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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 0-14713
[INTERLEAF LOGO]
INTERLEAF, INC.
(exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2729042
(State or other jurisdiction (I.R.S. employer identification number)
of incorporation or organization)
PROSPECT PLACE, 9 HILLSIDE AVE., WALTHAM, MA 02154
(Address of principal executive offices) (Zip Code)
(617) 290-0710
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's Common Stock, $.01 par value,
as of January 31, 1996 was 16,664,721.
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INTERLEAF, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated balance sheets at December 31, 1995 and March 31, 1995. . . . . . . . . . . . . . . . . . . 3
Consolidated statements of operations for the three and nine months ended December 31, 1995 and 1994 . . 4
Consolidated statements of cash flows for the nine months ended December 31, 1995 and 1994 . . . . . . . 5
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . 8
PART II - OTHER INFORMATION
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
2
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INTERLEAF, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1995
In thousands, except for share and per
share amounts (unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 12,434 $ 10,441
Accounts receivable, net 20,111 22,766
Prepaid expenses and other current assets 1,778 2,122
-------- --------
TOTAL CURRENT ASSETS 34,323 35,329
Property and equipment, net 8,117 11,058
Intangible assets 6,409 3,801
Other assets 376 605
-------- --------
TOTAL ASSETS $ 49,225 $ 50,793
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,209 $ 2,687
Accrued expenses 14,388 16,193
Unearned revenue 14,025 15,649
Other current liabilities 1,724 5,024
-------- --------
TOTAL CURRENT LIABILITIES 32,346 39,553
Other liabilities 17 625
-------- --------
TOTAL LIABILITIES 32,363 40,178
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SHAREHOLDERS' EQUITY
Preferred stock, par value $.10 per share,
authorized 5,000,000 shares:
Series A Junior Participating, none
issued and outstanding
Senior Series B Convertible, issued and
outstanding 923,304 at December 31, 1995
and 1,728,573 at March 31, 1995 92 173
Common stock, par value $.01 per share,
authorized 30,000,000 shares, issued and
outstanding 16,656,421 at December 31,
1995 and 14,203,027 at March 31, 1995 167 142
Additional paid-in capital 72,194 67,382
Retained earnings (deficit) (55,446) (57,269)
Cumulative translation adjustment (145) 187
-------- --------
TOTAL SHAREHOLDERS' EQUITY 16,862 10,615
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 49,225 $ 50,793
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</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
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INTERLEAF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended December 31 Nine months ended December 31
1995 1994 1995 1994
In thousands, except for per share amounts (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Products $ 7,915 $ 7,400 $26,625 $ 24,862
Maintenance 7,932 8,197 24,123 23,076
Services 5,408 6,226 16,945 16,137
------- ------- ------- --------
TOTAL REVENUES 21,255 21,823 67,693 64,075
------- ------- ------- --------
COSTS OF REVENUES:
Products 1,598 2,492 4,822 7,035
Maintenance 1,300 1,685 3,983 4,920
Services 4,474 5,153 14,050 14,915
------- ------- ------- --------
TOTAL COSTS OF REVENUES 7,372 9,330 22,855 26,870
------- ------- ------- --------
Gross Margin 13,883 12,493 44,838 37,205
------- ------- ------- --------
OPERATING EXPENSES:
Selling, general and administrative 9,545 14,110 31,398 43,287
Research and development 3,992 3,985 11,849 12,684
Restructuring expense - - - 7,109
------- ------- ------- --------
TOTAL OPERATING EXPENSES 13,537 18,095 43,247 63,080
------- ------- ------- --------
Income (loss) from operations 346 (5,602) 1,591 (25,875)
Other income (expense) 113 (227) 262 (498)
------- ------- ------- --------
Income (loss) before income taxes 459 (5,829) 1,853 (26,373)
Provision (benefit) for income taxes 30 (48) 30 2,118
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NET INCOME (LOSS) $ 429 $(5,781) $ 1,823 $(28,491)
------- ------- ------- --------
------- ------- ------- --------
Net income (loss) per share $ .02 $ (.41) $ .10 $ (2.05)
------- ------- ------- --------
------- ------- ------- --------
Shares used in computing net 18,874 13,971 18,382 13,887
income (loss) per share ------- ------- ------- --------
------- ------- ------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
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INTERLEAF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended December 31
1995 1994
In thousands (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,823 $(28,491)
Adjustments to reconcile net income (loss)
to net cash provided by
(used in) operating activities:
Restructuring expense - 7,109
Gain from settlement of legal dispute (note 4) (1,230) -
Depreciation and amortization expense 5,833 8,113
(Gain) loss from disposal of property and equipment (2) 142
Deferred income taxes - 1,860
Changes in assets and liabilities:
Decrease in accounts receivable, net 2,399 15,338
(Increase) decrease in other assets 448 (149)
Decrease in accounts payable and accrued expenses (189) (1,915)
Decrease in unearned revenue (1,465) (920)
Decrease in other liabilities (2,220) (3,051)
Other, net (2) (61)
------- --------
Net cash provided by (used in) operating activities 5,395 (2,025)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (811) (4,942)
Capitalized software development costs (3,452) (3,062)
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Net cash used in investing activities (4,263) (8,004)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 2,655 1,408
Property and equipment financing - 652
Repayment of long-term debt and capital leases (1,680) (1,703)
------- --------
Net cash provided by financing activities 975 357
------- --------
Effect of exchange-rate changes on cash (114) 144
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Net increase (decrease) in cash and cash equivalents 1,993 (9,528)
Cash and cash equivalents at beginning of period 10,441 23,364
------- --------
Cash and cash equivalents at end of period $12,434 $ 13,836
------- --------
------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
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INTERLEAF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts of Interleaf,
Inc. and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Interleaf, Inc. and its
subsidiaries are collectively referred to as the "Company." Certain 1994
amounts have been reclassified to conform to the 1995 method of
presentation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all
financial information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, these financial statements include all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
results of operations for the interim periods reported and of the financial
condition of the Company as of the date of the interim balance sheet. The
results of operations for interim periods are not necessarily indicative of
the results to be expected for the full year.
These financial statements should be read in conjunction with the Company's
audited consolidated financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1995.
2. Net Income (Loss) Per Share
Per share amounts are calculated using the weighted average number of
common shares and common share equivalents outstanding during periods of
net income. Common share equivalents are attributable to stock options,
common stock warrants and convertible preferred stock. Per share amounts
are calculated using only the weighted average number of common shares
outstanding during periods of net loss. Fully diluted earnings per share is
not materially different from reported primary earnings per share.
3. Noncash Financing Activities
Senior Series B Convertible Preferred Stock holders converted 805,269 and
57,142 shares of preferred stock into 1,082,081 and 76,784 shares of the
Company's common stock during the nine months ended December 31, 1995 and
1994, respectively. The Company issued 366,113 shares of common stock,
during the nine months ended December 31, 1995, in connection with the
exercise of warrants. The Company received no proceeds upon the conversion
of the warrants into common stock. There are no warrants outstanding as of
December 31, 1995.
4. Research and Development Agreements
In October 1988, the Company entered into a joint venture (the "Venture")
with PruTech Research and Development Partnership III ("PruTech"), for the
purpose of developing and marketing certain products. PruTech contributed
approximately $2,950,000 in cash to the Venture; the Company licensed to
the Venture certain base technology and was required to perform certain
development, marketing and administrative services for the Venture.
In March 1994, PruTech commenced an arbitration action against the Company
alleging, among other things, (i) that the Company had mismanaged the
Venture; (ii) that PruTech was entitled to cash distributions of 30% of
Venture revenues; and (iii) that certain Venture-owned technology was used
in the Company's other products. The Company denied such allegations.
6
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INTERLEAF, INC.
In November 1995, the Company and PruTech reached an agreement. The
Company paid PruTech $2.1 million (the "Purchase Price") solely in
consideration of (i) the acquisition by the Company of PruTech's interest
in the Venture, and (ii) the settlement of the pending arbitration action
and the release by PruTech of all claims that it may have had against the
Company arising out of the formation and operation of the Venture. The
Company issued to PruTech 190,000 Common Stock shares for payment of the
Purchase Price. The settlement of the arbitration action resulted in an
expense reduction of approximately $1.2 million, which is included in
selling, general and administrative expenses in the Consolidated Statements
of Operations. The Venture-owned technology acquired by the Company was
valued at $1.4 million and is included in Intangible assets in the
Consolidated Balance Sheets.
5. Contingencies
Interleaf's German subsidiary, Interleaf GmbH, has been notified that it is
liable for certain German withholding taxes related to payments remitted to
the United States from Germany. The Company is appealing this assessment,
however, approximately $1.1 million of the cash and cash equivalents
balance at December 31, 1995 has been restricted for potential payment of
the German withholding taxes. The Company believes the final outcome will
not have a material adverse effect on the financial position or results of
operations of the Company.
7
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INTERLEAF, INC.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The Company recorded net income of approximately $0.4 million and $1.8 million
for its third quarter and nine months ended December 31, 1995, respectively,
compared with a net loss of approximately $5.8 million and $28.5 million for the
corresponding periods of fiscal 1995. The improvement in the Company's operating
results was primarily attributable to a significant reduction in operating
expenses, due to a reduction in personnel and facility expenses arising from the
Company's fiscal 1995 restructuring. The third quarter of fiscal 1996 was
positively impacted by the settlement of a long-term dispute with a joint
venture partner, which resulted in an expense reduction of approximately $1.2
million. The second quarter of fiscal 1995 was adversely affected by a
restructuring charge of approximately $7.1 million and a $1.9 million charge
related to the revaluation of the Company's deferred tax asset. Further
reductions in operating expenses from their current levels are not anticipated
as the majority of the benefits from the previous year's restructuring have been
realized.
REVENUES
Total revenues decreased approximately $0.6 million (3%) for the third quarter
ended December 31, 1995, when compared with the same period a year ago. During
the third quarter of fiscal 1995, the Company recorded a $1.8 million write-off
of a customer contract. Excluding the write-off, this quarter's revenues
declined approximately $2.4 million (10%) primarily due to a decline in product
license and services revenue. Revenues increased approximately $3.6 million (6%)
for the nine months ended December 31, 1995, when compared with the same period
a year ago.
Product license revenue increased approximately $0.5 million (7%) for the third
quarter ended December 31, 1995, when compared with the same period a year ago.
Excluding the product license portion of the contract write-off, approximately
$1.6 million, product license revenue decreased approximately $1.1 million
(12%). This was attributable to declines in the North American and European
regions, partially offset by an increase in Asia/Pacific/Japan. During fiscal
1996, the Company has concentrated on rebuilding and strengthening its worldwide
sales force. The improvement in sales force productivity has taken longer than
expected, resulting in lower than anticipated revenues. Product license revenues
increased approximately $1.8 million (7%) for the nine months ended December 31,
1995, when compared with the same period a year ago. This increase was primarily
attributable to the major decline in product license revenues during the first
quarter of fiscal 1995, which resulted in the reorganization and restructuring
of the Company initiated in September 1994, and the contract write-off discussed
above. Product license revenue increased in Europe and Asia/Pacific/Japan,
offset by a decline in North America.
Maintenance revenue, resulting from contracts to provide telephone support and
upgrades to the Company's software products, decreased approximately $0.3
million (3%) for the third quarter ended December 31, 1995, when compared with
the same period a year ago. Maintenance revenue increased approximately $1.0
million (5%) for the nine months ended December 31, 1995, when compared with the
same period a year ago. The increase for the nine months was primarily due to
increased contract renewals during the second quarter of fiscal 1996. Future
maintenance revenue is dependent on the Company's ability to maintain its
existing customer base and to increase maintenance contract volume related to
the new products being shipped. This will be necessary to offset the general
downward pricing pressure on maintenance in the software industry.
8
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INTERLEAF, INC.
Services revenue, consisting of consulting and customer training revenue,
decreased approximately $0.8 million (13%) for the third quarter ended December
31, 1995, when compared with the same period a year ago. Excluding the services
portion of the contract write-off discussed above, approximately $0.2 million,
services revenue decreased approximately $1.0 million (16%). This decrease was
primarily attributable to a decrease in consulting services personnel and the
decline in product license revenues. Services revenue increased approximately
$0.8 million (5%) for the nine months ended December 31, 1995, when compared
with the same period a year ago. This was primarily related to price increases
and increased customer demand for the Company's consulting services to implement
document management solutions, partially offset by a decline in training
services.
Revenues from the Company's international operations were approximately $7.6
million (36%) and $24.8 million (37%) of total revenues for the third quarter
and nine months ended December 31, 1995, respectively, compared with $9.1
million (42%) and $22.2 million (35%) of total revenues for the corresponding
periods of fiscal 1995. These trends were primarily due to a significant
increase in product license revenues in Japan and Europe during the first six
months of fiscal 1996, partially offset by declines in Europe and Canada during
the third quarter of fiscal 1996.
Growth in revenues for the remainder of fiscal 1996 and fiscal 1997 will be
largely dependent on improving sales force productivity, customer acceptance of
product upgrades and new products that shipped in fiscal 1996 and that are
planned for the next year, and the Company's success in leveraging product
license revenues with services to provide integrated document management
solutions to its customers. The Company recently announced Intellecte/Business
Web, which provides easy access to business information by enabling the use of
all popular web browsers to locate and retrieve documents from enterprise
document repositories utilizing the Company's document management product (RDM).
In addition, the Company continued its aggressive program of product releases by
completing enhancements to five products and introducing Liaison, a new
strategic open Application Programming Interface for simplifying the creation of
integrated document management solutions, during the third quarter of fiscal
1996.
The Company's sales cycles have become longer as the Company provides more
integrated document management solutions combined with expert services to
satisfy its customers' requirements. In addition, a high percentage of the
Company's revenues are generally realized in the last month of a quarter and can
be difficult to predict until the end of a quarter. Accordingly, given the
Company's relatively fixed cost structure, a shortfall or increase in product
license revenue will have a significant impact on the Company's operating
results.
COSTS OF REVENUES
Cost of product revenues includes amortization of capitalized software
development costs; product media, documentation materials, packaging and
shipping costs; and royalties paid for licensed technology. Cost of product
revenues declined approximately $0.9 million (36%) and $2.2 million (31%) for
the third quarter and nine months ended December 31, 1995, respectively, when
compared with the same periods a year ago. The decline was primarily related to
decreased amortization of capitalized software development costs due to the
write-down of capitalized software development costs in the fourth quarter of
fiscal 1995 associated with older software products for which revenue
projections did not support the capitalized amounts. Also contributing to the
decrease in cost of product revenues was a decline in royalties associated with
certain time-based royalty agreements. Cost of maintenance revenues declined
approximately $0.4 million (23%) and $0.9 million (19%) for the third quarter
and nine months ended December 31, 1995, respectively, when compared to the same
periods a year ago, primarily due to a decrease in customer support personnel
related to the Company's fiscal 1995 restructuring. Cost of services revenue
decreased approximately $0.7 million (13%) and $0.9 million (6%) for the third
quarter and nine months ended December 31, 1995, respectively, when compared to
the same periods a year ago, primarily attributable to a decline in services
personnel.
9
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INTERLEAF, INC.
OPERATING EXPENSES
Selling, general and administrative ("SG&A") expenses decreased approximately
$4.6 million (32%) and $11.9 million (27%) for the third quarter and nine months
ended December 31, 1995, respectively, when compared with the same periods a
year ago. This was primarily due to significant personnel and facilities expense
reductions related to the Company's fiscal 1995 restructuring. Additionally, the
settlement of a long-term dispute with a joint venture partner resulted in an
expense reduction of approximately $1.2 million in the third quarter of fiscal
1996. Excluding the contract write-off in fiscal 1995 and the dispute
settlement in fiscal 1996, SG&A expenses were approximately 51% and 60% of total
revenues for the third quarters ended December 31, 1995 and 1994, respectively.
The Company intends to increase its investment in marketing expenditures to
increase its visibility and create new sales opportunities.
Research and development ("R&D") expenses consist primarily of personnel
expenses to support product development offset by capitalized software
development costs. R&D expenses remained relatively stable for the third quarter
ended December 31, 1995, when compared with the same period a year ago. For the
third quarters ended December 31, 1995 and 1994, R&D expenses were approximately
19% and 18%, respectively, of total revenues. R&D spending, which excludes the
offset for capitalized software development costs, represented approximately 24%
and 23% of total revenues, respectively. R&D expenses decreased approximately
$0.8 million (7%) for the nine months ended December 31, 1995, when compared
with the same period a year ago. This was primarily due to reduced personnel
expenses associated with the Company's fiscal 1995 restructuring and increased
capitalization of software development costs through the second quarter of
fiscal 1996. Capitalized software development costs in the third quarter of
fiscal 1996 declined from the previous quarter as several major product releases
were completed near the end of the second quarter. The Company continues to work
on several product upgrades and new products which are expected to be released
during the fourth quarter of fiscal 1996 and beginning of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $12.4 million of cash and cash equivalents at
December 31, 1995, an increase of approximately $2.0 million from March 31,
1995. The increase was primarily attributable to the Company's profitability for
the nine months ended December 31, 1995 and proceeds from common stock issuances
related to its stock option plans and employee stock purchase plan of
approximately $2.7 million. This positive impact was partially offset by
significant expenditures to liquidate collateralized and other lease obligations
of approximately $1.7 million and restructuring payments of approximately $1.6
million. Capital expenditures were approximately $0.8 million, a significant
reduction from the prior fiscal year. Future commitments consist primarily of
operating leases related to both open and closed facilities. As discussed in
note 5 to the consolidated financial statements, approximately $1.1 million of
the cash and cash equivalents balance at December 31, 1995 has been restricted
for potential payment of German withholding taxes.
The Company relocated part of its headquarters operations in October 1995. The
Company expended approximately $1.1 million related to prepaid rent, leasehold
improvements and moving costs to the new building through December 1995. The
reduction in office space and rental rate and sub-lease of the vacated space
will result in annual cash and expense savings slightly in excess of $1.0
million beginning in fiscal 1997.
Accrued restructuring charges are approximately $1.7 million at December 31,
1995. This reserve should be sufficient to cover remaining expenditures,
primarily attributable to operating lease payments for closed facilities, which
are expected to continue until the year 2000. The Company has sub-leased all
major closed facilities.
10
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INTERLEAF, INC.
In May 1995, the Company obtained a revolving line of credit from a major
commercial lender. Borrowings from the line of credit are secured by
substantially all domestic assets of the Company. The credit agreement limits
borrowing based upon the level of North American accounts receivable, modified
by the previous quarter's cash collections. As of January 31, 1996, the amount
available for borrowings was approximately $3.6 million. The agreement contains
certain financial covenants as well as restrictions on certain additional
indebtedness, acquisitions, capital expenditures, and dividend payments. At
December 31, 1995, there were no loans outstanding under this line of credit.
As discussed in note 4 to the consolidated financial statements, the Company and
PruTech Research and Development Partnership III ("PruTech") reached a
settlement to end their joint venture (the "Venture") agreement. The Company
paid PruTech $2.1 million (the "Purchase Price") solely in consideration of (i)
the acquisition by the Company of PruTech's interest in the Venture, and (ii)
the settlement of the pending arbitration action and the release by PruTech of
all claims that it may have against the Company arising out of the formation and
operation of the Venture. The Company issued to PruTech 190,000 Common Stock
shares for payment of the Purchase Price.
The Company believes that existing cash and cash equivalents and borrowing
availability, together with cash generated from operations, will provide
sufficient funds to meet the Company's planned operations for the foreseeable
future.
11
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INTERLEAF, INC.
PART II - OTHER INFORMATION
Item 5. Other Information
On November 22, 1995, the Company accepted the resignation of Paul English as
Senior Vice President, Product Management. Eric Severson was appointed Vice
President and Chief Strategist on January 8, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed in the accompanying Exhibit Index are filed
as part of this Quarterly Report on Form 10-Q.
(b) No reports were filed on Form 8-K by the Company during the
quarter ended December 31, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERLEAF, INC.
February 12, 1996
/s/ G. Gordon M. Large
--------------------------------------
G. Gordon M. Large
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
12
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INTERLEAF, INC.
EXHIBIT INDEX
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
10(a) Company's 1983 Stock Option Plan, as amended [v]
10(a1) 1994 Employee Stock Option Plan [vi]
10(a2) 1993 Incentive Stock Option Plan, as amended [viii]
10(b) Company's 1989 Director Stock Option Plan [i]
10(b2) Company's 1987 Employee Stock Purchase Plan, as [v]
amended
10(c) Company's 1989 Officer and Employee Severance [i]
Benefit Plans
10(cc) Company's 1993 Director Stock Option Plan [v]
10(d) Agreements between PruTech Research and Development [ii]
Partnership III and the Company, dated October 21,
1988.
10(e) Exclusive Marketing and Licensing Agreement, between [i]
Interleaf South America, Ltd. and the Company, and
related Option Agreement, dated March 31, 1989.
10(f) Distribution and License Agreement between Interleaf [i]
Italia, S.r.l. and the Company, and related Joint
Venture Agreement, dated October 31, 1988.
10(g) Preferred Stock Purchase Agreements, for the issuance [ii]
of 2,142,857 shares of the Company's Senior Series B
Convertible Preferred Stock, dated September 29, 1989.
10(h) Notification to Preferred Shareholder of increase in [iii]
conversion ratio, dated May 18, 1992.
10(i) Lease of Prospect Place, Waltham, MA, between Prospect [iv]
Place Limited Partnership and Interleaf, Inc., and
related Agreements, dated March 30, 1990.
10(k) Letter Agreement between the Company and Richard P. [v]
Delio, the Company's former Sr. Vice President of
Finance and Administration and Chief Financial
Officer, dated March 30, 1994, concerning his
employment and severance with the Company.
10(l) Letter of Separation and Management Consulting [vi]
Agreement between the Company and Mark K. Ruport,
the Company's former President, Chief Executive
Officer and Director, dated July 25, 1994,
concerning his separation and consulting obligations
to the Company.
10(m) Letter Agreement between the Company and Richard P. [vi]
Delio, the Company's former Sr. Vice President of
Finance and Administration and Chief Financial Officer
and Acting President, dated August 3, 1994, concerning
his employment and severance with the Company.
10(n) Letter of Separation and Management Consulting [vi]
Agreement between the Company and Peter Cittadini, the
Company's former Sr. Vice President Worldwide
Operations, dated July 27, 1994, concerning his
separation and consulting obligations to the Company.
10(o) Executive Compensation Arrangement for David A. [vi]
Boucher, the Company's Chairman of the Board, dated
July 20, 1994.
10(p) Letter of Separation and Management Consulting [vi]
Agreement between the Company and Lawrence S. Bohn,
the Company's former Sr. Vice President, Marketing
and Business Development, dated September 20, 1994,
concerning his separation and consulting obligations
to the Company.
10(q) Employment and severance agreement between the [vii]
Company and Edward Koepfler, the Company's President,
dated October 3, 1994.
13
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INTERLEAF, INC.
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
10(r) Loan and Security Agreement between the Company and [ix]
Foothill Capital Corporation, dated May 2, 1995.
10(s) Employment and severance agreement between the [ix]
Company and G. Gordon M. Large, the Company's
Executive Vice President and Chief Financial Officer,
dated June 5, 1995
10(t) Net Lease, dated August 14, 1995, between Principal [x]
Mutual Insurance Company and the Company.
10(u) Sublease, dated September 15, 1995, between Parametric [x]
Technology Corporation and the Company.
10(v) Employment and severance agreement between the Company [xi]
and Mark Cieplik, the Company's Vice President,
Americas, dated March 17, 1995.
10(w) Agreement between PruTech Research and Development Included
Partnership III and the Company, dated November 14,
1995.
11 Computation of Earnings Per Share Included
27 Financial Data Schedule Included
_______________________
[i] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31,
1989, File Number 0-14713.
[ii] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31,
1990, File Number 0-14713.
[iii] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31,
1992, File Number 0-14713.
[iv] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 8-K filed April 13, 1990, File Number
0-14713.
[v] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31,
1994, File Number 0-14713.
[vi] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended September 30,
1994, File Number 0-14713.
[vii] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended December 31,
1994, File Number 0-14713.
[viii] Incorporated herein by reference is the applicable Exhibit
to Company's Annual Report on Form 10-K for the year ended March
31, 1995, File Number 0-14713.
[ix] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended June 30, 1995,
File Number 0-14713.
[x] Incorporated herein by reference is the applicable Exhibit to
Company's Registration Statement on Form S-2, File Number 33-63785.
[xi] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended September 30,
1995, File Number 0-14713.
14
<PAGE>
EXHIBIT 10(w)
AGREEMENT
Agreement made as of this 14th day of November, 1995, by and among
Interleaf, Inc., a Massachusetts corporation having its principal place of
business at Prospect Place, 9 Hillside Avenue, Waltham, Massachusetts 02154
("Interleaf"), PruTech Research and Development Partnership III, a California
Limited Partnership having its principal place of business at 440 Mission Court,
Suite 250, Fremont, California 94539 ("PruTech"), and R & D Funding Corp., a
Delaware corporation having its principal place of business at 40 Mission Court,
Suite 250, Fremont, California 94539 ("R&D").
WHEREAS, Interleaf and PruTech entered into a Joint Venture Agreement
effective as of October 21, 1988 (the "Joint Venture Agreement"), pursuant to
which the PruTech-Interleaf Joint Venture (the "Venture") was formed to develop,
manufacture and market certain Research Products (as defined in the Joint
Venture Agreement);
WHEREAS, PruTech commenced a proceeding before the American Arbitration
Association in Boston, Massachusetts on February 22, 1994 (the "Arbitration"),
seeking arbitration of certain controversies between Interleaf and PruTech and
claiming certain damages from Interleaf arising out of the transactions
contemplated by the Joint Venture Agreement;
WHEREAS, in connection with the Arbitration, Interleaf has denied any
liability to PruTech and has asserted certain counterclaims against PruTech in
its answering statement dated April 4, 1994;
WHEREAS, Interleaf and PruTech desire to provide for the purchase by
Interleaf of PruTech's interest in the Venture and the settlement of all
disputes between them.
NOW THEREFORE, in consideration of these premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. PURCHASE AND SALE OF VENTURE INTEREST.
(a) PURCHASE AND SALE. Subject to and upon the terms and conditions
of this Agreement, at the Closing (as defined in Section 1(c)), PruTech shall
sell, assign and transfer to Interleaf, and Interleaf shall purchase from
PruTech, all of PruTech's right, title and interest in and to the Venture.
<PAGE>
(b) CONSIDERATION; PAYMENT. In consideration for PruTech's interest
in the Venture and the performance by PruTech of the other obligations set forth
herein, Interleaf shall pay to PruTech the sum of $2,100,000 (two million one
hundred thousand dollars) (the "Purchase Price"). At Interleaf's option, the
Purchase Price shall be payable in cash, by the issuance of shares of Common
Stock, $.01 par value per share, of Interleaf ("Common Stock"), or a combination
thereof, as specified in Section 1(c). All Common Stock issued by Interleaf
hereunder in payment of the Purchase Price shall be issued pursuant to the
provisions of Section 7 hereof.
(c) CLOSING; PAYMENT PROCEDURE. The closing ("Closing") of the
purchase and sale hereunder shall take place on November 14, 1995 or such other
date as PruTech and Interleaf shall mutually agree upon but in no event later
than November 30, 1995. At the Closing, Interleaf shall deliver to PruTech, or
its designee, one or more certified checks and/or one or more certificates for
shares of Common Stock, at Interleaf's option, having an aggregate value equal
to the Purchase Price. In the event that Interleaf delivers certificate(s) for
shares of Common Stock as part or all of the Purchase Price, the number of
shares of Common Stock to be conveyed to PruTech shall be determined by dividing
(i) (a) the Purchase Price, less the amount of any certified checks, multiplied
by (b) 1.05, by (ii) the average Share Price for the ten (10) trading days
immediately preceding the Closing. PruTech agrees that it shall not, without
Interleaf's consent, sell, on any single trading day, more than 50,000 shares of
Common Stock. In the event PruTech violates such daily volume limitation,
Interleaf's sole remedy shall be as set forth in Section 1(d)(3) below.
(d) ADJUSTMENT.
(1) In the event that the net cash proceeds from the sale by
PruTech of all of the shares of Common Stock delivered hereunder shall be less
than the Purchase Price minus the amount of any certified checks delivered in
payment of the Purchase Price (a "Shortfall"), PruTech shall deliver to
Interleaf a written notice identifying the amount of the Shortfall, accompanied
by copies of all confirmations from the sales of such Common Stock. Within ten
days of the delivery of such notice, Interleaf shall deliver to PruTech one or
more additional certified checks and/or one or more additional certificates
evidencing shares of Common Stock (issued pursuant to the provisions of Section
7 hereof) in an aggregate amount equal to the Shortfall. In the event that
Interleaf delivers certificate(s) for shares of Common Stock in payment of the
Shortfall, the number of shares of Common Stock to be conveyed to PruTech shall
be determined by dividing (i) (a) the amount of such Shortfall, less the amount
of any certified checks, multiplied by (b) 1.05, by (ii) the average Share Price
for the
-2-
<PAGE>
ten (10) trading days immediately preceding the date of payment of such
Shortfall. At any time prior to the receipt by PruTech of certified checks
and/or net cash proceeds from the sale of Common Stock in the aggregate amount
of the full Purchase Price, Interleaf may, at its option, deliver to PruTech a
certified check in the amount of the remaining Purchase Price, whereupon PruTech
shall deliver to Interleaf all remaining certificates for shares of Common Stock
delivered to PruTech hereunder.
(2) In the event that the amount of net cash proceeds received
by PruTech prior to December 30, 1995 upon the sale of shares of Common Stock
delivered hereunder, together with the amount of all certified checks delivered
hereunder, exceeds the Purchase Price (a "Stock Gain"), PruTech shall, within
ten (10) days after receipt of such Stock Gain, deliver to Interleaf a certified
check in the amount of the Stock Gain together with any remaining certificates
for shares of Common Stock delivered to PruTech hereunder.
(3) Interleaf shall not be required to make the adjustment set
forth in Section 1(d)(1) above in the event that (i) PruTech violates the daily
limitation on sales of Common Stock set forth in Section 1(c) above, or (ii)
PruTech delivers written notice requesting payment under Section 1(d)(1) after
December 30, 1995. PruTech shall not be required to make the payment required
under Section 1(d)(2) for any shares of Common Stock sold after December 30,
1995.
(4) In the event that Interleaf fails to make payment as
required under Section 1(d)(1) above, PruTech may, at its option, terminate this
Agreement by delivering to Interleaf a certified check for the amount of the
certified checks, if any, delivered at the Closing and for the net proceeds from
the sale of all Common Stock received hereunder and certificate(s) evidencing
any remaining shares of Common Stock, and, thereupon, all of the rights and
releases granted hereunder shall be deemed rescinded and the rights of PruTech
under the Joint Venture Agreement shall revert to PruTech in the same manner as
existed prior to this Agreement.
(e) SHARE PRICE. As used herein, the "Share Price" on a specified
date shall be the closing price of the Common Stock in the National Market
System, as reported by NASDAQ, on such date.
2. CONSEQUENCES OF PURCHASE AND SALE; FURTHER ASSURANCES. For purposes
of the rights and obligations of Interleaf set forth in Sections 8.2(d), 9.1(c),
9.2, 11.3, 11.4 and 12.1 of the Joint Venture Agreement, the Closing of the
purchase and sale of PruTech's interest in the Venture hereunder shall be
treated as the exercise of Interleaf's purchase option (sometimes referred to in
the Joint Venture as the "Company's Buyout Option") pursuant to
-3-
<PAGE>
Article XI of the Joint Venture Agreement (notwithstanding the terms of Section
11.1 of the Joint Venture Agreement); provided, however, that PruTech agrees and
acknowledges that, anything to the contrary in the Joint Venture Agreement
notwithstanding, upon payment in full of the Purchase Price: (i) PruTech shall
not be entitled to any distribution of assets of the Venture (pursuant to
Sections 12.2 or 12.3 of the Joint Venture Agreement or otherwise); (ii)
Interleaf shall have no obligations, and PruTech shall have no rights, under any
of the sections referred to in Section 12.4 of the Joint Venture Agreement; and
(iii) the security interest and all rights granted to PruTech pursuant to
Section 13.12 of the Joint Venture Agreement shall terminate and be of no
further force and effect. PruTech shall, as soon as practicable after the
Closing, (i) deliver to Interleaf all tangible manifestations of the Technology
(as defined in the Joint Venture Agreement) and any other proprietary
information of Interleaf in its possession, and (ii) execute and deliver to
Interleaf such financing termination statements, patent or copyright assignments
or other instruments as Interleaf may reasonably require in order to evidence
the termination of the security interests granted pursuant to Section 13.12 of
the Joint Venture Agreement.
3. DISMISSAL OF ARBITRATION PROCEEDING. PruTech shall not take any
further action with respect to the Arbitration until and unless Interleaf shall
fail to make payment of the Purchase Price as provided herein. As soon as
practicable after payment in full of the Purchase Price, PruTech shall file a
stipulation of dismissal with prejudice in the Arbitration in such form as may
be reasonably acceptable to Interleaf and take such other actions as Interleaf
may reasonably require to advise the arbitrators that the Arbitration has been
settled. Each party shall be responsible for its own fees and expenses in
connection with the Arbitration.
4. RELEASE BY PRUTECH AND R&D. Effective with the payment in full of the
Purchase Price, PruTech and R&D shall release and forever discharge Interleaf
from any and all debts, liabilities, obligations, promises, covenants,
agreements, contracts, controversies, actions, causes of action, judgments,
damages, expenses, claims and demands whatsoever, known or unknown, in law or at
equity, which PruTech or R&D had, now has or hereafter may have against
Interleaf for, or by reason of, any matter or cause whatsoever arising from or
related to the Joint Venture Agreement, the operation of the Venture or the
Arbitration, except for (i) obligations of Interleaf arising out of this
Agreement, or (ii) obligations of Interleaf arising out of Sections 11.3 or 11.4
of the Joint Venture Agreement which obligations shall survive the termination
of the Joint Venture Agreement.
5. RELEASE BY INTERLEAF. Effective with the payment in full of the
Purchase Price, Interleaf hereby releases and forever
-4-
<PAGE>
discharges PruTech and R&D from any and all debts, liabilities, obligations,
promises, covenants, agreements, contracts, controversies, actions, causes of
action, judgments, damages, expenses, claims and demands whatsoever, known or
unknown, in law or at equity, which Interleaf had, now has or hereafter may have
against PruTech or R&D for, or by reason of, any matter or cause whatsoever
arising from or related to the Joint Venture Agreement, the operation of the
Venture or the Arbitration, except for obligations arising out of this
Agreement.
6. REPRESENTATIONS AND COVENANTS OF PRUTECH. PruTech hereby represents
and covenants to Interleaf as follows:
(a) AUTHORITY. PruTech has the full right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
(b) OWNERSHIP OF INTEREST IN VENTURE. PruTech has not previously
sold, transferred, assigned, pledged or otherwise disposed of any part of its
interest in the Venture, whether voluntarily or by operation of law. PruTech
has not incurred any obligations in the name of or on behalf of the Venture.
(c) ENFORCEABILITY. The Agreement has been duly executed by PruTech
and constitutes the valid and binding obligation of PruTech, enforceable against
PruTech in accordance with its terms.
(d) NO CONFLICTS. The execution, delivery and performance of this
Agreement and compliance with the provisions hereof by PruTech will not, with or
without the giving of notice or the passage of time or both, (i) violate any
judgment, decree, order or award of any court, administrative agency or other
governmental body binding upon Interleaf, or (ii) conflict with or result in any
breach of any term, condition or provision of, or constitute a default under,
any agreement to which PruTech is a party.
(e) SHARES. With respect to any shares of Common Stock acquired
hereunder, (i) PruTech is acquiring such shares for its own account for
investment and not with a view to, or for sale in connection with, any
distribution in violation of the Securities Act of 1933, or any rule or
regulation thereunder, (ii) PruTech understands that the shares are "restricted
shares" within the meaning of Rule 144 under the Securities Act of 1933, and
cannot be sold, transferred or otherwise disposed of except pursuant to a
registration statement under the Securities Act of 1933 or a valid exemption
from registration.
7. REPRESENTATIONS AND COVENANTS OF INTERLEAF. Interleaf hereby
represents and covenants to PruTech as follows:
-5-
<PAGE>
(a) AUTHORITY. Interleaf has the full right, power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
(b) AUTHORIZATION OF SHARES. All shares of Common Stock of Interleaf
to be issued to PruTech hereunder have been duly authorized for issuance and,
upon issuance pursuant to the terms hereof, will be validly issued, fully paid
and non-assessable. No stockholder of Interleaf has any pre-emptive right to
subscribe for or purchase any of such shares of Common Stock.
(c) ENFORCEABILITY. This Agreement has been duly executed by the
Interleaf and constitute the valid and binding obligation of Interleaf,
enforceable against Interleaf in accordance with its terms.
(d) NO CONFLICTS. The execution, delivery and performance of this
Agreement, and compliance with the provisions hereof by Interleaf will not, with
or without the giving of notice or the passage of time or both, (i) violate any
judgment, decree, order or award of any court, administrative agency or other
governmental body binding upon Interleaf, or (ii) conflict with or result in any
breach of any term, condition or provision of, or constitute a default under,
any agreement to which Interleaf is a party.
(e) REGISTRATION. If Interleaf elects to issue shares of Common
Stock in payment of any portion of the Purchase Price, the resale of such shares
by PruTech shall be registered under the Securities Act of 1933, as amended. In
connection with any such registration, Interleaf shall deliver to PruTech at or
prior to the Closing, a currently effective prospectus relating to the shares
(the "Prospectus").
(f) NASDAQ LISTING. If Interleaf elects to issue shares of Common
Stock in payment of any portion of the Purchase Price, prior to the Closing
Interleaf shall take all actions required to cause such shares to be fully
authorized for inclusion in the NASDAQ National Market System upon official
notice of issuance. After the Closing, for so long as Interleaf shall have any
shares of its Common Stock included in the National Market System or listed for
trading on a national securities exchange, and for so long as PruTech continues
to hold any shares of Common Stock, Interleaf shall continue to take such action
as shall be required to keep the shares so included or listed for trading on a
national securities exchange.
(g) DELIVERY OF PUBLIC DOCUMENTS. Interleaf has delivered to PruTech
copies of (i) Interleaf's 1995 Annual Report to stockholders and (ii)
Interleaf's Annual Report on From 10-K
-6-
<PAGE>
for the fiscal year ended March 31, 1995 and Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1995, as filed with the Securities and
Exchange Commission. As of the date of this Agreement, Interleaf has not filed
with the Securities and Exchange Commission any report on Form 8-K since March
31, 1995. From the date hereof through the Closing, Interleaf will
contemporaneously deliver to PruTech copies of all further filings made by
Interleaf with the Securities and Exchange Commission. All documents delivered
or to be delivered to PruTech pursuant to Section 7(g) are hereinafter referred
to as the "Public Documents".
(h) REPRESENTATIONS REGARDING PUBLIC DOCUMENTS. The Public Documents
do not and will not, and the Prospectus (if and one is delivered to PruTech)
will not, contain any misstatement of a material fact or omit to state any fact
necessary to make the statements therein, in light of the circumstances under
which they are made and as of the respective dates of such statements, not
misleading.
8. MISCELLANEOUS PROVISIONS.
(a) ASSIGNMENT. No party may assign any of its rights or obligations
hereunder without the prior written consent of the other parties. This
Agreement shall be binding and inure to the benefit of the parties hereto and
their successors and permitted assigns.
(b) SEVERABILITY. In the event that any provision of this Agreement
is held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any law of any relevant jurisdiction, the validity
of the remaining provisions shall not be affected and the rights and obligations
of the parties shall be construed and enforced as if this Agreement did not
contain the particular provision held to be unenforceable.
(c) NOTICES. Except for the notices contemplated in Section 1(d)
hereof, which may be made by facsimile transmission, all notices or other
communications in connection with this Agreement shall be in writing and either
delivered in person or sent via certified mail, postage and fees prepaid, return
receipt requested, and addressed to the other party at the address specified in
this Agreement, attn: President, or such other address as the addressee shall
have specified by notice hereunder.
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with reference to the subject matter hereof. No
waiver, consent, modification or change of the terms of this Agreement shall
bind any party unless in writing signed by all parties by their duly authorized
representatives.
-7-
<PAGE>
(e) WAIVER. The waiver by any party of a breach or default of any
provision of this Agreement by any other party shall not be construed as a
waiver of any succeeding breach or default of the same or any other provision,
nor shall any delay or omission on the part of a party to exercise or avail
itself of any right, power or privilege that it may have hereunder operate as a
waiver of any right, power or privilege by such party.
(f) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
(g) HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in interpreting or
construing this Agreement.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed as an instrument
under seal as of the date first written above.
Interleaf, Inc.
By: /s/ JOHN HYVNAR
-------------------------
Title: GENERAL COUNSEL
----------------------
PruTech Research and Development
Partnership III, a California
Limited Partnership
By: R & D Funding Corp.,
General Partner
By: /s/ RUSSELL ALLEN
-----------------------
Title: PRESIDENT
--------------------
R & D Funding Corp.
By: /s/ RUSSELL ALLEN
-------------------------
Title: PRESIDENT
----------------------
-8-
<PAGE>
INTERLEAF, INC.
EXHIBIT 11-COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31 December 31
1995 1994 1995 1994
-------- -------- -------- --------
In thousands, except for per share amounts (unaudited) (unaudited)
<S> <C> <C> <C> <C>
PRIMARY
Weighted average shares outstanding of Common Stock 16,102 13,971 15,186 13,887
Dilutive Senior Series B Convertible Preferred Stock 1,467 - 1,929 -
Dilutive stock options 1,121 - 1,094 -
Dilutive stock purchase warrants 109 - 130 -
Dilutive stock purchase plan rights 75 - 43 -
-------- -------- ------- --------
TOTAL 18,874 13,971 18,382 13,887
-------- -------- ------- --------
Net income (loss) $ 429 $ (5,781) $ 1,823 $(28,491)
-------- -------- ------- --------
Net income (loss) per share $ .02 $ (.41) $ .10 $ (2.05)
-------- -------- ------- --------
FULLY DILUTED
Weighted average shares outstanding of Common Stock 16,102 13,971 15,186 13,887
Dilutive Senior Series B Convertible Preferred Stock 1,467 - 1,929 -
Dilutive stock options 1,121 - 1,293 -
Dilutive stock purchase warrants 129 - 249 -
Dilutive stock purchase plan rights 75 - 45 -
-------- -------- ------- --------
TOTAL 18,894 13,971 18,702 13,887
-------- -------- ------- --------
Net Income (Loss) $ 429 $ (5,781) $ 1,823 $(28,491)
-------- -------- ------- --------
Net Income (Loss) per share $ .02 $ (.41) $ .10 $ (2.05)
-------- -------- ------- --------
</TABLE>
The dilutive effect of stock options, stock purchase warrants, and stock
purchase plan rights are calculated using the treasury stock method. Under this
method, these common stock equivalents are assumed to be exercised and proceeds
from the exercise are assumed to be used to repurchase common stock at the
average market price for primary income (loss) per share and the higher of the
end of the period or average market price for fully diluted income (loss) per
share. The dilutive effect of Convertible Preferred Stock is calculated using
the if-converted method.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 12,434
<SECURITIES> 0
<RECEIVABLES> 21,903
<ALLOWANCES> 1,792
<INVENTORY> 193
<CURRENT-ASSETS> 34,323
<PP&E> 47,880
<DEPRECIATION> 39,763
<TOTAL-ASSETS> 49,225
<CURRENT-LIABILITIES> 32,346
<BONDS> 0
0
92
<COMMON> 167
<OTHER-SE> 16,862
<TOTAL-LIABILITY-AND-EQUITY> 49,225
<SALES> 26,625
<TOTAL-REVENUES> 67,693
<CGS> 4,822
<TOTAL-COSTS> 22,855
<OTHER-EXPENSES> 42,822
<LOSS-PROVISION> 425
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> 1,853
<INCOME-TAX> 30
<INCOME-CONTINUING> 1,823
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,823
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
