<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:
[ ] 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 240.14a-11(c) or 240.14a-12
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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
INTERLINQ SOFTWARE CORPORATION
11980 NE 24TH STREET
BELLEVUE, WASHINGTON 98005
--------------------------------------------------------------------------------
October 6, 2000
DEAR FELLOW SHAREHOLDER:
It is our pleasure to invite you to attend the 2000 Annual Meeting of
Shareholders. This year's Annual Meeting will be held on November 14,
2000, at 3:00 p.m., Pacific Standard Time, in the Conference Room at the
INTERLINQ corporate headquarters, 11980 NE 24th Street, Bellevue,
Washington 98005.
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
/s/ JIRI M. NECHLEBA
Jiri M. Nechleba
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 14, 2000
--------------------------------------------------------------------------------
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, 11980 NE 24th Street,
Bellevue, Washington 98005, on November 14, 2000, at 3:00 p.m. Pacific Standard
Time (the "Annual Meeting"), for the following purposes:
(1) To elect three directors to hold office for two years or until
their respective successors are elected and qualified.
(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 29, 2000 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,
/s/ ALAN R. PICKERILL
Alan R. Pickerill
Corporate Secretary
Bellevue, Washington
October 6, 2000
YOUR COPY OF THE COMPANY'S ANNUAL REPORT FOR THE
FISCAL YEAR ENDED JUNE 30, 2000 IS ENCLOSED.
2
<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 10, 2000) 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 14, 2000,
at 3:00 p.m. Pacific Standard Time, including any adjournment thereof, at the
Company's headquarters, 11980 NE 24th Street, Bellevue, Washington, 98005.
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 holders of the Common
Stock of the Company ("Common Stock") as of the close of business on September
29, 2000, are entitled to vote at the meeting. As of that date, there were
4,825,077 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. Shareholders of record who are present at the
meeting in person or by proxy and who abstain from voting, including brokers
holding customers' shares of record who cause abstentions to be recorded at the
meeting, are considered shareholders who are present and entitled to vote and
they count toward the quorum.
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 three 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
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<PAGE> 5
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.
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 11980 NE 24th Street, Bellevue,
Washington 98005, 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 $5,000, plus
reimbursement of certain out-of-pocket expenses, for its services in soliciting
Proxies. The Company also will 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 the beneficial owners of the
shares. All of the costs of the solicitation of Proxies will be paid by the
Company.
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<PAGE> 6
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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 as amended) known
to the Company who beneficially owned more than 5% of the Company's Common Stock
as of September 15, 2000. They also show beneficial ownership as of September
15, 2000 for each director, for each executive officer named in the Summary
Compensation Table 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 as of
September 15, 2000, who owned more than 5% of the Company's Common Stock. To the
Company's knowledge, and except where noted below, 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
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS OWNED
------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Carlo Cannell (d/b/a Cannell Capital Management) 615,400 (2) 12.8%
600 California Street
San Francisco, CA 94108
Dimensional Fund Advisors Inc. 286,100 (3) 5.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401-1038
Ironstone Group, Inc 263,200 5.5%
One Bush Street, Suite 1240
San Francisco, CA 94104
RS Investment Management Co., LLC 251,400 (4) 5.2%
388 Market Street, Suite 200
San Francisco, CA 94111
ROI Capital Management, Inc. 249,000 (5) 5.2%
17 E. Sir Francis Drake Blvd., Suite 225
Larkspur, CA 94939
</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) Mr. Cannell has shared voting power with respect to these shares which
include 231,800 shares held by Tonga Partners, LP, 44,500 shares held by
Pleiades Investment Partners, LP, 20,700 shares held by George S. Sarlo
1995 Charitable Remainder Trust, 125,000 shares held by The Cuttyhunk
Fund Limited, 60,400 shares held by Canal, Ltd., 54,200 shares held by
Goldman Sachs Performance Partners (Offshore), L.P., and 78,800 shares
held by Goldman Sachs Performance Partners, L.P.
(3) Dimensional Fund Advisors Inc. an investment adviser registered under the
Investment Advisors Act of 1940, furnishes investment advice to four
investment companies and serves as investment manager to certain other
investment vehicles. In
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<PAGE> 7
its role as investment advisor and investment manager, Dimensional Fund
Advisors Inc. possesses both voting and investment power over the
Company's Common Stock. All of this Common Stock is owned by the
investment companies and investment vehicles and Dimensional Fund
Advisors Inc. disclaims beneficial ownership of such securities.
(4) RS Investment Management Co., LLC has shared voting power with respect to
these shares. RS Value Group LLC is a registered investment advisor whose
clients have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the stock. No client
owns greater than 5% of the stock. RS Investment Management, L.P. is the
managing member of RS Value Group, LLC. RS Investment Management Co., LLC
is the General Partner of RS Investment Management L.P.
(5) ROI Capital Management, Inc. is deemed to be the beneficial owner of
these shares pursuant to separate arrangements whereby it acts as
investment adviser to certain persons, including ROI Partners, L.P. Each
person for whom ROI Management, Inc. acts as investment adviser has the
right to receive or power to direct the receipt of dividends from, or
proceeds from the sale of, the Common Stock purchased or held pursuant to
such arrangement. Mitchell J. Soboleski & Mark T. Boyer are deemed to be
the beneficial owners of the number of these shares pursuant to their
ownership interest in ROI Capital Management, Inc.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of September 15, 2000, the number of shares of
Common Stock owned by each of the Company's directors, the executive officers
named in the summary compensation table, 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 PERCENT
AND NATURE OF
NAME OF BENEFICIAL OWNER OF BENEFICIAL CLASS
OWNERSHIP (1)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
George S. Sarlo 367,599 (2) 7.6%
Theodore M. Wight 74,500 (3) 1.5%
Robert J. Gallagher 59,395 (3) 1.2%
Robert W. O'Rear 45,500 (3) *
Jiri M. Nechleba 331,250 (4) 6.4%
Patricia R. Graham 84,000 (4) 1.7%
Alan R. Pickerill 724 (4) *
------- -----
All directors and executive officers as a
group (7 persons) 962,968 19.3%
</TABLE>
* Less than 1.0%
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(1) Shares of Common Stock issuable upon the exercise of options currently
exercisable or exercisable within 60 days of September 15, 2000 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 10,000 shares of Common Stock currently
exercisable or exercisable within 60 days of September 15, 2000. Mr.
Sarlo has sole voting and dispositive power over an aggregate of 297,259
shares of the Company, which consist of 234,295 shares held by the George
S. Sarlo Revocable Trust; 7,033 shares held by the George S. Sarlo
SEPIRA; 3,000 shares held by the George S. Sarlo IRA Rollover; and 52,931
shares held by the Walden Management Corporation Pension FBO George S.
Sarlo. In addition, Mr. Sarlo is one of four general partners of Walden
Partners II, LP, which is a general partner of Walden Capital Partners
II, LP. Walden Capital Partners II, LP, holds 60,340 shares of the
Company's Common Stock of which Mr. Sarlo shares the voting and
dispositive power with the other general partners of Walden Partners II,
LP.
(3) Includes options to purchase 38,500 shares of Common Stock currently
exercisable or exercisable within 60 days of September 15, 2000.
(4) Represents options to purchase shares of Common Stock currently
exercisable or exercisable within 60 days of September 15, 2000.
7
<PAGE> 9
--------------------------------------------------------------------------------
ELECTION OF DIRECTORS
(PROPOSAL 1)
--------------------------------------------------------------------------------
The Company's Board of Directors (the "Board") currently consists of five
directors and is divided into two classes, with each director serving for a
two-year term and all the directors in one class standing for election each
year. Three directors presently serve in Class I and two directors presently
serve in Class II. This year, three Class I directors are to be elected.
Although the Board is informed that each of the three 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
I directors, all of whom are nominated for terms of two years, until the
Company's Annual Meeting of Shareholders in 2002, and in each case until his
respective successor shall be elected and qualified: Robert W. O'Rear, Robert J.
Gallagher and George S. Sarlo. Unless otherwise instructed, the persons named in
the accompanying Proxy intend to vote shares represented by such Proxies for Mr.
O'Rear, Mr. Gallager and Mr. Sarlo.
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, 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.
--------------------------------------------------------------------------------
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
TERMS EXPIRING IN 2002
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
-------------------------------------------------------------------------------------------------
ROBERT W. O'REAR Mr. O'Rear has served as a director of the Company
since 1994. Since 1991, he has been President of
Director O'Rear Cattle, Inc., a beef cattle company. From
1978 through 1993, Mr. O'Rear served as the manager
Age 57 of subsidiary development for Microsoft
Corporation. Mr. O'Rear is a Principal of Poulsbo
Recreational Vehicle, Inc.
-------------------------------------------------------------------------------------------------
ROBERT J. GALLAGHER Mr. Gallagher has served as a director of the
Company since 1994. Since 1997, Mr. Gallagher has
Director been an independent consultant. From 1987 through
1997, Mr. Gallagher served as an executive officer
Age 44 with North American Mortgage Company, a California
mortgage banking company, in various roles,
including Senior Vice President and Chief Financial
Officer and Executive Vice President and Chief
Administrative Officer.
-------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 10
<TABLE>
<S> <C>
-------------------------------------------------------------------------------------------------
Mr. Sarlo has served as a director of the Company
GEORGE S. SARLO since November 30, 1999. Since 1974, Mr. Sarlo has
been a Partner in the Walden Group of Venture
Director Capital Funds. Mr. Sarlo is a member of the board
of directors of Invivio Corporation.
Age 62
-------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
CONTINUING CLASS II DIRECTORS
TERMS EXPIRING IN 2001
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
-------------------------------------------------------------------------------------------------
JIRI M. NECHLEBA Mr. Nechleba has served as President and Chief
Executive Officer of the Company since September
Director, Chairman of the Board 11, 1995 and as Chairman of the Board since
November 6, 1995. From 1993 to 1995, he served as
Age 42 Senior Vice President and General Manager of
SolutionWare, a division of A.C. Nielsen, a Dun &
Bradstreet subsidiary, and a provider of
information solutions to the consumer packaged
goods industry. From 1985 to 1993, Mr. Nechleba
was an independent management consultant to a
variety of industries.
-------------------------------------------------------------------------------------------------
THEODORE M. WIGHT Mr. Wight has served as a director of the Company
since 1985. Since 1994, Mr. Wight has been
Director general partner of the general partner of Pacific
Northwest Partners SBIC, L.P., a venture capital
Age 57 firm. Mr. Wight 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
directors of RehabCare Group, Inc., Walt's
Radiator & Brake, Inc., AcryMed, Inc., Pet's
Choice, Inc., NextCare Hospitals, Inc., Health
Practice Partners, Inc., Verus, Inc., and Landmark
Group, Inc.
</TABLE>
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<PAGE> 11
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COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
--------------------------------------------------------------------------------
During fiscal year 2000, there were nine meetings of the Company's Board. The
standing committees of the Board include an Audit Committee and a Compensation
Committee, but do not include a Nominating Committee. The full Board selects
nominees for election as directors. All of the incumbent directors attended at
least 85% of the meetings of the Board 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. Three 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 $1,000 in cash compensation for each attendance
at Board meetings, and reimburses directors for their out-of-pocket expenses
incurred for attendance at Board meetings.
The Company's Stock Option Plan for Non-Employee Directors (the "Directors
Plan") provides for the automatic grant of nonqualified stock options at an
exercise price equal to the fair market value on the date of grant. Each
non-employee director elected or appointed receives an initial grant of 10,000
shares upon becoming a director. Each continuing director receives an annual
grant of 7,500 shares immediately following each Annual Meeting of Shareholders.
Options granted under the Directors Plan vest in full six months from the date
of grant. Options granted under the Directors Plan expire five years from the
date of grant or, if earlier, three months after the optionee's termination of
service with the Company or one year after the optionee's death or disability.
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<PAGE> 12
--------------------------------------------------------------------------------
COMPENSATION OF EXECUTIVE OFFICERS
--------------------------------------------------------------------------------
Compensation Summary.
The following table shows, for the Chief Executive Officer and other executive
officers during the fiscal year ended June 30, 2000, information concerning
compensation paid or accrued for services to the Company in all capacities for
that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------
SECURITIES
UNDERLYING ALL OTHER
OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (#) $
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jiri M. Nechleba (1) 2000 200,000 -- -- 4,800 (2)
Chairman of the Board, President 1999 195,385 122,549 100,000 4,800
and Chief Executive Officer 1998 175,112 94,951 25,000 --
----------------------------------------------------------------------------------------------------
Stephen A. Yount (3) 2000 103,930 -- 16,000 3,280 (2)
Executive Vice President - 1999 138,616 39,644 -- 4,008
Enterprise,
Technology Division, CFO & 1998 120,077 64,900 17,500 900
Secretary
----------------------------------------------------------------------------------------------------
Patricia R. Graham (4) 2000 151,983 50,064 (5) 16,000 --
Executive Vice President - Mortgage 1999 138,616 126,465 (6) -- --
Technology Division 1998 120,077 139,042 (7) 17,500 --
----------------------------------------------------------------------------------------------------
Alan R. Pickerill (8) 2000 87,834 -- 26,400 2,602 (2)
Vice President of Finance - 1999 72,351 6,195 750 1,963
Mortgage
Technology Division and Corporate 1998 31,583 -- -- --
Secretary
</TABLE>
(1) Mr. Nechleba joined the Company as President and Chief Executive Officer
in September 1995. He was elected as Chairman of the Board in November
1995.
(2) In fiscal year 2000, the Company matched 50% ($0.50 on the $1.00) of the
first 6% the employee contributed to their 401(k) Plan. The company's
matching amount is subject to four years of vesting with 25% vesting each
year.
(3) Mr. Yount joined the Company as Chief Financial Officer and Secretary in
October 1991 and was promoted to the position of Executive Vice President
- Enterprise Technology Division in June 1998. Mr. Yount departed from
the Company on January 26, 2000. The amount disclosed is the year to date
total for Mr. Yount at the time of his departure.
(4) Ms. Graham joined the Company as Vice President - Sales and Marketing in
March 1996, and was promoted to Executive Vice President - Mortgage
Technology Division in June 1998.
(5) Includes commission income of $50,064 for fiscal 2000 based upon a
percentage of net software license fees and other revenues.
(6) Includes commission income of $85,709 for fiscal 1999 based upon a
percentage of net software license fees and other revenues.
(7) Includes commission income of $74,055 for fiscal 1998 based upon a
percentage of net software license fees and other revenues.
(8) Mr. Pickerill joined the Company as Controller in January 1998, was later
promoted to Director of Finance, and became Vice President of Finance in
January 2000. The amount shown for fiscal year 1998 includes compensation
from January 5, 1998 to June 30, 1998.
11
<PAGE> 13
Option Grants
Shown below is certain information concerning options granted to the Company's
executive officers during the fiscal year ended June 30, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL
SECURITIES % OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME (#) FISCAL YEAR ($/SHARE)(1) DATE 5% 10%
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jiri M. Nechleba -- -- N/A N/A -- --
Stephen A. Yount 16,000 (3) 4.7% 6.531 8/03/09 -- --
Patricia R. Graham 16,000 (4) 4.7% 6.531 8/03/09 $63,799 $166,546
Alan R. Pickerill 1,400 (5) * 6.531 8/03/09 $5,583 $14,572
25,000 (6) 7.4% 4.344 2/11/10 $66,301 $173,080
</TABLE>
* Less than 1.0%
(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 dollar amounts under these columns are the result of calculations at
the 5% and 10% rates required by applicable regulations of the Securities
and Exchange Commission and, therefore, are not intended to forecast
possible future appreciation, if any, of the Common Stock price. The
calculations assume that all of the options are exercised at the end of
their respective ten-year terms. Actual gains, if any, on the stock
option exercises depend on the future performance of Common Stock and
overall market conditions, as well as the holder's continued employment
through the vesting period. The amounts reflected in this table may not
be achieved.
(3) The options granted consist of a combination of non-qualified and
incentive stock options that vest in yearly increments over a four-year
period, becoming fully vested on August 3, 2003. 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. These options were forfeited on January 26,
2000.
(4) The options granted consist of a combination of non-qualified and
incentive stock options that vest in yearly increments over a four-year
period, becoming fully vested on August 3, 2003. 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.
(5) The options granted consist of incentive stock options that vest in
yearly increments over a four-year period, becoming fully vested on
August 3, 2003. 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.
(6) The options granted consist of incentive stock options that vest in
yearly increments over a four-year period, becoming fully vested on
February 11, 2004. 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.
12
<PAGE> 14
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 2000 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, 2000.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END
OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
JUNE 30, 2000 (#) JUNE 30,2000 ($)
--------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
(1) (1)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jiri M. Nechleba 256,250 143,750 ---- ----
Patricia R. Graham 84,000 24,500 ---- ----
Alan R. Pickerill 724 26,426 ---- ----
Stephen A. Yount ---- ---- ---- ----
</TABLE>
(1) 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, 2000 ($2.25) and
the exercise prices for the relevant options.
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EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
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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.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
The Compensation Committee of the Board (the "Committee") for fiscal year 2000
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.
Executive Compensation Policies and Performance Measures
The Company's executive compensation policies have been developed to meet the
following objectives:
- Attract and retain key executives critical to the Company's long-term
success;
- Reward key executives for their contributions to the executive team in
the development and successful execution of product, marketing, sales and
business strategies; and
- Motivate key executives to make decisions and take actions that 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 periodically. In
evaluating executive salaries, the Committee uses 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 by 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.
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
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potential cash compensation is based on a quantitative evaluation of the
Company's financial performance. The plan's pay out formula provides for
pay-outs on a sliding scale based upon achieving a target level of profitability
before payment of executive bonuses, employee profit sharing and income taxes.
No pay out will be made, however, if the Company fails to achieve a minimum
pre-determined level of profitability. Because profit targets were not met for
the fiscal year ended June 30, 2000, executive bonuses were not 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 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. For fiscal year 2000,
the Committee granted Stephen A. Yount, the Company's former Chief Financial
Officer & Corporate Secretary, and Patricia R. Graham, the Company's Vice
President - Mortgage Technology Division, 16,000 stock options. In addition, the
committee granted 26,400 stock options to Alan R. Pickerill, the Company's Vice
President of Finance & Corporate Secretary.
CHIEF EXECUTIVE OFFICER COMPENSATION
Cash-Based Compensation
In assembling the compensation package of the Chief Executive Officer (the
"CEO"), 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 the
Company's Executive Bonus Plan. This plan is based on a quantitative evaluation
of the Company's financial performance. The plan's pay out formula provides for
pay-outs on a sliding scale based upon achieving a target level of profitability
before payment of executive bonuses, employee profit sharing and income taxes.
No pay out will be made,
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<PAGE> 18
however, if the Company fails to achieve a minimum pre-determined level of
profitability. Because profit targets were not met for the fiscal year ended
June 30, 2000, the CEO was not paid a bonus.
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. 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. During fiscal year 2000, no grants were
made to the Company's CEO.
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 June 30, 1995, and ending on June 30, 2000, the end of the
Company's last fiscal year.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
6/95 6/96 6/97 6/98 6/99 6/00
<S> <C> <C> <C> <C> <C> <C>
INTERLINQ SOFTWARE CORPORATION 100.00 128.57 110.71 203.57 192.86 64.29
S & P 500 100.00 126.00 169.73 220.92 271.19 290.85
S & P COMPUTERS (SOFTWARE & SERVICES) 100.00 133.21 221.37 343.32 527.34 594.05
</TABLE>
Assumes $100 invested on June 30, 1995 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 has selected KPMG LLP, certified public accountants, to act as
independent auditor of the Company for the fiscal year ending June 30, 2001.
KPMG LLP has been auditor of the Company since 1985.
A representative of KPMG 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 2001 Annual Meeting of
Shareholders must be in writing and received by the Company no later than June
12, 2001 in order that they may be included in the Proxy Statement and proxy
card for that meeting. In accordance with the Company's Bylaws, a shareholder
proposing to transact business at the Company's Annual Meeting must provide
written notice of such proposal, in the manner provided by the Company's Bylaws,
not fewer than 60 days nor more than 90 days prior to the date of such Annual
Meeting (or, if the Company provides less than 60 days notice of such meeting,
no later than the 10th day after the date of the Company's notice). In addition,
if the Company receives notice of a shareholder proposal after August 26, 2001,
the persons named as proxies in such Proxy Statement and Proxy will have
discretionary authority to vote on such shareholder proposal.
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
The Company believes that none of its officers, directors, or beneficial owners
of more than 10% of the outstanding shares of Common Stock filed any late
reports as required by Securities and Exchange Commission rules promulgated
under Section 16 of the Securities Exchange Act of 1934.
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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 may recommend. Copies of the Company's Annual
Report to Shareholders for the fiscal year ended June 30, 2000 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, 11980 NE 24th Street, Bellevue, Washington
98005.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ALAN R. PICKERILL
Alan R. Pickerill
Corporate Secretary
Dated: October 6, 2000
Bellevue, 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 14, 2000
The undersigned hereby appoints Patricia R. Graham and Alan R. Pickerill, 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
29, 2000, at the Annual Meeting of Shareholders to be held on November 14, 2000,
or any adjournment thereof.
Proposal 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: George S. Sarlo, Robert W. O'Rear and Robert J. Gallagher.
<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 PROPOSAL 1.
<PAGE> 23
Page 2
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 PROPOSAL
1.
Dated:________________, 2000 __________________(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.
