-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wpg8YmS5cxOIG5lRPlWkqKzCM61OQ2A8TOxl23JU0obOOjmtbmz2KRko+V8/8byz fvPSOdvh3Osq6AOy44VDyg== 0000912057-95-009912.txt : 19951119 0000912057-95-009912.hdr.sgml : 19951119 ACCESSION NUMBER: 0000912057-95-009912 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERLEAF INC /MA/ CENTRAL INDEX KEY: 0000793604 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [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: 95591748 BUSINESS ADDRESS: STREET 1: PROSPECT PLACE STREET 2: 9 HILLSIDE AVE CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6172900710 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 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) (617) 290-0710 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes X No ___ APPLICABLE ONLY TO CORPORATE ISSUERS The number of shares outstanding of the issuer's Common Stock, $.01 par value, as of October 31, 1995 was 15,659,118. INTERLEAF, INC. TABLE OF CONTENTS PAGE ---- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated balance sheets at September 30, 1995 and March 31, 1995 3 Consolidated statements of operations for the three and six months ended September 30, 1995 and 1994 4 Consolidated statements of cash flows for the six months ended September 30, 1995 and 1994 5 Notes to consolidated financial statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 4 - Submission of Matters to Vote of Security Holders 11 Item 5 - Other Information 11 Item 6 - Exhibits and Reports on Form 8-K 11 SIGNATURE 11 INTERLEAF, INC. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
September March 31, 30, 1995 1995 In thousands, except for share and per (unaudited) share amounts ASSETS CURRENT ASSETS Cash and cash equivalents $ 10,646 $ 10,441 Accounts receivable, net 19,961 22,766 Prepaid expenses and other current assets 1,935 2,122 -------- -------- TOTAL CURRENT ASSETS 32,542 35,329 Property and equipment, net 8,863 11,058 Intangible assets 4,777 3,801 Other assets 435 605 -------- -------- TOTAL ASSETS $ 46,617 $ 50,793 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 1,964 $ 2,687 Accrued expenses 15,518 16,193 Unearned revenue 13,114 15,649 Other current liabilities 2,286 5,024 -------- -------- TOTAL CURRENT LIABILITIES 32,882 39,553 Other liabilities 19 625 -------- -------- TOTAL LIABILITIES 32,901 40,178 -------- -------- Contingencies SHAREHOLDERS' EQUITY Preferred stock, par value $.10 per share, authorized 5,000,000 shares: Series A Junior Participating, none issued and outstanding Senior Series B Convertible, issued and outstanding 1,232,144 at September 30, 1995 and 1,728,573 at March 31, 1995 123 173 Common stock, par value $.01 per share, authorized 30,000,000 shares, issued and outstanding 15,650,968 at September 30, 1995 and 14,203,027 at March 31, 1995 157 142 Additional paid-in capital 69,426 67,382 Retained earnings (deficit) (55,875) (57,269) Cumulative translation adjustment (115) 187 -------- -------- TOTAL SHAREHOLDERS' EQUITY 13,716 10,615 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 46,617 $ 50,793 -------- -------- -------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 INTERLEAF, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended September 30 Six months ended September 30 1995 1994 1995 1994 In thousands, except for per share amounts (unaudited) (unaudited) REVENUES: Products $ 9,273 $ 10,871 $ 18,710 $ 17,461 Maintenance 8,399 7,439 16,191 14,879 Services 5,639 4,701 11,537 9,911 ------- ------- ------- ------- TOTAL REVENUES 23,311 23,011 46,438 42,251 ------- ------- ------- ------- COSTS OF REVENUES: Products 1,564 2,395 3,224 4,543 Maintenance 1,314 1,660 2,683 3,234 Services 4,767 5,025 9,576 9,762 ------- ------- ------- ------- TOTAL COSTS OF REVENUES 7,645 9,080 15,483 17,539 ------- ------- ------- ------- Gross Margin 15,666 13,931 30,955 24,712 ------- ------- ------- ------- OPERATING EXPENSES: Selling, general and administrative 10,871 14,791 21,853 29,177 Research and development 3,931 4,349 7,857 8,699 Restructuring expense - 7,109 - 7,109 ------- ------- ------- ------- TOTAL OPERATING EXPENSES 14,802 26,249 29,710 44,985 ------- ------- ------- ------- Income (loss) from operations 864 (12,318) 1,245 (20,273) Other income (expense) 58 (129) 149 (270) ------ ------- ------- ------- Income (loss) before 922 (12,447) 1,394 (20,543) income taxes Provision for income taxes - 2,109 - 2,166 ------ ------- ------- ------- NET INCOME (LOSS) 922 $(14,556) $ 1,394 $(22,709) ------ ------- ------- ------- ------ ------- ------- ------- Net income (loss) per share $ .05 $ (1.05) $ .08 $ (1.64) ------ ------- ------- ------- ------ ------- ------- ------- Shares used in computing net income (loss) per share 18,618 13,929 18,134 13,845 ------- ------- ------- ------- ------- ------- ------- -------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 INTERLEAF, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended September 30 1995 1994 In thousands (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 1,394 $(22,709) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Restructuring expense - 7,109 Depreciation and amortization expense 3,863 5,314 Loss from disposal of property and equipment 20 94 Deferred income taxes - 1,860 Changes in assets and liabilities: Decrease in accounts receivable, net 2,573 9,843 (Increase) decrease in other assets 293 (749) Decrease in accounts payable and accrued expenses (1,286) (834) Decrease in unearned revenue (2,399) (1,191) Decrease in other liabilities (1,662) (1,389) Other, net (83) (100) ------- ------- Net cash provided by (used in) operating activities 2,713 (2,752) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (441) (4,076) Capitalized software development costs (2,352) (2,016) ------- ------- Net cash used in investing activities (2,793) (6,092) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of common stock 2,009 1,287 Property and equipment financing - 652 Repayment of long-term debt and capital leases (1,674) (1,060) ------- ------- Net cash provided by financing activities 335 879 ------- ------- Effect of exchange-rate changes on cash (50) 168 ------- ------- Net increase (decrease) in cash and cash equivalents 205 (7,797) Cash and cash equivalents at beginning of period 10,441 23,364 ------- ------- Cash and cash equivalents at end of period $10,646 $15,567 ------- ------- ------- -------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 INTERLEAF, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The consolidated financial statements include the accounts of Interleaf, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Interleaf, Inc. and its subsidiaries are collectively referred to as the "Company." Certain 1994 amounts have been reclassified to conform to the 1995 method 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 financial information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, these financial statements include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the interim periods reported and of the financial condition of the Company as of the date of the interim balance sheet. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company's audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended March 31, 1995. 2. Net Income (Loss) Per Share Per share amounts are calculated using the weighted average number of common shares and common share equivalents outstanding during periods of net income. Common share equivalents are attributable to stock options, common stock warrants and convertible preferred stock. Per share amounts are calculated using only the weighted average number of common shares outstanding during periods of net loss. Fully diluted earnings per share is not materially different from reported primary earnings per share. 3. Noncash Financing Activities Senior Series B Convertible Preferred Stock holders converted 496,429 and 57,142 shares of preferred stock into 667,077 and 76,784 shares of the Company's common stock during the six months ended September 30, 1995 and 1994, respectively. The Company issued 171,635 shares of common stock, during the six months ended September 30, 1995, in connection with the exercise of a warrant. The Company received no proceeds upon the conversion of the warrant into common stock. 4. Research and Development Agreements In October 1988, the Company entered into a joint venture (the "Venture") with PruTech Research and Development Partnership III ("PruTech"), for the purpose of developing and marketing certain products. PruTech contributed approximately $2,950,000 in cash to the Venture; the Company licensed to the Venture certain base technology and was required to perform certain development, marketing and administrative services for the Venture. In March 1994, PruTech commenced an arbitration action against the Company alleging, among other things, (i) that the Company had mismanaged the Venture; (ii) that PruTech is entitled to cash distributions of 30% of Venture revenues; and (iii) that certain Venture-owned technology was used in the Company's other products. The Company has denied such allegations. 6 INTERLEAF, INC. The Company has agreed to pay PruTech $2.1 million (the "Purchase Price") solely in consideration of (i) the acquisition by the Company of PruTech's interest in the Venture, and (ii) the settlement of the pending arbitration action and the release by PruTech of all claims that it may have against the Company arising out of the formation and operation of the Venture. At the Company's option, the Purchase Price shall be payable in cash, by the issuance of Common Stock, or a combination thereof. The Company intends to issue to PruTech Common Stock shares having a value of $2.1 million for payment of the Purchase Price. This will not have a material adverse effect on the financial position or results of operations of the Company. 5. Contingencies Interleaf's German subsidiary, Interleaf GmbH, has been notified that it is liable for certain German withholding taxes related to payments remitted to the United States from Germany. The Company is appealing this assessment, however, approximately $1.1 million of the cash and cash equivalents balance at September 30, 1995 has been reserved for potential payment of the German withholding taxes. The Company believes the final outcome will not have a material adverse effect on the financial position or results of operations of the Company. 7 INTERLEAF, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS OVERVIEW The Company recorded net income of $922,000 and $1,394,000 for its second quarter and six months ended September 30, 1995, respectively, compared with a net loss of approximately $14.6 million and $22.7 million for the corresponding periods of fiscal 1995. The continued improvement in the Company's operating results is primarily attributable to a significant reduction in operating expenses, due to a decline in personnel and facility expenses arising from the Company's fiscal 1995 restructuring. The second quarter of fiscal 1995 included a restructuring charge of approximately $7.1 million and a $1.9 million charge related to a revaluation of the Company's deferred tax asset. Further reductions in operating expenses from their current level are not anticipated as the majority of the benefits from the previous year's restructuring have been realized. REVENUES Total revenues increased $0.3 million (1%) and $4.2 million (10%) for the second quarter and six months ended September 30, 1995, respectively, when compared with the same periods a year ago. Product license revenues declined 15% for the second quarter of fiscal 1996 from the previous year due to a decrease in domestic revenues relative to particularly strong results last year, partially offset by increases in Europe and Asia/Pacific/Japan regions. Product license revenues increased approximately $1.2 million (7%) for the six months ended September 30, 1995, when compared with the same period a year ago. This increase was primarily attributable to the major decline in product license revenues during the first quarter of fiscal 1995 which resulted in the reorganization and restructuring of the Company initiated in September 1994. Maintenance revenue, resulting from contracts to provide telephone support and upgrades to the Company's software products, increased by approximately $1.0 million (13%) and $1.3 million (9%) for the second quarter and six months ended September 30, 1995, respectively, when compared with the same periods a year ago. The increase was primarily due to increased renewal contracts during the second quarter of fiscal 1996. Future maintenance revenue will become increasingly dependent on the Company's ability to maintain its existing customer base and to increase maintenance contract volume as the product upgrades and new products are shipped. This will be necessary to offset the general downward pricing pressure on maintenance in the software industry. Services revenue, consisting of consulting and customer training revenue, increased approximately $0.9 million (20%) and $1.6 million (16%) for the second quarter and six months ended September 30, 1995, respectively, when compared with the same periods a year ago. This was primarily related to price increases and increased customer demand for the Company's expert services to implement document management solutions, partially offset by a small decline in training services. Revenues from the Company's international operations were approximately 38% ($8.9 million) and 37% ($17.2 million) of total revenues for the second quarter and six months ended September 30, 1995, respectively, compared with 31% ($7.2 million) and 31% ($13.1 million) for the corresponding periods of fiscal 1995. The increase from the prior year was primarily due to a significant increase in product license revenues in Japan and Europe. 8 INTERLEAF, INC. Growth in revenues during the remainder of fiscal 1996 will be largely dependent on customer acceptance of the Company's product upgrades and new products and the Company's ability to leverage product license revenues with services to provide integrated document management solutions to its customers. The Company completed the port of its publishing product (Interleaf 6) to the Windows NT operating system. In addition, upgrades to WorldView Viewer, RDM, Production Manager, SGML conversion tools, and Liaison, a new strategic open Application Programming Interface for simplifying the creation of integrated document management solutions, began shipping in the latter part of the second quarter and beginning of the third quarter. The Company's sales cycles have become longer as the Company provides more integrated document management solutions combined with expert services to satisfy its customers' requirements. In addition, a high percentage of the Company's revenues are generally realized in the last month of a quarter and can be difficult to predict until the end of a quarter. Accordingly, given the Company's relatively fixed cost structure, a shortfall or increase in product license revenue will have a significant impact on the Company's operating results. COSTS OF REVENUES Cost of product revenues includes amortization of capitalized software development costs; product media, documentation materials, packaging and shipping costs; and royalties paid for licensed technology. Cost of product revenues declined approximately $0.8 million (35%) and $1.3 million (29%) for the second quarter and six months ended September 30, 1995, respectively, when compared to the same periods a year ago. The decline was primarily related to decreased amortization of capitalized software development costs due to the write-down of capitalized software costs in the fourth quarter of fiscal 1995 associated with older software products for which revenue projections did not support the capitalized amounts. Also contributing to the decrease in cost of product revenues was a decline in royalties associated with certain time-based royalty agreements. Cost of maintenance revenues declined 21% and 17% for the second quarter and six months ended September 30, 1995, respectively, when compared to the same periods a year ago, primarily due to a decrease in customer support personnel related to the Company's fiscal 1995 restructuring. Cost of services revenue decreased 5% for the second quarter ended September 30, 1995, when compared to the same period a year ago, primarily attributable to a decline in consulting personnel. OPERATING EXPENSES Selling, general and administrative ("SG&A") expenses decreased approximately $3.9 million (27%) and $7.3 million (25%) for the second quarter and six months ended September 30, 1995, respectively, when compared with the same periods a year ago. This was primarily due to significant personnel and facilities expense reductions related to the Company's fiscal 1995 restructuring. SG&A expenses were approximately 47% and 64% of total revenues for the second quarters ended September 30, 1995 and 1994, respectively. Research and development ("R&D") expenses consist primarily of personnel expenses to support product development offset by capitalized software development costs. R&D expenses decreased approximately 10% for the second quarter and six months ended September 30, 1995, when compared with the same periods a year ago. This was primarily due to reduced personnel expenses associated with the Company's fiscal 1995 restructuring and increased capitalization of software development costs as several product upgrades were near completion. For the second quarters ended September 30, 1995 and 1994, R&D expenses were approximately 17% and 19%, respectively, of total revenues. R&D spending, which excludes the offset for capitalized software development costs, represented approximately 22% and 23% of total revenues, respectively. The Company completed several major releases, as discussed above, as a result capitalization of software development costs is anticipated to decline for the remainder of fiscal 1996. The Company expects to ship additional product upgrades and new products during the third quarter of fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES The Company had approximately $10.6 million of cash and cash equivalents at September 30, 1995, an increase of $205,000 from March 31, 1995. The increase was primarily attributable to the Company's net income for the six months ended September 30, 1995 and proceeds from common stock issuances related to its stock option plans and employee stock purchase plan of approximately $2.0 million. 9 INTERLEAF, INC. Significant expenditures were incurred to liquidate collateralized and other lease obligations of approximately $1.7 million and restructuring payments of approximately $1.1 million. Capital expenditures were approximately $0.4 million, a significant reduction from the prior fiscal year. Future commitments consist primarily of operating leases related to both open and closed facilities. The Company relocated part of its headquarters operations in October 1995. The Company expended approximately $0.4 million as of September 30 and will incur additional payments of approximately $0.6 million in the third quarter to complete the move. The reduction in office space and rental rate and sub-lease of the vacated space will result in annual cash and expense savings slightly in excess of $1.0 million beginning in fiscal 1997. Interleaf's German subsidiary, Interleaf GmbH, has been notified that it is liable for German withholding taxes related to payments remitted to the United States from Germany. The Company is appealing this assessment, however, approximately $1.1 million of the cash and cash equivalents balance at September 30, 1995 has been reserved for potential payment of the German withholding taxes. Accrued restructuring charges are approximately $2.3 million at September 30, 1995. This reserve should be sufficient to cover remaining expenditures, primarily attributable to operating lease payments for closed facilities, which are expected to continue until the year 2000. The Company is attempting to sub-lease closed facilities to reduce future obligations. In May 1995, the Company obtained a revolving line of credit from a major commercial lender. Borrowings from the line of credit are secured by substantially all domestic assets of the Company. The credit agreement limits borrowing based upon the level of North American accounts receivable, modified by the previous quarter's cash collections. As of October 31, 1995, the amount available for borrowings was approximately $4.3 million. The agreement contains certain financial covenants as well as restrictions on certain additional indebtedness, acquisitions, capital expenditures, and dividend payments. At September 30, 1995, there were no loans outstanding under this line of credit. In October 1988, the Company entered into a joint venture (the "Venture") with PruTech Research and Development Partnership III ("PruTech"), for the purpose of developing and marketing certain products. In March 1994, PruTech commenced an arbitration action against the Company alleging, among other things, (i) that the Company had mismanaged the Venture; (ii) that PruTech is entitled to cash distributions of 30% of Venture revenues; and (iii) that certain Venture-owned technology was used in the Company's other products. The Company has denied such allegations. The Company has agreed to pay PruTech $2.1 million (the "Purchase Price") solely in consideration of (i) the acquisition by the Company of PruTech's interest in the Venture, and (ii) the settlement of the pending arbitration action and the release by PruTech of all claims that it may have against the Company arising out of the formation and operation of the Venture. At the Company's option, the Purchase Price shall be payable in cash, by the issuance of Common Stock, or a combination thereof. The Company intends to issue to PruTech Common Stock shares having a value of $2.1 million for payment of the Purchase Price. The Company believes that existing cash and cash equivalents and borrowing availability, together with cash generated from operations, will provide sufficient funds to meet the Company's planned operations for the foreseeable future. 10 INTERLEAF, INC. PART II - OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders At the Annual Meeting of Shareholders held on August 17, 1995 ("Annual Meeting") the shareholders of the Company elected the following two nominees as Class II directors of the Company whose terms shall expire at the Company's 1998 shareholder meeting: Andre Harari, by a vote of 15,331,638 in favor to 259,497 against, and George D. Potter, Jr., by a vote of 15,418,207 in favor to 172,928 against. The Company also has three Class III directors Frederick B. Bamber, David A. Boucher, and Ed Koepfler, whose terms are set to expire at the annual shareholders' meeting in 1996, and two Class I directors Clinton P. Harris (as a Preferred Class I director elected solely by the Senior Series B Preferred Shareholders) and Patrick J. Sansonetti, whose terms are set to expire at the annual shareholders' meeting in 1997. At the Annual Meeting, the shareholders ratified and approved the amendment to the Company's 1993 Stock Option Plan to increase the number of shares of the Company's Common Stock available for issuance from 750,000 to 1,500,000 under the plan, by a vote of 7,670,661 in favor, 1,397,040 against, 75,423 abstentions, and 6,448,011 no votes. The shareholders also ratified and approved the selection of Ernst & Young LLP as the Company's independent auditors for fiscal 1996, by a vote of 15,506,820 in favor, 48,478 against, and 35,837 abstentions. A more complete description of these matters appears in the Company's 1995 Proxy Statement, dated July 1, 1995. Item 5. Other Information Effective September 1, 1995, Andre Harari resigned as a Class II director. Accordingly, the Company currently has six directors. 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 September 30, 1995. 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. November 10, 1995 /s/ G. Gordon M. Large ----------------------------------- G. Gordon M. Large Executive Vice President and Chief Financial Officer (Principal Financial Officer) 11 INTERLEAF, INC. EXHIBIT INDEX Exhibit Number Description Method of Filing - ------- ----------- ---------------- 10(a) Company's 1983 Stock Option Plan, as amended [vi] 10(a1) 1994 Employee Stock Option Plan [vii] 10(a2) 1993 Incentive Stock Option Plan, as amended [ix] 10(b) Company's 1989 Director Stock Option Plan [i] 10(b2) Company's 1987 Employee Stock Purchase Plan, [vi] as amended 10(c) Company's 1989 Officer and Employee [i] Severance Benefit Plans 10(cc) Company's 1993 Director Stock Option Plan [vi] 10(d) Agreements between PruTech Research and [ii] Development Partnership III and the Company, dated October 21, 1988. 10(e) Exclusive Marketing and Licensing Agreement, [i] between Interleaf South America, Ltd. and the Company, and related Option Agreement, dated March 31, 1989. 10(f) Distribution and License Agreement between [i] Interleaf Italia, S.r.l. and the Company, and related Joint Venture Agreement, dated October 31, 1988. 10(g) Preferred Stock Purchase Agreements, for the [ii] issuance of 2,142,857 shares of the Company's Senior Series B Convertible Preferred Stock, dated September 29, 1989. 10(h) Notification to Preferred Shareholder of [iii] increase in conversion ratio, dated May 18, 1992. 10(i) Lease of Prospect Place, Waltham, MA, [iv] between Prospect Place Limited Partnership and Interleaf, Inc., and related Agreements, dated March 30, 1990. 10(j) Management Consulting Agreement between the [v] Company and David A. Boucher, the Company's Chairman of the Board, dated July 15, 1992. 10(k) Letter Agreement between the Company and [vi] Richard P. Delio, the Company's former Sr. Vice President of Finance and Administration and Chief Financial Officer, dated March 30, 1994, concerning his employment and severance with the Company. 10(l) Letter of Separation and Management [vii] 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 separation and consulting obligations to the Company. 10(m) Letter Agreement between the Company and [vii] Richard P. Delio, the Company's former 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. 10(n) Letter of Separation and Management [vii] Consulting Agreement between the Company and Peter Cittadini, the Company's former Sr. Vice President Worldwide Operations, dated July 27, 1994, concerning his separation and consulting obligations to the Company. 10(o) Executive Compensation Arrangement for David [vii] A. Boucher, the Company's Chairman of the Board, dated July 20, 1994. 10(p) Letter of Separation and Management [vii] Consulting Agreement between the Company and Lawrence S. Bohn, the Company's former Sr. Vice President, Marketing and Business Development, dated September 20, 1994, concerning his separation and consulting obligations to the Company. 12 INTERLEAF, INC. Exhibit Number Description Method of Filing - ------- ----------- ---------------- 10(q) Employment and severance agreement between [viii] the Company and Edward Koepfler, the Company's President, dated October 3, 1994. 10(r) Loan and Security Agreement between the [x] Company and Foothill Capital Corporation, dated May 2, 1995. 10(s) Employment and severance agreement between [x] the Company and G. Gordon M. Large, the Company's Executive Vice President and Chief Financial Officer, dated June 5, 1995 10(t) Net Lease, dated August 14, 1995, between [xi] Principal Mutual Insurance Company and the Company. 10(u) Sublease, dated September 15, 1995, between [xi] Parametric Technology Corporation and the Company. 10(v) Employment and severance agreement between Included the Company and Mark Cieplik, the Company's Vice President, Americas, dated March 17, 1995. 11 Computation of Earnings Per Share Included 27 Financial Data Schedule Included ________________________ [i] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1989, File Number 0-14713. [ii] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1990, File Number 0-14713. [iii] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1992, File Number 0-14713. [iv] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 8-K filed April 13, 1990, File Number 0-14713. [v] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1993, File Number 0-14713. [vi] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1994, File Number 0-14713. [vii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended September 30, 1994, File Number 0-14713. [viii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended December 31, 1994, File Number 0-14713. [ix] Incorporated herein by reference is the applicable Exhibit to Company's Annual Report on Form 10-K for the year ended March 31, 1995, File Number 0-14713. [x] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended June 30, 1995, File Number 0-14713. [xi] Incorporated herein by reference is the applicable Exhibit to Company's Registration Statement on Form S-2, File Number 33-63785. 13 EX-10.(V) 2 EXHIBIT 10(V) EXHIBIT 10(v) March 17, 1995 Mark Cieplik 23366 N. Chesapeake Lake Barrington, IL 60010 Dear Mark, It is with great pleasure that I confirm our offer to have you join Interleaf, Inc. as Vice President in charge of all field operations in North and South America. As discussed, we look forward to having you join the company April 10th or sooner, if possible. We are enthusiastic about getting going and I know that I speak for the rest of the executive board members and employees in welcoming you to the team. The following outlines the elements of your package: Position: Vice President On Target Earnings: $310,000 Salary: Base salary of $210,000 per year subject to annual review by the Compensation Committee of the Board of Directors. Loan: / / Interleaf will extend a loan of $80,000 to be paid upon your request to SSA. If you leave during the first year, of employment, then you owe the entire amount back to the firm. If you leave during the second year of employment you will owe one half of the amount. After completion of the second year, no payment will be required. Bonus: / / Quarterly and annual bonuses commensurate with Interleaf's current executive compensation plan. Such plan for our fiscal year 96 is pending Compensation Committee approval. Stock Options: In order to induce to accept the offer of employment set in this letter, Interleaf will grant to you a stock option for the purchase of 110,000 shares of common stock of Interleaf, Inc, at an exercise price equal to the fair market value of the Interleaf common stock on the day you start your employment with Interleaf. This option will vest over a four year period and will automatically terminate if for any reason you fail to commence your employment with Interleaf on or before April 13, 1995. 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. 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. If Interleaf's benefit does not cover current pre-existing conditions, then Interleaf agrees to reimburse employee for the COBRA payments for up to one year. Severance: In the event, during the first two years of employment, of the company terminating your employment for any reason but cause, we will provide one year of salary. Change of Control Provisions: In the event, during the first two years of your employment, that the company is purchased, we will vest one-half of all unvested stock options at the time of acquisition. Start Date: Per our conversation, we would expect you to resign your current position as soon as possible, and start at the company on or before April 13, 1995. Mark, we are truly looking forward to your joining Interleaf, Inc. as Vice President and leading the company over the coming 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 place below and return this letter to me. Sincerely, /s/ Ed Koepfler - --------------- Ed Koepfler President and CEO cc. Clinton P. Harris Accepted by: /s/ Mark Cieplik Date: April 13, 1995 - ---------------- Mark Cieplik EX-11 3 EXHIBIT 11 INTERLEAF, INC. EXHIBIT 11-COMPUTATION OF EARNINGS PER SHARE
Three months ended Six months ended September 30 September 30 1995 1994 1995 1994 ---- ---- ---- ---- In thousands, except for per (unaudited) (unaudited) share amounts PRIMARY Weighted average shares outstanding of Common Stock 15,084 13,929 14,725 13,845 Dilutive Senior Series B Convertible Preferred Stock 2,000 - 2,160 - Dilutive stock options 1,286 - 1,081 - Dilutive stock purchase warrants 203 - 141 - Dilutive stock purchase plan rights 45 - 27 - ------ ------ ------ ------ TOTAL 18,618 13,929 18,134 13,845 ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) $ 922 $(14,556) $ 1,394 $(22,709) ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) per share $ .05 $(1.05) $ .08 $ 1.64 ------ ------ ------ ------ ------ ------ ------ ------ FULLY DILUTED Weighted average shares outstanding of Common Stock 15,084 13,929 14,725 13,845 Dilutive Senior Series B Convertible Preferred Stock 2,000 - 2,160 - Dilutive stock options 1,323 - 1,366 - Dilutive stock purchase warrants 215 - 277 - Dilutive stock purchase plan rights 46 - 32 - ------ ------ ------ ------ TOTAL 18,668 13,929 18,560 13,845 ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) $922 $(14,556) $1,394 $(22,709) ------ ------ ------ ------ ------ ------ ------ ------ Net income (loss) per share $ .05 $(1.05) $ .08 $(1.64) ------ ------ ------ ------ ------ ------ ------ ------
The dilutive effect of stock options, stock purchase warrants, and stock purchase plan rights are calculated using the treasury stock method. Under this method, these common stock equivalents are assumed to be exercised and proceeds from the exercise are assumed to be used to repurchase common stock at the average market price for primary income (loss) per share and the higher of the end of the period or average market price for fully diluted income (loss) per share. The dilutive effect of Convertible Preferred Stock is calculated using the if-converted method. 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 quarterly period ended September 30, 1995, and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS MAR-31-1996 SEP-30-1995 10,646 0 21,730 1,769 120 32,542 47,634 38,771 46,617 32,882 0 157 0 123 13,436 46,617 18,710 46,438 3,224 15,483 29,413 297 10 1,394 0 1,394 0 0 0 1,394 0.08 0.08
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