<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
INTERLINQ SOFTWARE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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> 2
[LOGO]
INTERLINQ SOFTWARE CORPORATION
11255 KIRKLAND WAY
KIRKLAND, WASHINGTON 98033
_______________________________________________________________________________
October 6, 1997
DEAR FELLOW SHAREHOLDER:
It is our pleasure to invite you to attend the 1997 Annual Meeting of
Shareholders. This year's Annual Meeting will be held on November 5,
1997, at 3:00 p.m., Pacific Standard Time, in the Conference Room at
the INTERLINQ corporate headquarters, 11255 Kirkland Way, Kirkland,
Washington 98033.
Details of the business to be conducted at the Annual Meeting are set
forth in the enclosed Notice of Annual Meeting of Shareholders and
the Proxy Statement.
It is important that your shares be represented at the Annual
Meeting. Accordingly, whether or not you plan to attend the Annual
Meeting, we urge you to complete, date and sign the enclosed proxy
card, and return it in the envelope provided.
We look forward to greeting personally those shareholders who are
able to attend.
Very truly yours,
INTERLINQ Software Corporation
[SIG]
Jiri M. Nechleba
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 5, 1997, AT KIRKLAND, WASHINGTON
_______________________________________________________________________________
TO THE SHAREHOLDERS OF INTERLINQ SOFTWARE CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of
INTERLINQ Software Corporation, a Washington corporation (the "Company"),
will be held in the Conference Room at the Company's headquarters, 11255
Kirkland Way, Kirkland, Washington, on November 5, 1997, at 3:00 p.m.
Pacific Standard Time (the "Annual Meeting"), for the following purposes:
(1) To elect two directors to hold office for two years or until their
respective successors are elected and qualify.
(2) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement.
Shareholders of record at the close of business on September 30, 1997 will be
entitled to notice of, and to vote at, the Annual Meeting.
The Company cordially invites all shareholders to attend the Annual Meeting in
person. WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE RETURN YOUR PROXY PROMPTLY. It
is important that you mark, sign, date and return the accompanying Proxy,
regardless of the size of your holdings, as promptly as possible. A postage
prepaid envelope (if mailed in the United States) is enclosed for your
convenience. Your Proxy is revocable at your request at any time before it is
voted. Any shareholder may attend the Annual Meeting and vote in person even if
that shareholder has returned a proxy card.
By Order of the Board of Directors
[SIG]
Stephen A. Yount
Corporate Secretary
Kirkland, Washington
October 6, 1997
===============================================================================
YOUR COPY OF THE COMPANY'S ANNUAL REPORT FOR THE
FISCAL YEAR ENDED JUNE 30, 1997 IS ENCLOSED.
===============================================================================
<PAGE> 4
PROXY STATEMENT
_______________________________________________________________________________
GENERAL
The Company is furnishing this Proxy Statement and the enclosed Proxy (which are
being mailed to shareholders on or about October 6, 1997) in connection with the
solicitation of Proxies by the Board of Directors of INTERLINQ Software
Corporation, a Washington corporation (the "Company"), for use at its Annual
Meeting of Shareholders (the "Annual Meeting") to be held on November 5, 1997,
at 3:00 p.m., including any adjournment thereof, at the Company's headquarters,
11255 Kirkland Way, Kirkland, Washington 98033.
RECORD DATE AND OUTSTANDING SHARES
The Company has called the Annual Meeting for the purposes stated in the
accompanying Notice of Annual Meeting of Shareholders. All shareholders of the
Common Stock of the Company ("Common Stock") as of the close of business on
September 30, 1997, are entitled to vote at the meeting. As of that date, there
were 5,297,012 shares of Common Stock outstanding.
QUORUM
A quorum for the Annual Meeting will consist of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting,
present in person or by proxy.
VOTING
Each share of Common Stock outstanding on the record date is entitled to one
vote per share at the Annual Meeting. All shares represented by Proxies will be
voted in accordance with shareholder directions. If the accompanying Proxy is
properly signed and is not revoked by the shareholder, the shares it represents
will be voted at the Annual Meeting by the proxy holder in accordance with the
instructions of the shareholder. If no specific instructions are designated, the
shares will be voted as recommended by the Board of Directors.
The Company is not aware, as of the date hereof, of any matters to be voted upon
at the Annual Meeting other than as stated in the Proxy Statement and the
accompanying Notice of Annual Meeting of Shareholders. If any other matters are
properly brought before the Annual Meeting, the enclosed Proxy gives
discretionary authority to the persons named therein to vote the shares in their
best judgment.
Under Washington law and the Company's Restated Articles of Incorporation and
Restated Bylaws, if a quorum exists at the meeting, the two nominees for
election as directors who receive the greatest number of votes cast for the
election of directors by the shares present in person or represented by proxy
and entitled to vote shall be elected directors. Abstentions will have no impact
on the outcome of this proposal since they have not been cast in favor of any
nominee. There can be no broker non-votes on this matter since brokers who hold
shares for the accounts of their clients have discretionary authority to vote
such shares with respect to the election of directors.
3
<PAGE> 5
REVOCABILITY OF PROXIES
A Proxy may be revoked at any time before it is voted at the meeting. Any
shareholder who attends the meeting and wishes to vote in person may revoke his
or her Proxy at that time. Otherwise, to revoke a Proxy a shareholder must
deliver a Proxy revocation or another duly executed Proxy bearing a later date
to the Corporate Secretary of the Company at 11255 Kirkland Way, Kirkland,
Washington 98033 before the Annual Meeting. Attendance at the Annual Meeting
will not revoke a shareholder's Proxy unless the shareholder votes in person.
SOLICITATION OF PROXIES
The proxy accompanying this proxy statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers, directors and
regular supervisory and executive employees of the company, none of whom will
receive any additional compensation for their services, and, in addition, the
Company has retained the services of Allen Nelson & Co. to assist in the
solicitation of proxies. Proxies may be solicited personally or by mail,
telephone, telex, telegraph or messenger. The Company will pay Allen Nelson &
Co. its reasonable and customary fees not expected to exceed $4,000, plus
reimbursement of certain out-of-pocket expenses, for its services in soliciting
proxies. The Company will also pay persons holding shares of the Common Stock in
their names or in the names of the nominees, but not owning such shares
beneficially, such as brokerage houses, banks and other fiduciaries, for the
expense of forwarding soliciting materials to their principals. All of the costs
of the solicitation of proxies will be paid by the Company.
4
<PAGE> 6
_______________________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
_______________________________________________________________________________
The following tables show the persons (including any group deemed a "person"
under Section 13(d)(3) of the Securities Exchange Act of 1934) known to the
Company who beneficially own more than 5% of the Company's Common Stock as of
August 31, 1997. They also show beneficial ownership as of August 31, 1997 for
each director, for each executive officer named in the Summary Compensation
Table (the "Named Executive Officers") and for all executive officers and
directors as a group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows the beneficial owners known to the Company who own
more than 5% of the Company's Common Stock. To the Company's knowledge, each of
the named persons has sole voting and investment power with respect to the
shares shown.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) OWNED
- -------------------------------------------------------------------------------
<S> <C> <C>
Pioneering Management Corporation
60 State Street 591,500 11.2%
Boston, MA 02109
Persons Associated with Hambrecht
& Quist Group
One Bush Street 463,642 (2) 8.8%
San Francisco, CA 94104
</TABLE>
- --------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC,
and includes voting and/or investment power with respect to the shares.
(2) Based on publicly available information as of August 31, 1997. Consists of
43,692 shares held by William R. Hambrecht, 156,750 shares held by
Hambrecht & Quist LLC ("H&Q LLC"), and 263,200 shares beneficially owned
by Hambrecht & Quist Group ("H&Q Group") as a result of its indirect
ownership of Ironstone Group, Inc. ("Ironstone"). H&Q Group is the sole
parent of Hambrecht & Quist California ("H&Q California"), which in turn
is a member of H&Q LLC. H&Q Group and certain of its affiliates
collectively own 71.2% of the common stock of Ironstone, which holds
263,200 shares of the Company's Common Stock. William R.
Hambrecht is the Chairman of H&Q Group, H&Q California and H&Q LLC.
5
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of August 31, 1997 the number of shares of
Common Stock owned by each director, each of the Company's executive officers,
and all directors and executive officers as a group. Each of the named persons
and members of the group has sole voting and investment power with respect to
the shares shown, except as stated below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS OWNED(1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Theodore M. Wight 58,000 (2) 1%
Robert W. O'Rear 29,000 (2) *
Robert J. Gallagher 24,895 (2) *
Jiri M. Nechleba 100,000 2%
Stephen A. Yount 62,422 (3) 1%
David A. Sperline 58,250 1%
Patricia R. Graham 15,000 *
All directors and executive
officers as a group (7 persons) 347,567 6%
</TABLE>
- -------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days of August 31, 1997 are deemed outstanding for
computing the percentage ownership of the person holding such options, but
are not deemed outstanding for computing the percentage ownership of any
other person.
(2) Includes options to purchase 22,000 shares of Common Stock currently
exercisable or exercisable within 60 days of August 31, 1997.
(3) Includes options to purchase 51,750 shares of Common Stock currently
exercisable or exercisable within 60 days of August 31, 1997 and 10,672
shares held by the INTERLINQ 401(k) Plan. Mr. Yount shares voting power
with respect to these shares with the Plan Trustees. Mr. Yount disclaims
beneficial ownership with respect to the shares held by the INTERLINQ
401(k) Plan.
6
<PAGE> 8
_______________________________________________________________________________
ELECTION OF DIRECTORS
(PROPOSAL 1)
_______________________________________________________________________________
The Company's Board of Directors (the "Board") consists of five directors and is
divided into two classes, with each director serving for a two-year term, with
approximately one-half of the directors, and all the directors in one class,
standing for election each year. Two directors presently serve in Class I and
two directors presently serve in Class II, with one vacancy in Class II.
This year, two Class II directors are to be elected.
Although the Board is informed that each of the two nominees is willing to serve
as a director and it is not anticipated that any nominee will be unavailable for
election, if for any reason either of the nominees shall become unavailable for
election, the Proxy will be voted as directed by the Board.
The Board has nominated the following candidates to stand for election as Class
II directors, both of whom are nominated for terms of two years, until the
Company's Annual Meeting of Shareholders in 1999, and in each case until his
respective successor shall be elected and qualify: Jiri M. Nechleba and
Theodore M. Wight. Unless otherwise instructed, the persons named in the
accompanying Proxy intend to vote shares represented by such Proxies for Mr.
Nechleba and Mr. Wight.
Information as to the nominees and as to each other director whose term will
continue after the Annual Meeting is given in the following section. Unless
otherwise indicated, the nominees have been engaged in the same principal
occupation for the past five years. Directors' ages are as of June 30, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF BOTH NOMINEES.
_______________________________________________________________________________
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
TERMS EXPIRING IN 1999
_______________________________________________________________________________
_______________________________________________________________________________
JIRI M. NECHLEBA Mr. Nechleba has been President and Chief
Executive Officer since September 11, 1995
and Chairman of the Board since November 6,
1995. From 1993 to 1995, he served as Senior
Director, Chairman of the Board Vice President and General Manager of
since 1995 SolutionWare, a division of A.C. Nielsen,
a Dun & Bradstreet subsidiary, and a provider
of information solutions to the consumer
Age 39 packaged goods industry. From 1985 to 1993,
Mr. Nechleba was an independent management
consultant to a variety of industries.
_______________________________________________________________________________
THEODORE M. WIGHT Mr. Wight was elected to the Board of
Directors on August 19, 1985. Since 1994,
Mr. Wight has been general partner of the
general partner of Pacific Northwest Partners
Director SBIC, L.P., a venture capital firm. Mr. Wight
since 1985 has also served as a general partner of the
general partner of Walden Investors since
1983. Mr. Wight is a member of the board of
Age 54 directors of RehabCare Corp. and Eagle
Hardware & Garden, Inc.
7
<PAGE> 9
_______________________________________________________________________________
CONTINUING CLASS I DIRECTORS
TERMS EXPIRING IN 1998
_______________________________________________________________________________
_______________________________________________________________________________
ROBERT W. O'REAR Since 1991, he has been President of O'Rear
Cattle, Inc., a beef cattle company. From
1978 through 1993, Mr. O'Rear served as the
Director manager of subsidiary development for
since 1994 Microsoft Corporation.
Age 54
_______________________________________________________________________________
ROBERT J. GALLAGHER Since 1987, Mr. Gallagher has been an
executive officer with North
American Mortgage Company, a California
Director mortgage banking company; from 1987 until
since 1994 1992, he served as Senior Vice President and
Chief Financial Officer, and thereafter has
served as Executive Vice President and Chief
Age 41 Administrative Officer.
8
<PAGE> 10
_______________________________________________________________________________
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
_______________________________________________________________________________
During fiscal year 1997, there were seven meetings of the Company's Board of
Directors. The standing committees of the Board of Directors include an Audit
Committee and a Compensation Committee, but do not include a Nominating
Committee. The full Board of Directors selects nominees for election as
directors. All of the incumbent Directors attended at least 75% of the meetings
of the Board of Directors and its committees held during the fiscal year.
The Audit Committee consists of Theodore M. Wight and Robert J. Gallagher. Four
meetings of the Audit Committee were held during the last fiscal year. The Audit
Committee's responsibilities include: (i) reviewing the plan, scope and results
of the independent audit and reporting to the full Board whether financial
information is fairly presented and whether generally accepted accounting
principles are followed; (ii) monitoring the internal accounting and financial
functions of the Company to assure quality of staff and proper internal
controls; and (iii) investigating conflicts of interest, ethics and compliance
with laws and regulations.
The Compensation Committee consists of Theodore M. Wight, Robert J. Gallagher
and Robert W. O'Rear. Four meetings of the Compensation Committee were held
during the last fiscal year. The Compensation Committee establishes base
salaries and incentive compensation for all executive officers of the Company.
The Committee also administers the INTERLINQ Software Corporation 1985 Restated
Stock Option Plan (the "1985 Option Plan") and the INTERLINQ Software
Corporation 1993 Stock Option Plan (the "1993 Option Plan").
_______________________________________________________________________________
DIRECTORS' FEES
_______________________________________________________________________________
The Company pays each Director $1,000 in cash compensation for attendance at
Board of Director meetings, and reimburses Directors for their out-of-pocket
expenses incurred for personal attendance at Board meetings.
The Company's Stock Option Plan for Non-Employee Directors (the "Directors
Plan") provides for the automatic grant of options to non-employee directors up
to an aggregate of 215,000 shares of Common Stock. As of June 30, 1997, 66,000
shares of Common Stock were subject to options outstanding under the Directors
Plan. The Directors Plan provides for automatic grants of nonqualified stock
options at an exercise price that is not less than fair market value per share
on the date of grant. Each non-employee director elected or appointed other than
at the Annual Meeting of Shareholders receives an initial grant of 10,000 shares
upon becoming a director. Each continuing director receives an annual grant of
7,500 shares effective as of the date of the Company's Annual Meeting of
Shareholders. Options granted under the Director's Plan vest six months from the
date of grant. Options granted under the Directors Plan expire five years from
the date of grant or, if earlier, three months after the optionee's termination
of service with the Company or one year after the optionee's death or
disability.
9
<PAGE> 11
_______________________________________________________________________________
COMPENSATION OF EXECUTIVE OFFICERS
_______________________________________________________________________________
Compensation Summary.
The following table shows, for the Chief Executive Officer and other executive
officers during the fiscal year ended June 30, 1997, information concerning
compensation paid or accrued for services to the Company in all capacities for
that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)
- --------------------------- ---- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Jiri M. Nechleba(1) 1997 175,000 17,500 25,000 --
Chairman of the Board, President 1996 141,908 -- 250,000 11,610(2)
and Chief Executive Officer
---- ---------- -------- ----------- ------------
Stephen A. Yount 1997 119,039 12,100 15,000 --
Vice President - Finance, 1996 108,900 12,600 12,000 --
Chief Financial Officer and Secretary 1995 81,775 -- 26,000 --
---- ---------- -------- ----------- ------------
David A. Sperline 1997 117,138 12,100 15,000 --
Vice President - Customer Service 1996 97,101 12,600 12,000 --
1995 79,809 -- 26,000 --
---- ---------- -------- ----------- ------------
Patricia R. Graham(3) 1997 120,000 49,154(4) 15,000 --
Vice President - Sales and Marketing 1996 32,769 -- 60,000 7,000(5)
</TABLE>
(1) Mr. Nechleba joined the Company as President and Chief Executive Officer on
September 11, 1995. He was elected as Chairman of the Board on November
6, 1995.
(2) Represents reimbursement to Mr. Nechleba for his moving expenses
associated with his relocation upon joining the company as President and
Chief Executive Officer.
(3) Ms. Graham joined the Company as Vice President - Sales and Marketing on
March 22, 1996.
(4) Includes commission income of $37,054 for fiscal 1997 based upon a
percentage of net software license fees and other revenues.
(5) From February 26, 1996 to March 22, 1996, Ms. Graham served as a consultant
to the Company. Amount represents consulting fees received during this
period.
10
<PAGE> 12
Option Grants
Shown below is certain information concerning options granted to the Company's
executive officers during the fiscal year ended June 30, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------------
POTENTIAL
NUMBER OF REALIZABLE VALUE AT
SECURITIES % OF TOTAL ASSUMED ANNUAL
UNDERLYING OPTIONS RATES OF STOCK PRICE
OPTIONS GRANTED TO EXERCISE APPRECIATION
GRANTED EMPLOYEES IN PRICE EXPIRATION FOR OPTION TERM
NAME # FISCAL YEAR ($/SHARE)(1) DATE 5% 10%
- ----------------- -------------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Jiri M. Nechleba 25,000(2) 11.4% 5.84375 1/22/07 $ 91,878 $232,836
Stephen A. Yount 15,000(2) 6.8% 5.84375 1/22/07 55,127 139,701
David A. Sperline 15,000(2) 6.8% 5.84375 1/22/07 55,127 139,701
Patricia R. Graham 15,000(2) 6.8% 5.84375 1/22/07 55,127 139,701
</TABLE>
(1) The option exercise price as determined by the Board, is equal to the fair
market value of the underlying Common Stock on the date of grant.
(2) The options granted are incentive stock options that vest in yearly
increments over a four-year period, becoming fully vested on January 22,
2001. Options not already exercisable generally become fully vested and
exercisable upon mergers or reorganizations pursuant to the Company's 1993
Option Plan. Each option has a term of ten years.
11
<PAGE> 13
Option Exercises and Fiscal Year-End Values.
Shown below is information with respect to the exercise of options to purchase
the Company's Common Stock granted in fiscal 1997 and prior years under the 1993
Option Plan and the 1985 Option Plan to the Company's executive officers and
stock options held by them as of June 30, 1997.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END
OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
JUNE 30, 1997 (#) JUNE 30,1997 ($)
------------------------------- -----------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE(2)
- ------------------ ------------ -------- ----------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Jiri M. Nechleba -- -- 50,000 225,000 $ 18,750 $ 75,000
Stephen A. Yount 11,500 34,000 51,250 37,250 112,781 10,969
David A. Sperline 5,000 12,500 57,750 37,250 134,719 10,969
Patricia R. Graham -- -- 15,000 60,000 8,438 25,312
</TABLE>
(1) This amount represents the aggregate of the number of shares acquired on
exercise multiplied by the difference between the closing price of the
Common Stock on the Nasdaq National Market on the respective option
exercise date minus the exercise price for the relevant option.
(2) This amount represents the aggregate of the number of in-the-money options
multiplied by the difference between the closing price of the Common Stock
on the Nasdaq National Market on June 30, 1997 ($3 7/8) and the exercise
prices for the relevant options.
12
<PAGE> 14
_______________________________________________________________________________
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
_______________________________________________________________________________
Termination of Employment
If Mr. Nechleba is terminated within his first three years of employment for any
reason other than cause, he will receive severance payments equal to one year of
his base salary.
1993 Option Plan and 1985 Option Plan
The 1993 Option Plan and the 1985 Option Plan both provide that, upon the
occurrence of certain transactions, including certain mergers and business
combinations involving the Company, outstanding options will become fully vested
and exercisable. Such options, if not exercised, will then terminate upon
consummation of such transaction. In the alternative, at the discretion of the
Company and the other participants in any such transaction, such options may be
assumed by the acquiring or surviving entity.
Stock Option Plan for Non-Employee Directors
The Stock Option Plan for Non-Employee Directors provides that upon the
occurrence of certain events, including certain mergers and business
combinations involving the Company, outstanding options will become fully vested
and exercisable for a period of twenty days prior to the consummation of such
transaction whereupon such options, if not exercised, will terminate unless
converted in a stock-for-stock exchange.
13
<PAGE> 15
_______________________________________________________________________________
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
_______________________________________________________________________________
The Compensation Committee of the Board of Directors (the "Committee") for
fiscal year 1997 consisted of three members of the Board, who are all
non-employee directors of the Company. The Committee is responsible for
reviewing and approving base salaries for all executive officers, the level of
participation in the executive bonus program, the company-wide profit sharing
plan and any changes to the design of these plans. The Committee also
administers the 1993 Option Plan and 1985 Option Plan. Decisions made by the
Committee relating to compensation of executive officers are reviewed by the
full Board of Directors.
Executive Compensation Policies and Performance Measures
The Company's executive compensation policies have been developed to meet the
following objectives:
o Attract and retain key executives critical to the Company's long-term
success;
o Reward key executives for their contributions to the executive team in
the development and successful execution of product, marketing, sales and
business strategies; and
o Motivate key executives to make decisions and take actions which increase
the value of the Common Stock over the long term.
The Committee uses a combination of cash- and equity-based programs to
compensate key executives.
Cash-Based Compensation
Base salaries for all executive officers are reviewed annually. In evaluating
executive salaries, the Committee used various salary surveys of compensation
paid at companies of similar size in the software industry. Additionally,
salaries are based upon a review of the officer's contribution to the team in
accomplishing Company short- and long-term objectives. Short-term objectives
include sales growth from new and existing products and financial performance
measures which include gross margin, operating margin, net income and earnings
per share. Long-term objectives include the timely development of new products,
enhancements to existing products, identification of new markets, development
and execution of plans to address identified market opportunities, and share
price appreciation. The Committee does not place any specific weighting on these
individual factors in determining executive officer salary levels, but instead
evaluates the overall impact of achieving these short- and long-term objectives
on the return on shareholders' equity. In general, based upon the above ongoing
review for each executive officer, the Committee targets its base salaries for
all of its executive officers from the 70th percentile to the 85th percentile of
the salary grade determined from referencing the various salary surveys for
comparable positions. Because the salary surveys used are published
confidentially, without listing the participants, the Company is not aware if
any of the companies in the S&P Computer Software and Services Index presented
in the Performance Graph with this Proxy Statement were also in the these salary
surveys.
14
<PAGE> 16
The Company provides executive officers with incentive compensation in the form
of its Executive Bonus Plan. This plan was designed to ensure that a high
percentage of each executive officer's total potential cash compensation is
based on a quantitative evaluation of the Company's financial performance. The
plan's payout formula provides for payouts on a sliding scale based upon
achieving a target level of profitability before payment of executive bonuses,
employee profit sharing and income taxes. No payout will be made, however, if
the Company fails to achieve a minimum pre-determined level of profitability.
Because profit targets were met for the fiscal year ended June 30, 1997,
executive bonuses were paid.
Equity-Based Compensation
The Company provides its executive officers with long-term incentives through
its 1993 Option Plan. The primary objective of this plan is to provide an
incentive for the executives to make decisions and take actions which maximize
long-term shareholder value. The plan design promotes this long-term focus using
vesting periods. Options currently vest in either four or five equal annual
installments beginning one year from date of grant. The Compensation Committee
reviews and approves all grants made under the plan. The Committee generally
grants executive officers options upon hire, and additional grants are reviewed
annually. The number of new grants each year for both the executive officers and
the rest of the Company's employees is based primarily on relative salary
levels. The Committee reviews the number of grants already awarded each
executive officer before approval of additional grants.
CHIEF EXECUTIVE OFFICER COMPENSATION
Cash-Based Compensation
In assembling the chief executive officer's (the "CEO") compensation package,
the Committee pursues the same objectives which apply for the Company's other
executive officers. The committee applies a combination of qualitative and
quantitative performance measures in developing the CEO's base salary. As
mentioned previously in this report, these include short-term objectives of
sales growth from new and existing products and financial performance measures
which include gross margin, operating margin, net income and earnings per share.
Long-term objectives include the timely development of new products,
enhancements to existing products, identification of new markets, development
and execution of plans to address identified market opportunities, and share
price appreciation. The Committee does not place any specific weighting on these
individual factors in determining the CEO's salary level, but instead evaluates
the overall impact of achieving these short- and long-term objectives on the
return on shareholders' equity.
In order to promote long-term shareholder value, the CEO's total potential
compensation generally includes a relatively high proportion in the form of its
Executive Bonus Plan. This plan is based on a quantitative evaluation of the
Company's financial performance. The plan's payout formula provides for payouts
on a sliding scale based upon achieving a target level of profitability before
payment of executive bonuses, employee profit sharing and income taxes. No
payout will be made, however, if the Company fails to achieve a minimum
pre-determined level of profitability. Because profit targets were met for the
fiscal year ended June 30, 1997, the CEO was paid a bonus.
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Equity-Based Compensation
The Company provides its CEO with long-term incentives through its 1993 Stock
Option Plan. The primary objective of this plan is to provide an incentive for
the CEO to make decisions and take actions which maximize long-term shareholder
value. The plan design promotes this long-term focus using vesting periods. For
the fiscal year 1997, the Committee granted its CEO 25,000 incentive stock
option grants. The number of new grants each year for the CEO, the other
executive officers, and the rest of the Company's employees is based primarily
on relative salary levels. The Committee reviews the number of grants already
awarded to its CEO before approval of additional grants.
COMPENSATION COMMITTEE
Robert W. O'Rear
Robert J. Gallagher
Theodore M. Wight
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_______________________________________________________________________________
PERFORMANCE GRAPH
_______________________________________________________________________________
The following graph compares the cumulative total return to shareholders on the
Common Stock with the cumulative total return of the Standard and Poor's 500
Stock Index ("S & P 500 Index") and the Standard and Poor's Computer Software &
Services Index ("S & P Computer Software & Services Index") for the period
beginning on April 27, 1993, the date of the Company's initial public offering,
and ending on June 30, 1997, the end of the Company's last fiscal year.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
INTERLINQ SOFTWARE CORPORATION,
S & P 500 INDEX AND
S & P COMPUTER SOFTWARE & SERVICES INDEX
(FISCAL YEAR ENDED JUNE 30)
Assumes $100 invested on April 27, 1993 in the Common Stock, S & P 500 Index and
the S & P Computer Software & Services Index, with all dividends reinvested.
Stock price performance shown above for the Common Stock is historical and not
necessarily indicative of future price performance.
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_______________________________________________________________________________
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
_______________________________________________________________________________
The Board of Directors has selected KPMG Peat Marwick LLP, certified public
accountants, to act as independent auditor of the Company for the fiscal year
ending June 30, 1998. KPMG Peat Marwick LLP has been auditor of the Company
since 1985.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Annual Meeting, with the opportunity to make a statement, if the representative
so desires, and is expected to be available to respond to appropriate questions
from shareholders.
_______________________________________________________________________________
DEADLINE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS
_______________________________________________________________________________
Proposals by eligible shareholders of the Company that are intended to be
presented to the shareholders at the Company's 1998 Annual Meeting of
Shareholders must be in writing and received by the Company no later than June
5, 1998 in order that they may be included in the Proxy Statement and proxy card
for that meeting.
_______________________________________________________________________________
FILING OF FORMS PURSUANT TO SECTION 16
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________________________________________________________________________
As required by Securities and Exchange Commission rules under Section 16 of the
Securities Exchange Act of 1934, the Company notes that none of its officers,
directors, or beneficial owners of more than 10% of the outstanding shares of
Common Stock filed any late reports.
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_______________________________________________________________________________
OTHER MATTERS
_______________________________________________________________________________
The Company is not aware of any other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, however,
it is the intention of the persons named in the enclosed Proxy to vote the
shares they represent as the Board of Directors may recommend. Copies of the
Company's Annual Report to Shareholders for the fiscal year ended June 30, 1997
are being mailed to shareholders, together with this Proxy Statement, the Proxy
and the Notice of Annual Meeting of Shareholders. Additional copies may be
obtained from the Corporate Secretary of the Company, 11255 Kirkland Way,
Kirkland, Washington 98033.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG]
Stephen A. Yount
Corporate Secretary
Dated: October 6, 1997
Kirkland, Washington
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INTERLINQ Software Corporation
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 5, 1997
The undersigned hereby appoints Patricia R. Graham and Stephen A. Yount, and
each of them, as Proxies, with full power of substitution, and hereby
authorizes them to represent and to vote, as directed below, all the shares of
Common Stock of INTERLINQ Software Corporation held of record by the
undersigned on September 30, 1997, at the Annual Meeting of Shareholders to be
held November 5, 1997, or any adjournment thereof.
1. ELECTION OF DIRECTORS. Election of the following nominees to serve as
directors for two-year terms or until their respective successors are elected
and qualify: Jiri M. Nechleba and Theodore M. Wright.
<TABLE>
<S> <C> <C>
FOR all WITHHOLD AUTHORITY WITHHOLD AUTHORITY for the following
Nominees to vote for all nominees Nominees only: (write the name of the Nominee(s) in
this space)
--------------------------------------------------
[ ] [ ] [ ]
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1.
<PAGE> 22
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR ALL NOMINEES" IN ITEM 1.
Dated: , 1997
------------- ---------------------------
(Signature)
---------------------------
(Signature if held jointly)
Please sign exactly as your name appears
on your stock certificate. When shares are
held jointly, each person should sign.
When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. An authorized
person should sign on behalf of
corporations, partnerships, and
associations and give his or her title.
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD
WILL HELP SAVE THE EXPENSE OF ADDITIONAL SOLICITATION EFFORTS.
