggregate, are
not reasonably likely to have an Arbor Material Adverse Effect: (i) Arbor and
its Subsidiaries have complied with all applicable Environmental Laws (as
defined in Section 3.12(b)); (ii) the properties currently owned or operated by
Arbor and its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances (as defined in Section 3.12(c)); (iii) the properties formerly owned
or operated by Arbor or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by Arbor or any
of its Subsidiaries; (iv) neither Arbor nor any of its Subsidiaries are subject
to liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither Arbor nor any of its Subsidiaries has been
associated with any release or threat of release of any Hazardous Substance;
(vi) neither Arbor nor any of its Subsidiaries has received any notice, demand,
letter, claim or request for information alleging that Arbor or any of its
Subsidiaries may be in violation of or liable under any Environmental Law; (vii)
neither Arbor nor any of its Subsidiaries is subject to any orders, decrees,
injunctions or other arrangements with any Governmental Entity or is subject to
any indemnity
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or other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving Arbor or any of its Subsidiaries that
could reasonably be expected to result in any claims, liability, investigations,
costs or restrictions on the ownership, use or transfer of any property of Arbor
pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (i) the protection, investigation
or restoration of the environment, health and safety, or natural resources, (ii)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (iii) noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property.
(c) As used herein, the term "Hazardous Substance" means any substance that
is: (i) listed, classified or regulated pursuant to any Environmental Law; (ii)
any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; or (iii) any other substance which is the subject of
regulatory action by any Governmental Entity pursuant to any Environmental Law.
Section 3.13 EMPLOYEE BENEFIT PLANS.
(a) Arbor has listed in Section 3.13 of the Arbor Disclosure Schedule all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar employee benefit plans, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of Arbor or any trade or business (whether or not
incorporated) (an "ERISA Affiliate") which under Section 414 of the Code is
aggregated with Arbor or any Subsidiary of Arbor (collectively, the "Arbor
Employee Plans").
(b) With respect to each Arbor Employee Plan, Arbor has made available to
Hyperion a true and correct copy of (i) the most recent annual report (Form
5500), if any, filed with the IRS, (ii) such Arbor Employee Plan, (iii) each
trust agreement and group annuity contract, if any, relating to such Arbor
Employee Plan and (iv) the most recent actuarial report or valuation relating to
an Arbor Employee Plan subject to Title IV of ERISA.
(c) With respect to the Arbor Employee Plans, individually and in the
aggregate, no event has occurred and, to the knowledge of Arbor, there exists no
condition or set of circumstances in connection with which Arbor could be
subject to
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any liability that is reasonably likely to have an Arbor Material Adverse Effect
under ERISA, the Code or any other applicable law.
(d) With respect to the Arbor Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
that have not been accounted for by reserves, or otherwise properly footnoted in
accordance with GAAP, on the financial statements of Arbor, which obligations
are reasonably likely to have an Arbor Material Adverse Effect.
(e) Except as disclosed in Arbor SEC Reports filed prior to the date of
this Agreement, and except as provided for in this Agreement, neither Arbor nor
any of its Subsidiaries is a party to any oral or written (i) agreement with any
officer or other key employee of Arbor or any of its Subsidiaries, the benefits
of which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Arbor of the nature contemplated by this
Agreement, (ii) agreement with any officer of Arbor providing any term of
employment or compensation guarantee extending for a period longer than one year
from the date hereof and for the payment of compensation in excess of $100,000
per annum, or (iii) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
Section 3.14 COMPLIANCE WITH LAWS. Arbor and each of its Subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to
have an Arbor Material Adverse Effect.
Section 3.15 ACCOUNTING AND TAX MATTERS. To its knowledge, after consulting
with its independent auditors, neither Arbor nor any of its Affiliates (as
defined in Section 6.10) has taken or agreed to take any action which would (i)
prevent Arbor from accounting for the business combination to be effected by the
Merger as a pooling of interests or (ii) prevent the Merger from constituting a
transaction qualifying as a reorganization under 368(a) of the Code.
Section 3.16 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information to be supplied by Arbor for inclusion in the registration statement
on Form S-4 pursuant to which shares of Arbor Common Stock issued in the Merger
will be registered under the Securities Act (the "Registration Statement") shall
not at
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the time the Registration Statement is declared effective by the SEC contain any
untrue statement of a material fact or omit to state any material fact required
to be stated in the Registration Statement or necessary in order to make the
statements in the Registration Statement, in light of the circumstances under
which they were made, not misleading. The information supplied by Arbor for
inclusion in the joint proxy statement/prospectus to be sent to the stockholders
of Hyperion and Arbor in connection with the meeting of Arbor's stockholders
(the "Arbor Stockholders' Meeting") to consider the issuance of shares of Arbor
Common Stock pursuant to the Merger and in connection with the meeting of
Hyperion's stockholders (the "Hyperion Stockholders' Meeting") to consider this
Agreement and the Merger (the "Joint Proxy Statement") shall not, on the date
the Joint Proxy Statement is first mailed to stockholders of Arbor or Hyperion,
at the time of the Arbor Stockholders' Meeting and the Hyperion Stockholders'
Meeting and at the Effective Time, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Joint Proxy Statement not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Arbor Stockholders' Meeting or the Hyperion Stockholders'
Meeting which has become false or misleading. If at any time prior to the
Effective Time any event relating to Arbor or any of its Affiliates, officers or
directors should be discovered by Arbor which should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement, Arbor shall promptly inform Hyperion. Notwithstanding the foregoing,
Arbor makes no representation, warranty or covenant with respect to any
information supplied by Hyperion that is contained in any of the foregoing
documents.
Section 3.17 LABOR MATTERS. Neither Arbor nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor,
as of the date hereof, is Arbor or any of its Subsidiaries the subject of any
material proceeding asserting that Arbor or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization nor, as of the date of this Agreement, is
there pending or, to the knowledge of Arbor, threatened, any material labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving Arbor or
any of its Subsidiaries.
Section 3.18 INSURANCE; RISK MANAGEMENT. All material fire and casualty,
general liability, business interruption, product liability, and sprinkler and
water damage insurance policies maintained by Arbor or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Arbor and its Subsidiaries and
their respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or
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hazards, except for any such failures to maintain insurance policies that,
individually or in the aggregate, are not reasonably likely to have an Arbor
Material Adverse Effect. The steps taken by Arbor to manage the various risks
incident to the business and operations of Arbor and its Subsidiaries and their
respective properties and assets are at least equivalent to those taken by
persons engaged in similar businesses, except for any failures to take such
steps that, individually or in the aggregate, are not reasonably likely to have
an Arbor Material Adverse Effect.
Section 3.19 NO EXISTING DISCUSSIONS. As of the date hereof, Arbor is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal (as defined in Section
6.01).
Section 3.20 OPINION OF FINANCIAL ADVISOR. The financial advisor of Arbor,
Morgan Stanley & Co. Incorporated, has delivered to Arbor an opinion dated the
date of this Agreement to the effect that the Exchange Ratio is fair to the
holders of Arbor Common Stock from a financial point of view.
Section 3.21 SECTION 203 OF THE DGCL NOT APPLICABLE. The Board of Directors
of Arbor has taken all actions so that the restrictions contained in Section 203
of the DGCL applicable to a "business combination" (as defined in Section 203)
will not apply to the execution, delivery or performance of this Agreement or
the Hyperion Stock Option Agreement or the consummation of the Merger or the
other transactions contemplated by this Agreement or by the Hyperion Stock
Option Agreement.
Section 3.22 INSIDER TRADING POLICIES AND PRACTICES. Section 3.22 to the
Arbor Disclosure Schedule sets forth a copy of Arbor's insider trading policy as
in effect on the date hereof. Arbor and, to the knowledge of Arbor, each of its
directors, officers and employees who are subject to such policy have complied
in all material respects with the terms of such policy.
Section 3.23 INTERIM OPERATIONS OF SUB. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HYPERION
Hyperion represents and warrants to Arbor and Sub that the statements
contained in this Article IV are true and correct except as set forth herein and
in the disclosure schedule delivered by Hyperion to Arbor prior to the execution
and delivery of this Agreement (the "Hyperion Disclosure Schedule"). The
Hyperion Disclosure Schedule shall be arranged in sections and paragraphs
corresponding to the numbered and lettered sections and paragraphs contained in
this Article IV and the disclosure in any section or paragraph shall qualify
other sections and paragraphs in this Article IV only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other sections and paragraphs.
Section 4.01 ORGANIZATION OF HYPERION. Each of Hyperion and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power to own, lease and operate its property and to carry on
its business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have a Hyperion
Material Adverse Effect (as defined below). Except as set forth in the Hyperion
SEC Reports (as defined in Section 4.04) filed prior to the date hereof, neither
Hyperion nor any of its Subsidiaries directly or indirectly owns any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or other business
association or entity, excluding securities in any publicly traded company held
for investment by Hyperion and comprising less than five percent (5%) of the
outstanding stock of such company. For purposes of this Agreement, the term
"Hyperion Material Adverse Effect" means any effect that is, or would reasonably
be expected to be, materially adverse to the business, properties, financial
condition or results of operations of Hyperion and its Subsidiaries, taken as a
whole; provided, however, that (a) any adverse change, event or effect that is
demonstrated to be primarily caused by conditions affecting the United States
economy generally or the economy of any nation or region in which Hyperion or
any of its Subsidiaries conducts business that is material to the business of
Hyperion and its Subsidiaries, taken as a whole, shall not be taken into account
in determining whether there has been or would be a "Hyperion Material Adverse
Effect" on or with respect to Hyperion and its Subsidiaries, taken as a whole,
(b) any adverse change, event or effect that is demonstrated to be primarily
caused by conditions generally affecting the enterprise software industry shall
not be taken into account in determining whether there has been or would be a
"Hyperion Material Adverse Effect" on or with respect to Hyperion and its
Subsidiaries, taken as a whole, (c) any adverse change, event or effect that is
demonstrated to be primarily caused by the announcement or pendency of the
Merger shall not be taken into account in determining whether there
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has been or would be a "Hyperion Material Adverse Effect" on or with respect to
Hyperion and its Subsidiaries, taken as a whole, and (d) any adverse change in
the stock price of Hyperion as quoted on the Nasdaq National Market shall not be
taken into account in determining whether there has been or would be a "Hyperion
Material Adverse Effect" on or with respect to Hyperion and its Subsidiaries,
taken as a whole.
Section 4.02 HYPERION CAPITAL STRUCTURE.
(a) The authorized capital stock of Hyperion consists of 50,000,000 shares
of Common Stock, $.01 par value, and 1,000,000 shares of Preferred Stock, $.01
par value ("Hyperion Preferred Stock"). As of March 31, 1998, (i) 19,040,506
shares of Hyperion Common Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable, and (ii) 4,344,599 shares of
Hyperion Common Stock were held in the treasury of Hyperion or by Subsidiaries
of Hyperion. Section 4.02 of the Hyperion Disclosure Schedule shows the number
of shares of Hyperion Common Stock reserved for future issuance pursuant to
stock options granted and outstanding as of March 31, 1998 and the plans under
which such options were granted (together with the Hyperion 1991 Employee Stock
Purchase Plan, the "Hyperion Stock Plans"). No material change in such
capitalization has occurred between March 31, 1998 and the date of this
Agreement. As of the date of this Agreement, none of the shares of Hyperion
Preferred Stock is issued and outstanding. All shares of Hyperion Common Stock
subject to issuance as specified above are duly authorized and, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, shall be validly issued, fully paid and nonassessable. There are no
obligations, contingent or otherwise, of Hyperion or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Hyperion Common Stock or
the capital stock of any Subsidiary or to provide funds to or make any material
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or any other entity other than guarantees of bank obligations of
Subsidiaries entered into in the ordinary course of business. All of the
outstanding shares of capital stock of each of Hyperion's Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and all such shares
(other than directors' qualifying shares in the case of foreign Subsidiaries)
are owned by Hyperion or another Subsidiary free and clear of all security
interests, liens, claims, pledges, agreements, limitations in Hyperion's voting
rights, charges or other encumbrances of any nature.
(b) Except as set forth in this Section 4.02 or as reserved for future
grants of options and issuances of shares of Common Stock under the Hyperion
Stock Plans or the Arbor Stock Option Agreement, and except for the rights (the
"Hyperion Rights") issued and issuable under the Rights Agreement dated November
17, 1995, as amended, between Hyperion and American Stock Transfer & Trust
Company (the "Hyperion Rights Plan"), there are no equity securities of any
class of Hyperion
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or any of its Subsidiaries, or any security exchangeable into or exercisable for
such equity securities, issued, reserved for issuance or outstanding. Except as
set forth in the Hyperion SEC Reports filed prior to the date hereof, in the
Arbor Stock Option Agreement or disclosed in Section 4.02 of the Hyperion
Disclosure Schedule, there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which Hyperion or any of
its Subsidiaries is a party or by which it is bound obligating Hyperion or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of Hyperion or any of its
Subsidiaries or obligating Hyperion or any of its Subsidiaries to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, equity security, call, right, commitment or agreement.
To the best knowledge of Hyperion, there are no voting trusts, proxies or other
voting agreements or understandings with respect to the shares of capital stock
of Hyperion.
Section 4.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Hyperion has all requisite corporate power and authority to enter into
this Agreement and the Arbor Stock Option Agreement and to consummate the
transactions contemplated by this Agreement and the Arbor Stock Option
Agreement. The execution and delivery of this Agreement and the Arbor Stock
Option Agreement and the consummation of the transactions contemplated by this
Agreement and the Arbor Stock Option Agreement by Hyperion have been duly
authorized by all necessary corporate action on the part of Hyperion, subject
only to the approval of the Merger by Hyperion's stockholders under the DGCL.
This Agreement and the Arbor Stock Option Agreement have been duly executed and
delivered by Hyperion and constitute the valid and binding obligation of
Hyperion, enforceable in accordance with their terms, subject to the Bankruptcy
and Equity Exception.
(b) The execution and delivery of this Agreement and the Arbor Stock Option
Agreement by Hyperion does not, and the consummation of the transactions
contemplated by this Agreement and the Arbor Stock Option Agreement will not,
(i) conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Hyperion, each as amended to date,
(ii) result in any violation of, or default under or breach of, or constitute
(with or without notice or lapse of time, or both) a default (or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
any material benefit) under, or require a consent or waiver under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which Hyperion or any
of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) conflict with or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Hyperion or any of its Subsidiaries
or any of its or their properties or assets, except in the case of clauses (ii)
and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or
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accelerations that are not, individually or in the aggregate, reasonably likely
to have a Hyperion Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Hyperion or any of its Subsidiaries in connection with the execution
and delivery of this Agreement and the Arbor Stock Option Agreement or the
consummation of the transactions contemplated hereby or thereby, except for (i)
the filing of a pre-merger notification report under the HSR Act, (ii) the
filing of the Certificate of Merger with the Secretary of State of Delaware,
(iii) the filing of the Joint Proxy Statement with the SEC in accordance with
the Exchange Act and the National Association of Securities Dealers, Inc., and
any clearance thereof by the SEC, (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the laws of any foreign country and (v)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not be reasonably likely to have a Hyperion
Material Adverse Effect.
Section 4.04 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Hyperion has filed and made available to Arbor all forms, reports and
documents required to be filed by Hyperion with the SEC since July 1, 1995 other
than registration statements on Form S-8 (collectively, the "Hyperion SEC
Reports"). The Hyperion SEC Reports (i) at the time filed or, with respect to
registration statements filed with the SEC under the Securities Act, as of the
effective date thereof, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Hyperion SEC Reports or necessary in order to make
the statements in such Hyperion SEC Reports, in the light of the circumstances
under which they were made, not misleading. None of Hyperion's Subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the Hyperion SEC Reports complied as to form in
all material respects with the applicable published rules and regulations of the
SEC with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) and fairly presented the consolidated
financial position of Hyperion and its Subsidiaries as of the dates and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim
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financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
audited balance sheet of Hyperion as of June 30, 1997 is referred to herein as
the "Hyperion Balance Sheet."
Section 4.05 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Hyperion SEC Reports filed prior to the date hereof, and except for normal or
recurring liabilities incurred since June 30, 1997 in the ordinary course of
business consistent with past practices, Hyperion and its Subsidiaries do not
have any liabilities, either accrued, contingent or otherwise (whether or not
required to be reflected in financial statements in accordance with GAAP), and
whether due or to become due, which individually or in the aggregate, are
reasonably likely to have a Hyperion Material Adverse Effect.
Section 4.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Hyperion SEC Reports filed prior to the date hereof, during the period
commencing on the date of the Hyperion Balance Sheet and ending on the date of
this Agreement, Hyperion and its Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice and,
during such period, there has not been (i) any change in the financial
condition, results of operations, business or properties of Hyperion and its
Subsidiaries, taken as a whole, which has had or could reasonably be expected to
have a Hyperion Material Adverse Effect; (ii) any damage, destruction or loss
(whether or not covered by insurance) with respect to Hyperion or any of its
Subsidiaries having a Hyperion Material Adverse Effect; (iii) any material
change by Hyperion in its accounting methods, principles or practices to which
Arbor has not previously consented in writing; (iv) any revaluation by Hyperion
of any of its assets having a Hyperion Material Adverse Effect; or (v) any other
action or event that would have required the consent of Arbor pursuant to
Section 5.01 of this Agreement had such action or event occurred after the date
of this Agreement and that, in the case of this clause (v), individually or in
the aggregate, has had or is reasonably likely to have a Hyperion Material
Adverse Effect.
Section 4.07 TAXES.
(a) Each of Hyperion and its Subsidiaries has filed all Tax Returns that it
was required to file, and, except to the extent that a reserve for Taxes was
reflected on the Hyperion Balance Sheet (exclusive of any accruals for "deferred
taxes" or similar items that reflect timing differences between Tax and
financial accounting principles), all such Tax Returns were correct and
complete. Each group of corporations with which Hyperion or any Subsidiary has
filed (or was required to file) consolidated, combined, unitary or similar Tax
Returns (a "Hyperion Affiliated Group") has filed all such Tax Returns that it
was required to file with respect to any period in which Hyperion or a
Subsidiary was a member of such Hyperion Affiliated Group (a "Hyperion
Affiliated Period"), and, except to the extent that a reserve for
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Taxes was reflected on the Hyperion Balance Sheet (exclusive of any accruals for
"deferred taxes" or similar items that reflect timing differences between Tax
and financial accounting principles), all such Tax Returns were correct and
complete. Except to the extent that a reserve for Taxes was reflected on the
Hyperion Balance Sheet (exclusive of any accruals for "deferred taxes" or
similar items that reflect timing differences between Tax and financial
accounting principles), each of Hyperion and its Subsidiaries has paid all Taxes
(whether or not shown on such Tax Returns) that were due and payable, and each
Hyperion Affiliated Group has paid all Taxes (whether or not shown on such Tax
Returns) that were due and payable with respect to all Hyperion Affiliated
Periods and with respect to which Hyperion or any of its Subsidiaries may be
liable by operation of law or otherwise. The unpaid Taxes of Hyperion and the
Subsidiaries for Tax periods through the date of the Hyperion Balance Sheet do
not exceed the accruals and reserves for Taxes set forth on the Hyperion Balance
Sheet (exclusive of any accruals for "deferred taxes" or similar items that
reflect timing differences between Tax and financial accounting principles). The
unpaid Taxes of Hyperion and the Subsidiaries for Tax periods from the date of
the Hyperion Balance Sheet through the Closing Date are attributable solely to
the conduct of their businesses in the ordinary course and in a manner
consistence with past practices. All Taxes that Hyperion or any Subsidiary is or
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Entity.
Each of the representations contained in this Section 4.07(a) shall be limited
in its application to items which are reasonably likely, individually or in the
aggregate, to have a Hyperion Material Adverse Effect.
(b) Hyperion is not and never has been a party to or bound by any Tax
indemnity, Tax sharing or Tax allocation agreement (whether written or unwritten
or arising under operation of federal law as a result of being a member of a
group filing consolidated Tax Returns, under operation of certain state laws as
a result of being a member of a unitary group, or under comparable laws of other
states or foreign jurisdictions) which includes a party other than Hyperion nor
does Hyperion owe any amount under any such agreement. No examination or audit
by any Governmental Entity of any Tax Return of Hyperion, any of its
Subsidiaries or any Hyperion Affiliated Group with respect to a Hyperion
Affiliated Period is currently in progress or, to the knowledge of Hyperion and
its Subsidiaries, threatened or contemplated, in each case, which involve claims
that individually or in the aggregate are reasonably likely to have a Hyperion
Material Adverse Effect. Neither Hyperion nor any of its Subsidiaries has been
informed by any jurisdiction that the jurisdiction believes that Hyperion or any
of its Subsidiaries was required to file any Tax Return that was not filed which
failure or failures individually, or in the aggregate, are reasonably likely to
have a Hyperion Material Adverse Effect.
(c) Neither Hyperion nor any of its Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Code, and none of the
assets
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of Hyperion or the Subsidiaries are subject to an election under Section 341(f)
of the Code.
(d) Neither Hyperion nor any of its Subsidiaries has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the
Code.
(e) Neither Hyperion nor any of its Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that will be an "excess parachute payment"
under Code Section 280G.
Section 4.08 PROPERTIES.
(a) Hyperion has provided to Arbor a true and complete list of all real
property that Hyperion or any of its Subsidiaries owns. With respect to each
such item of real property, except as disclosed in the Hyperion SEC Reports and
except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Hyperion Material Adverse Effect: (a) Hyperion or
the identified Subsidiary has good and clear record and marketable title to such
property, insurable by a recognized national title insurance company at standard
rates, free and clear of any security interest, easement, covenant or other
restriction, except for recorded easements, covenants and other restrictions
which do not materially impair the current uses or occupancy of such property;
and (b) the improvements constructed on such property are in good condition, and
all mechanical and utility systems servicing such improvements are in good
condition, free in each case of material defects.
(b) All material real property leases of Hyperion and its Subsidiaries are
in good standing, valid and effective in accordance with their respective terms,
and neither Hyperion nor its Subsidiaries is in default under any of such
leases, except where the lack of such good standing, validity or effectiveness
or the existence of such default would not be reasonably likely to have a
Hyperion Material Adverse Effect.
Section 4.09 INTELLECTUAL PROPERTY.
(a) Hyperion and its Subsidiaries own, or are licensed or otherwise possess
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and mask works, any applications for and registrations of such
patents, trademarks, trade names, service marks, copyrights and mask works, and
all processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of Hyperion
and its Subsidiaries as currently conducted, or planned to be conducted, the
absence of which would be
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reasonably likely to have a Hyperion Material Adverse Effect (the "Hyperion
Intellectual Property Rights").
(b) Neither Hyperion nor any of its Subsidiaries is, or will as a result of
the execution and delivery of this Agreement or the performance of Hyperion's
obligations under this Agreement or otherwise be, in breach of any license,
sublicense or other agreement relating to the Hyperion Intellectual Property
Rights, or any material licenses, sublicenses and other agreements as to which
Hyperion or any of its Subsidiaries is a party and pursuant to which Hyperion or
any of its Subsidiaries is authorized to use any third party patents, trademarks
or copyrights ("Hyperion Third Party Intellectual Property Rights"), including
software that is used in the manufacture of, incorporated in, or forms a part of
any product sold by or expected to be sold by Hyperion or any of its
Subsidiaries, the breach of which would be reasonably likely to have a Hyperion
Material Adverse Effect.
(c) All patents, registered trademarks, service marks and copyrights which
are held by Hyperion or any of its Subsidiaries and which are material to the
business of Hyperion and its Subsidiaries, taken as a whole, are valid and
subsisting. Hyperion (i) has not been sued in any suit, action or proceeding, or
received in writing any claim or notice, which involves a claim of infringement
of any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party; and (ii) has no knowledge
that the manufacturing, marketing, licensing or sale of its products infringes
any patent, trademark, service mark, copyright, trade secret or other
proprietary right of any third party, which infringement would reasonably be
expected to have a Hyperion Material Adverse Effect.
Section 4.10 AGREEMENTS, CONTRACTS AND COMMITMENTS. Hyperion has not
breached, or received in writing any claim or notice that it has breached, any
of the terms or conditions of any agreement, contract or commitment filed as an
exhibit to the Hyperion SEC Reports ("Hyperion Material Contracts") in such a
manner as, individually or in the aggregate, are reasonably likely to have a
Hyperion Material Adverse Effect. Each Hyperion Material Contract that has not
expired by its terms is in full force and effect.
Section 4.11 LITIGATION. Except as described in the Hyperion SEC Reports
filed prior to the date hereof, there is no action, suit or proceeding, claim,
arbitration or investigation against Hyperion or any of its Subsidiaries pending
or as to which Hyperion or any such Subsidiary has received any written notice
of assertion, which, individually or in the aggregate, is reasonably likely to
have a Hyperion Material Adverse Effect or a material adverse effect on the
ability of Hyperion to consummate the transactions contemplated by this
Agreement.
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Section 4.12 ENVIRONMENTAL MATTERS. Except as disclosed in the Hyperion SEC
Reports filed prior to the date hereof and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Hyperion
Material Adverse Effect: (i) Hyperion and its Subsidiaries have complied with
all applicable Environmental Laws; (ii) the properties currently owned or
operated by Hyperion and its Subsidiaries (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by Hyperion or any
of its Subsidiaries were not contaminated with Hazardous Substances during the
period of ownership or operation by Hyperion or any of its Subsidiaries; (iv)
neither Hyperion nor any of its Subsidiaries are subject to liability for any
Hazardous Substance disposal or contamination on any third party property; (v)
neither Hyperion nor any of its Subsidiaries has been associated with any
release or threat of release of any Hazardous Substance; (vi) neither Hyperion
nor any of its Subsidiaries has received any notice, demand, letter, claim or
request for information alleging that Hyperion or any of its Subsidiaries may be
in violation of or liable under any Environmental Law; (vii) neither Hyperion
nor any of its Subsidiaries is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any indemnity
or other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving Hyperion or any of its Subsidiaries that
could reasonably be expected to result in any claims, liability, investigations,
costs or restrictions on the ownership, use or transfer of any property of
Hyperion pursuant to any Environmental Law.
Section 4.13 EMPLOYEE BENEFIT PLANS.
(a) Hyperion has listed in Section 4.13 of the Hyperion Disclosure Schedule
all employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar employee benefit plans, and all
unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of Hyperion or any ERISA Affiliate
of Hyperion, or any Subsidiary of Hyperion (collectively, the "Hyperion Employee
Plans").
(b) With respect to each Hyperion Employee Plan, Hyperion has made
available to Arbor, a true and correct copy of (i) the most recent annual report
(Form 5500), if any, filed with the IRS, (ii) such Hyperion Employee Plan, (iii)
each trust agreement and group annuity contract, if any, relating to such
Hyperion Employee Plan and (iv) the most recent actuarial report or valuation
relating to a Hyperion Employee Plan subject to Title IV of ERISA.
(c) With respect to the Hyperion Employee Plans, individually and in the
aggregate, no event has occurred and, to the knowledge of Hyperion, there exists
no
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condition or set of circumstances in connection with which Hyperion could be
subject to any liability that is reasonably likely to have a Hyperion Material
Adverse Effect under ERISA, the Code or any other applicable law.
(d) With respect to the Hyperion Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
that have not been accounted for by reserves, or otherwise properly footnoted in
accordance with GAAP, on the financial statements of Hyperion, which obligations
are reasonably likely to have a Hyperion Material Adverse Effect.
(e) Except as disclosed in Hyperion SEC Reports filed prior to the date of
this Agreement, and except as provided for in this Agreement, neither Hyperion
nor any of its Subsidiaries is a party to any oral or written (i) agreement with
any officer or other key employee of Hyperion or any of its Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Hyperion of the nature
contemplated by this Agreement, (ii) agreement with any officer of Hyperion
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof or for the payment of
compensation in excess of $100,000 per annum, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
Section 4.14 COMPLIANCE WITH LAWS. Hyperion and each of its Subsidiaries
has complied with, is not in violation of, and has not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to
have a Hyperion Material Adverse Effect.
Section 4.15 ACCOUNTING AND TAX MATTERS. To its knowledge, after consulting
with its independent auditors, neither Hyperion nor any of its Affiliates has
taken or agreed to take any action which would (i) prevent Arbor from accounting
for the business combination to be effected by the Merger as a pooling of
interests or (ii) prevent the Merger from constituting a transaction qualifying
as a reorganization under Section 368(a) of the Code.
Section 4.16 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information to be supplied by Hyperion for inclusion in the Registration
Statement
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shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by Hyperion for inclusion in the Joint Proxy Statement shall not, on
the date the Joint Proxy Statement is first mailed to stockholders of Hyperion
or Arbor, at the time of the Hyperion Stockholders' Meeting and the Arbor
Stockholders' Meeting and at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Joint Proxy
Statement not false or misleading; or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Hyperion Stockholders' Meeting or the Arbor
Stockholders' Meetings which has become false or misleading. If at any time
prior to the Effective Time any event relating to Hyperion or any of its
Affiliates, officers or directors should be discovered by Hyperion which should
be set forth in an amendment to the Registration Statement or a supplement to
the Joint Proxy Statement, Hyperion shall promptly inform Arbor. Notwithstanding
the foregoing, Hyperion makes no representation, warranty or covenant with
respect to any information supplied by Arbor that is contained in any of the
foregoing documents.
Section 4.17 LABOR MATTERS. Neither Hyperion nor any of its Subsidiaries is
a party to or otherwise bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor organization,
nor, as of the date hereof, is Hyperion or any of its Subsidiaries the subject
of any material proceeding asserting that Hyperion or any of its Subsidiaries
has committed an unfair labor practice or is seeking to compel it to bargain
with any labor union or labor organization nor, as of the date of this
Agreement, is there pending or, to the knowledge of Hyperion, threatened, any
material labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving Hyperion or any of its Subsidiaries.
Section 4.18 INSURANCE; RISK MANAGEMENT. All material fire and casualty,
general liability, business interruption, product liability, and sprinkler and
water damage insurance policies maintained by Hyperion or any of its
Subsidiaries are with reputable insurance carriers, provide full and adequate
coverage for all normal risks incident to the business of Hyperion and its
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for any
such failures to maintain insurance policies that, individually or in the
aggregate, are not reasonably likely to have a Hyperion Material Adverse Effect.
The steps taken by Hyperion to manage the various risks incident to the business
and operations of Hyperion and its Subsidiaries and their respective properties
and assets are at least equivalent to those taken by persons
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engaged in similar businesses, except for any failures to take such steps that,
individually or in the aggregate, are not reasonably likely to have a Hyperion
Material Adverse Effect.
Section 4.19 NO EXISTING DISCUSSIONS. As of the date hereof, Hyperion is
not engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal.
Section 4.20 OPINION OF FINANCIAL ADVISOR. The financial advisor of
Hyperion, Goldman, Sachs & Co., has delivered to the Board of Directors of
Hyperion an opinion dated the date of this Agreement to the effect that the
Exchange Ratio is fair, as of the date of the Agreement, to the stockholders of
Hyperion from a financial point of view.
Section 4.21 SECTION 203 OF THE DGCL NOT APPLICABLE. The Board of Directors
of Hyperion has taken all actions so that the restrictions contained in Section
203 of the DGCL applicable to a "business combination" (as defined in Section
203) will not apply to the execution, delivery or performance of this Agreement
or the Arbor Stock Option Agreement or the consummation of the Merger or the
other transactions contemplated by this Agreement or by the Arbor Stock Option
Agreement.
Section 4.22 INSIDER TRADING POLICIES AND PRACTICES. Section 4.22 to the
Hyperion Disclosure Schedule sets forth a copy of Hyperion's insider trading
policy as in effect on the date hereof. Hyperion and, to the knowledge of
Hyperion, each of its directors, officers and employees who are subject to such
policy have complied in all material respects with the terms of such policy.
Section 4.23 RIGHTS AGREEMENT. The Hyperion Rights Plan has been amended as
set forth in Section 4.23 of the Hyperion Disclosure Schedule.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.01 COVENANTS OF ARBOR AND HYPERION. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Arbor and Hyperion each agrees as to
itself and its respective Subsidiaries (except to the extent expressly
contemplated by this Agreement or the Disclosure Schedules or that the other
party shall otherwise consent in writing), to carry on its and its Subsidiaries'
business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, to pay and to cause its Subsidiaries to pay
debts and Taxes when due subject to good faith disputes over such debts or
Taxes, to pay or perform its and its Subsidiaries' other obligations when due,
and, to the extent consistent with such business, use all
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reasonable efforts (and in any event efforts no less favorable than those
consistent with past practices and policies) to preserve intact its and its
Subsidiaries' present business organizations, to use its reasonable best efforts
to keep available the services of its present officers and key employees and to
use its reasonable best efforts to preserve its and its Subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees and
others having business dealings with it or its Subsidiaries to the end that its
and its Subsidiaries' goodwill and ongoing business shall be unimpaired at the
Effective Time. Arbor and Hyperion each shall promptly notify the other party of
any material event or occurrence not in the ordinary course of business. Except
as expressly contemplated by this Agreement, Arbor and Hyperion each shall not
(and shall not permit any of its respective Subsidiaries to), without the
written consent of the other party:
(a) Accelerate, amend or change the period of exercisability of options or
restricted stock granted under any employee stock plan of such party or
authorize cash payments in exchange for any options granted under any of such
plans except as required by the terms of such plans or any related agreements in
effect as of the date of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to such
party;
(c) Issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock or securities convertible into
shares of its capital stock, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than (i) the grant
of options consistent with past practices to new employees, or otherwise upon
consent in accordance with the provisions of this Section 5.01, (ii) the
issuance of shares of Arbor Common Stock or Hyperion Common Stock, as the case
may be, pursuant to the exercise of options outstanding on the date of this
Agreement, or (iii) the issuance of shares of Arbor Common Stock or Hyperion
Common Stock pursuant to the terms of the Arbor Employee Stock Purchase Plan or
the Hyperion 1991 Employee Stock Purchase Plan, respectively, each as in effect
on the date hereof;
(d) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership or
other business
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organization or division, or otherwise acquire or agree to acquire any assets
(other than inventory and other items in the ordinary course of business),
except for any such acquisitions involving aggregate consideration (including
assumed indebtedness) of not more than $1,000,000;
(e) Sell, lease, license or otherwise dispose of any of its material
properties or assets, except for transactions in the ordinary course of
business;
(f) (i) Increase or agree to increase the compensation payable or to become
payable to its officers or employees, except for increases in salary or wages of
employees (other than officers) in accordance with past practices, (ii) grant
any additional severance or termination pay to, or enter into any employment or
severance agreements with, any employees or officers, (iii) enter into any
collective bargaining agreement (other than as required by law or extensions to
existing agreements in the ordinary course of business), (iv) establish, adopt,
enter into or amend any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(g) Amend or propose to amend its charter or bylaws, except as contemplated
by this Agreement;
(h) Incur any indebtedness for borrowed money other than pursuant to credit
agreements in effect as of the date hereof;
(i) Initiate, compromise or settle any material litigation or arbitration
proceeding (other than as a result of a breach of this Agreement);
(j) Except in the ordinary course of business, modify, amend or terminate
any Arbor Material Contract or Hyperion Material Contract or waive, release or
assign any material rights or claims;
(k) Change in any material respect its accounting methods, principles or
practices, except insofar as may be required by a generally applicable change in
GAAP; or
(l) Take, or agree in writing or otherwise to take, any of the actions
described in paragraphs (a) through (k) above.
In addition, Hyperion shall notify Arbor promptly following the execution by
Hyperion or any of its Subsidiaries of any agreement providing for the receipt
or payment of in excess of $3,000,000, and Arbor shall notify Hyperion promptly
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following the execution by Arbor or any of its Subsidiaries of any agreement
providing for the receipt or payment of in excess of $1,000,000.
Section 5.02 COOPERATION. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of Hyperion and Arbor shall
confer on a regular and frequent basis with one or more representatives of the
other party to report on the general status of ongoing operations and shall
promptly provide the other party or its counsel with copies of all filings made
by such party with any Governmental Entity in connection with this Agreement,
the Merger and the transactions contemplated hereby and thereby.
Section 5.03 ARBOR RIGHTS PLAN. On or prior to June 15, 1998, Arbor shall
cause to be adopted a rights agreement in form and substance reasonable
satisfactory to Hyperion, provided that neither Hyperion nor any of its
Affiliates shall, by virtue of its ownership or voting of capital stock of Arbor
acquired pursuant to this Agreement or the Hyperion Option Agreement, be defined
as a person or entity similar to an "acquiring person" under such rights
agreement. Arbor shall not redeem the rights issued under such rights agreement,
or amend (other than to delay any "distribution date" therein or to render the
rights inapplicable to the Merger or any action permitted under this Agreement
or the Hyperion Option Agreement) or terminate such rights agreement prior to
the Effective Time unless required to do so by order of a court or competent
jurisdiction or in connection with the exercise by the directors of Arbor of
their fiduciary duties.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 NO SOLICITATION.
(a) Arbor and Hyperion each shall not, directly or indirectly, through any
officer, director, employee, financial advisor, representative or agent of such
party (i) take any action to solicit, initiate or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transaction involving such party
or any of its Subsidiaries, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any
Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent Arbor or Hyperion, or their respective Boards of
Directors, to the extent such Board of Directors determines, in good faith,
based upon and consistent with
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advice received in consultation with outside legal counsel, that such Board of
Directors' fiduciary duties under applicable law require it to do so, from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity or recommending an
unsolicited bona fide written Acquisition Proposal by such person or entity to
the stockholders of such party, if and only to the extent that (1) the Board of
Directors of such party believes in its good faith reasonable judgment (based
upon and consistent with advice received in consultation with independent
financial and legal advisors) that such Acquisition Proposal is reasonably
capable of being completed on the terms proposed and, after taking into account
the strategic benefits anticipated to be derived from the Merger and the
long-term prospects of Arbor and Hyperion as a combined company, would, if
consummated, result in a transaction more favorable over the long term from a
financial point of view than the transaction contemplated by this Agreement (any
such more favorable Acquisition Proposal being referred to in this Agreement as
a "Superior Proposal") and the Board of Directors of such party determines in
good faith after consultation with, and based upon and consistent with advice
received from, outside legal counsel that such action is necessary for such
Board of Directors to comply with its fiduciary duties to stockholders under
applicable law and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality agreement with terms no less favorable to such party than those
contained in the Non-Disclosure Agreement dated January 14, 1998 between Arbor
and Hyperion (the "Confidentiality Agreement"), such non-public information has
been previously delivered to the Board of Directors of the other party hereto
and such party advises the other party hereto in writing of such disclosure or
negotiations, including the party to whom disclosed or with whom discussions or
negotiations will occur; or (B) complying with Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal.
(b) Arbor and Hyperion shall each notify the other party immediately after
receipt by Arbor or Hyperion (or their advisors) of any Acquisition Proposal or
any request for non-public information in connection with an Acquisition
Proposal or for access to the properties, books or records of such party or any
of its Subsidiaries by any person or entity that informs such party that it is
considering making, or has made, an Acquisition Proposal. Such notice shall be
made orally and in writing and shall indicate in reasonable detail the identity
of the offeror and the terms and conditions of such proposal, inquiry or
contact. Such party shall continue to keep the other party hereto informed, on a
current basis, of the status of any such discussions or negotiations and the
terms being discussed or negotiated.
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Section 6.02 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practical after the execution of this Agreement,
Hyperion and Arbor shall prepare and file with the SEC the Joint Proxy
Statement, and Arbor shall prepare and file with the SEC the Registration
Statement, in which the Joint Proxy Statement will be included as a prospectus,
provided that Arbor may delay the filing of the Registration Statement until
approval of the Joint Proxy Statement by the SEC. Hyperion and Arbor shall use
all reasonable efforts to cause the Registration Statement to become effective
as soon after such filing as practical; provided, however, that Arbor shall have
no obligation to agree to account for the Merger as a "purchase" in order to
cause the Registration Statement to become effective. The Joint Proxy Statement,
and any amendment or supplement thereto, shall include the recommendation of the
Board of Directors of Arbor in favor of the issuance of shares of Arbor Common
Stock pursuant to the Merger and the recommendation of the Board of Directors of
Hyperion in favor of this Agreement and the Merger; provided that the Board of
Directors of either party may withdraw such recommendation if such Board of
Directors believes in its good faith reasonable judgment, based upon and
consistent with advice received in consultation with outside legal counsel, that
the withdrawal of such recommendation is necessary for such Board of Directors
to comply with its fiduciary duties under applicable law.
(b) Hyperion and Arbor shall make all necessary filings with respect to the
Merger under the Securities Act, the Exchange Act, applicable state blue sky
laws and the rules and regulations thereunder.
Section 6.03 NASDAQ QUOTATION. Each of Hyperion and Arbor agrees to
continue the quotation of Hyperion Common Stock and Arbor Common Stock on the
Nasdaq National Market during the term of this Agreement so that appraisal
rights will not be available to stockholders of Arbor under Section 262 of the
DGCL.
Section 6.04 ACCESS TO INFORMATION. Upon reasonable notice, Arbor and
Hyperion shall each (and shall cause each of their respective Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each of Arbor and Hyperion
shall (and shall cause each of their respective Subsidiaries to) furnish
promptly to the other (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Unless otherwise required by law, the parties will hold any
such information which is non-public in confidence in accordance with the
Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 6.04 shall affect or be deemed to modify
any representation or warranty
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contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
Section 6.05 STOCKHOLDERS' MEETINGS.
(a) Arbor and Hyperion shall each call a meeting of its respective
stockholders to be held as promptly as practicable for the purpose of voting, in
the case of Hyperion, upon this Agreement and the Merger and, in the case of
Arbor, upon (i) the issuance of shares of Arbor Common Stock pursuant to the
Merger, (ii) an increase in the authorized number of shares of Arbor Common
Stock to 300,000,000 shares, the change in the name of Arbor to "Hyperion
Solutions Corporation," the creation of a staggered Board of Directors and the
incorporation into Arbor's Certificate of Incorporation of indemnification
provisions in substantially the form set forth in Arbor's current Bylaws
(collectively, the "Arbor Charter Amendment"), and (iii) the election of
directors of Newco in accordance with Section 1.04 (the proposals referred to in
clauses (i), (ii) and (iii) of this Section 6.05(a) being hereinafter referred
to collectively as the "Arbor Voting Proposals"). Subject to Sections 6.01 and
6.02, Arbor and Hyperion will, through their respective Boards of Directors,
recommend to their respective stockholders approval of such matters and will
coordinate and cooperate with respect to the timing of such meetings and shall
use their best efforts to hold such meetings on the same day and as soon as
practicable after the date hereof and shall not postpone or adjourn (other than
for the absence of a quorum) their respective stockholders' meetings without the
consent of the other party. Subject to Section 6.02, each party shall use all
reasonable efforts to solicit from stockholders of such party proxies in favor
of such matters.
(b) Arbor may also submit additional proposals to its stockholders at the
Arbor Stockholders' Meeting, separate from the Arbor Voting Proposals referred
to in Section 6.05(a). The approval by Arbor's stockholders of such additional
proposals shall not be a condition to the closing of the Merger under this
Agreement.
Section 6.06 LEGAL CONDITIONS TO MERGER.
(a) Subject to Section 6.02, Arbor and Hyperion shall each use their best
efforts to (i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary and proper under applicable law to
consummate and make effective the transactions contemplated hereby as promptly
as practicable, (ii) obtain from any Governmental Entity any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made by Arbor or Hyperion or any of their Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, including, without limitation, the Merger,
and (iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under (A) the Securities Act and
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the Exchange Act, and any other applicable federal or state securities laws, (B)
the HSR Act and any related governmental request thereunder, and (C) any other
applicable law. Arbor and Hyperion shall cooperate with each other in connection
with the making of all such filings, including providing copies of all such
documents to the non-filing party and its advisors prior to filing and, if
requested, to accept all reasonable additions, deletions or changes suggested in
connection therewith. Arbor and Hyperion shall use their best efforts to furnish
to each other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable law (including all
information required to be included in the Joint Proxy Statement and the
Registration Statement) in connection with the transactions contemplated by this
Agreement.
(b) Hyperion and Arbor agree, and shall cause each of their respective
Subsidiaries, to cooperate and to use their respective best efforts to obtain
any government clearances or approvals required for Closing under the HSR Act,
the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade
Commission Act, as amended, and any other Federal, state or foreign law,
regulation, rule, order or decree designed to prohibit, restrict or regulate
actions for the purpose or effect of monopolization or restraint of trade
(collectively, "Antitrust Laws"), to respond to any government requests for
information under any Antitrust Law, and to contest and resist any action,
including any legislative, administrative or judicial action, and to have
vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order") that
restricts, prevents or prohibits the consummation of the Merger or any other
transactions contemplated by this Agreement under any Antitrust Law. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to any Antitrust Law. In the event of a challenge to the
transactions contemplated by this Agreement pursuant to the HSR Act, Arbor and
Hyperion shall use their best efforts to defeat such challenge, including by
institution and defense of litigation, or to settle such challenge on terms that
permit the consummation of the Merger; provided, however, that nothing herein
shall require either party to agree to divest or hold separate any portion of
its business, product line or assets or otherwise take action that could
reasonably be expected to have an Arbor Material Adverse Effect, a Hyperion
Material Adverse Effect or an effect to Arbor combined with the Surviving
Corporation after the Effective Time comparable to either an Arbor Material
Adverse Effect or a Hyperion Material Adverse Effect. Without limiting the
foregoing, in the event that either the Federal Trade Commission or the
Antitrust Division of the United States Department of Justice should issue a
Request for Additional Information or Documentary Material under 17 C.F.R. ss.
803.20 (a "Second Request"), then Arbor and Hyperion each agree to use their
best efforts to respond fully to such Second Request within 20 days after its
receipt and shall promptly make any further
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filings or information submissions and make any employee available for interview
or testimony pursuant to the foregoing (both before and after any Second
Request) that may be necessary, proper or advisable. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either of the Constituent Corporations, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
(c) Each of Arbor and Hyperion shall give (or shall cause their respective
Subsidiaries to give) any notices to third parties, and use, and cause their
respective Subsidiaries to use, their best efforts to obtain any third party
consents related to or required in connection with the Merger that are (i)
necessary to consummate the transactions contemplated hereby, (ii) disclosed or
required to be disclosed in the Arbor Disclosure Schedule or the Hyperion
Disclosure Schedule, as the case may be, or (iii) required to prevent an Arbor
Material Adverse Effect or a Hyperion Material Adverse Effect from occurring
prior to or after the Effective Time.
Section 6.07 PUBLIC DISCLOSURE. Hyperion and Arbor shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or by obligations pursuant to any listing agreement with
any national securities exchange or by the National Association of Securities
Dealers, Inc.
Section 6.08 TAX-FREE REORGANIZATION. Hyperion and Arbor shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code.
Section 6.09 POOLING ACCOUNTING. From and after the date hereof and until
the Effective Time, Arbor and Hyperion shall each use its best efforts to cause
the business combination to be effected by the Merger to be accounted for as a
pooling of interests and to take such action as may be reasonably necessary to
permit such treatment. Each of Arbor and Hyperion shall use its best efforts to
cause its respective Affiliates not to take any action that would adversely
affect the ability of Arbor to account for the business combination to be
effected by the Merger as a pooling of interests.
Section 6.10 AFFILIATE AGREEMENTS. Upon the execution of this Agreement,
Hyperion and Arbor will provide each other with a list of those persons who are,
in Hyperion's or Arbor's respective reasonable judgment, "affiliates" of
Hyperion or Arbor, respectively, within the meaning of Rule 145 promulgated
under the Securities Act ("Rule 145") (each such person who is an "affiliate" of
Hyperion or Arbor within the meaning of Rule 145 is referred to as an
"Affiliate"). Hyperion and Arbor shall
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provide each other with such information and documents as Arbor or Hyperion
shall reasonably request for purposes of reviewing such list and shall notify
the other party in writing regarding any change in the identity of its
Affiliates prior to the Closing Date. Arbor and Hyperion shall each use its best
efforts to deliver or cause to be delivered to each other by June 10, 1998 (and
in any case prior to the Effective Time) from each of its Affiliates, an
executed Affiliate Agreement, in form attached hereto as EXHIBIT D-1, in the
case of Affiliates of Hyperion, and in the form attached hereto as EXHIBIT D-2,
in the case of Affiliates of Arbor (each, an "Affiliate Agreement"). Arbor shall
be entitled to place appropriate legends on the certificates evidencing any
Arbor Common Stock to be received by such Affiliates of Hyperion pursuant to the
terms of this Agreement, and to issue appropriate stop transfer instructions to
the transfer agent for the Arbor Common Stock, consistent with the terms of the
Affiliate Agreements (provided that such legends or stop transfer instructions
shall be removed, two years after the Effective Date, upon the request of any
stockholder that is not then an Affiliate of Arbor).
Section 6.11 NASDAQ QUOTATION. Arbor shall use its best efforts to cause
the shares of Arbor Common Stock to be issued in the Merger to be approved for
quotation on the Nasdaq National Market, subject to official notice of issuance,
prior to the Closing Date.
Section 6.12 STOCK PLANS.
(a) At the Effective Time, each outstanding option to purchase shares of
Hyperion Common Stock (a "Hyperion Stock Option") under the Hyperion Stock
Plans, whether vested or unvested, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such Hyperion
Stock Option, the same number of shares of Arbor Common Stock as the holder of
such Hyperion Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full immediately prior to the
Effective Time (rounded downward to the nearest whole number), at a price per
share (rounded upward to the nearest whole cent) equal to (y) the aggregate
exercise price for the shares of Hyperion Common Stock purchasable pursuant to
such Hyperion Stock Option immediately prior to the Effective Time divided by
(z) the number of full shares of Arbor Common Stock deemed purchasable pursuant
to such Hyperion Stock Option in accordance with the foregoing.
(b) As soon as practicable after the Effective Time, Arbor shall deliver to
the participants in Hyperion Stock Plans appropriate notice setting forth such
participants' rights pursuant thereto and the grants pursuant to Hyperion Stock
Plans shall continue in effect on the same terms and conditions (subject to the
adjustments required by this Section 6.12 after giving effect to the Merger).
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(c) At the Effective Time, by virtue of the Merger and without the need of
any further corporate action, Arbor shall assume the Hyperion Stock Plans, with
the result that all obligations of Hyperion under the Hyperion Stock Plans,
including with respect to Hyperion Stock Options outstanding at the Effective
Time under each Hyperion Stock Plan, shall be obligations of Arbor following the
Effective Time. Arbor shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Arbor Common Stock for delivery under
Hyperion Stock Plans assumed in accordance with this Section 6.12. As soon as
practicable and in no event more than five business days after the Effective
Time, Arbor shall file a registration statement on Form S-8 (or any successor or
other appropriate forms), or another appropriate form with respect to the shares
of Arbor Common Stock subject to such options, and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(d) The Board of Directors of Hyperion shall, prior to or as of the
Effective Time, take all necessary actions, pursuant to and in accordance with
the terms of the Hyperion Stock Plans and the instruments evidencing the
Hyperion Stock Options, to provide for the conversion of the Hyperion Stock
Options into options to acquire Arbor Common Stock in accordance with this
Section 6.12, and that no consent of the holders of the Hyperion Stock Options
is required in connection with such conversion.
Section 6.13 BROKERS OR FINDERS. Each of Hyperion and Arbor represents, as
to itself, its Subsidiaries and its Affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement except
Morgan Stanley & Co. Incorporated, whose fees and expenses will be paid by Arbor
in accordance with Arbor's agreement with such firm (a copy of which has been
delivered by Arbor to Hyperion prior to the date of this Agreement), and
Goldman, Sachs & Co. and BT Alex. Brown Incorporated, whose fees and expenses
will be paid by Hyperion in accordance with Hyperion's agreements with such
firms (copies of which have been delivered by Hyperion to Arbor prior to the
date of this Agreement). Each of Hyperion and Arbor agrees to indemnify and hold
the other harmless from and against any and all claims, liabilities or
obligations with respect to any such fees, commissions or expenses asserted by
any person on the basis of any act or statement alleged to have been made by
such party or any of its Affiliates.
Section 6.14 INDEMNIFICATION.
(a) From and after the Effective Time, Arbor agrees that it will, and will
cause the Surviving Corporation to, indemnify and hold harmless each present and
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former director and officer of Hyperion (the "Indemnified Parties"), against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities or amounts paid in settlement (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that Hyperion would have been permitted under
Delaware law and its certificate of incorporation or bylaws in effect on the
date hereof to indemnify such Indemnified Party (and Arbor and the Surviving
Corporation shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the Indemnified Party to whom expenses
are advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification).
(b) For a period of three years after the Effective Time, Arbor shall cause
the Surviving Corporation to maintain (to the extent available in the market) in
effect a directors' and officers' liability insurance policy covering those
persons who are currently covered by Hyperion's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to
Arbor) with coverage in amount and scope at least as favorable as Hyperion's
existing coverage; provided, that in no event shall Arbor or the Surviving
Corporation be required to expend in excess of 150% of the annual premium
currently paid by Hyperion for such coverage (currently approximately $594,000).
(c) The provisions of this Section 6.14 are intended to be an addition to
the rights otherwise available to the current officers and directors of Hyperion
by law, charter, statute, bylaw or agreement, and shall operate for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
Section 6.15 LETTER OF HYPERION'S ACCOUNTANTS. Hyperion shall use all
reasonable efforts to cause to be delivered to Arbor and Hyperion a letter of
Ernst & Young LLP, Hyperion's independent auditors, dated a date within two
business days before the date on which the Registration Statement shall become
effective and addressed to Arbor, in form reasonably satisfactory to Arbor and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
Section 6.16 LETTER OF ARBOR'S ACCOUNTANTS. Arbor shall use all reasonable
efforts to cause to be delivered to Hyperion and Arbor a letter of Price
Waterhouse LLP, Arbor's independent auditors, dated a date within two business
days before the date on which the Registration Statement shall become effective
and addressed to Hyperion, in form reasonably satisfactory to Hyperion and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
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Section 6.17 SCHEDULES. From time to time prior to the Closing Date, each
of Arbor and Hyperion will promptly supplement or amend the Arbor or Hyperion
Disclosure Schedules, as the case may be, with respect to any matter hereafter
arising that, if existing or occurring at or prior to the date of this
Agreement, would have been required to be set forth or described in the Arbor or
Hyperion Disclosure Schedules, as the case may be, or that is necessary to
correct any information in the Arbor or Hyperion Disclosure Schedules, as the
case may be, or in any representation and warranty of each of Arbor and Hyperion
that has been rendered inaccurate thereby. For purposes of determining the
accuracy of the respective representations and warranties contained in Articles
III and IV, and in order to determine the fulfillment of the conditions set
forth in Article VII, the Arbor or Hyperion Disclosure Schedules, as the case
may be, shall be deemed to include only that information contained therein on
the date of this Agreement and shall be deemed to exclude any information
contained in any subsequent supplement or amendment thereto unless such changes
reflect actions taken in compliance with the provisions of Articles V and VI
hereof.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of Hyperion Common Stock and the Arbor Voting Proposals shall
have been approved by the affirmative vote of the holders of a majority of the
shares of Arbor Common Stock present or represented at the Arbor Stockholders'
Meeting at which a quorum is present and, in the case of the Arbor Charter
Amendment, by the affirmative vote of the holders of a majority of the
outstanding shares of Arbor Common Stock.
(b) HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) APPROVALS. Other than the filing provided for by Section 1.01, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity the
failure of which to file, obtain or occur is reasonably likely to have a
Hyperion Material Adverse Effect or an Arbor Material Adverse Effect shall have
been filed, been obtained or occurred.
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(d) REGISTRATION STATEMENT. The SEC shall have declared the Registration
Statement effective. No stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Joint
Proxy Statement, shall have been initiated or threatened by the SEC.
(e) NO INJUNCTIONS. No Governmental Entity or federal, state or foreign
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any order, executive order, stay, decree, judgment or
injunction (each an "Order") or statute, rule, regulation which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger or otherwise limiting or restricting Arbor's conduct
or operation of the business of Hyperion and its Subsidiaries following the
Merger in a manner that could reasonably be expected to have an affect on Arbor
combined with the Surviving Corporation after the Effective Time comparable to
either an Arbor Material Adverse Effect or a Hyperion Material Adverse Effect.
(f) POOLING LETTERS. Hyperion shall have received a letter from Ernst &
Young LLP addressed to Hyperion and Arbor shall have received a letter from
Price Waterhouse LLP addressed to Arbor, each regarding its concurrence with
management's conclusions, as to the appropriateness of the pooling of interests
accounting, under Accounting Principles Board Opinion No. 16 for the Merger, if
closed and consummated in accordance with this Agreement, it being agreed that
Hyperion and Arbor shall each provide reasonable cooperation to Ernst & Young
LLP and Price Waterhouse LLP, to enable them to issue such letters.
(g) NASDAQ. The shares of Arbor Common Stock to be issued in the Merger
shall have been approved for quotation on the Nasdaq National Market.
Section 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF HYPERION. The
obligation of Hyperion to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived in writing
exclusively by Hyperion:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Arbor and Sub set forth in this Agreement shall be true and correct as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, except (i) for changes contemplated by this
Agreement and (ii) in the case of representations and warranties that are not
qualified as to materiality, where the failures to be true and correct,
individually or in the aggregate, have not had and are not reasonably likely to
have an Arbor Material Adverse Effect or a material adverse effect upon the
consummation of the transactions contemplated hereby; and Hyperion shall have
received a certificate signed on behalf of Arbor by the chief executive officer
and the chief financial officer of Arbor to such effect.
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(b) PERFORMANCE OF OBLIGATIONS OF ARBOR AND SUB. Arbor and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date; and Hyperion shall
have received a certificate signed on behalf of Arbor by the chief executive
officer and the chief financial officer of Arbor to such effect.
(c) AFFILIATES AGREEMENTS. Each Affiliate of Arbor shall have entered into
an Affiliate Agreement with Hyperion and Arbor in accordance with Section 6.10
of this Agreement.
(d) TAX OPINION. Hyperion shall have received a written opinion from Hale
and Dorr LLP, counsel to Hyperion, to the effect that the Merger will be treated
for Federal income tax purposes as a tax-free reorganization within the meaning
of Section 368(a) of the Code, and such opinion shall not have been withdrawn.
Section 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ARBOR AND SUB. The
obligation of Arbor to effect the Merger is subject to the satisfaction of each
of the following conditions, any of which may be waived in writing exclusively
by Arbor and Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Hyperion set forth in this Agreement shall be true and correct as of the date of
this Agreement and (except to the extent such representations speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date, except (i) for changes contemplated by this Agreement and (ii) in the case
of representations and warranties that are not qualified as to materiality,
where the failures to be true and correct, individually or in the aggregate,
have not had and are not reasonably likely to have a Hyperion Material Adverse
Effect or a material adverse effect upon the consummation of the transactions
contemplated hereby; and Arbor shall have received a certificate signed on
behalf of Hyperion by the chief executive officer and the chief financial
officer of Hyperion to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF HYPERION. Hyperion shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Arbor shall have received a
certificate signed on behalf of Hyperion by the chief executive officer and the
chief financial officer of Hyperion to such effect.
(c) AFFILIATES AGREEMENTS. Each Affiliate of Hyperion shall have entered
into an Affiliate Agreement with Hyperion and Arbor in accordance with Section
6.10 of this Agreement.
(d) TAX OPINION. Arbor shall have received the opinion of Gunderson Dettmer
Stough Villeneuve Franklin & Hachigian, LLP, counsel to Arbor, to the effect
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that the Merger will be treated for Federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code, and such
opinion shall not have been withdrawn.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 8.01(b) through 8.01(g),
by written notice by the terminating party to the other party), whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of Arbor or Hyperion:
(a) by mutual written consent of Hyperion and Arbor; or
(b) by either Hyperion or Arbor if the Merger shall not have been
consummated by October 30, 1998 (the "Outside Date") (provided that the right to
terminate this Agreement under this Section 8.01(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
a significant cause of or resulted in the failure of the Merger to occur on or
before such date); or
(c) by either Hyperion or Arbor if a court of competent jurisdiction or
other Governmental Entity shall have issued a nonappealable final order, decree
or ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by Hyperion, if, at the Arbor Stockholders' Meeting (including any
adjournment or postponement), the requisite vote of the stockholders of Arbor in
favor of the Arbor Voting Proposals shall not have been obtained; or by Arbor
if, at the Hyperion Stockholders' Meeting (including any adjournment or
postponement), the requisite vote of the stockholders of Hyperion in favor of
this Agreement and the Merger shall not have been obtained; or
(e) by Hyperion, if (i) the Board of Directors of Arbor shall have
withdrawn or modified its recommendation of this Agreement or the Merger; (ii)
the Board of Directors of Arbor shall have recommended to the stockholders of
Arbor an Alternative Transaction (as defined in Section 8.03(g)); (iii) a tender
offer or exchange offer for 15% or more of the outstanding shares of Arbor
Common Stock is commenced (other than by Hyperion or an Affiliate of Hyperion)
and the Board of Directors of Arbor recommends that the stockholders of Arbor
tender their shares in such tender or exchange offer; or (iv) for any reason
Arbor fails to call and hold the Arbor Stockholders' Meeting by the Outside Date
(provided that Hyperion's right to
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terminate this Agreement under such clause (iv) shall not be available if at
such time Arbor would be entitled to terminate this Agreement under Section
8.01(g)); or
(f) by Arbor, if (i) the Board of Directors of Hyperion shall have
withdrawn or modified its recommendation of this Agreement or the Merger; (ii)
the Board of Directors of Hyperion shall have recommended to the stockholders of
Hyperion an Alternative Transaction; (iii) a tender offer or exchange offer for
15% or more of the outstanding shares of Hyperion Common Stock is commenced
(other than by Arbor or an Affiliate of Arbor) and the Board of Directors of
Hyperion recommends that the stockholders of Hyperion tender their shares in
such tender offer or exchange offer; or (iv) for any other reason Hyperion fails
to call and hold the Hyperion Stockholders' Meeting by the Outside Date
(provided that Arbor's right to terminate this Agreement under such clause (iv)
shall not be available if at such time Hyperion would be entitled to terminate
this Agreement under Section 8.01(g)); or
(g) by Hyperion or Arbor, if there has been a breach of any representation,
warranty, covenant or agreement on the part of the other party set forth in this
Agreement, which breach (i) causes the conditions set forth in Section 7.02(a)
or (b) (in the case of termination by Hyperion) or 7.03(a) or (b) (in the case
of termination by Arbor) not to be satisfied, and (ii) shall not have been cured
within 20 business days following receipt by the breaching party of written
notice of such breach from the other party.
Section 8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Hyperion,
Arbor, Sub or their respective officers, directors, stockholders or Affiliates,
except as set forth in Section 8.03; provided, that any such termination shall
not limit liability for any willful breach of this Agreement; and provided
further, that the provisions of Section 8.03 of this Agreement, the Stock Option
Agreements and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
Section 8.03 FEES AND EXPENSES.
(a) Except as set forth in this Section 8.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; provided, however, that Arbor and Hyperion shall share
equally all fees and expenses, other than attorneys' fees, incurred in relation
to the printing and filing of the Joint Proxy Statement (including any related
preliminary materials) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements.
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(b) Arbor shall pay Hyperion up to $2,500,000 as reimbursement for expenses
of Hyperion actually incurred relating to the transactions contemplated by this
Agreement prior to termination (including, but not limited to, fees and expenses
of Hyperion's counsel, accountants and financial advisors, but excluding any
discretionary fees paid to such financial advisors), upon the termination of
this Agreement by Hyperion pursuant to Section 8.01(d) as a result of the
failure to receive the requisite vote for approval of the Arbor Voting Proposals
by the stockholders of Arbor at the Arbor Stockholders' Meeting (other than in
the circumstances set forth in Section 8.03(c)(iii)).
(c) Arbor shall pay Hyperion a termination fee of $20,000,000 upon the
earliest to occur of the following events:
(i) the termination of this Agreement by Hyperion pursuant to Section
8.01(e); or
(ii) the termination of this Agreement by Hyperion pursuant to Section
8.01(g) after a breach by Arbor of this Agreement; or
(iii) the termination of the Agreement by Hyperion pursuant to Section
8.01(d) as a result of the failure to receive the requisite vote for approval of
the Arbor Voting Proposals by the stockholders of Arbor at the Arbor
Stockholders' Meeting if, at the time of such failure, there shall have been
announced an Alternative Transaction relating to Arbor which shall not have been
absolutely and unconditionally withdrawn and abandoned.
(d) Hyperion shall pay Arbor up to $2,500,000 as reimbursement for expenses
of Arbor actually incurred relating to the transactions contemplated by this
Agreement prior to termination (including, but not limited to, fees and expenses
of Arbor's counsel, accountants and financial advisors, but excluding any
discretionary fees paid to such financial advisors), upon the termination of
this Agreement by Arbor pursuant to Section 8.01(d) as a result of the failure
to receive the requisite vote for approval of this Agreement and the Merger by
the stockholders of Hyperion at the Hyperion Stockholders' Meeting (other than
in the circumstances set forth in Section 8.03(e)(iii)).
(e) Hyperion shall pay Arbor a termination fee of $20,000,000 upon the
earliest to occur of the following events:
(i) the termination of this Agreement by Arbor pursuant to Section
8.01(f); or
(ii) the termination of this Agreement by Arbor pursuant to Section
8.01(g) after a breach by Hyperion of this Agreement; or
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(iii) the termination of the Agreement by Arbor pursuant to Section
8.01(d) as a result of the failure to receive the requisite vote for approval of
this Agreement and the Merger by the stockholders of Hyperion at the Hyperion
Stockholders' Meeting if, at the time of such failure, there shall have been
announced an Alternative Transaction relating to Hyperion which shall not have
been absolutely and unconditionally withdrawn and abandoned.
(f) The expenses and fees, if applicable, payable pursuant to Section
8.03(b), 8.03(c), 8.03(d) and 8.03(e) shall be paid within one business day
after the first to occur of the events described in Section 8.03(b), 8.03(c)(i),
(ii) or (iii), 8.03(d) or 8.03(e)(i), (ii) or (iii); provided that in no event
shall Hyperion or Arbor, as the case may be, be required to pay the expenses and
fees, if applicable, to the other, if, immediately prior to the termination of
this Agreement, the party to receive the expenses and fees, if applicable, was
in material breach of its obligations under this Agreement.
(g) As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any person (or group of persons) other than
Hyperion or Arbor or its respective affiliates (a "Third Party"), acquires more
than 15% of the outstanding shares of Arbor Common Stock or Hyperion Common
Stock, as the case may be, pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving Hyperion or
Arbor pursuant to which any Third Party acquires more than 15% of the
outstanding equity securities of Hyperion or Arbor or the entity surviving such
merger or business combination, (iii) any other transaction pursuant to which
any Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of Hyperion or Arbor, and the
entity surviving any merger or business combination including any of them) of
Hyperion or Arbor having a fair market value (as determined by the Board of
Directors of Hyperion or Arbor, as the case may be, in good faith) equal to more
than 15% of the fair market value of all the assets of Hyperion or Arbor and its
Subsidiaries, taken as a whole, immediately prior to such transaction, or (iv)
any public announcement by a Third Party of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
Section 8.04 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Arbor or of Hyperion, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.05 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors,
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may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.01 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Sections 1.04, 2.01, 2.02, 6.14 and
Article IX, and the agreements of the Affiliates delivered pursuant to Section
6.10. The Confidentiality Agreement shall survive the execution and delivery of
this Agreement.
Section 9.02 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Hyperion, to
Hyperion Software Corporation
900 Long Ridge Road
Stamford, CT 06902
Attn: Secretary
Telecopy: (203) 461-7795
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: John A. Burgess, Esq.
Hal J. Leibowitz, Esq.
Telecopy: (617) 526-5000
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(b) if to Arbor or Sub, to
Arbor Software Corporation
1344 Crossman Avenue
Sunnyvale, CA 94089
Attn: General Counsel
Telecopy: (408) 543-4788
with a copy to:
Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attn: Robert V. Gunderson, Jr. Esq.
Steven M. Spurlock, Esq.
Telecopy: (650) 321-2800
Section 9.03 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to May
25, 1998.
Section 9.04 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.05 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein) (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 6.14 is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality Agreement shall remain in full force and
effect until the Effective
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Time. Each party hereto agrees that, except for the representations and
warranties contained in this Agreement, neither Arbor nor Hyperion makes any
other representations or warranties, and each hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to the execution and delivery of this Agreement or the transactions
contemplated hereby, notwithstanding the delivery or disclosure to the other or
the other's representatives of any documentation or other information with
respect to any one or more of the foregoing.
Section 9.06 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
Section 9.07 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, Hyperion, Sub and Arbor have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
Hyperion Software Corporation
By: /s/ James Perakis
------------------------------------
Title: Chairman and Chief Executive
---------------------------------
Officer
---------------------------------
HSC Merger Corp.
By: /s/ John Dillon
------------------------------------
Title: President
---------------------------------
Arbor Software Corporation
By: /s/ John Dillon
------------------------------------
Title: President and Chief Executive
---------------------------------
Officer
---------------------------------
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Exhibit A
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Hyperion Stock Option Agreement
STOCK OPTION AGREEMENT, dated as of May 25, 1998 (the "Agreement"), between
HYPERION SOFTWARE CORPORATION, a Delaware corporation (the "Grantee"), and ARBOR
SOFTWARE CORPORATION, a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, the Grantor and HSC Merger Corp., a Delaware
corporation and a wholly owned subsidiary of the Grantor ("Sub"), are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Sub with and into the Grantee;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase 2,274,000 shares of Common Stock, par value $0.001 per share,
of the Grantor (the "Common Stock"), upon the terms and subject to the
conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS; PAYMENT OF SPREAD.
(a) Contemporaneously herewith the Grantee, Sub and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase up to 2,274,000 shares of Common Stock (the "Shares")
at a cash purchase price equal to the lowest of (i) $42.125 per Share, (ii) the
average closing price of the Common Stock on the Nasdaq National Market for the
five consecutive trading days beginning on and including the day that the Merger
is publicly announced, or (iii) the average closing price of the Common Stock on
the Nasdaq National Market for the five consecutive trading days immediately
preceding the public announcement of an Alternative Transaction (as defined in
the Merger Agreement) involving Grantor giving rise to the right to exercise
this Option pursuant to Section 2 below (the "Purchase Price"). The Option may
be exercised by the Grantee, in whole or in part, at any time, or from time to
time, following the
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occurrence of one of the events set forth in Section 2(c) hereof and prior to
the termination of the Option in accordance with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below)) not later than 10
business days and not earlier than the next business day following the date such
notice is given for the closing of such purchase. In the event of any change in
the number of issued and outstanding shares of Common Stock by reason of any
stock dividend, stock split, split-up, recapitalization, merger or other change
in the corporate or capital structure of the Grantor, the number of Shares
subject to this Option and the purchase price per Share shall be appropriately
adjusted to restore to the Grantee its rights hereunder, including its right to
purchase Shares representing 19.9% of the capital stock of the Grantor entitled
to vote generally for the election of the directors of the Grantor which is
issued and outstanding immediately prior to the exercise of the Option at an
aggregate purchase price equal to the Purchase Price multiplied by 2,274,000.
(c) If at any time the Option is then exercisable pursuant to the
terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the
Option to purchase Shares provided in Section 1.(a) hereof, to send a written
notice to the Grantor (the "Cash Exercise Notice") specifying a date not later
than 20 business days and not earlier than 10 business days following the date
such notice is given on which date the Grantor shall pay to the Grantee an
amount in cash equal to the Spread (as hereinafter defined) multiplied by all or
such portion of the Shares subject to the Option as Grantee shall specify. As
used herein "Spread" shall mean the excess, if any, over the Purchase Price of
the higher of (x) if applicable, the highest price per share of Common Stock
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by any person in an Alternative Transaction (as defined in the Merger
Agreement) (the "Alternative Purchase Price") or (y) the closing price of the
shares of Common Stock on the Nasdaq National Market on the last trading day
immediately prior to the date of the Cash Exercise Notice (the "Closing Price").
If the Alternative Purchase Price includes any property other than cash, the
Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if
any, included in the Alternative Purchase Price plus (ii) the fair market value
of such other property. If such other property consists of securities with an
existing public trading market, the average of the closing prices (or the
average of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the five trading
days ending five days prior to the date of the Cash Exercise Notice shall be
deemed to equal the fair market value of such property. If such other property
consists of something other than cash or securities with an existing public
trading market and, as of the payment date for the Spread, agreement on the
value of such other property has not been reached, the Alternative Purchase
Price shall be deemed to equal the Closing Price. Upon exercise of its right to
receive cash pursuant to this Section 1(c), the obligations of the Grantor to
deliver Shares pursuant to
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Section 3 shall be terminated with respect to such number of Shares for which
the Grantee shall have elected to be paid the Spread.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to deliver
Shares upon exercise of the Option or the Spread upon exercise of the Grantor's
rights under Section 1(c) above is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been
terminated; and
(c) A proposal for an Alternative Transaction involving Grantor shall
have been made prior to the date the Merger Agreement is terminated pursuant to
the terms thereof (the "Merger Termination Date") and one or more of the
following events shall have occurred on or after the date of the making of such
proposal: (1) the requisite vote of the stockholders of Grantor in favor of the
Arbor Voting Proposals shall not have been obtained at the Arbor Stockholders'
Meeting (as such terms are defined in the Merger Agreement) or any adjournment
or postponement thereof; (2) the Board of Directors of Grantor shall have
withdrawn or modified its recommendation of the Merger Agreement or the Merger;
(3) the Board of Directors of Grantor shall have recommended to the stockholders
of Grantor an Alternative Transaction (as defined in the Merger Agreement); (4)
a tender offer or exchange offer for 15% or more of the outstanding shares of
Grantor Common Stock shall have been commenced (other than by Grantee or an
affiliate of Grantee) and the Board of Directors of Grantor shall have
recommended that the stockholders of Grantor tender their shares in such tender
or exchange offer; or (5) for any reason Grantor shall have failed to call and
hold the Arbor Stockholders' Meeting (as defined in the Merger Agreement) by the
Outside Date (as defined in the Merger Agreement) and Grantor is not at such
time otherwise entitled to terminate the Merger Agreement pursuant to Section
8.01(g) thereof.
3. THE CLOSING.
(a) Any closing hereunder shall take place on the date specified by
the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case
may be, at 10:00 A.M., local time, at the offices of Hale and Dorr LLP, 60 State
Street, Boston, Massachusetts, or, if the conditions set forth in Section 2(a)
or 2(b) have not then been satisfied, on the second business day following the
satisfaction of such conditions, or at such other time and place as the parties
hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of
a closing pursuant to Section 1(b) hereof, the Grantor
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will deliver to the Grantee a certificate or certificates, duly endorsed (or
accompanied by duly executed stock powers), representing the Shares in the
denominations designated by the Grantee in its Stock Exercise Notice and the
Grantee will purchase such Shares from the Grantor at the price per Share equal
to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
hereof, the Grantor will deliver to the Grantee cash in an amount determined
pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor,
or by the Grantor to the Grantee, pursuant to this Agreement shall be made by
certified or official bank check or by wire transfer of immediately available
federal funds to a bank designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor represents
and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights; (d)
except as otherwise required by the HSR Act, the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby do not require the consent, waiver, approval or
authorization of or any filing with any person or public authority and will not
violate, result in a breach of or the acceleration of any obligation under, or
constitute a default under, any provision of any charter or by-law, indenture,
mortgage, lien, lease, agreement, contract, instrument, order, law, rule,
regulation, judgment, ordinance, decree or restriction by which the Grantor or
any of its subsidiaries or any of their respective properties or assets is
bound; and (e) no "fair price", "moratorium", "control share acquisition" or
other form of antitakeover statute or regulation (including, without limitation,
Section 203 of the Delaware General Corporation Law) is or shall be applicable
to the acquisition of Shares pursuant to this Agreement.
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5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee represents
and warrants to the Grantor that (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and will constitute a
valid and binding obligation of Grantee; and (b) the Grantee is acquiring the
Option and, if and when it exercises the Option, will be acquiring the Shares
issuable upon the exercise thereof for its own account and not with a view to
distribution or resale in any manner which would be in violation of the
Securities Act.
6. LISTING OF SHARES; HSR ACT FILINGS; GOVERNMENTAL CONSENTS;
DIRECTORSHIP.
(a) Subject to applicable law and the rules and regulations of the
Nasdaq National Market, the Grantor will promptly file an application to list
the Shares on the Nasdaq National Market and will use its best efforts to obtain
approval of such listing and to effect all necessary filings by the Grantor
under the HSR Act; provided, however, that if the Grantor is unable to effect
such listing on the Nasdaq National Market by the Closing Date, the Grantor will
nevertheless be obligated to deliver the Shares upon the Closing Date. Each of
the parties hereto will use its best efforts to obtain consents of all third
parties and governmental authorities, if any, necessary to the consummation of
the transactions contemplated.
(b) Upon exercise by the Grantee of the Option, in whole or in part,
for at least 1,143,000 Shares (such number representing approximately 10% of the
number of outstanding shares of Common Stock on the date hereof) the Grantee
shall be entitled to designate one person to be appointed to the Board of
Directors of the Grantor. Within five business days of the giving of notice by
the Grantee to the Grantor of the name of such designee, the Grantor, subject to
the fiduciary obligations of the Board of Directors of the Grantor, shall cause
such designee to be appointed to the Board of Directors of the Grantor.
Thereafter, subject to the further provisions hereof, the Grantor's nominating
committee (or any other committee exercising a similar function) shall recommend
to the Board of Directors of the Grantor that such person designated by the
Grantee be included in the slate of nominees recommended by the Board of
Directors to the stockholders for election as directors at each annual meeting
of stockholders of the Grantor. In the event that the designee of the Grantee
shall cease to serve as a director for any reason, the Grantee shall give notice
to the Grantor of the name of a designee to fill such vacancy in accordance with
the second and third sentences of this Section 6(b). If any such person has been
designated by the Grantee and not approved by the Board of Directors, the
Grantee shall be permitted to designate a substitute designee for such person in
accordance with this Section 6(b). Notwithstanding the foregoing, the Grantor
shall not be required to nominate the designee of the Grantee, and shall be
entitled to request and receive the resignation of any designee of the Grantee
then serving on the Board of Directors of the Grantor, at
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any time that the Grantee then beneficially owns less than 1,143,000 shares of
Common Stock. The Grantee and the Grantor agree to take such steps as may be
necessary to give effect to this Section 6(b) in a manner consistent with
applicable law.
7. COVENANTS OF THE GRANTEE. For so long as, and at any time that, a
designee of the Grantee is a member of the Board of Directors of the Grantor,
the Grantee covenants and agrees that the Grantee will not enter into any
agreement or understanding with any person with respect to the voting of any
shares of Common Stock it may beneficially own, and shall vote all such shares
beneficially owned by it (unless the aggregate of all such shares of Common
Stock beneficially owned by the Grantee and its affiliates exceeds 50% of the
outstanding shares of Common Stock) in favor of the Grantor's nominees for
election of directors.
8. RIGHT OF FIRST REFUSAL. If a Change in Control Event (as defined in
Section 8(e) below) has not then already occurred, if the Grantee, at any time
prior to the first anniversary of the Merger Termination Date, seeks to sell all
or any part of the Shares (i) in a transaction registered under the Securities
Act (other than in a registered public offering in which the underwriters are
instructed to achieve a broad public distribution) or (ii) in a transaction not
required to be registered under the Securities Act (other than in a transfer by
operation of law upon consummation of a merger), it shall give the Grantor (or a
designee of the Grantor) the opportunity, in the following manner, to purchase
such Shares:
(a) The Grantee shall give notice to the Grantor in writing of its
intent to sell Shares (a "Disposition Notice"), specifying the number of Shares
to be sold, the price and, if applicable, the material terms of any agreement
relating thereto For purposes of this Section 8, if the Disposition Notice is
given with respect to the sale of the Shares pursuant to a tender or exchange
offer, it shall be assumed that all Shares tendered will be accepted for
payment. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
(b) The Grantor or its designee shall have the right, exercisable by
written notice given to the Grantee within five business days after receipt of a
Disposition Notice (or, if applicable, in the case of a proposed sale pursuant
to a tender or exchange offer for shares of Common Stock, by written notice
given to the Grantee at least two business days prior to the then announced
expiration date of such tender or exchange offer (the "Expiration Date") if such
Disposition Notice was given at least four business days prior to such
Expiration Date), to purchase all, but not less than all, of the Shares
specified in the Disposition Notice at the price set forth in the Disposition
Notice. If the purchase price specified in the Disposition Notice includes any
property other than cash, the purchase price to be paid by the Grantor shall be
an amount of cash equal to the sum of (i) the cash included in the purchase
price plus (ii) the fair market value of such other property at the date of the
Disposition Notice. If such other property consists of securities with an
existing public trading market, the
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average of the last sales prices for such securities on the five trading days
ending five days prior to the date of the Disposition Notice shall be used as
the fair market value of such property. If such other property consists of
something other than cash or securities with an existing public trading market
and at the time of the closing referred to in paragraph (c) below, agreement on
the value of such other property has not been reached, the average of the
closing prices for the Grantor's Common Stock on the five trading days ending
five days prior to the date of the Disposition Notice shall be used as the per
share purchase price; provided, however, that promptly after the closing, the
Grantee and the Grantor or its designee, as the case may be, shall settle any
additional amounts to be paid or returned as a result of the determination of
fair market value of such other property made by a nationally recognized
investment banking firm selected by the Grantor and approved by the Grantee
within 30 days of the closing. Such determination shall be final and binding on
all parties hereto. If, at the time of the purchase of any Shares by the Grantor
(or its designee) pursuant to this Section 8, a tender or exchange offer is
outstanding, then the Grantor (or its designee) shall agree at the time of such
purchase to promptly pay to Grantee from time to time such additional amounts,
if any, so that the consideration received by Grantee with respect to each Share
shall be equal to the highest price paid for a share of Common Stock pursuant to
such tender or exchange, or pursuant to any other tender or exchange offer
outstanding at any time such tender or exchange offer is outstanding.
(c) If the Grantor exercises its right of first refusal hereunder, the
closing of the purchase of the Shares with respect to which such right has been
exercised shall take place within five business days after the notice of such
exercise (or, if applicable, in the case of a tender or exchange offer, no later
than one business day prior to the expiration date of the offer if written
notice was given within the time set forth in the parenthetical in the first
sentence of paragraph (b) above); provided, however, that at any time prior to
the closing of the purchase of Shares hereunder, the Grantee may determine not
to sell the Shares and revoke the Disposition Notice and by so doing, cancel the
Grantor's right of first refusal with respect to the disposition in question.
The Grantor (or its designee) shall pay for the Shares in immediately available
funds.
(d) If the Grantor does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Grantee shall be free
for 90 days following the expiration of such time for exercise to sell or enter
into an agreement to sell the Shares specified in the Disposition Notice, at the
price specified in the Disposition Notice or any price in excess thereof and
otherwise on substantially the same terms set forth in the Disposition Notice;
provided, that if such sale is not consummated within such 90-day period, then
the provisions of this Section 8 will again apply to the sale of such Shares.
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(e) For purposes of the Agreement, a "Change in Control Event" shall
be deemed to have occurred if (i) any person has a acquired beneficial ownership
of more than 50% (excluding the Shares) of the outstanding shares of Common
Stock or (ii) the Grantor shall have entered into an agreement, including
without limitation an agreement in principle, providing for a merger or other
business combination involving the Grantor or the acquisition of 20% or more of
the assets of the Grantor and its subsidiaries, taken as a whole.
9. REPURCHASE OF SHARES; SALE OF SHARES.
(a) If a Change in Control Event has not occurred prior to the first
anniversary date of the Merger Termination Date, then beginning on such
anniversary date, the Grantor shall have the right to purchase (the "Repurchase
Right") all, but not less than all, of the Shares at the greater of (i) the
Purchase Price, or (ii) the average of the closing prices for shares of Common
Stock on the five trading days ending five days prior to the date the Grantor
gives written notice of its intention to exercise the Repurchase Right. If the
Grantor does not exercise the Repurchase Right within 30 days following the
first anniversary of the Merger Termination Date, the Repurchase Right shall
terminate. In the event the Grantor wishes to exercise the Repurchase Right, the
Grantor shall send a written notice to the Grantee specifying a date (not later
than 10 business days and not earlier than the next business day following the
date such notice is given) for the closing of such purchase.
(b) At any time prior to the first anniversary of the Merger
Termination Date, the Grantee shall have the right to sell (the "Sale Right") to
the Grantor all, but no less than all, of the Shares at the greater of (i) the
Purchase Price or (ii) the average of the last sales prices for shares of Common
Stock on the five trading days ending five days prior to the date the Grantee
gives written notice of its intention to exercise the Sale Right. If the Grantee
does not exercise the Sale Right prior to the first anniversary of the Merger
Termination Date, the Sale Right shall terminate. In the event the Grantee
wishes to exercise the Sale Right, the Grantee shall send a written notice to
the Grantor specifying a date (not later than 20 business days and not earlier
than 10 business days following the date such notice is given) for the closing
of such sale.
10. REGISTRATION RIGHTS.
(a) In the event that the Grantee shall desire to sell any of the
Shares within two years after the purchase of such Shares pursuant hereto, and
such sale requires, in the opinion of counsel to the Grantee, which opinion
shall be reasonably satisfactory to the Grantor and its counsel, registration of
such Shares under the Securities Act, the Grantor will cooperate with the
Grantee and any underwriters in registering such Shares for resale, including,
without limitation, promptly filing a registration statement that complies with
the requirements of applicable federal and
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state securities laws and entering into an underwriting agreement with such
underwriters upon such terms and conditions as are customarily contained in
underwriting agreements with respect to secondary distributions; provided that
the Grantor shall not be required to have declared effective more than two
registration statements hereunder and shall be entitled to delay the filing or
effectiveness of any registration statement for up to 120 days if the offering
would, in the judgment of the Board of Directors of the Grantor, require
premature disclosure of any material corporate development or otherwise
interfere with or adversely affect any pending or proposed offering of
securities of the Grantor or any other material transaction involving the
Grantor.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 10, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 90 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of the registration, including, but not limited to, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for the Grantor, except that the Grantee shall pay the
fees and disbursements of its counsel, the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by the Grantee. The
Grantor shall indemnify and hold harmless Grantee, its affiliates and its
officers and directors from and against any and all losses, claims, damages,
liabilities and expenses arising out of or based upon any statements contained
in, omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does not
apply to any loss, liability, claim, damage or expense to the extent it arises
out of any untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Grantor by the Grantee, its affiliates
and its officers expressly for use in any registration statement (or any
amendment thereto) or any preliminary prospectus filed pursuant to this
paragraph. The Grantor shall also indemnify and hold harmless each underwriter
and each person who controls any underwriter within the meaning of either the
Securities Act or the Securities Exchange Act of 1934 against any and all
losses, claims, damages, liabilities and expenses arising out of or based upon
any statements contained in, omissions or alleged omissions from, each
registration statement filed pursuant to this paragraph; provided, however, that
this provision does not apply to any loss, liability, claim, damage or expense
to the extent it arises out of any untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Grantor by the
underwriters expressly for use in any registration statement (or
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any amendment thereto) or any preliminary prospectus filed pursuant to this
paragraph.
11. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as defined in Section 11(c) below) exceed $30
million and, if it otherwise would exceed such amount, the Grantee, at its sole
election, shall either (i) deliver to the Grantor for cancellation Shares
previously purchased by Grantee, (ii) pay cash or other consideration to the
Grantor or (iii) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed $30 million after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of Shares as would, as of the date of the
Stock Exercise Notice, result in a Notional Total Profit (as defined in Section
11(c) below) of more than $30 million and, if exercise of the Option otherwise
would exceed such amount, the Grantee, at its discretion, may increase the
Purchase Price for that number of Shares set forth in the Stock Exercise Notice
so that the Notional Total Profit shall not exceed $30 million; provided, that
nothing in this sentence shall restrict any exercise of the Option permitted
hereby on any subsequent date at the Purchase Price set forth in Section 1(a)
hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
Grantee pursuant to Section 8.03(c) of the Merger Agreement and Section 1(c)
hereof, (ii) (x) the amount received by Grantee pursuant to the Grantor's
repurchase of Shares pursuant to Sections 8 or 9 hereof, less (y) the Grantee's
purchase price for such Shares, and (iii) (x) the net cash amounts received by
Grantee pursuant to the sale of Shares (or any other securities into which such
Shares are converted or exchanged) to any unaffiliated party, less (y) the
Grantee's purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise Notice
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Shares, together with all other Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
12. EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
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13. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
14. NOTICE. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by certified mail, return receipt requested, or if sent by facsimile
transmission, upon receipt of oral confirmation that such transmission has been
received, to the person at the address set forth below, or such other address as
may be designated in writing hereafter, in the same manner, by such person:
If to the Grantor:
Arbor Software Corporation
1344 Crossman Avenue
Sunnyvale, CA 94089
Attn: General Counsel
Telecopy: (408) 543-4788
With a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attn: Robert V. Gunderson, Jr., Esq.
Steven M. Spurlock, Esq.
Telecopy: (650) 321-2800
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If to the Grantee:
Hyperion Software Corporation
900 Long Ridge Road
Stamford, CT 06902
Attn: Secretary
Telecopy: (203) 461-7795
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: John A. Burgess, Esq.
Hal J. Leibowitz, Esq.
Telecopy: (617) 526-5000
15. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective successors and
assigns; provided, however, that such successors in interest or assigns shall
agree to be bound by the provisions of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
16. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Merger
Agreement and the other documents referred to therein, contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings, oral
or written, with respect to such transactions. This Agreement may not be
changed, amended or modified orally, but may be changed only by an agreement in
writing signed by the party against whom any waiver, change, amendment,
modification or discharge may be sought.
17. ASSIGNMENT. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto, except that the Grantee may assign its rights and obligations
hereunder to any of its direct or indirect wholly owned subsidiaries, but no
such transfer shall relieve the Grantee of its obligations hereunder if such
transferee does not perform such obligations.
18. HEADINGS. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
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19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
21. TERMINATION. The right to exercise the Option granted pursuant to this
Agreement shall terminate at the earlier of (i) the Effective Time (as defined
in the Merger Agreement), (ii) the date on which Grantee realizes a Total Profit
of $30 million and (iii) 90 days after the Merger Termination Date (the date
referred to in clause (iii) being hereinafter referred to as the "Option
Termination Date"); provided that if the Option cannot be exercised or the
Shares cannot be delivered to Grantee upon such exercise because the conditions
set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied,
the Option Termination Date shall be extended until thirty days after such
impediment to exercise has been removed; and provided, further, that, if at any
time the Grantee seeks to exercise the Option by delivery of a Stock Exercise
Notice but is unable to do so with respect to all of the Shares subject to the
Option at the Purchase Price because of the limitation on profit contained in
Section 11(b) hereof, the Option Termination Date shall be extended for an
additional 180 days from the date of such Stock Exercise Notice (but in no event
shall the Option Termination Date be more than 270 days after the Merger
Termination Date).
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
22. SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
23. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and the
Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
exchange or by the National Association of Securities Dealers, Inc.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
Hyperion Software Corporation
By: /s/ James Perakis
----------------------------------------
Title: Chairman and Chief Executive Officer
--------------------------------------
Arbor Software Corporation
By: /s/ John Dillon
----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
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Exhibit B
---------
Arbor Stock Option Agreement
STOCK OPTION AGREEMENT, dated as of May 25, 1998 (the "Agreement"), between
ARBOR SOFTWARE CORPORATION, a Delaware corporation (the "Grantee"), and HYPERION
SOFTWARE CORPORATION, a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, the Grantor and HSC Merger Corp., a Delaware
corporation and a wholly owned subsidiary of the Grantee ("Sub"), are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Sub with and into the Grantor;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase 3,789,000 shares of Common Stock, par value $0.01 per share,
of the Grantor (the "Common Stock"), upon the terms and subject to the
conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS; PAYMENT OF SPREAD.
(a) Contemporaneously herewith the Grantee, Sub and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase up to 3,789,000 shares of Common Stock (the "Shares")
at a cash purchase price equal to the lowest of (i) $38.125 per Share, (ii) the
average closing price of the Common Stock on the Nasdaq National Market for the
five consecutive trading days beginning on and including the day that the Merger
is publicly announced, or (iii) the average closing price of the Common Stock on
the Nasdaq National Market for the five consecutive trading days immediately
preceding the public announcement of an Alternative Transaction (as defined in
the Merger Agreement) involving Grantor giving rise to the right to exercise
this Option pursuant to Section 2 below (the "Purchase Price"). The Option may
be exercised by the Grantee, in whole or in part, at any time, or from time to
time, following the occurrence of one of the events set forth
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in Section 2(c) hereof and prior to the termination of the Option in accordance
with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below)) not later than 10
business days and not earlier than the next business day following the date such
notice is given for the closing of such purchase. In the event of any change in
the number of issued and outstanding shares of Common Stock by reason of any
stock dividend, stock split, split-up, recapitalization, merger or other change
in the corporate or capital structure of the Grantor, the number of Shares
subject to this Option and the purchase price per Share shall be appropriately
adjusted to restore to the Grantee its rights hereunder, including its right to
purchase Shares representing 19.9% of the capital stock of the Grantor entitled
to vote generally for the election of the directors of the Grantor which is
issued and outstanding immediately prior to the exercise of the Option at an
aggregate purchase price equal to the Purchase Price multiplied by 3,789,000.
(c) If at any time the Option is then exercisable pursuant to the
terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the
Option to purchase Shares provided in Section 1.(a) hereof, to send a written
notice to the Grantor (the "Cash Exercise Notice") specifying a date not later
than 20 business days and not earlier than 10 business days following the date
such notice is given on which date the Grantor shall pay to the Grantee an
amount in cash equal to the Spread (as hereinafter defined) multiplied by all or
such portion of the Shares subject to the Option as Grantee shall specify. As
used herein "Spread" shall mean the excess, if any, over the Purchase Price of
the higher of (x) if applicable, the highest price per share of Common Stock
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by any person in an Alternative Transaction (as defined in the Merger
Agreement) (the "Alternative Purchase Price") or (y) the closing price of the
shares of Common Stock on the Nasdaq National Market on the last trading day
immediately prior to the date of the Cash Exercise Notice (the "Closing Price").
If the Alternative Purchase Price includes any property other than cash, the
Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if
any, included in the Alternative Purchase Price plus (ii) the fair market value
of such other property. If such other property consists of securities with an
existing public trading market, the average of the closing prices (or the
average of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the five trading
days ending five days prior to the date of the Cash Exercise Notice shall be
deemed to equal the fair market value of such property. If such other property
consists of something other than cash or securities with an existing public
trading market and, as of the payment date for the Spread, agreement on the
value of such other property has not been reached, the Alternative Purchase
Price shall be deemed to equal the Closing Price. Upon exercise of its right to
receive cash pursuant to this Section 1(c), the obligations of the Grantor to
deliver Shares pursuant to
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Section 3 shall be terminated with respect to such number of Shares for which
the Grantee shall have elected to be paid the Spread.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to deliver
Shares upon exercise of the Option or the Spread upon exercise of the Grantor's
rights under Section 1(c) above is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or
been terminated; and
(c) A proposal for an Alternative Transaction involving Grantor shall
have been made prior to the date the Merger Agreement is terminated
pursuant to the terms thereof (the "Merger Termination Date") and one or
more of the following events shall have occurred on or after the date of
the making of such proposal: (1) the requisite vote of the stockholders of
Grantor in favor of the Merger Agreement and the Merger shall not have been
obtained at the Hyperion Stockholders' Meeting (as such term is defined in
the Merger Agreement) or any adjournment or postponement thereof; (2) the
Board of Directors of Grantor shall have withdrawn or modified its
recommendation of the Merger Agreement or the Merger; (3) the Board of
Directors of Grantor shall have recommended to the stockholders of Grantor
an Alternative Transaction (as defined in the Merger Agreement); (4) a
tender offer or exchange offer for 15% or more of the outstanding shares of
Grantor Common Stock shall have been commenced (other than by Grantee or an
affiliate of Grantee) and the Board of Directors of Grantor shall have
recommended that the stockholders of Grantor tender their shares in such
tender or exchange offer; or (5) for any reason Grantor shall have failed
to call and hold the Hyperion Stockholders' Meeting (as defined in the
Merger Agreement) by the Outside Date (as defined in the Merger Agreement)
and Grantor is not at such time otherwise entitled to terminate the Merger
Agreement pursuant to Section 8.01(g) thereof.
3. THE CLOSING.
(a) Any closing hereunder shall take place on the date specified by
the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case
may be, at 10:00 A.M., local time, at the offices of Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP, 155 Constitution Drive, Menlo Park,
California, or, if the conditions set forth in Section 2(a) or 2(b) have not
then been satisfied, on the second business day following the satisfaction of
such conditions, or at such other time and place as the
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parties hereto may agree (the "Closing Date"). On the Closing Date, (i) in the
event of a closing pursuant to Section 1(b) hereof, the Grantor will deliver to
the Grantee a certificate or certificates, duly endorsed (or accompanied by duly
executed stock powers), representing the Shares in the denominations designated
by the Grantee in its Stock Exercise Notice and the Grantee will purchase such
Shares from the Grantor at the price per Share equal to the Purchase Price or
(ii) in the event of a closing pursuant to Section 1(c) hereof, the Grantor will
deliver to the Grantee cash in an amount determined pursuant to Section 1(c)
hereof. Any payment made by the Grantee to the Grantor, or by the Grantor to the
Grantee, pursuant to this Agreement shall be made by certified or official bank
check or by wire transfer of immediately available federal funds to a bank
designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor represents
and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights; (d)
except as otherwise required by the HSR Act, the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby do not require the consent, waiver, approval or
authorization of or any filing with any person or public authority and will not
violate, result in a breach of or the acceleration of any obligation under, or
constitute a default under, any provision of any charter or by-law, indenture,
mortgage, lien, lease, agreement, contract, instrument, order, law, rule,
regulation, judgment, ordinance, decree or restriction by which the Grantor or
any of its subsidiaries or any of their respective properties or assets is
bound; (e) no "fair price", "moratorium", "control share acquisition" or other
form of antitakeover statute or regulation (including, without limitation,
Section 203 of the Delaware General Corporation Law) is or shall be applicable
to the acquisition of Shares pursuant to this Agreement; and (f) the Grantor has
taken all corporate action necessary so that the grant and any subsequent
exercise
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of the Option by the Grantee will not result in the separation, distribution,
trigger or exercisability of rights under the Rights Agreement, dated as of
November 17, 1995, between the Grantor and American Stock Transfer & Trust
Company, as Rights Agent.
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee represents
and warrants to the Grantor that (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and will constitute a
valid and binding obligation of Grantee; and (b) the Grantee is acquiring the
Option and, if and when it exercises the Option, will be acquiring the Shares
issuable upon the exercise thereof for its own account and not with a view to
distribution or resale in any manner which would be in violation of the
Securities Act.
6. LISTING OF SHARES; HSR ACT FILINGS; GOVERNMENTAL CONSENTS;
DIRECTORSHIP.
(a) Subject to applicable law and the rules and regulations of the
Nasdaq National Market, the Grantor will promptly file an application to list
the Shares on the Nasdaq National Market and will use its best efforts to obtain
approval of such listing and to effect all necessary filings by the Grantor
under the HSR Act; provided, however, that if the Grantor is unable to effect
such listing on the Nasdaq National Market by the Closing Date, the Grantor will
nevertheless be obligated to deliver the Shares upon the Closing Date. Each of
the parties hereto will use its best efforts to obtain consents of all third
parties and governmental authorities, if any, necessary to the consummation of
the transactions contemplated.
(b) Upon exercise by the Grantee of the Option, in whole or in part,
for at least 1,900,000 Shares (such number representing approximately 10% of the
number of outstanding shares of Common Stock on the date hereof) the Grantee
shall be entitled to designate one person to be appointed to the Board of
Directors of the Grantor. Within five business days of the giving of notice by
the Grantee to the Grantor of the name of such designee, the Grantor, subject to
the fiduciary obligations of the Board of Directors of the Grantor, shall cause
such designee to be appointed to the Board of Directors of the Grantor.
Thereafter, subject to the further provisions hereof, the Grantor's nominating
committee (or any other committee exercising a similar function) shall recommend
to the Board of Directors of the Grantor that such person designated by the
Grantee be included in the slate of nominees recommended by the Board of
Directors to the stockholders for election as directors at each annual meeting
of stockholders of the Grantor. In the event that the designee of the Grantee
shall cease to serve as a director for any reason, the Grantee shall give notice
to the Grantor of the name of a designee to fill such vacancy in accordance with
the second and third sentences of this Section 6(b). If any such person has been
designated by the Grantee and not approved by the Board of Directors, the
Grantee shall be permitted to
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designate a substitute designee for such person in accordance with this Section
6(b). Notwithstanding the foregoing, the Grantor shall not be required to
nominate the designee of the Grantee, and shall be entitled to request and
receive the resignation of any designee of the Grantee then serving on the Board
of Directors of the Grantor, at any time that the Grantee then beneficially owns
less than 1,900,000 shares of Common Stock. The Grantee and the Grantor agree to
take such steps as may be necessary to give effect to this Section 6(b) in a
manner consistent with applicable law.
7. COVENANTS OF THE GRANTEE. For so long as, and at any time that, a
designee of the Grantee is a member of the Board of Directors of the Grantor,
the Grantee covenants and agrees that the Grantee will not enter into any
agreement or understanding with any person with respect to the voting of any
shares of Common Stock it may beneficially own, and shall vote all such shares
beneficially owned by it (unless the aggregate of all such shares of Common
Stock beneficially owned by the Grantee and its affiliates exceeds 50% of the
outstanding shares of Common Stock) in favor of the Grantor's nominees for
election of directors.
8. RIGHT OF FIRST REFUSAL. If a Change in Control Event (as defined in
Section 8(e) below) has not then already occurred, if the Grantee, at any time
prior to the first anniversary of the Merger Termination Date, seeks to sell all
or any part of the Shares (i) in a transaction registered under the Securities
Act (other than in a registered public offering in which the underwriters are
instructed to achieve a broad public distribution) or (ii) in a transaction not
required to be registered under the Securities Act (other than in a transfer by
operation of law upon consummation of a merger), it shall give the Grantor (or a
designee of the Grantor) the opportunity, in the following manner, to purchase
such Shares:
(a) The Grantee shall give notice to the Grantor in writing of its
intent to sell Shares (a "Disposition Notice"), specifying the number of Shares
to be sold, the price and, if applicable, the material terms of any agreement
relating thereto For purposes of this Section 8, if the Disposition Notice is
given with respect to the sale of the Shares pursuant to a tender or exchange
offer, it shall be assumed that all Shares tendered will be accepted for
payment. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
(b) The Grantor or its designee shall have the right, exercisable by
written notice given to the Grantee within five business days after receipt of a
Disposition Notice (or, if applicable, in the case of a proposed sale pursuant
to a tender or exchange offer for shares of Common Stock, by written notice
given to the Grantee at least two business days prior to the then announced
expiration date of such tender or exchange offer (the "Expiration Date") if such
Disposition Notice was given at least four business days prior to such
Expiration Date), to purchase all, but not less than all, of the Shares
specified in the Disposition Notice at the price set forth in the Disposition
Notice. If the purchase price specified in the Disposition Notice includes
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any property other than cash, the purchase price to be paid by the Grantor shall
be an amount of cash equal to the sum of (i) the cash included in the purchase
price plus (ii) the fair market value of such other property at the date of the
Disposition Notice. If such other property consists of securities with an
existing public trading market, the average of the last sales prices for such
securities on the five trading days ending five days prior to the date of the
Disposition Notice shall be used as the fair market value of such property. If
such other property consists of something other than cash or securities with an
existing public trading market and at the time of the closing referred to in
paragraph (c) below, agreement on the value of such other property has not been
reached, the average of the closing prices for the Grantor's Common Stock on the
five trading days ending five days prior to the date of the Disposition Notice
shall be used as the per share purchase price; provided, however, that promptly
after the closing, the Grantee and the Grantor or its designee, as the case may
be, shall settle any additional amounts to be paid or returned as a result of
the determination of fair market value of such other property made by a
nationally recognized investment banking firm selected by the Grantor and
approved by the Grantee within 30 days of the closing. Such determination shall
be final and binding on all parties hereto. If, at the time of the purchase of
any Shares by the Grantor (or its designee) pursuant to this Section 8, a tender
or exchange offer is outstanding, then the Grantor (or its designee) shall agree
at the time of such purchase to promptly pay to Grantee from time to time such
additional amounts, if any, so that the consideration received by Grantee with
respect to each Share shall be equal to the highest price paid for a share of
Common Stock pursuant to such tender or exchange, or pursuant to any other
tender or exchange offer outstanding at any time such tender or exchange offer
is outstanding.
(c) If the Grantor exercises its right of first refusal hereunder, the
closing of the purchase of the Shares with respect to which such right has been
exercised shall take place within five business days after the notice of such
exercise (or, if applicable, in the case of a tender or exchange offer, no later
than one business day prior to the expiration date of the offer if written
notice was given within the time set forth in the parenthetical in the first
sentence of paragraph (b) above); provided, however, that at any time prior to
the closing of the purchase of Shares hereunder, the Grantee may determine not
to sell the Shares and revoke the Disposition Notice and by so doing, cancel the
Grantor's right of first refusal with respect to the disposition in question.
The Grantor (or its designee) shall pay for the Shares in immediately available
funds.
(d) If the Grantor does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Grantee shall be free
for 90 days following the expiration of such time for exercise to sell or enter
into an agreement to sell the Shares specified in the Disposition Notice, at the
price specified in the Disposition Notice or any price in excess thereof and
otherwise on substantially the same terms set forth in the Disposition Notice;
provided, that if such sale is not
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consummated within such 90-day period, then the provisions of this Section 8
will again apply to the sale of such Shares.
(e) For purposes of the Agreement, a "Change in Control Event" shall
be deemed to have occurred if (i) any person has a acquired beneficial ownership
of more than 50% (excluding the Shares) of the outstanding shares of Common
Stock or (ii) the Grantor shall have entered into an agreement, including
without limitation an agreement in principle, providing for a merger or other
business combination involving the Grantor or the acquisition of 20% or more of
the assets of the Grantor and its subsidiaries, taken as a whole.
9. REPURCHASE OF SHARES; SALE OF SHARES.
(a) If a Change in Control Event has not occurred prior to the first
anniversary date of the Merger Termination Date, then beginning on such
anniversary date, the Grantor shall have the right to purchase (the "Repurchase
Right") all, but not less than all, of the Shares at the greater of (i) the
Purchase Price, or (ii) the average of the closing prices for shares of Common
Stock on the five trading days ending five days prior to the date the Grantor
gives written notice of its intention to exercise the Repurchase Right. If the
Grantor does not exercise the Repurchase Right within 30 days following the
first anniversary of the Merger Termination Date, the Repurchase Right shall
terminate. In the event the Grantor wishes to exercise the Repurchase Right, the
Grantor shall send a written notice to the Grantee specifying a date (not later
than 10 business days and not earlier than the next business day following the
date such notice is given) for the closing of such purchase.
(b) At any time prior to the first anniversary of the Merger
Termination Date, the Grantee shall have the right to sell (the "Sale Right") to
the Grantor all, but no less than all, of the Shares at the greater of (i) the
Purchase Price or (ii) the average of the last sales prices for shares of Common
Stock on the five trading days ending five days prior to the date the Grantee
gives written notice of its intention to exercise the Sale Right. If the Grantee
does not exercise the Sale Right prior to the first anniversary of the Merger
Termination Date, the Sale Right shall terminate. In the event the Grantee
wishes to exercise the Sale Right, the Grantee shall send a written notice to
the Grantor specifying a date (not later than 20 business days and not earlier
than 10 business days following the date such notice is given) for the closing
of such sale.
10. REGISTRATION RIGHTS.
(a) In the event that the Grantee shall desire to sell any of the
Shares within two years after the purchase of such Shares pursuant hereto, and
such sale requires, in the opinion of counsel to the Grantee, which opinion
shall be reasonably satisfactory to the Grantor and its counsel, registration of
such Shares under the
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Securities Act, the Grantor will cooperate with the Grantee and any underwriters
in registering such Shares for resale, including, without limitation, promptly
filing a registration statement that complies with the requirements of
applicable federal and state securities laws and entering into an underwriting
agreement with such underwriters upon such terms and conditions as are
customarily contained in underwriting agreements with respect to secondary
distributions; provided that the Grantor shall not be required to have declared
effective more than two registration statements hereunder and shall be entitled
to delay the filing or effectiveness of any registration statement for up to 120
days if the offering would, in the judgment of the Board of Directors of the
Grantor, require premature disclosure of any material corporate development or
otherwise interfere with or adversely affect any pending or proposed offering of
securities of the Grantor or any other material transaction involving the
Grantor.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 10, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 90 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of the registration, including, but not limited to, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for the Grantor, except that the Grantee shall pay the
fees and disbursements of its counsel, the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by the Grantee. The
Grantor shall indemnify and hold harmless Grantee, its affiliates and its
officers and directors from and against any and all losses, claims, damages,
liabilities and expenses arising out of or based upon any statements contained
in, omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does not
apply to any loss, liability, claim, damage or expense to the extent it arises
out of any untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Grantor by the Grantee, its affiliates
and its officers expressly for use in any registration statement (or any
amendment thereto) or any preliminary prospectus filed pursuant to this
paragraph. The Grantor shall also indemnify and hold harmless each underwriter
and each person who controls any underwriter within the meaning of either the
Securities Act or the Securities Exchange Act of 1934 against any and all
losses, claims, damages, liabilities and expenses arising out of or based upon
any statements contained in, omissions or alleged omissions from, each
registration statement filed pursuant to this paragraph; provided, however, that
this provision does not apply to any loss, liability,
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claim, damage or expense to the extent it arises out of any untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Grantor by the underwriters expressly for use in any
registration statement (or any amendment thereto) or any preliminary prospectus
filed pursuant to this paragraph.
11. PROFIT LIMITATION.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as defined in Section 11(c) below) exceed $30
million and, if it otherwise would exceed such amount, the Grantee, at its sole
election, shall either (i) deliver to the Grantor for cancellation Shares
previously purchased by Grantee, (ii) pay cash or other consideration to the
Grantor or (iii) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed $30 million after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of Shares as would, as of the date of the
Stock Exercise Notice, result in a Notional Total Profit (as defined in Section
11(d) below) of more than $30 million and, if exercise of the Option otherwise
would exceed such amount, the Grantee, at its discretion, may increase the
Purchase Price for that number of Shares set forth in the Stock Exercise Notice
so that the Notional Total Profit shall not exceed $30 million; provided, that
nothing in this sentence shall restrict any exercise of the Option permitted
hereby on any subsequent date at the Purchase Price set forth in Section 1(a)
hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
Grantee pursuant to Section 8.03(e) of the Merger Agreement and Section 1(c)
hereof, (ii) (x) the amount received by Grantee pursuant to the Grantor's
repurchase of Shares pursuant to Sections 8 or 9 hereof, less (y) the Grantee's
purchase price for such Shares, and (iii) (x) the net cash amounts received by
Grantee pursuant to the sale of Shares (or any other securities into which such
Shares are converted or exchanged) to any unaffiliated party, less (y) the
Grantee's purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise Notice
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Shares, together with all other Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
B-10
87
12. EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
13. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
14. NOTICE. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by certified mail, return receipt requested, or if sent by facsimile
transmission, upon receipt of oral confirmation that such transmission has been
received, to the person at the address set forth below, or such other address as
may be designated in writing hereafter, in the same manner, by such person:
If to the Grantor:
Hyperion Software Corporation
900 Long Ridge Road
Stamford, CT 06902
Attn: Secretary
Telecopy: (203) 461-7795
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: John A. Burgess, Esq.
Hal J. Leibowitz, Esq.
Telecopy: (617) 526-5000
B-11
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If to the Grantee:
Arbor Software Corporation
1344 Crossman Avenue
Sunnyvale, CA 94089
Attn: General Counsel
Telecopy: (408) 543-4788
With a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attn: Robert V. Gunderson, Jr., Esq.
Steven M. Spurlock, Esq.
Telecopy: (650) 321-2800
15. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective successors and
assigns; provided, however, that such successors in interest or assigns shall
agree to be bound by the provisions of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
16. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Merger
Agreement and the other documents referred to therein, contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings, oral
or written, with respect to such transactions. This Agreement may not be
changed, amended or modified orally, but may be changed only by an agreement in
writing signed by the party against whom any waiver, change, amendment,
modification or discharge may be sought.
17. ASSIGNMENT. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto, except that the Grantee may assign its rights and obligations
hereunder to any of its direct or indirect wholly owned subsidiaries, but no
such transfer shall relieve the Grantee of its obligations hereunder if such
transferee does not perform such obligations.
18. HEADINGS. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
B-12
89
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
21. TERMINATION. The right to exercise the Option granted pursuant to this
Agreement shall terminate at the earlier of (i) the Effective Time (as defined
in the Merger Agreement), (ii) the date on which Grantee realizes a Total Profit
of $30 million and (iii) 90 days after the Merger Termination Date (the date
referred to in clause (iii) being hereinafter referred to as the "Option
Termination Date"); provided that if the Option cannot be exercised or the
Shares cannot be delivered to Grantee upon such exercise because the conditions
set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied,
the Option Termination Date shall be extended until thirty days after such
impediment to exercise has been removed; and provided, further, that, if at any
time the Grantee seeks to exercise the Option by delivery of a Stock Exercise
Notice but is unable to do so with respect to all of the Shares subject to the
Option at the Purchase Price because of the limitation on profit contained in
Section 11(b) hereof, the Option Termination Date shall be extended for an
additional 180 days from the date of such Stock Exercise Notice (but in no event
shall the Option Termination Date be more than 270 days after the Merger
Termination Date).
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
22. SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
23. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and the
Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
exchange or by the National Association of Securities Dealers, Inc.
[Remainder of page intentionally left blank.]
B-13
90
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
Arbor Software Corporation
By: /s/ John Dillon
----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
Hyperion Software Corporation
By: /s/ James Perakis
----------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
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EXHIBIT C -- DIRECTOR AND OFFICER DESIGNEES
C-1 -- Hyperion Designees
James A. Perakis
Gary G. Greenfield
Harry S. Gruner
Aldo Papone
C-2 -- Arbor Designees
John M. Dillon
Mark Perry
Jeffrey R. Rodek
C-3 -- Directors Classes
Class I Directors
(terms ending at the
1999 Annual Meeting of Stockholders)
------------------------------------
Gary G. Greenfield
Mark Perry
Class II Directors
(terms ending at the
2000 Annual Meeting of Stockholders)
------------------------------------
Harry S. Gruner
Aldo Papone
Jeffrey R. Rodek
Class III Directors
(terms ending at the
2001 Annual Meeting of Stockholders)
------------------------------------
John M. Dillon
James A. Perakis
C-1
92
C-4 -- Officers
Chairman: James A. Perakis
President and Chief Executive Officer: John M. Dillon
Chief Financial Officer: Stephen V. Imbler
C-2
93
Exhibit D-1
-----------
Hyperion Affiliate Agreement
AFFILIATE AGREEMENT
______________, 1998
Hyperion Software Corporation
900 Long Ridge Road
Stamford, CT 06902
Arbor Software Corporation
1344 Crossman Avenue
Sunnyvale, CA 94089
Ladies and Gentlemen:
An Agreement and Plan of Merger dated as of May 25, 1998 (the "Agreement")
has been entered into by and among Hyperion Software Corporation, a Delaware
corporation ("Hyperion"), Arbor Software Corporation, a Delaware corporation
("Arbor"), and HSC Merger Corp., a Delaware corporation and a wholly owned
subsidiary of Arbor (the "Sub"). The Agreement provides for the merger of the
Sub with and into Hyperion (the "Merger"). In accordance with the Agreement,
shares of common stock, $.01 par value per share, of Hyperion (the "Hyperion
Common Stock") shall be converted into shares of common stock, $.001 par value
per share, of Arbor (the "Arbor Common Stock"), as described in the Agreement.
The undersigned has been advised that as of the date of this agreement the
undersigned may be deemed to be an "affiliate" of Hyperion, as the term
"affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145 of the
Rules and Regulations of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), and/or as such term is used in, and for purposes of, Accounting Series
Releases Nos. 130 and 135, as amended, of the Commission.
In consideration of the mutual agreements, provisions and covenants set
forth in the Agreement and hereinafter in this agreement, the undersigned
represents and agrees as follows:
1. POOLING REQUIREMENTS. The undersigned will not within the 30 day
period prior to the Effective Time (as defined in the Agreement), sell,
transfer, pledge, hypothecate or otherwise dispose of, or reduce the
undersigned's interest in or risk
D-1-1
94
relating to, any shares of Hyperion Common Stock or Arbor Common Stock owned by
the undersigned. In addition, the undersigned will not sell, transfer, pledge,
hypothecate or otherwise dispose of, or reduce the undersigned's interest in or
risk relating to, any Arbor Common Stock issued to the undersigned pursuant to
the Merger, or any other shares of Arbor capital stock, until after such time as
Arbor has published (within the meaning of Accounting Series Release No. 135, as
amended, of the Commission) financial results covering at least 30 days of
combined operations of Hyperion and Arbor.
2. RULE 145. The undersigned will not offer, sell, pledge, hypothecate,
transfer or otherwise dispose of, or reduce its interest in or risk relating to,
any of the shares of Arbor Common Stock issued to the undersigned in the Merger
unless at such time either: (i) such transaction is permitted pursuant to the
provisions of Rule 145 under the Securities Act; (ii) the undersigned shall have
furnished to Arbor an opinion of counsel, reasonably satisfactory to Arbor, to
the effect that such transaction is otherwise exempt from the registration
requirements of the Securities Act; or (iii) a registration statement under the
Securities Act covering the proposed offer, sale, pledge, hypothecation,
transfer or other disposition shall be effective under the Securities Act.
3. LEGEND.
(a) The undersigned understands that all certificates representing
Arbor Common Stock delivered to the undersigned pursuant to the Merger shall
bear a legend in substantially the form set forth below, until the earlier to
occur of (i) one of the events referred to in Section 2 above or (ii) the date
on which the undersigned requests removal of such legend, provided, that such
request occurs at least two years from the Effective Date (as defined in the
Merger Agreement) and that the undersigned is not at the time of such request,
and has not been during the three months period preceding to such request, an
affiliate of Arbor.
"The shares represented by this certificate were issued in a transaction to
which Rule 145 of the Securities Act of 1933 applies and may only be
transferred in accordance with the provisions of such rule. In addition,
the shares represented by this certificate may only be transferred in
accordance with the terms of an affiliate agreement dated ____________,
1998 between the initial holder hereof and Arbor Software Corporation, a
copy of which agreement may be inspected by the holder of this certificate
at the principal offices of Arbor Software Corporation, or furnished by
Arbor Software Corporation to the holder of this certificate upon written
request, without charge."
D-1-2
95
(b) Arbor in its discretion may cause stop transfer orders to be
placed with its transfer agent with respect to the certificates for the shares
of Arbor Common Stock that are required to bear the foregoing legend.
4. GENERAL PROVISIONS. This agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
principles of conflicts of laws. This agreement shall be binding on the
undersigned's successors and assigns, including his or her heirs, executors and
administrators.
The undersigned has carefully read this agreement and discussed its
requirements, to the extent the undersigned believed necessary, with its counsel
or counsel for Hyperion.
Very truly yours,
---------------------------------------------
Signature
---------------------------------------------
Print Name
Accepted:
HYPERION SOFTWARE CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated:
-------------------------------
D-1-3
96
ARBOR SOFTWARE CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated:
-------------------------------
D-1-4
97
Exhibit D-2
-----------
Arbor Affiliate Agreement
AFFILIATE AGREEMENT
______________, 1998
Hyperion Software Corporation
900 Long Ridge Road
Stamford, CT 06902
Arbor Software Corporation
1344 Crossman Avenue
Sunnyvale, CA 94089
Ladies and Gentlemen:
An Agreement and Plan of Merger dated as of May 25, 1998 (the "Agreement")
has been entered into by and among Hyperion Software Corporation, a Delaware
corporation ("Hyperion"), Arbor Software Corporation, a Delaware corporation
("Arbor"), and HSC Merger Corp., a Delaware corporation and a wholly owned
subsidiary of Arbor (the "Sub"). The Agreement provides for the merger of the
Sub with and into Hyperion (the "Merger"). In accordance with the Agreement,
shares of common stock, $.01 par value per share, of Hyperion (the "Hyperion
Common Stock") shall be converted into shares of common stock, $.001 par value
per share, of Arbor (the "Arbor Common Stock"), as described in the Agreement.
The undersigned has been advised that as of the date of this agreement the
undersigned may be deemed to be an "affiliate" of Arbor, as the term "affiliate"
is defined under the Rules and Regulations of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended,
and/or as such term is used in, and for purposes of, Accounting Series Releases
Nos. 103 and 135, as amended, of the Commission.
In consideration of the mutual agreements, provisions and covenants set
forth in the Agreement and hereinafter in this agreement, the undersigned
represents and agrees as follows:
1. POOLING REQUIREMENTS. The undersigned will not within the 30 day
period prior to the Effective Time (as defined in the Agreement), sell,
transfer, pledge, hypothecate or otherwise dispose of, or reduce the
undersigned's interest in or risk relating to, any shares of Hyperion Common
Stock or Arbor Common Stock owned by
D-2-1
98
the undersigned. In addition, the undersigned will not sell, transfer, pledge,
hypothecate or otherwise dispose of, or reduce the undersigned's interest in or
risk relating to any shares of Arbor capital stock, until after such time as
Arbor has published (within the meaning of Accounting Series Release No. 135, as
amended, of the Commission) financial results covering at least 30 days of
combined operations of Hyperion and Arbor.
2. GENERAL PROVISIONS. This agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving effect to
principles of conflicts of laws. This agreement shall be binding on the
undersigned's successors and assigns, including his heirs, executors and
administrators.
The undersigned has carefully read this agreement and discussed its
requirements, to the extent the undersigned believed necessary, with its counsel
or counsel for Arbor.
Very truly yours,
---------------------------------------------
Signature
---------------------------------------------
Print Name
Accepted:
HYPERION SOFTWARE CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated:
-------------------------------
D-2-2
99
ARBOR SOFTWARE CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated:
-------------------------------