<PAGE>
- ------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment #1)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
-----------------------
INTERLEAF, INC.
(Name of Registrant as Specified in Its Charter)
INTERLEAF, INC.
(Name of Person(s) Filing Proxy Statement)
------------------------
Payment of the filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1. Amount previously paid:
2. Form, schedule or registration statement no.:
3. Filing party:
4. Date filed:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
[INTERLEAF LOGO]
INTERLEAF, INC.
PROSPECT PLACE
9 HILLSIDE AVENUE
WALTHAM, MASSACHUSETTS 02154
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NO.: (617) 290-0710
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 17, 1995
The Annual Meeting of Shareholders (the "Annual Meeting") of Interleaf,
Inc. (the "Company") will be held at the Westin Hotel, 70 Third Avenue,
Waltham, Massachusetts, on Thursday, August 17, 1995 at 8:30 a.m., local
time, to consider and act upon the following matters:
1. To elect two (2) Class II directors to serve for the ensuing three years.
2. To ratify and approve an 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, as described in the Proxy Statement.
3. To ratify the selection of Ernst & Young LLP as the Company's independent
auditors for the 1996 fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on June 23, 1995 will be
entitled to vote at the Annual Meeting or any adjournment thereof. The stock
transfer books of the Company will remain open.
By Order of the Board of Directors,
John K. Hyvnar, Clerk
Waltham, Massachusetts
July 1, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY IS MAILED IN THE UNITED STATES.
2
<PAGE>
INTERLEAF, INC.
PROSPECT PLACE
9 HILLSIDE AVENUE
WALTHAM, MASSACHUSETTS 02154
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 17, 1995
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Interleaf, Inc. (the "Company") for
use at the Annual Meeting of Shareholders to be held on Thursday, August 17,
1995 and at any adjournment of that meeting (the "Annual Meeting"). All proxies
will be voted in accordance with the shareholders' instructions, and if no
choice is specified, the proxies will be voted in favor of the matters set
forth in the accompanying Notice of Annual Meeting. Any proxy may be revoked
by a shareholder at any time before its exercise by delivery of written
revocation, or a subsequently dated proxy to the Clerk of the Company, or by
voting in person at the Annual Meeting.
The Board of Directors has fixed June 23, 1995 as the record date for
determining shareholders who are entitled to vote at the Annual Meeting. At
the close of business on June 23, 1995 there were outstanding and entitled to
vote 14,457,009 shares of common stock of the Company, $.01 par value per
share ("Common Stock") and 1,728,573 shares of the Company's Senior Series B
Convertible Preferred Stock, $.10 par value per share ("Preferred Stock"). At
the Annual Meeting each share of the Common Stock is entitled to one vote;
each share of the Preferred Stock is entitled to 1.34375 votes, and therefore
the total number of votes eligible to be cast at the Annual Meeting is
16,779,778.
The Company's Annual Report for the fiscal year ended March 31,
1995 is being mailed to the shareholders with the accompanying Notice of
Annual Meeting and this Proxy Statement on or about July 1, 1995.
3
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of June 15, 1995,
with respect to all of the beneficial ownership of the Company's voting shares
by (i) each person known by the Company to own beneficially more than five
percent (5%) of the outstanding shares of any voting class, (ii) each current
director, (iii) each named executive listed under "Executive Compensation,"
and (iv) all current directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
CLASS OF STOCK
COMMON STOCK PREFERRED STOCK % OF TOTAL VOTING
DIRECTORS, OFFICERS AND NO. OF SHARES % OF CLASS NO. OF SHARES % OF CLASS CAPITAL STOCK
5% SHAREHOLDERS BENEFICIALLY OWNED OUTSTANDING BENEFICIALLY OWNED OUTSTANDING OUTSTANDING(1)
<S> <C> <C> <C> <C> <C>
Advent International Corporation - (2) - 1,241,242(3) 71.81% 9.94%
101 Federal Street
Boston, MA 02110
Compagnie Financiere du Scribe - (4) - 428,572 24.79% 3.43%
73, Rue du Faubourg
Saint Honore, Paris, France
Frederick B. Bamber 33,491(5) * - - *
David A. Boucher 426,644(6) 2.93% - - 2.53%
Andre Harari 10,000(7) * 428,572(8) 24.79% 3.43%
Clinton P. Harris 16,000(9) * - (12) - *
George D. Potter, Jr. 116,662(10) * - - *
Patrick J. Sansonetti 31,900(11) * - (12) - *
Ed Koepfler 25,000 * - - *
Richard P. Delio 103,692(13) * - - *
Frederick J. Egan 129,000(14) * - - *
Paul English 67,188(15) * - - *
Bob Maher 10,833(16) * - - *
Mark K. Ruport(17) - - - - -
Peter Cittadini(18) - - - - -
All current directors and executive
officers as a group (13 persons) 970,410(19) 6.53% 428,572(20) 24.79% 11.29%
- ------------------------------
<FN>
* Less than 1%.
- Indicates zero.
(1) Determined by using a conversion ratio of 1.34375 for the Preferred Stock.
(2) Does not include 16,000 shares of Common Stock listed as beneficially
owned by Mr. Clinton P. Harris, and 31,900 shares of Common Stock listed
as beneficially owned by Mr. Patrick J. Sansonetti, both of whom serve as
Sr. Vice Presidents of Advent International Corporation.
(3) Represents 1,241,242 shares of Senior Series B Convertible Preferred Stock
("Preferred Stock") held by various limited partnerships of which Advent
International Corporation is either the general partner or a general
partner in limited partnerships which are the general partners in such
various limited partnerships ("Advent"). The Company has relied on
information contained in a Schedule 13D, filed on October 18, 1989 by
Advent, in providing this information.
(4) Does not include 10,000 shares of Common Stock listed as beneficially
owned by Mr. Andre Harari. Mr. Harari is the controlling shareholder,
Chairman of the Board of Directors, and Chief Executive Officer of
Compagnie Financiere du Scribe.
(5) Includes 28,000 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable or become exercisable
within a 60-day period after June 15, 1995.
(6) Includes 10,000 shares held by the spouse of Mr. Boucher, as to which
Mr. Boucher disclaims all beneficial ownership. Also includes 94,800
shares of Common Stock issuable upon exercise of certain options, which
options are all currently exercisable.
(7) Represents 10,000 shares of Common Stock issuable upon exercise of certain
options, all of which are currently exercisable.
(8) Represents 428,572 shares of Preferred Stock listed as beneficially owned
by Compagnie Financiere du Scribe, a French corporation of which
Andre Harari, a director of the Company, is Chairman of the Board of
Directors, Chief Executive Officer and controlling shareholder.
4
<PAGE>
(9) Includes 10,000 shares of Common Stock issuable upon exercise of certain
options, which are currently exercisable, and 2,000 shares of Common Stock
held by trustees of trusts established for the benefit of Mr. Harris' wife
and children, as to all of which shares Mr. Harris disclaims beneficial
ownership.
(10) Includes 10,000 shares of Common Stock issuable upon exercise of an option
granted, which options are currently exercisable.
(11) Includes 28,000 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable.
5
<PAGE>
(12) Does not include 1,241,242 shares of Preferred Stock listed as
beneficially owned by Advent International Corporation, a corporation
in which he serves as Sr. Vice President.
(13) Includes 97,500 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable or become exercisable
within a 60-day period after June 15, 1995.
(14) Includes 67,500 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable or become exercisable
within a 60-day period after June 15, 1995.
(15) Includes 62,250 shares of Common Stock issuable upon exercise of certain
options, which options are currently exercisable or become exercisable
within a 60-day period after June 15, 1995.
(16) Represents 10,833 shares of Common Stock issuable upon exercise of
certain options, which options are currently exercisable or become
exercisable within a 60-day period after June 15, 1995.
(17) Mr. Ruport resigned from all positions with the Company, effective
July 25, 1994.
(18) Mr. Cittadini resigned from all positions with the Company, effective
September 30, 1994.
(19) Includes an aggregate of 418,883 shares issuable upon exercise of options
held by 6 directors and 6 executive officers, which options are currently
exercisable or become exercisable within the 60-day period after June 15,
1995.
(20) Represents 428,572 shares of Preferred Stock listed as beneficially owned
by Compagnie Financiere du Scribe, a French corporation of which
Andre Harari, a director of the Company, is Chairman of the Board of
Directors, Chief Executive Officer and controlling shareholder. Does not
include 1,241,242 shares of Preferred Stock listed as beneficially
owned by Advent International Corporation, a corporation in which
Patrick J. Sansonetti and Clinton P. Harris serve as Sr. Vice Presidents.
</TABLE>
VOTES REQUIRED
A plurality of votes cast by the holders of the Preferred and
Common Stock is required for the election of directors. The affirmative vote
of the holders of a majority of the shares of Common and Preferred Stock
represented and entitled to vote at the Annual Meeting is required for the
approval of the amendment to the Company's 1993 Incentive Stock Option Plan.
The affirmative vote of the holders of a majority of the shares of Common and
Preferred Stock represented and voting at the Annual Meeting is required for
the ratification of the selection by the Board of Directors of Ernst & Young
LLP as the Company's independent accountants for the current 1996 fiscal
year.
Shares of Common and Preferred Stock represented in person or by proxy
at the Annual Meeting (including shares which abstain from or do not vote
with respect to one or more of the matters presented at the Annual Meeting)
will be tabulated by the inspector of the election. The First National Bank
of Boston (the "Bank of Boston") was appointed inspector for the Annual
Meeting and will determine whether or not a quorum is present for a
particular matter(s). The Bank of Boston will treat abstentions as shares
that are present and entitled to vote for purposes of determining the number
of shares that are present and entitled to vote with respect to any
particular matter, but will not count abstentions as a vote in favor of such
matter. Accordingly, an abstention from voting on a matter by a shareholder
present in person or represented by proxy at the Annual Meeting with respect
to any matter requiring a majority of the shares represented and entitled to
vote has the same legal effect as a vote "against" the matter even though the
shareholder or interested parties analyzing the results of the voting may
interpret such vote differently. If a broker holding stock in "street name"
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to the matter.
1. ELECTION OF DIRECTORS
The Company has a classified Board of Directors presently consisting
of two (2) Class I, two (2) Class II, and three (3) Class III directors.
At each annual meeting of shareholders, a class of directors is elected for
a full term of three years to succeed those directors whose terms are
expiring. The Preferred Shareholders, as a separate class, elect the director
designated herein as the Preferred Class I Director.
At the Annual Meeting, two (2) Class II directors will be elected to
hold office until the 1998 annual meeting of shareholders and until their
respective successors are duly elected and qualified. All nominees have
indicated their willingness to serve if elected; however, if an individual
should be unable to serve, the proxies may be voted for a substitute nominee
or nominees designated by management.
The persons named in the enclosed proxy will vote to elect as directors
the Class II nominees named below, unless authority to vote for any or all of
the directors is withheld by marking the proxy to that effect.
6
<PAGE>
The following table sets forth the name and age of each nominee for
election as a Class II director (each of whom is currently a director) and
each of the Class I and Class III directors, the positions and offices held
by him with the Company, his principal occupation and business experience
during the past five years, the names of other publicly held companies of
which he serves as a director, if any, and the year of the commencement of
his term as a director of the Company.
NOMINEES FOR THE TERMS EXPIRING IN 1998
(CLASS II DIRECTORS)
Andre Harari
Age 52; Chairman of the Board of Directors and Chief Executive Officer of
Compagnie Financiere du Scribe, a French venture capital firm, since
January 1975. Director of the Company since 1991.
George D. Potter, Jr.
Age 58; President of Quality Systems International, Inc., a developer of
quality assurance software, since October 1993 to present; Independent
business consultant September 1991 to October 1993; Sr. Vice President of
Sales and Marketing, Gescan International, Inc., a data retrieval software
company from January 1990 to September 1991; Sr. Vice President of Sales
Operations of the Company from April 1989 to December 1990; Vice President of
Marketing of the Company, February 1983 to March 1989. Director of the
Company since 1983.
DIRECTORS WHOSE TERMS EXPIRE IN 1996
(CLASS III DIRECTORS)
David A. Boucher
Age 44; General Partner of Applied Technology Partners, L.P., a venture
capital limited partnership, since January 1993; Chairman of the Board of
Directors of the Company since October 1989; Chief Executive Officer of the
Company from October 1989 to July 1992; Chief Executive Officer and President
from 1981 to October 1989. Director of the Company since 1981. Director of
Viewlogic, Inc., and Wang Laboratories, Inc.
Frederick B. Bamber
Age 52; General Partner of Applied Technology Partners, L.P., a venture capital
limited partnership, since January 1982. Director of the Company since 1984.
Ed Koepfler
Age 46; President and Chief Executive Officer of the Company since November
1994; from January 1992 to November 1994, Vice President for North American
Operations of System Software Associates, Inc. ("SSA"), a developer of
manufacturing software, and from 1989 to December 1991, Vice President of
Operations of SSA. Director of the Company since November 1994.
DIRECTORS WHOSE TERMS EXPIRE IN 1997
(CLASS I DIRECTORS)
Patrick J. Sansonetti
Age 51; Sr. Vice President of Advent International Corporation, a venture
capital company, since December 1987. Director of the Company since 1983.
Director of Cognex Corp.
PREFERRED CLASS I DIRECTOR
Clinton P. Harris
Age 48; Sr. Vice President of Advent International Corporation, a venture
capital company, since December 1984. Director of the Company since 1990.
7
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors,
which provides the opportunity for direct contact between the Company's
independent auditors and the Board of Directors. The Audit Committee reviews
the overall scope and specific plans of the annual audit by the Company's
independent auditors and the adequacy of the Company's internal controls, and
considers and recommends the selection of the Company's independent auditors.
The Audit Committee met five (5) times during fiscal 1995. The current Audit
Committee members are Messrs. Bamber (Chairman), Harris, and Potter.
The Company also has a standing Compensation Committee of the Board of
Directors, which provides recommendations to the Board of Directors regarding
compensation programs of the Company and administers the Company's 1983, 1993
and 1994 Stock Option Plans and 1987 Employee Stock Purchase Plan. The
Compensation Committee met six (6) times during fiscal 1995. The current
members of the Compensation Committee are Messrs. Bamber, Harari, and Harris
(Chairman).
The Company has no nominating committee.
The Board of Directors met six (6) times during fiscal 1995. Each current
director attended at least 75% of the aggregate number of the meetings of the
Board of Directors and of all committees of the Board of Directors on which he
served.
There are no family relationships between or among any directors or
officers of the Company. Under the terms of the Certificate of Vote
Establishing the Preferred Stock, the holders of the Preferred Stock have the
right, as a single class, to elect one director, herein designated the
Preferred Class I Director. At the time of such establishment in September,
1989, a current director of the Company, Patrick J. Sansonetti, was so
designated. Daniel Harari and Clinton P. Harris were elected by the Board
of Directors as directors of the Company pursuant to arrangements arising
out of the Company's private placement of the Preferred Stock in
September, 1989. In May, 1991, Daniel Harari resigned as a director of the
Company. Subsequently, the Board of Directors elected Mr. Andre Harari a
Class II director of the Company, succeeding to the position previously held
Daniel Harari. Mr. Andre Harari is a current nominee for election as a
Director.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
While Mr. David Boucher served as the Company's Chief Executive Officer,
the Company and Mr. Boucher entered into an agreement that in the event
Mr. Boucher should resign from his employment with the Company, he would be
available on an exclusive consulting basis to the Company for a period of
18 months during which time his monthly compensation would equal that of his
1992 compensation of $30,750 per month. Additionally, in such event, certain
outstanding unvested stock options, approximately 30,000 shares, would
continue to vest over said 18 month period. In July 1992, Mr. Boucher resigned
as Chief Executive Officer and thereafter received compensation as a consultant
until January 31, 1994, totalling $553,500. Mr. Boucher shall have until
June 30, 1996 to exercise options covering 42,800 shares at per share exercise
price of $3.13. Mr. Boucher is currently Chairman of the Company's Board of
Directors, and since January 1993 a general partner in Applied Technology
Partners, L.P. Mr. Frederick Bamber, a Company director, is also a general
partner in Applied Technology Partners, L.P. In July 1994, upon the resignation
of the Company's then President and Chief Executive Officer, Mark K. Ruport,
and to assist the Company in its restructuring, Mr. Boucher was selected by
the Company's Board of Directors to oversee the restructuring and the search
for a new President and Chief Executive Officer, ultimately resulting in the
appointment of Ed Koepfler, as the Company's President and Chief Executive
Officer in November 1994. For his services, Mr. Boucher received cash
compensation of approximately $37,000, and was granted an option of 50,000
shares, at an exercise price of $2.75 per share, the Company's then current
market price. In addition, the exercise period for his existing options was
extended an additional 18 months to June 30, 1996.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the summary of compensation received by the
Chief Executive Officer and other Named Executive Officers along with their
principal positions, for services rendered with respect to fiscal 1995, 1994,
and 1993:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATON LONG TERM
COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------
AWARDS
- ---------------------------------------------------------------------------------------------------------------------
NAME AND YEAR SALARY(1)($) BONUS(2)($) SECURITIES UNDERLYING
PRINCIPAL POSITION* OPTIONS (#)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ed Koepfler,(3)
President and Chief Executive Officer 1995 $120,000 $50,000 350,000
- ----------------------------------------------------------------------------------------------------------------------
1994 - - -
- ----------------------------------------------------------------------------------------------------------------------
1993 - - -
- ----------------------------------------------------------------------------------------------------------------------
Richard P. Delio,(4)
Senior Vice President of Finance and
Administration and Chief Financial Officer 1995 $194,615 $70,000 180,000
- -------------------------------------------------------------------------------------------------------------
1994 - - -
- -------------------------------------------------------------------------------------------------------------
1993 - - -
- -------------------------------------------------------------------------------------------------------------
Frederick J. Egan,
Vice President, Asia/Pacific/Japan 1995 $163,462 - 70,000
- -------------------------------------------------------------------------------------------------------------
1994 $160,000 $160,000 -
- -------------------------------------------------------------------------------------------------------------
1993 $129,731 $80,752 -
- -------------------------------------------------------------------------------------------------------------
Paul English,
Sr. Vice President, Product Management 1995 $174,615 $25,000 134,000
- -------------------------------------------------------------------------------------------------------------
1994 $109,115 $25,000 47,000(5)
- -------------------------------------------------------------------------------------------------------------
1993 $91,646 $17,000 15,000(5)
- -------------------------------------------------------------------------------------------------------------
Bob Maher,
Vice President, Technology 1995 $111,807 $25,000 30,000
- -------------------------------------------------------------------------------------------------------------
1994 - - -
- -------------------------------------------------------------------------------------------------------------
1993 - - -
- -------------------------------------------------------------------------------------------------------------
Mark K. Ruport,(6)
formerly President and
Chief Executive Officer 1995 $346,152 - 30,000
- -------------------------------------------------------------------------------------------------------------
1994 $250,000 $49,810 30,000
- -------------------------------------------------------------------------------------------------------------
1993 $250,000 $87,500 25,000
- -------------------------------------------------------------------------------------------------------------
Peter Cittadini,(7)
formerly Sr. VP Worldwide Operations 1995 $227,811 - 20,000
- -------------------------------------------------------------------------------------------------------------
1994 $150,000 $73,444 20,000
- -------------------------------------------------------------------------------------------------------------
1993 $150,000 $293,303 -
- -------------------------------------------------------------------------------------------------------------
<FN>
* No restricted stock awards have ever been made by the Company to the Chief
Executive Officer and the other Named Executive Officers.
- Indicates zero.
(1) Salary includes amounts deferred pursuant to the Interleaf, Inc. 401(k)
Savings Plan.
(2) Amounts shown, except for those relating to Messrs. Cittadini and Egan, are
the awards made under the Company's corporate bonus program, which amounts
are earned and accrued during the fiscal years indicated and paid subsequent
to the end of each fiscal year. Amounts shown for Messrs. Cittadini and Egan
are comprised of sales commissions based on revenue and a cash bonus for
meeting his sales goal, or part thereof, with respect to each fiscal year.
(3) Mr. Koepfler joined the Company and was elected President and Chief
Executive Officer in November 1994.
(4) Mr. Delio resigned from all positions with the Company, effective
June 6, 1995.
(5) Mr. English's options were cancelled in fiscal 1995 and reissued in the
Company's 1995 repricing program.
9
<PAGE>
(6) Mr. Ruport resigned from all positions with the Company, effective
July 25, 1994.
(7) Mr. Cittadini resigned from all positions with the Company, effective
September 30, 1994.
</TABLE>
10
<PAGE>
The following table sets forth certain information with respect to the
grant of incentive and non-qualified stock options for the Chief Executive
Officer and its other Named Executive Officers in fiscal 1995:
<TABLE>
<CAPTION>
OPTION GRANTS TABLE
OPTIONS GRANTED IN FISCAL YEAR 1995
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION TERM(3)
NAME NUMBER OF SECURITIES PERCENT OF TOTAL OPTIONS EXERCISE OF EXPIRATION 5% ($) 10% ($)
UNDERLYING OPTIONS GRANTED TO EMPLOYEES IN BASE PRICE DATE
GRANTED (#)(1) FISCAL YEAR(2) ($/SHARE)
<S> <C> <C> <C> <C> <C> <C>
Ed Koepfler 350,000 15.09% $3.75 10/27/2004 $826,875 $2,086,875
Richard P. Delio 180,000 7.76% $2.75 4/1/2004 $311,850 $747,050
Frederick J. Egan 70,000 3.02% $2.75 8/2/2004 $121,275 $306,075
Paul English 5,000 0.22% $2.75 4/2/2002 $8,163 $21,863
10,000 0.43% $2.75 9/3/2002 $17,325 $43,725
2,000 0.09% $2.75 4/8/2002 $3,465 $8,745
7,000 0.30% $2.75 4/8/2003 $12,127 $30,608
40,000 1.72% $2.75 2/28/2004 $69,300 $174,900
70,000 3.02% $2.75 8/3/2004 $121,275 $306,075
Bob Maher 30,000 1.29% $2.75 4/14/2004 $51,975 $131,175
Mark K. Ruport(4) 30,000 1.29% $6.25 - - -
Peter Cittadini(4) 20,000 .86% $6.25 - - -
<FN>
- - Indicates zero.
(1) All options granted to the Named Executive Officers provided above are
exercisable in two to four equal annual installments, commencing one
year after the date of grant. The Company's 1983, 1993 and 1994 Stock
Option Plans ("Stock Option Plans") provide that the exercise price of
each option must be at least 100% of the fair market value of the
Company's Common Stock on the date the option is granted. The exercise
price may be paid in cash. Pursuant to the terms of the Plans, the
options held by all employees, including the above-mentioned
executives, become exercisable in full upon a "change in control." See,
"Severance and Change in Control."
(2) During the fiscal year ended March 31, 1995, the Company granted options
under its Stock Option Plans to its employees to purchase a total of
2,319,000 shares of Common Stock and cancelled options to purchase
1,696,000 shares of Common Stock. These options include 1,043,000 shares
that were cancelled and reissued under the Company's repricing program.
(3) The dollar amounts under these columns are the result of calculations
at the 5% and 10% appreciation rates set by the Securities and Exchange
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock.
(4) Due to Named Executive's resignation in fiscal 1995, all options
granted in fiscal 1995 have been forfeited.
</TABLE>
11
<PAGE>
The following table sets forth certain information on option exercises in
fiscal 1995 for the Company's Chief Executive Officer and its other Named
Executive Officers during fiscal 1995 and the value of such executive
officers' in-the-money unexercised options as of March 31, 1995:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES AND FISCAL 1995 YEAR-END OPTION VALUE
AGGREGATED OPTION EXERCISES IN 1995 AND FY-END OPTION VALUES
NAME SHARES ACQUIRED VALUE REALIZED ($) NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE
ON EXERCISE (#) OPTIONS AT FY1995-END (#) MONEY OPTIONS AT FY1995-END
($)(1)
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Ed Koepfler - - -/350,000 -/$393,750
Richard P. Delio(2) - - 25,000/155,000 $53,125/$329,375
Frederick J. Egan - - 61,500/81,500 $108,269/$166,994
Paul English - - 34,250/102,750 $70,881/$218,344
Bob Maher - - -/30,000 -/$63,750
Mark K. Ruport(3) - - -/- -/-
Peter Cittadini(4) - - -/- -/-
<FN>
- - Indicates zero.
(1) Market value of shares covered by in-the-money options on
March 31, 1995, or $4.875 per share, less the option exercise price.
Options are in-the-money if the market value of the shares covered
thereby is greater than the option exercise price.
(2) Mr. Delio resigned from all positions with the Company, effective
June 6, 1995.
(3) Mr. Ruport resigned from all positions with the Company, effective
July 25, 1994.
(4) Mr. Cittadini resigned from all positions with the Company,
effective September 30, 1994.
</TABLE>
COMPENSATION COMMITTEE REPORT ON REPRICING
On August 3, 1994, the Compensation Committee met to determine the need
to reprice the Company's outstanding stock options for certain key
employees and officers. Because of the $8.2 million loss for the quarter
ended June 30, 1994, the Company's stock price dropped from a trading range
of $6-$8 per share, to a trading range of $2-$3 per share. As a result, all
options granted in the last five years to employees were significantly
underwater. The Committee also reviewed the planned corporate
reorganization and restructuring that was expected to be announced by
September 7, 1994. As part of this restructuring and reorganization, the
Company was expected to incur a $7.1 million charge to earnings to cover
expected lay-offs of approximately 150 employees and the consolidation of
19 sales offices worldwide. As part of the reorganization, the Company also
planned to revamp its senior management team, having previously accepted
the resignation of Mark K. Ruport, the Company's President and Peter
Cittadini, its Sr. Vice President for Worldwide Operations.
Given this environment, the Committee recognized the need to incent
and retain certain key employees and officers. The Committee adopted a
repricing program whereby outstanding options would be repriced at $2.75 per
share, the closing market price on August 3, 1994, for certain employees
and officers which it believed were important to the future success of the
Company. Because of the critical need to retain these individuals, the
vesting period was not restarted.
None of the employees and officers, including former President,
Mark K. Ruport and former Sr. Vice President for Worldwide Operations,
Peter Cittadini, who departed or were scheduled to depart were eligible to
have their options repriced. Of the Named Executive Officers, Richard P.
Delio, Frederick J. Egan, and Paul English, who were selected by the Board
of Directors to implement the Company's reorganization and restructuring,
had their options repriced. The Company's current President, Ed Koepfler,
joined the Company in November 1994 and did not participate in the
repricing program.
COMPENSATION COMMITTEE: ANDRE HARARI FREDERICK B. BAMBER CLINTON P. HARRIS
12
<PAGE>
The following table sets forth certain information concerning all
repricing of options held by an executive officer of the Company during the
last ten completed fiscal years:
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICINGS
Length of
Original Option
Number of Term
Securities Remaining at
Underlying Market Price of Exercise Price New Date of
Options Stock at Time at Time of Exercise Repricing
Name Date Repriced (#) of Repricing ($) Repricing ($) Price ($) (Years)
<S> <C> <C> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND CURRENT OFFICERS
Richard P. Delio, Sr. VP 8/3/94 100,000 $2.75 $7.00 $2.75 9.7
of Finance and Administration 8/3/94 15,000 $2.75 $6.75 $2.75 9.7
and Chief Financial Officer
Paul English, Sr. VP of Product 11/2/90 1,500 $3.13 $6.63 $3.13 9.4
Management 11/2/90 1,000 $3.13 $8.38 $3.13 8.4
8/3/94 5,000 $2.75 $10.63 $2.75 7.7
8/3/94 10,000 $2.75 $9.88 $2.75 8.1
8/3/94 7,000 $2.75 $8.25 $2.75 8.7
8/3/94 40,000 $2.75 $7.00 $2.75 9.6
Bob Maher, VP of Technology 8/3/94 25,000 $2.75 $7.25 $2.75 9.7
Frederick J. Egan, 10/31/88 7,500 $7.38 $19.38 $7.38 9.4
VP of Asia/Pacific/Japan 11/2/90 25,000 $3.13 $5.13 $3.13 9.8
11/2/90 25,000 $3.13 $8.13 $3.13 8.6
11/2/90 10,000 $3.13 $8.38 $3.13 8.4
11/2/90 7,500 $3.13 $7.38 $3.13 7.4
11/2/90 5,000 $3.13 $4.50 $3.13 5
8/3/94 10,000 $2.75 $6.75 $2.75 9.7
Stephen J. Hill, VP of Europe 8/3/94 8,000 $2.75 $6.75 $2.75 9
8/3/94 2,000 $2.75 $6.75 $2.75 9.7
John K. Hyvnar, 10/31/88 2,000 $7.38 $16.13 $7.38 8.8
General Counsel and Clerk 10/31/88 1,500 $7.38 $15.63 $7.38 9.6
11/2/90 1,500 $3.13 $7.38 $3.13 7.6
11/2/90 17,000 $3.13 $7.75 $3.13 8.8
11/2/90 2,000 $3.13 $7.38 $3.13 6.8
11/2/90 5,000 $3.13 $3.38 $3.13 10
8/3/94 8,000 $2.75 $8.25 $2.75 8.7
8/3/94 6,000 $2.75 $6.75 $2.75 9.7
FORMER EXECUTIVE OFFICERS
William W. Barnes, 10/31/88 6,000 $7.38 $14.63 $7.38 8.5
VP of Human Resources 11/2/90 5,000 $3.13 $7.75 $3.13 8.8
11/2/90 2,000 $3.13 $8.38 $3.13 8.4
11/2/90 6,000 $3.13 $7.38 $3.13 6.5
Lawrence S. Bohn, Sr. 10/31/88 3,000 $7.38 $16.50 $7.38 8.7
VP of Marketing and Business 11/2/90 5,000 $3.13 $6.63 $3.13 9.4
Development 11/2/90 2,000 $3.13 $8.38 $3.13 8.4
11/2/90 10,000 $3.13 $8.38 $3.13 8.1
11/2/90 3,000 $3.13 $7.38 $3.13 6.7
8/3/94 20,000 $2.75 $10.63 $2.75 7.7
8/3/94 7,000 $2.75 $4.50 $2.75 1.7
8/3/94 10,000 $2.75 $9.00 $2.75 8.8
8/3/94 10,000 $2.75 $6.75 $2.75 9.7
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
TEN-YEAR OPTION REPRICINGS
Length of
Original Option
Number of Term
Securities Remaining at
Underlying Market Price of Exercise Price New Date of
Options Stock at Time at Time of Exercise Repricing
Name Date Repriced (#) of Repricing ($) Repricing ($) Price ($) (Years)
<S> <C> <C> <C> <C> <C> <C>
David A. Boucher, President 3/20/89 40,000 $8.38 $14.63 $8.38 8.1
and Chief Executive Officer 11/2/90 44,800 $3.13 $8.38 $3.13 6.5
David J. Collard, Sr. VP of
Finance and Administration
and Chief Financial Officer 11/2/90 75,000 $3.13 $7.75 $3.13 8.8
David L. Cross, Treasurer 10/31/88 10,000 $7.38 $10.13 $7.38 9.8
11/2/90 10,000 $3.13 $7.38 $3.13 7.8
Stephen J. Cummings, VP of 11/2/90 5,000 $3.13 $8.13 $3.13 8.6
International Operations 11/2/90 5,000 $3.13 $8.38 $3.13 8.4
11/2/90 2,400 $3.13 $8.13 $3.13 5.8
11/2/90 1,500 $3.13 $4.50 $3.13 5.5
11/2/90 1,500 $3.13 $4.50 $3.13 5.1
11/2/90 3,000 $3.13 $4.00 $3.13 4.1
M. David Downs, 10/31/88 2,000 $7.38 $16.13 $7.38 8.8
VP of Manufacturing 10/31/88 5,000 $7.38 $10.13 $7.38 9.8
Harry A. George, 3/20/89 30,000 $8.38 $14.63 $8.38 8.1
VP of Finance
Edward Mallen, 10/31/88 3,000 $7.38 $14.63 $7.38 8.5
VP of U.S. Sales 11/2/90 20,000 $3.13 $7.38 $3.13 8
11/2/90 3,000 $3.13 $7.38 $3.13 6.5
Michael Mark, VP of Systems
Integration 3/20/89 4,000 $8.38 $14.63 $8.38 8.1
Stephen D. Pelletier, 10/31/88 30,000 $7.38 $12.38 $7.38 9.7
VP of Engineering 11/2/90 30,000 $3.13 $6.63 $3.13 9.4
11/2/90 30,000 $3.13 $7.38 $3.13 7.7
George D. Potter, Jr.,
Sr. VP of Sales Operations 3/20/89 30,000 $8.38 $14.63 $8.38 8.1
Mark K. Ruport, President
and Chief Executive Officer 11/2/90 75,000 $3.13 $5.38 $3.13 9.5
Steven M. Schwartz, 10/31/88 6,000 $7.38 $14.63 $7.38 8.5
VP of Marketing 10/31/88 6,000 $7.38 $10.13 $7.38 9.8
Andrew J Van Abs, 10/31/88 10,000 $7.38 $13.50 $7.38 9.1
VP of Engineering - 11/2/90 7,500 $3.13 $6.63 $3.13 9.4
Peripherals Technology 11/2/90 5,000 $3.13 $7.75 $3.13 8.8
11/2/90 5,000 $3.13 $7.38 $3.13 8
11/2/90 10,000 $3.13 $7.38 $3.13 7.1
George R. Vaughn, Controller 10/31/88 6,000 $7.38 $14.63 $7.38 8.5
Robert K. Weiler, President
and Chief Operating Officer 11/2/90 125,000 $3.13 $6.75 $3.13 8.9
Haviland Wright, Sr. VP and
Chief Scientist 8/3/94 60,000 $2.75 $6.75 $2.75 9
8/3/94 7,500 $2.75 $6.75 $2.75 9.7
</TABLE>
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors during fiscal 1995 were Andre Harari, Clinton P. Harris and
Frederick B. Bamber, none of whom is or has ever been an officer or
employee of the Company or any of its subsidiaries. No member of the
Compensation Committee is a party to any relationship required to be
disclosed under Item 402 or Item 404 of Regulation S-K promulgated by the
Securities and Exchange Commission. See "Certain Relationships and Related
Transactions," above.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is developed and approved
by the Compensation Committee. The Committee's philosophy is to reward
executives based upon the achievement of corporate and individual
performance goals as well as to provide long-term incentives for the
achievement of future financial and strategic goals. Commencing in fiscal
1995, the Company's then President and Chief Executive Officer, Mark K.
Ruport, could earn up to 50% of his compensation based exclusively upon the
achievement of corporate goals. Approximately 25% to 50% of the Company's
other executive officers' total compensation opportunity was based upon the
achievement of corporate and individual performance goals, except for
executives whose salaries are highly leveraged based on profitability for a
particular business unit. Of the Named Executive Officers, Peter Cittadini,
the Company's then Sr. Vice President of Worldwide Operations, and
Frederick Egan, Vice President, Asia/Pacific/Japan, had their compensation
based on this latter criterion.
The Company's executive compensation program for fiscal 1995
originally consisted of the following three elements: (1) base salary; (2)
incentive compensation in the form of commissions and annual cash bonuses
earned under the Company's corporate bonus program; and (3) long-term
equity-based incentive compensation in the form of stock options granted
pursuant to the Company's 1993 Stock Option Plan.
1. BASE SALARY
Base salaries for the Company's executive officers, including the
Company's then President, Mark K. Ruport, were determined by taking into
account a combination of the following three factors: (a) salaries
generally paid for similar positions in comparable software companies, (b)
the particular skills of the executive, and (c) the past performance of the
executive with the Company.
2. INCENTIVE COMPENSATION
In April 1994, the Compensation Committee established Interleaf's
corporate bonus program ("1995 Bonus Program"). Under the 1995 Bonus
Program, each then executive, with the exception of Messrs. Cittadini and
Ruport, could receive between 25% to 50% of his base salary if certain
targeted (i) corporate revenue and (ii) corporate net income goals were
achieved ("Goals") in fiscal 1995, along with certain individual
performance goals established by Mr. Ruport, with the approval of the
Compensation Committee. Under the 1995 Bonus Program, however, no bonuses
were to be paid to Mr. Ruport, the Company's President and Chief Executive
Officer, if the Company achieved less than 70% of these Goals; if the
Company achieved 70% of its Goals, 12.5% of his base salary would be paid;
and at 90% of Goals, 35% of his base salary would be paid. Finally, if 100%
of Goals were achieved, Mr. Ruport would receive a bonus equal to 50% of
his base salary. This formula has been in effect for the Company's last
four fiscal years.
3. LONG-TERM INCENTIVES
The Company awards options primarily to executives and key employees.
Under the Company's 1993 Stock Option Plan, stock options are awarded an
executive to incent the executive to focus on the Company's long-term
success as measured by the Company's stock price. Since options for
executives vest annually over a 4 to 5 year period, executives are
encouraged to focus on the long-term success of the Company. In April 1994,
Mr. Ruport, the Company's then President, was awarded an option grant
covering 30,000 shares of the Company's Common Stock at an exercise price
of $6.25 per share, the then fair market price of the Company's Common
Stock.
In the first quarter of fiscal 1995, ended June 30, 1994, the Company
recorded a loss of approximately $8.2 million and the full Board of
Directors determined that the Company's senior management organization
needed to be reorganized. Upon mutual agreement, the Company's then
President and Chief Executive Officer, Mark K. Ruport, resigned effective
July 25, 1994. Mr. Ruport received one year of severance totalling $350,000
payable over
15
<PAGE>
26 equal installments. The Compensation Committee believed this to be fair
and reasonable in light of Mr. Ruport's position, his term of five years
with the Company, and his dedicated efforts. Mr. Ruport also forfeited all
options, in which he was not vested as of his termination date, July 25,
1994.
In November 1994, the Company's Board of Directors elected Mr. Ed
Koepfler as President and Chief Executive Officer. Pursuant to Mr.
Koepfler's employment agreement with the Company, he received a base salary
of $300,000, with a guaranteed bonus of $50,000 for fiscal 1995. The
Compensation Committee based this salary on consultations with outside
executive placement firms, and given Mr. Koepfler's past experience and
performance as a senior executive in the software industry. In addition,
Mr. Koepfler was awarded an option grant of 350,000 shares, vesting over
four years, at an exercise price of $3.75 per share, the then current
market price. This option was granted to significantly tie Mr. Koepfler's
compensation to the long term success of the Company, and was within the
range of options being offered by other software companies for newly
recruited CEO's for companies similarly situated to Interleaf.
In fiscal 1995, the bonuses awarded to the current executive officers
were awarded based on their contribution to the Company's restructuring
program. With the exception of Paul English, the Company's Sr. Vice
President of Product Management, none of these individuals served in their
respective positions in fiscal 1994, the previous year.
Finally, for fiscal 1995, the Committee has reviewed the implications
of Section 162(m) of the Internal Revenue Code and the proposed regulations
thereunder. Section 162(m) disallows for federal tax purposes the
deductibility of compensation to the Company's President or any Named
Executive Officer to the extent compensation to the executive exceeds $1
million in a year. The Compensation Committee believes that the Company's
compensation for each executive in the foreseeable future would not exceed
this limitation. Therefore, it has no present intention of formally
qualifying any compensation paid to its executive officers for
deductibility under Section 162(m) of the Internal Revenue Code, but may
consider doing so in the future when the proposed regulations become final
if it appears that the limitations are likely to be exceeded.
COMPENSATION COMMITTEE: ANDRE HARARI FREDERICK B. BAMBER CLINTON P. HARRIS
STOCK PERFORMANCE GRAPH
The following graph compares the Company's cumulative
shareholder return with that of a broad market index (NASDAQ Stock Market
Index for U.S. and Foreign Companies) and a published industry index (NASDAQ
Computer and Data Processing Services Stocks). Each of these indexes is
calculated assuming that $100 was invested on March 31, 1990. The lines
represent monthly index levels derived from the changes in the daily market
capitalization, which are calculated based on daily closing stock prices,
quarterly shares outstanding and quarterly dividend reinvestments. The broad
market index and industry index are weighted on the basis of market
capitalization.
16
<PAGE>
[GRAPH]
17
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR
3/30/90 3/28/91 3/31/92 3/31/93 3/31/94 3/31/95
<S> <C> <C> <C> <C> <C> <C>
Interleaf, Inc. 100 108.16 179.59 153.06 110.20 79.59
NASDAQ Stock Market
(U.S. & Foreign) 100 113.56 145.12 166.55 179.63 198.36
NASDAQ Computer and Data
Processing Services Stocks 100 134.19 198.61 221.56 227.02 308.83
</TABLE>
SEVERANCE PLAN AND CHANGE OF CONTROL
Executive officers and all other officers of the Company are covered
by the Company's Officer Severance Benefit Plan (the "Severance Plan").
Adopted by the Board of Directors effective March 13, 1989, the Severance
Plan provides that if any officer, vice president or more senior officer
loses his employment with the Company, or has his responsibilities
significantly diminished, during a one year period after a "change in
control of the Company," such individual will be entitled to receive an
amount equal to his then total annual compensation. For purposes of the
Severance Plan, a "change in control" occurs if (a) an individual by
himself or in affiliation with others shall acquire, directly or
indirectly, 25% or more of the the combined voting power of Company's
outstanding securities, or causes the replacement of a majority of the
incumbent Board of Directors of the Company, (b) the Company is merged or
reorganized into or with another entity, resulting in previous shareholders
of the Company holding less than 80% of the combined voting power of the
outstanding securities of the resulting entity, or (c) the Company is
liquidated or substantially all of its assets are sold.
In addition, under the Company's 1983, 1993 and 1994 Stock Option
Plans, all options held by all employees, including Named Executive
Officers, become exercisable in full upon a "change in control."
On April 13, 1994, Richard P. Delio was elected the Company's Sr. Vice
President of Finance and Administration and Chief Financial Officer.
Pursuant to Mr. Delio's employment agreement, in the event that Mr. Delio is
terminated without cause or resigns due to a diminution of responsibility, he
shall receive severance equal to his first year's salary, or approximately
$300,000. In addition, all options granted to him shall continue vesting for
an additional year. In June 1995, upon mutual agreement between the Company
and Mr. Delio, Mr. Delio resigned from all positions with the Company, and
will receive for a period of 12 months, severance equal to approximately
$300,000. In July 1994, upon mutual agreement between the Company and Mr.
Mark Ruport, the Company's then President and Chief Executive Officer, Mr.
Ruport resigned from all positions with the Company, and received severance
equal to one year of compensation, approximately $350,000. In September 1994,
upon mutual agreement between the Company and Mr. Peter Cittadini, the
Company's then Senior Vice President of Worldwide Operations, Mr. Cittadini
resigned from the Company, and received severance equal to approximately
$185,833. In
18
<PAGE>
November 1994, Mr. Ed Koepfler was elected the Company's President
and Chief Executive Officer. Pursuant to Mr. Koepfler's employment
agreement with the Company, in the event that Mr. Koepfler is terminated
without cause, he shall receive severance equal to his annual base salary
of $300,000.
DIRECTORS' COMPENSATION
CASH COMPENSATION. Nonemployee directors of the Company receive
$1,000 for each Board of Directors and Audit Committee meeting attended. In
addition, each nonemployee director receives a retainer fee of $6,000 per
year, payable in four equal quarterly payments. Board members are also
reimbursed for reasonable out-of-pocket expenses.
COMPANY'S 1989 AND 1993 DIRECTOR STOCK OPTION PLANS. On March 20,
1989, the Board of Directors of the Company adopted the 1989 Director Stock
Option Plan (the "1989 Director Stock Option Plan"), which was ratified by
the shareholders at the Special Meeting in Lieu of An Annual Meeting held
in August 1989. To replace the 1989 Director Stock Option Plan, on
September 8, 1993, the Board adopted the 1993 Director Stock Option Plan
("1993 Director Stock Option Plan"), which was ratified at the Annual
Meeting of Shareholders held in August 1994.
Under the 1989 Director Stock Option Plan, each then nonemployee
director of the Company was granted a non-statutory stock option to
purchase 12,000 shares of Common Stock on March 20, 1989, the date the 1989
Director Stock Option Plan was adopted by the Board of Directors at a per
share exercise price of $8.38. Each such option is exercisable on a
cumulative basis in equal annual installments over a three-year period
beginning one year after the date of grant. At the end of the three year
period, each such director receives an option grant of 3,000 shares on each
succeeding March 20, at the then fair market value on such date in which he
will be fully vested at such time.
Only two of six (6) current nonemployee directors, Messrs. Sansonetti
and Bamber, participate in the 1989 Director Stock Option Plan. Under the
1989 Director Stock Option Plan, each holds an option to purchase 12,000
shares at an exercise price of $8.38 per share, and an option to purchase
3,000 shares at an exercise price of $8.75 per share.
Under the 1993 Director Stock Option Plan, each current nonemployee
director of the Company was granted a non-statutory option to purchase
5,000 shares of Common Stock on September 9, 1993 at an exercise price of
$6.65 per share, the average last reported sale price per share during the
period of September 9, 1993 through September 30, 1993, inclusive. Such
options became exercisable in full on August 4, 1994. Each person who
becomes a director of the Company and is not an employee of the Company
will be granted, as of the first date of his or her election as a director,
a non-statutory option to purchase 5,000 shares of Common Stock at the then
fair market value of the Common Stock. Each such option will be exercisable
one year after the date of grant. In addition, each nonemployee director
will be automatically granted, on April 1 of each year, a non-statutory
option to purchase 5,000 shares of Common Stock at the fair market value of
the stock on April 1. Such option will be fully exercisable one year after
the date of grant.
Under the 1993 Director Stock Option Plan, each current nonemployee
director, with the exception of Mr. Boucher, has three options of 5,000
shares each to purchase shares of the Company's Common Stock at exercise
prices of $6.65, $7.13, and $4.87, respectively.
19
<PAGE>
2. RATIFICATION AND APPROVAL OF AMENDMENT TO
THE COMPANY'S 1993 STOCK OPTION PLAN
Under the Company's 1993 Stock Option Plan (the "1993 Stock Option
Plan"), the Company is currently authorized to grant options to purchase up
to an aggregate of 750,000 shares of Common Stock, of which 10,000 shares
of Common Stock remain available for future grants as of June 1, 1995. Any
options to purchase shares of Common Stock issued pursuant to the 1993
Stock Option Plan which are cancelled shall be available for future grants
under such plan.
To ensure that the Company may continue to attract and retain key
employees, on April 27, 1995, the Board of Directors adopted, subject to
the approval of the Company's shareholders at the Annual Meeting, an
amendment to the 1993 Stock Option Plan increasing the total number of
shares available for issuance under the 1993 Stock Option Plan from 750,000
to 1,500,000 shares (subject to adjustment for any dividend, stock split or
other relevant changes in the Company's capitalization).
The following is a summary of certain provisions of the 1993 Stock
Option Plan.
ELIGIBILITY
All employees (including executive officers) of the Company are
eligible to receive incentive stock options and non-statutory stock
options. Consultants and advisors to the Company are only eligible to
receive non-statutory stock options. As of June 15, 1995, approximately 650
employees (including 5 executive officers) were eligible for selection to
receive stock options under the 1993 Stock Option Plan.
ADMINISTRATION; OPTION TERMS
The 1993 Stock Option Plan is administered by the Compensation
Committee of the Board of Directors, which designates the optionees, number
of shares, exercise price, date of grant and other terms of each option.
The exercise price may not be less than 100% of the fair market value of
the Common Stock for both non-statutory and for incentive stock options.
Under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), no incentive stock option granted under the 1993 Stock Option Plan
can, together with any other incentive stock option granted under any other
plan of the Company, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market
value (determined as of the date of grant) of more than $100,000 and no
incentive stock option can have a term exceeding ten years. Payment of the
option price may be made in cash, shares of Common Stock or a combination
thereof.
While the Company may grant options which are exercisable at different
times or within different periods, it is anticipated that options granted
generally will be exercisable on a cumulative basis in three equal annual
installments (generally four or five equal annual installments in the case
of executive officers). Options are nontransferable other than by the laws
of descent and distribution and are exercisable, during the optionee's
lifetime, only by him or her. The Compensation Committee will determine the
length of time an optionee may exercise his option following the
termination of employment of the optionee (which may not exceed three
months in the case of incentive stock options) or upon the optionee's death
or disability (which may not exceed one year in the case of incentive stock
options). In the event of a "Change of Control" of the Company, as defined
in the 1993 Stock Option Plan, all outstanding options will immediately
become exercisable in full.
The last reported sale price for the Common Stock as reported by
NASDAQ on the National Market System on June 15, 1995 was $6.37 per share.
CANCELLATION AND GRANT OF NEW OPTIONS
The Compensation Committee, with the consent of the affected option
holder, may at any time cancel any or all outstanding options under the
1993 Stock Option Plan and grant in substitution therefor new options under
the 1993 Stock Option Plan covering the same or different numbers of shares
of Common Stock. Such new options shall have an exercise price of not less
than 100% of the fair market value on the date of the new grant in the case
of both non-statutory and incentive stock options. The Company anticipates
that in most cases the option price in effect under any such new grant will
be less than the option price which would have been payable under the
cancelled options since the new grant is likely to arise in situations
where the exercise price of existing options exceed the market price and
new options are granted at lower prices to restore incentive to recipients
of such options.
20
<PAGE>
AMENDMENT AND TERMINATION
The Board of Directors may at any time amend or terminate the 1993
Stock Option Plan except that no amendment may be made without the approval
of the Company's stockholders if such amendment would (i) materially
increase the benefits accruing to participants under the 1993 Stock Option
Plan, (ii) materially increase the number of shares which may be issued
under the 1993 Stock Option Plan or (iii) materially modify the
requirements as to eligibility for participation under the 1993 Stock
Option Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax treatment of
incentive stock options and non-statutory stock options.
NON-STATUTORY OPTIONS. No taxable income is recognized by the optionee
upon the grant of a non-statutory stock option. The optionee must recognize
as ordinary income in the year in which the option is exercised the amount
by which the fair market value of the purchased shares on the date of
exercise exceeds the option price. The Company will be entitled to a
business expense deduction equal to the amount of ordinary income
recognized by the optionee. Any additional gain or loss recognized upon the
subsequent disposition of the purchased shares will be a capital gain or
loss, and will be a long-term gain or loss if the shares are held for more
than one year from the date of exercise.
INCENTIVE STOCK OPTIONS. No taxable income will be recognized by the
optionee upon the grant or exercise of an incentive stock option and no
corresponding business expense deduction will be available to the Company.
Generally, if an optionee holds shares acquired upon the exercise of
incentive stock options for at least two years from the grant of the option
and for at least one year from the date of transfer of the purchased shares
to him or her, any gain recognized by the optionee on a subsequent sale of
the shares will be treated as long-term capital gain. The gain recognized
upon the sale of the stock is the difference between the option price and
the sale price of the stock. The net federal income tax effect on the
holder of an incentive stock option is to defer, until the stock is sold,
taxation of any increase in the stock's value from the time of grant to the
time of exercise.
If the optionee disposes of the shares prior to the expiration of the
statutory holding periods described above, he or she will recognize taxable
income at ordinary income tax rates in an amount equal to the lesser of (i)
the value of the shares on the date of exercise, less the option price, or
(ii) the amount realized on the date of sale, less the option price and the
Company will receive a corresponding business expense deduction. The amount
by which the proceeds of sale exceed the fair market value of the shares on
the date of exercise will be treated as long-term capital gain if the
shares are held for more than one year prior to the sale and as short-term
capital gain if the shares are held for a shorter period. In the case of a
sale where a loss, if sustained, would have been recognized, the amount of
the optionee's income, and the amount of the Company's corresponding
expense deduction, will not exceed the difference between the sale price
and the adjusted basis of the shares.
For the purposes of the "alternative minimum tax" applicable to
individuals, an incentive stock option is treated as if it were a
non-statutory stock option. Thus, in the year of option exercise, an
optionee must generally include in his or her alternative minimum taxable
income the difference between the exercise price and the fair market value
of the stock on the date of exercise, and in the year of sale any
additional gain or loss is included in alternative minimum taxable income.
INFORMATION ABOUT PARTICIPATION
Because the selection of optionees and the number of shares to be
covered by options will be made from time to time in the future by the
Compensation Committee of the Board of Directors, it is not possible to
determine the benefits or amounts that will be received by executive
officers named under the caption "Executive Compensation" above, all
current executive officers as a group or all employees, including all
current officers who are not executive officers, as a group. For
information concerning recent grants to executive officers of stock options
under the Company's 1993 Stock Option Plan, see the table captioned "Option
Grants Table" above.
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RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes that the proposed increase in the
number of shares available for issuance in the 1993 Stock Option Plan is in
the best interests of the Company and its shareholders, and accordingly
recommends a vote FOR the proposal.
3. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Subject to ratification by the shareholders, the Board of Directors,
on the recommendation of the Audit Committee, has selected the firm of
Ernst & Young LLP as the Company's independent auditors for the current
fiscal year, ending March 31, 1996. Ernst & Young LLP has served as the
Company's independent auditors since 1981.
Although shareholder approval of the Board of Directors' selection of
Ernst & Young LLP is not required by law, the Board of Directors believes
it is advisable to give shareholders an opportunity to ratify this
selection. If this proposal is not approved at the Annual Meeting, the
Board of Directors will reconsider its selection of Ernst & Young LLP.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate
questions from shareholders.
OTHER MATTERS
Management does not know of any other matters which may come before
the Annual Meeting. However, if any other matters are properly presented to
the meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
This solicitation has been made by the Company. All costs of
solicitation of proxies will be borne by the Company. In addition to
solicitations by mail, the Company's directors, officers and other
employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and the Company will reimburse them
for their out-of-pocket expenses in this connection.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1996 Annual
Meeting of Shareholders must be received by the Company at its principal
office in Waltham, Massachusetts, by no later than April 1, 1996 for
inclusion in the proxy statement for that meeting.
By Order of the Board of Directors,
John K. Hyvnar, Clerk
July 1, 1995
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE ANNUAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE.
YOUR PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING
AND WILL BE APPRECIATED. SHAREHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR
SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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M74031-004
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APPENDIX
INTERLEAF, INC.
1993 STOCK OPTION PLAN
AMENDED BY THE BOARD OF DIRECTORS ON APRIL 27, 1995, SUBJECT TO SHAREHOLDER
RATIFICATION AND APPROVAL AT THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 17, 1995
1. PURPOSE.
The purpose of this plan (the "Plan") is to secure for Interleaf, Inc.
(the "Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company and its parent and subsidiary corporations who are expected to
contribute to the Company's future growth and success. Except where the context
otherwise requires, the term "Company" shall include the parent and all present
and future subsidiaries of the Company as defined in Sections 425(e) and 425(f)
of the Internal Revenue Code of 1986, as amended or replaced from time to time
(the "Code").
2. TYPE OF OPTIONS AND ADMINISTRATION.
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the Code
or non-statutory options which are not intended to meet the requirements of
Section 422 of the Code.
(b) ADMINISTRATION. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant options to purchase shares of the Company's Common
Stock ("Common Stock") and issue shares upon exercise of such options as
provided in the Plan. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective option agreements and the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective option agreements,
which need not be identical, and to make all other determinations in the
judgment of the Board of Directors necessary or desirable for the administration
of the Plan. The Board of Directors may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
in the manner and to the extent it shall deem expedient to carry the Plan into
effect and it shall be the sole and final judge of such expediency. No director
shall be liable for any action or determination made in good faith. The Board of
Directors may, to the full extent permitted by or consistent with applicable
laws or regulations (including, without limitation, applicable state law and
Rule l6b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"), or any successor rule ("Rule l6b-3"), delegate any or all of its powers
under the Plan to a committee (the "Committee") appointed by the Board of
Directors, and if the Committee is so appointed all references to the Board of
Directors in the Plan shall mean and relate to such Committee.
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(c) APPLICABILITY OF RULE l6b-3. Those provisions of the Plan which make
express reference to Rule l6b-3 shall apply to the Company only at such time as
the Company's Common Stock is registered under the Exchange Act, and then only
to such persons as are required to file reports under Section 16(a) of the
Exchange Act (a "Reporting Person").
3. ELIGIBILITY.
(a) GENERAL. Options shall be granted to persons who are, at the time of
grant, employees, officers or directors of, or consultants or advisors to, the
Company; provided, that Incentive Stock Options may be granted only to persons
who are eligible to receive such options under Section 422 of the Code. A person
who has been granted an option may, if he or she is otherwise eligible, be
granted an additional option or options if the Board of Directors shall so
determine.
(b) GRANT OF OPTIONS TO REPORTING PERSONS. While the Company's Common
Stock is registered under the Exchange Act, the selection of a Reporting Person
as a participant and decisions concerning the date of grant, exercise price and
amount of shares covered by an option or options to be granted to such Reporting
Person shall be made either by the Board of Directors, if each member is a
"disinterested person" (as hereinafter defined), or by a committee of two or
more directors, each of whom is a "disinterested person." For purposes of this
Plan, a person is a "disinterested person" only if such person qualifies as a
"disinterested person" within the meaning of paragraph (c)(1)(2)(i) of Rule
l6b-3 (or successor), as such term is interpreted from time to time.
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock of the Company which may be issued and sold under the
Plan is 1,500,000 shares. If an option granted under the Plan shall expire or
terminate for any reason without having been exercised in full, the unpurchased
shares subject to such option shall again be available for subsequent option
grants under the Plan. If shares issued upon exercise of an option under the
Plan are tendered to the Company in payment of the exercise price of an option
granted under the Plan, such tendered shares shall again be available for
subsequent option grants under the Plan; provided, that in no event shall (i)
the total number of shares issued pursuant to the exercise of Incentive Stock
Options under the Plan, on a cumulative basis, exceed the maximum number of
shares authorized for issuance under the Plan exclusive of shares made available
for issuance pursuant to this sentence or (ii) the total number of shares issued
pursuant to the exercise of options by Reporting Persons, on a cumulative basis,
exceed the maximum number of shares authorized for issuance under the Plan
exclusive of shares made available for issuance pursuant to this sentence.
5. FORMS OF OPTION AGREEMENTS.
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the board of directors. Such option agreements
may differ among recipients.
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6. PURCHASE PRICE.
(a) GENERAL. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the board of directors, PROVIDED,
HOWEVER, that (i) in the case of an Incentive Stock Option, the exercise price
shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11(b), and (ii) in the case of a non-statutory option granted at a time
when the Company is subject to Rule l6b-3, the exercise price shall not be less
than 100% of the fair market value of such stock, as determined by the Board of
Directors, at the time of grant of such option.
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, (ii) by any other means which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Rule l6b-3 and
Regulation T promulgated by the Federal Reserve Board) or (iii) by any
combination of such methods of payment. The fair market value of any shares of
the Company's Common Stock or other non-cash consideration which may be
delivered upon exercise of an option shall be determined in such manner as may
be prescribed by the Board of Directors.
7. OPTION PERIOD.
Each option and all rights thereunder shall expire on such date as shall
be set forth in the applicable option agreement, except that such date, in the
case of an Incentive Stock Option, shall in no case be later than ten years
after the date on which the option is granted.
8. EXERCISE OF OPTIONS.
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. NONTRANSFERABILITY OF OPTIONS.
Incentive Stock Options and options granted to Reporting Persons shall
not be assignable or transferable by the person to whom it is granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the optionee, shall be exercisable only by
the optionee.
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
The Board of Directors shall determine the period of time during which an
optionee may exercise an option following (i) the termination of the optionee's
employment or other
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relationship with the Company or (ii) the death or disability of the optionee.
Such periods shall be set forth in the agreement evidencing such option.
11. INCENTIVE STOCK OPTIONS.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 425(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than
110% of the fair market value of one share of Common Stock at
the time of grant; and
(ii) The option exercise period shall not exceed five years
from the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee ceases to be
an employee of the Company (or within such lesser period as may
be specified in the applicable option agreement), PROVIDED, that
the agreement with respect to such option may designate a longer
exercise period and that the exercise after such three-month
period shall be treated as the exercise of a non-statutory
option under the Plan;
(ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee ceases to be
such an employee,
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the Incentive Stock Option may be exercised by the person to
whom it is transferred by will or the laws of descent and
distribution within the period of one year after the date of
death (or within such lesser period as may be specified in the
applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning
of Section 22(e)(3) of the Code or any successor provision
thereto) while in the employ of the Company, the Incentive Stock
Option may be exercised within the period of one year after the
date the optionee ceases to be such an employee because of such
disability (or within such lesser period as may be specified in
the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. ADDITIONAL PROVISIONS.
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in any option granted under the Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or such other
provisions as shall be determined by the Board of Directors; provided that such
additional provisions shall not be inconsistent with any other term or condition
of the Plan.
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular option or options granted under the
Plan may be exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule l6b-3.
13. GENERAL RESTRICTIONS.
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to
whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option for
his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws, or with covenants or representations made by
the Company in connection with any public offering of its Common Stock.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or
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qualification of the shares subject to such option upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.
14. RIGHTS AS A SHAREHOLDER.
The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option (including, without limitation, any
rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to him or her for such
shares. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
15. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS.
(a) GENERAL. If, through or as a result of any merger, consolidation,
sale of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, (i) the outstanding shares of Common Stock
are increased or decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan, without changing the aggregate purchase price as to which such
options remain exercisable, provided that no adjustment shall be made pursuant
to this Section 15 if such adjustment would cause the Plan to fail to comply
with Section 422 of the Code or with Rule l6b-3.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this
Section 15 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) GENERAL. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may,
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in its discretion, take any one or more of the following actions, as to
outstanding options: (i) provide that such options shall be assumed, or
equivalent options shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), provided that any such options
substituted for Incentive Stock Options shall meet the requirements of Section
425(a) of the Code, (ii) upon written notice to the optionees, provide that all
unexercised options will terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a specified period following
the date of such notice, (iii) in the event of a merger under the terms of which
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment for each share surrendered in the merger (the "Merger
Price"), make or provide for a cash payment to the optionees equal to the
difference between (A) the Merger Price times the number of shares of Common
Stock subject to such outstanding options (to the extent then exercisable at
prices not in excess of the Merger Price) and (B) the aggregate exercise price
of all such outstanding options in exchange for the termination of such options,
and (iv) provide that all or any outstanding options shall become exercisable in
full immediately prior to such event.
(b) SUBSTITUTE OPTIONS. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. CHANGE IN CONTROL.
Notwithstanding any other provision of the Plan and except as otherwise
provided in the relevant option agreement, in the event of a "Change in Control
of the Company" (as defined below), the exercise dates of all options then
outstanding shall be accelerated in full and any restrictions on exercising
outstanding options issued pursuant to the Plan prior to any given date shall
terminate. For purposes of the Plan, a "Change in Control of the Company" shall
occur or be deemed to have occurred only if (i) any "person," as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any trustee of other
fiduciary holding securities under an employee benefit plan of the Company, or
any corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportion as their ownership of stock of the
Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities; (ii) during any period of two consecutive years ending
during the term of the Plan (not including any period prior to the adoption of
the Plan), individuals who are the beginning of such period constitute the Board
of Directors of the Company, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect any transaction described in clause (i), (iii), or (iv) of this Section
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17) whose election by the Board of Directors or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds of the
directors then still in office who were either directors at the beginning of the
period or whose election or whose nomination for election was previously so
approved (collectively, the "Disinterested Directors"), cease for any reason to
constitute a majority of the Board of Directors; (iii) the shareholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the company (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 25% of the combined voting power of the Company's then outstanding
securities; or (iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
18. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
19. OTHER EMPLOYEE BENEFITS.
The amount of any compensation deemed to be received by an employee as a
result of the exercise of an option or the sale of shares received upon such
exercise will not constitute compensation with respect to which any other
employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
20. AMENDMENT OF THE PLAN.
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
shareholders of the Company is required as to such modification or amendment
under Section 422 of the Code or any successor provision with respect to
Incentive Stock Options or under Rule l6b-3 or any successor provision with
respect to options held by Reporting Persons, the Board of Directors may not
effect such modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of an optionee, affect his or her rights under an
option previously granted to him or her. With the consent of the optionee
affected, the Board of Directors may amend outstanding option agreements in a
manner not inconsistent with the Plan. The Board of
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Directors shall have the right to amend or modify (i) the terms and provisions
of the Plan and of any outstanding Incentive Stock Options granted under the
Plan to the extent necessary to qualify any or all such options for such
favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code and (ii) the terms and provisions of the Plan and of any outstanding option
to the extent necessary to ensure the qualification of the Plan under Rule l6b-3
or any successor rule.
21. WITHHOLDING.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 21(a)
may only satisfy his or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule l6b-3(e) or
any successor rule under such Act.
22. CANCELLATION AND NEW GRANT OF OPTIONS, ETC.
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options; provided, that in the case of a Reporting Person, the
exercise price of options substituted or amended in the manner described above
shall not be less than 50% of the fair market value of the underlying stock at
the time of such substitution or amendment.
23. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no option granted under the Plan shall become
exercisable unless and until
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the Plan shall have been approved by the Company's shareholders. If such
shareholder approval is not obtained within twelve months after the date of the
Board's adoption of the Plan, no options previously granted under the Plan shall
be deemed to be Incentive Stock Options and no Incentive Stock Options shall be
granted thereafter. Amendments to the Plan not requiring shareholder approval
shall become effective when adopted by the Board of Directors; amendments
requiring shareholder approval (as provided in Section 20) shall become
effective when adopted by the Board of Directors, but no Incentive Stock Option
issued after the date of such amendment shall become exercisable (to the extent
that such amendment to the Plan was required to enable the Company to grant such
Incentive Stock Option to a particular optionee) unless and until such amendment
shall have been approved by the Company's shareholders. If such shareholder
approval is not obtained within twelve months of the Board's adoption of such
amendment, any Incentive Stock Options granted on or after the date of such
amendment shall terminate to the extent that such amendment to the Plan was
required to enable the Company to grant such option to a particular optionee.
Subject to this limitation, options may be granted under the Plan at any time
after the effective date and before the date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors, or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of options granted under the
Plan. Unless sooner terminated in accordance with Section l6, the Plan shall
terminate with respect to options which are not Incentive Stock Options on the
date specified in (ii) above. If the date of termination is determined under (i)
above, then options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
24. PROVISION FOR FOREIGN PARTICIPANTS.
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
Adopted by the Board of Directors on June 2, l993, and approved by the
Company's shareholders at Special Meeting in Lieu of an Annual Meeting on August
5, 1993. Amended by the Board of Directors on July 14, 1994.
33
<PAGE>
INTERLEAF, INC.
Proxy for the Annual Meeting of Shareholders to be held August 17, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Ed Koepfler,
G. Gordon M. Large, and John K. Hyvnar, and each of them, with full power of
substitution, as proxies to represent and vote as designated herein, all shares
of capital stock of Interleaf, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of the Company to be held at the Westin Hotel, 70 Third Avenue,
Waltham, Massachusetts on Thursday, August 17, 1995 at 8:30 a.m., local time,
and at any adjournment thereof.
The proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy
will be voted for all proposals. Attendance of the undersigned at the meeting
or at any adjournment thereof will not be deemed to revoke this proxy unless
the undersigned shall revoke this proxy in writing.
NEW ADDRESS:_______________________________________
___________________________________________________
___________________________________________________
___________________________________________________
(Front)
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
1. To elect the following two nominees as Class II
directors (except as marked below):
Nominees: Andre Harari and George D. Potter, Jr.
/X/ FOR /X/ WITHHOLD
nominees from nominees
For, except vote(s) withheld from the following
nominees:
/X/ ____________________________________________
2. To ratify and approve an FOR AGAINST ABSTAIN
amendment to the Company's
1993 Stock Option Plan to /X/ /X/ /X/
increase the number of shares
available for issuance by
750,000 shares.
- ------------------------------------------------------------------------------
3. To ratify the appointment of FOR AGAINST ABSTAIN
Ernst & Young LLP as the
Company's independent auditors /X/ /X/ /X/
for the 1996 fiscal year.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
CHECK HERE FOR CHECK HERE IF
ADDRESS CHANGE /X/ YOU PLAN TO ATTEND /X/
THE MEETING
Signature _______________________________ Date _______________________
Signature _______________________________ Date _______________________
(Reverse)
