-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jk24Jp6ggVbhb3Q3xl2cIuuhmZgO9a3iXpRvf/gFhItadVIEW5CgrpA/rrGZ1e5P bSV0gYfJf+sBGkVVcJPwbg== 0000912057-95-000686.txt : 19950615 0000912057-95-000686.hdr.sgml : 19950615 ACCESSION NUMBER: 0000912057-95-000686 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950214 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERLEAF INC /MA/ CENTRAL INDEX KEY: 0000793604 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 042729042 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14713 FILM NUMBER: 95509771 BUSINESS ADDRESS: STREET 1: PROSPECT PLACE STREET 2: 9 HILLSIDE AVE CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6172900710 10-Q 1 FORM 10-Q - - - - -------------------------------------------------------------------------------- - - - - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 0-14713 [Interleaf Logo] Interleaf, Inc. (exact name of registrant as specified in its charter) MASSACHUSETTS 04-2729042 (State or other jurisdiction (I.R.S. employer identification number) of incorporation or organization) PROSPECT PLACE, 9 HILLSIDE AVE., WALTHAM, MA 02154 (address of principal executive offices) (Zip Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of December 31, 1994: COMMON STOCK, PAR VALUE $.01 13,993,659 (Title of each class) (number of shares) - - - - -------------------------------------------------------------------------------- - - - - -------------------------------------------------------------------------------- INTERLEAF, INC. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION PAGE Consolidated balance sheets at December 31, 1994 and March 31, 1994.......... 3 Consolidated statements of operations for the three and nine months ended December 31, 1994 and 1993............................................. 4 Consolidated statements of cash flows for the nine months ended December 31, 1994 and 1993................................................... 5 Notes to consolidated financial statements................................... 6 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................... 7 PART II - OTHER INFORMATION.................................................. 9 EXHIBIT INDEX............................................................... 10 1 INTERLEAF, INC. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
December 31, 1994 March 31, 1994 In thousands, except share amounts (unaudited) (Note) ASSETS CURRENT ASSETS Cash and cash equivalents $ 13,836 $ 23,364 Accounts receivable, net 20,145 34,932 Inventories 200 129 Other current assets 2,728 2,377 ------------ ------------ TOTAL CURRENT ASSETS 36,909 60,802 Property and equipment, net 11,326 10,156 Other assets 8,512 11,093 Excess of purchase price over net assets 14,709 15,435 of businesses acquired ------------ ------------ $ 71,456 $ 97,486 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,805 $ 3,200 Current portion of capital lease obligations 1,786 4,260 Unearned service revenues 13,921 14,626 Other current liabilities 19,788 19,098 ------------ ------------ TOTAL CURRENT LIABILITIES 39,300 39,747 Other liabilities 2,263 1,107 SHAREHOLDERS' EQUITY Preferred stock, par value $.10 per share, authorized 5,000,000 shares: 173 179 Series A Junior Participating, none issued and outstanding Senior Series B Convertible, issued and outstanding, 1,728,573 shares and 1,785,715, respectively Common stock, par value $.01 per share, authorized 140 136 30,000,000 shares, issued and outstanding 13,993,659 and 13,630,657, respectively Additional paid-in capital 66,959 65,551 Retained earnings deficit (37,399) (8,907) Equity adjustment for foreign currency translation 20 (327) ------------ ------------ 29,893 56,632 ------------ ------------ $ 71,456 $ 97,486 ------------ ------------ ------------ ------------
NOTE: THE BALANCE SHEET AT MARCH 31, 1994 HAS BEEN DERIVED FROM THE AUDITED FINANCIAL STATEMENTS AT THAT DATE BUT DOES NOT INCLUDE ALL OF THE INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE FINANCIAL STATEMENTS. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2 INTERLEAF, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except for per share amounts Three months ended Nine months ended December 31 December 31 (unaudited) (unaudited) 1994 1993 1994 1993 ---- ---- ---- ---- REVENUES: Products $ 7,400 $ 15,816 $ 24,862 $ 44,770 Maintenance 8,197 7,725 23,076 23,032 Services 6,226 4,874 16,137 14,476 ---------- ---------- --------- ---------- TOTAL REVENUES 21,823 28,415 64,075 82,278 COSTS OF SALES: Products 1,396 1,773 3,959 4,140 Maintenance 1,685 1,706 4,920 5,446 Services 5,153 4,962 14,915 15,269 ---------- ---------- --------- --------- TOTAL COST OF SALES 8,234 8,441 23,794 24,855 ---------- ---------- --------- --------- Gross Margin 13,589 19,974 40,281 57,423 OPERATING EXPENSES: Selling, general and administrative 14,110 14,361 43,287 44,841 Research and development 5,081 5,348 15,760 15,865 Charge for purchased research and development - - - 3,985 Restructuring expense - - 7,109 3,000 ---------- ---------- --------- --------- TOTAL OPERATING EXPENSES 19,191 19,709 66,156 67,691 ---------- ---------- --------- --------- Loss from operations (5,602) 265 (25,875) (10,268) Interest income, net 15 17 228 187 Other expense, net (242) (242) (726) (740) ---------- ---------- --------- --------- Loss before income taxes and cumulative (5,829) 40 (26,373) (10,821) effect of change in accounting principle Provision for income taxes (48) - 2,118 169 ---------- ---------- --------- --------- Loss before cumulative effect of change (5,781) 40 (28,491) (10,990) in accounting principle Cumulative effect of change in accounting - - - 1,900 principle-accounting for income taxes ---------- ---------- --------- --------- NET LOSS $ (5,781) $ 40 $ (28,491) $ (9,090) ---------- ---------- --------- --------- ---------- ---------- --------- --------- PRIMARY AND FULLY DILUTED LOSS PER SHARE: Loss before cumulative effect of $ (.41) $ .00 $ (2.05) $ (.82) change in accounting principle ---------- ---------- --------- --------- ---------- ---------- --------- --------- Cumulative effect of change in accounting principle: $ - $ - $ - $ .14 ---------- ---------- --------- --------- ---------- ---------- --------- --------- Net loss: $ (.41) $ .00 $ (2.05) $ (.68) ---------- ---------- --------- --------- Shares used in computing loss per share: Primary 13,971 16,655 13,887 13,310 ---------- ---------- --------- --------- ---------- ---------- --------- --------- Fully diluted 13,971 16,697 13,887 13,310 ---------- ---------- --------- --------- ---------- ---------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 INTERLEAF, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended December 31 In thousands (unaudited) 1994 1993 ---- ---- OPERATING ACTIVITIES Net loss $ (28,491) $ (9,090) Change in accounting principle-accounting for income taxes - (1,900) Change in tax estimate 1,860 Charge for purchased research and development - 3,985 Restructuring expense 7,109 3,000 Depreciation and amortization expense 8,113 7,909 Loss from disposal of property and equipment 142 86 Changes in current accounts, excluding the effects of acquisitions: Decrease in unearned revenue (920) (1,901) (Increase) decrease in accounts receivable, net 15,338 (29) Increase in inventories (53) (13) Increase in other current assets (310) (335) Decrease in accounts payable and other current liabilities (1,915) (45) Decrease in accrued restructuring costs (3,051) (1,129) Other, net (61) - ------------ ----------- Net cash provided by (used in) operating activities (2,239) 538 INVESTING ACTIVITIES Decrease in marketable securities - 4,070 Additions to property and equipment (4,548) (4,264) Capitalized software development costs (3,062) (3,048) Increase in other non-current assets (180) (448) Payment for acquisition of business, net of cash acquired - (5,342) ----------- ------------ Net cash used in investing activities (7,790) (9,032) FINANCING ACTIVITIES Net proceeds from issuance of common stock 1,408 1,818 Proceeds from capital leases 652 1,028 Repayment of capital leases (1,703) (1,777) ----------- ------------ Net cash provided by financing activities 357 1,069 Effect of exchange-rate changes on cash 144 (17) ----------- ------------ Net decrease in cash and cash equivalents (9,528) (7,442) Cash and cash equivalents at beginning of period 23,364 26,402 ----------- ------------ Cash and cash equivalents at end of period $ 13,836 $ 18,960 ----------- ------------ ----------- ------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 INTERLEAF, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The results of operations for the period reported are not necessarily indicative of those that may be expected for the full year. The accompanying financial information is unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the operating results of the period, have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in Interleaf, Inc.'s ("the Company's") annual report on Form 10-K for the year ended March 31, 1994. 2. Earnings/Loss per share Earnings/loss per share are computed based on the weighted average number of common shares and common stock equivalents (when dilutive) outstanding during the period. Common stock equivalents are attributable to convertible preferred stock, stock options and common stock warrants. 3. PruTech Research and Development Partnership III Commencing in the third quarter of fiscal year 1994, PruTech Research and Development Partnership III ("PruTech") reviewed and audited the PruTech- Interleaf Joint Venture ("Joint Venture"). As previously disclosed, PruTech alleges that it is entitled to a mandatory royalty of 30% of the Joint Venture's sales. PruTech also alleges that certain Joint Venture technology is being used by the Company without compensating the Joint Venture. In March 1994, PruTech submitted this dispute to mandatory arbitration. The Company believes that PruTech's position is without merit and, in any event, believes that the outcome of the arbitration will not have a material adverse effect on the operations and financial position of the Company. Commencing February 1, 1992, and for each quarter thereafter, PruTech can purchase the Company's interest in the Joint Venture at a price equal to ten times the Joint Venture's net profits for the previous quarter. In such event, the Company will lose the right to market the products owned by the Joint Venture including WorldView on IBM-compatible personal computers. 5 INTERLEAF, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended December 31, 1994 For the third quarter of fiscal 1995, ended December 31, 1994, the Company recorded revenue of approximately $21.8 million resulting in a net loss of approximately $5.8 million. The net loss includes a $1.8 million write-off of a customer contract due to the Company's and customer's mutual decision to change their respective business models. For the same period a year ago, the Company recorded revenue of approximately $28.4 million with income of approximately $40 thousand. Nine Months Ended December 31, 1994 For the first three (3) quarters of fiscal 1995, revenues totalled approximately $64 million, with a loss of approximately $28.5 million compared with revenue of approximately $82 million with a loss of approximately $9 million for the same period a year ago. During this period in fiscal 1995 the Company recorded a restructuring charge of $7.1 million; for the same period a year ago, the Company recorded a restructuring charge of $3 million. Revenue These operating results reflect a continuing decline in the Company's software revenue, which in fiscal years 1991 through 1994 accounted for over 50% of the Company's total revenue. For the quarter ended December 31, 1994, software revenue accounted for approximately 33% of total revenue. Product revenue from the Company's authoring product, Interleaf 5/6, has been declining for the past two years, as some of the Company's customers have increasingly been migrating toward the Microsoft Windows and Windows NT operating system, which the Company does not expect to support until early fiscal 1996, and away from the Unix operating system, which the Company has historically supported. The Company is currently implementing a new alternate channel strategy to enable the Company's products to be distributed more cost effectively and generate incremental revenue. Secondly, the Company, during fiscal 1995, has not entered into any large multi-year procurements as it did during fiscal 1994, which generated approximately 20% of fiscal 1994 revenue. Finally, during the past fiscal year, the Company's electronic viewing product, WorldView, has experienced declining growth due to increased competition and longer sales cycles involved in the document distribution area. The Company's consulting revenue for the quarter did experience strong growth, as its revenue increased to $6.2 million, compared with $4.9 million for the same period a year ago. This growth reflects the customers' demand for expert services to implement document management solutions and the Company expects it will help leverage software product sales in the future. Expenses In light of the Company's declining software revenue, in September 1994 the Company recorded a $7.1 million restructuring charge to cover the costs of reducing worldwide employment by approximately 12% and the consolidation of the Company's North American and European sales offices. At February 1995, the Company has closed or consolidated 3 sales offices in Europe, with closure of an additional 2 offices expected by the end of fiscal 1995, and 15 sales offices in North America. In North 6 INTERLEAF, INC. America, the Company will operate with 6 major sales offices. The Company's worldwide employment is now 170 people, or 18%, lower than at the beginning of this fiscal year due to attrition and severance. The Company expects that these measures will ultimately result in annual savings of $8-$10 million per year. The Company has expended approximately $3 million of its restructuring reserve. 7 INTERLEAF, INC. FINANCIAL CONDITION The Company's cash position at December 31, 1994 declined to approximately $13.8 million from approximately $15 million for the previous quarter, and $23.6 million for the quarter ended June 30, 1994. This decline in the Company's cash position reflects the Company's operating performance and its implementation of its restructuring plan announced in September 1994. The Company expects to expend an additional $4 million to complete severance payments and fulfill its lease obligations for its sales offices which have been closed pursuant to its restructuring plan over the next three (3) years. The Company failed to meet certain operating covenants under its asset leases and has received a waiver for the period ended December 31, 1994. The Company will either refinance these lease obligations with another financial institution or pay off the leases during the fourth quarter. Total lease obligations are approximately $1.8 million. The Company will continue to closely monitor and control its expenses in light of its software revenue performance. The Company believes that its existing cash reserves and cash generated from ongoing operations are sufficient to meet its liquidity needs. The Company is also in the process of exploring the establishment of credit facilities. 8 INTERLEAF, INC. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) The exhibits listed in the accompanying Exhibit Index are filed as part of this Quarterly Report on Form 10-Q. (b) No reports were filed on Form 8-K by the Company during the quarter ended December 31, 1994. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERLEAF, INC. February 13, 1995 Richard P. Delio ------------------------------ Richard P. Delio Sr. Vice President of Finance and Administration and Chief Financial Officer (Principal Financial Officer) 9 INTERLEAF, INC. EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE [xii] 10(a)* Company's 1983 Stock Option Plan [xi] 10(aa)* Company's 1993 Stock Option Plan [xiii] 10(a1)* 1994 Employee Stock Option Plan [xiii] 10(a2)* 1993 Incentive Stock Option Plan, amended July 14, 1994 [iii] 10(b)* Company's 1989 Director Stock Option Plan [iii] 10(c)* Company's 1989 Officer and Employee Severance Benefit Plans [xii] 10(cc)* Company's 1993 Director Stock Option Plan [iii] 10(d) Agreements between PruTech Research and Development Partnership III and the Company, dated October 21, 1988. [iii] 10(e) Agreement between the Company and First National Bank of Boston, dated September 30, 1988, as amended. [iii] 10(f) Amendments to Agreement between the Company and First National Bank of Boston, dated September 30, 1988. [iii] 10(g) Exclusive Marketing and Licensing Agreement, between Interleaf South America, Ltd. and the Company, and related Option Agreement, dated March 31, 1989. [iii] 10(h) Distribution and License Agreement between Interleaf Italia, S.r.l. and the Company, and related Joint Venture Agreement, dated October 31, 1988. [iii] 10(i) Exclusive Marketing and Licensing Agreement between Interleaf GmbH and the Company, and related Option Agreement, dated July 27, 1988. [ix] 10(j) Company's Note and Stock Purchase Agreement concerning its acquisition of Interleaf GmbH, dated July 20, 1991 (the "Germany Agreements"). [iv] 10(k) Preferred Stock Purchase Agreements, for the issuance of 2,142,857 shares of the Company's Senior Series B Convertible Preferred Stock, dated September 29, 1989. [vi] 10(l) Notification to Preferred Shareholder of increase in conversion ratio, dated May 18, 1992 [i] 10(m) Agreements between ML Technology Ventures, L.P. and the Company, dated March 31, 1987. [viii] 10(n) Exercise of Purchase Option by ML Technology Ventures, L.P., and related agreements, dated January 23, 1991. [ii] 10(o) Lease of Davenport Building, Cambridge, MA, between Charlesport Limited Partnership and the Company, dated September 11, 1987. [viii] 10(p) Lease of Prospect Place, Waltham, MA, between Prospect Place Limited Partnership and Interleaf, Inc., and related Agreements, dated March 30, 1990. [x] 10(q)* Management Consulting Agreement between the Company and David A. Boucher, dated July 15, 1992. [xii] 10(r)* Letter Agreement between the Company and Richard P. Delio, the Company's Sr. Vice President of Finance and Administration and Chief Financial Officer, dated March 30, 1994, concerning his employment and severance with the Company. [xiii] 10(s)* Letter of Separation and Management Consulting Agreement between the Company and Mark K. Ruport, the Company's former President, Chief Executive Officer and Director, dated July 25, 1994, concerning his 10 INTERLEAF, INC. separation and consulting obligations to the Company. [xiii] 10(t)* Letter Agreement between the Company and Richard P. Delio, the Company's Sr. Vice President of Finance and Administration and Chief Financial Officer and Acting President, dated August 3, 1994, concerning his employment and severance with the Company. [xiii] 10(u)* Letter of Separation and Management Consulting Agreement between the Company and Peter Cittadini, the Company's Sr. Vice President Worldwide Operations, dated July 27, 1994, concerning his separation and consulting obligations to the Company. [xiii] 10(v)* Executive Compensation Arrangement for David A. Boucher, the Company's Chairman of the Board, dated July 20, 1994. [xiii] 10(w)* Letter of Separation and Management Consulting Agreement between the Company and Lawrence S. Bohn, the Company's Sr. Vice President, Marketing and Business Development, dated September 20, 1994, concerning his separation and consulting obligations to the Company. 10(x)* Employment and severance agreement between the Company and Edward Koepfler, the Company's President, dated October 3, 1994. 13 11 Computation of Earnings Per Share, for quarter ended December 31, 1994 15 27 Financial Data Schedule 16 ________________________ [i] Incorporated herein by reference is the applicable Exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1987. [ii] Incorporated herein by reference is the applicable Exhibit to the Company's Annual Report on Form 10-K for the year ended March 31, 1988. [iii] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1989. [iv] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1990. [v] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1991. [vi] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1992. [vii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 8-K filed April 13, 1990. [viii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 8-K filed January 24, 1991. [ix] Incorporated herein by reference is the applicable Exhibit to the Company Report on Form 8-K filed August 2, 1991, as amended by Amendment No. 1 on Form 8 filed September 23, 1991, as further amended by Amendment No. 2 on Form 8 filed February 12, 1992, and as further amended by Amendment No. 3 on Form 8 filed March 11, 1992. 11 INTERLEAF, INC. [x] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1993. [xi] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended December 31, 1993. [xii] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1994. [xiii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended September 30, 1994. *Represents a management contract, compensatory plan, or arrangement required to be filed as an Exhibit to this Form 10-Q pursuant to Item 14(c). 12 EX-10.X 2 EXHIBIT 10(X) [Interleaf, Inc. Letterhead] EXHIBIT 10(x) Exhibit 10(X) October 3, 1994 Ed Koepfler 315 Wilmington Court Woodstock, IL 60098 Dear Ed, It is with great pleasure that I confirm our offer to have you join Interleaf, Inc. as President and Chief Executive Officer. As discussed, we look forward to having you join the company November 8, 1994, or sooner if possible. We are enthusiastic about getting going and I know that I speak for the rest of the Directors and employees in welcoming you to the team. The following outlines the elements of your package. POSITION: President, Chief Executive Officer and Member of the Board of Directors. SALARY: Base salary of $300,000 per year, subject to annual review by the Board of Directors. BONUS: Commensurate with Interleaf's current executive compensation plan. For the remainder of fiscal year 1995, ending March 31, 1995, we will guarantee your bonus at an annual level of $100,000, prorated for the amount of time you are with the company. STOCK OPTIONS: In order to help induce you to accept the offer of employment set forth in this letter, Interleaf will grant to you, on October 17, 1994, a stock option for the purchase of 350,000 shares of common stock of Interleaf, Inc. at an exercise price equal to the fair market value of the Interleaf common stock on such date. This option will vest over a four year period, and will automatically terminate if for any reason you fail to commence employment with Interleaf on or before November 8, 1994. It is agreed by you and by Interleaf that the grant of this stock option is an essential inducement to your accepting employment with Interleaf. In addition, executives' and key employees' stock options are evaluated and granted on an annual basis as part of our employee stock option program. 1 BENEFITS: Commensurate with Interleaf's benefit package for senior management, the company will provide complete health, dental, short and long term disability benefits, as well as life insurance in the amount of $500,000. SEVERANCE: In the event of termination for any reason but cause, we will provide one year of salary. CHANGE OF CONTROL PROVISION: In the event that the company is purchased at any time during your tenure, we will vest one-half of all unvested stock options at the time of the acquisition. RELOCATION: Since the company does not have a standard relocation package, we will move all of your personal belongings from Chicago to the Boston area, pay the standard sales commission on your current residence, and give you $15,000 to be used for closing costs and points in buying a new house, and incidentals such as drapes, storage of personal belongings prior to purchase of a new house, etc. With regards to interim housing, we will also find a suitable apartment for you and pay for it up to six months. Obviously, we ask that you spend our money as wisely as you would spend your own, since all of these expenses are reflected in the profit and loss statement of the company. START DATE: Per our conversation, we would expect you to resign your current position on or before October 16, 1994 and start at the company as soon as possible thereafter prior to November 8, 1994. Ed, we are truly looking forward to your joining Interleaf, Inc. as Chief Executive Officer and leading the company over the next several years. We believe that while there are challenges ahead, we offer an outstanding opportunity to build a premiere software organization. Assuming these terms and conditions are acceptable to you, please sign in the appropriate spot below and return this to Joan Harrington at the company. Sincerely, Fred Bamber Board of Directors /s/ Fred Bamber - - - - -------------- ACCEPTED BY: 2 /s/ Ed Koepfler October 6, 1994 - - - - ----------------- ------------------- Ed Koepfler Date CC: David A. Boucher, Chairman David Mazza, Mazza and Riley 3 EX-11 3 EXHIBIT 11 INTERLEAF, INC. EXHIBIT 11-COMPUTATION OF EARNINGS PER SHARE
In thousands, except for per share amounts Three months ended Nine months ended December 31 December 31 (unaudited) (unaudited) 1994 1993 1994 1993 ---- ---- ---- ---- PRIMARY Average shares outstanding of Common Stock 13,971 13,452 13,887 13,310 Net effect of Senior Series B Convertible - 2,506 - - Preferred Stock, if dilutive Net effect of stock options, if dilutive, based on - 412 - - the treasury method using average market price Net effect of stock purchase warrants, if dilutive, based on the treasury method using average market price - 267 - - Net effect of stock purchase plan rights, if dilutive, based on the treasury method using average - 18 - - market price ------ ------ ------ ------ TOTAL 13,971 16,655 13,887 13,310 ------ ------ ------ ------ ------ ------ ------ ------ Income (loss) before cumulative effect of change in accounting principle $(5,781) $ 40 $(28,491) $(10,990) ------ ------ ------ ------ ------ ------ ------ ------ Per share amount $ (.41) $ .00 $ (2.05) $ (.82) ------ ------ ------ ------ ------ ------ ------ ------ Cumulative effect of change in accounting principle $ - $ - $ - $ 1,900 ------ ------ ------ ------- ------ ------ ------ ------- Per share amount $ - $ - $ - $ .14 ------ ------ ------ ------- ------ ------ ------ ------- Net income (loss) $(5,781) $ 40 $(28,491) $(9,090) ------ ------ ------ ------ ------ ------ ------ ------ Per share amount $ (.41) $ .00 $ (2.05) $ (.68) ------ ------ ------ ------ ------ ------ ------ ------ FULLY DILUTED Average shares outstanding of Common Stock 13,971 13,452 13,887 13,310 Net effect of Senior Series B Convertible - 2,506 - - Preferred Stock, if dilutive Net effect of stock options, if dilutive, based on - 428 - - the treasury method using quarter-end price, if higher Net effect of stock purchase warrants, if - 290 - - dilutive, based on the treasury method using quarter-end price, if higher Net effect of stock purchase plan rights, if - 21 - - ------ ------ ------ ------ dilutive, based on the treasury method using quarter-end price, if higher Total 13,971 16,697 13,887 13,310 ------ ------ ------ ------ ------ ------ ------ ------ Income (loss) before cumulative effect of change in accounting principle $ (5,781) $ 40 $(28,491) $(10,990) ------ ------ ------ ------- ------ ------ ------ ------- Per share amount $ (.41) $ .00 $ (2.05) $ (.82) ------ ------ ------ ------ ------ ------ ------ ------ Cumulative effect of change in accounting principle $ - $ - $ - $ 1,900 ------ ------ ------ ------- ------ ------ ------ ------- Per share amount $ - $ - $ - $ .14 ------ ------ ------ ------- ------ ------ ------ ------- Net income (loss) $(5,781) $ 40 $(28,491) $(9,090) ------ ------ ------ ------ ------ ------ ------ ------ Per share amount $ (.41) $ .00 $ (2.05) $ (.68) ------ ------ ------ ------ ------ ------ ------ ------
15 EX-27 4 EXHIBIT 27
5 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operations found on pages 3 and 4 of the Company's Form 10-Q for the quarter ended December 31, 1994, and is qualified in its entirety by reference to such financial statements. 9-MOS MAR-31-1995 OCT-01-1994 DEC-31-1994 13,836,358 0 21,677,064 (1,531,721) 200,198 36,909,386 45,670,388 (34,344,927) 71,455,794 38,548,734 0 139,922 0 172,858 29,580,909 71,455,794 21,823,145 21,823,145 8,234,292 8,234,292 19,191,286 (2,100) 53,162 (5,829,514) (47,938) (5,781,575) 0 0 0 (5,781,575) (0.41) (0.41)
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