================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 COMMISSION FILE NUMBER 0-14713 [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) 62 Fourth Avenue, Waltham, MA 02154 (Address of principal executive offices) (Zip Code) (617) 290-0710 (Registrant's telephone number, including area code) Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| APPLICABLE ONLY TO CORPORATE ISSUERS The number of shares outstanding of the issuer's Common Stock, $.01 par value, as of August 12, 1997 was 17,709,719. ================================================================================ Interleaf, Inc. TABLE OF CONTENTS Page ---- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated balance sheets at June 30, 1997 and March 31, 1997 ............ 3 Consolidated statements of operations for the three months ended June 30, 1997 and 1996 ..................................................... 4 Consolidated statements of cash flows for the three months ended June 30, 1997 and 1996 ..................................................... 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 ................................................. 11 Item 6 - Exhibits and Reports on Form 8-K .................................. 11 SIGNATURE .................................................................. 11 2 Interleaf, Inc. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS June 30, 1997 March 31, 1997 In thousands, except for share and per share (unaudited) amounts ASSETS Current Assets Cash and cash equivalents $ 18,031 $ 17,349 Accounts receivable, net of reserve for doubtful accounts of $1,377 at June 30, 1997 and $1,371 at March 31, 1997 7,922 11,359 Prepaid expenses and other current assets 1,532 1,504 --------- --------- Total current assets 27,485 30,212 Property and equipment, net 4,423 4,963 Intangible assets 1,946 2,281 Other assets 444 444 --------- --------- Total assets $ 34,298 $ 37,900 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable $ 2,544 $ 1,774 Accrued expenses 11,845 14,455 Unearned revenue 13,819 15,102 Accrued restructuring 3,598 4,386 --------- --------- Total current liabilities 31,806 35,717 Long-term restructuring 2,744 2,955 --------- --------- Total liabilities 34,550 38,672 --------- --------- Shareholders' Equity (Deficit) 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, 861,911 at June 30, 1997 and at March 31, 1997 86 86 Senior Series C Convertible, issued and outstanding, 1,006,480 at June 30, 1997 and 1,006,220 at March 31, 1997 101 101 Common stock, par value $.01 per share, authorized 30,000,000 shares, issued and outstanding, 17,709,719 at June 30, 1997 and 17,459,219 at March 31, 1997 177 175 Additional paid-in capital 85,747 85,513 Retained earnings (deficit) (86,122) (86,508) Cumulative translation adjustment (241) (139) --------- --------- Total shareholders' equity (deficit) (252) (772) --------- --------- Total liabilities and shareholders' equity (deficit) $ 34,298 $ 37,900 ========= ========= See notes to consolidated financial statements 3 Interleaf, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended June 30 1997 1996 In thousands, except for per share amounts (unaudited) Revenues: Products $ 2,742 $ 7,046 Maintenance 6,650 7,472 Services 3,434 4,536 -------- -------- Total Revenues 12,826 19,054 -------- -------- Costs of revenues: Products 730 1,626 Maintenance 946 1,308 Services 2,839 4,200 -------- -------- Total costs of revenues 4,515 7,134 -------- -------- Gross Margin 8,311 11,920 -------- -------- Operating Expenses: Selling, general and administrative 5,557 11,357 Research and development 2,451 4,270 -------- -------- Total operating expenses 8,008 15,627 -------- -------- Income (loss) from operations 303 (3,707) Other income (expense) 83 (93) -------- -------- 386 (3,800) Income (loss) before income taxes Provision for income taxes -- -- -------- -------- Net income (loss) $ 386 $ (3,800) ======== ======== Earnings (loss) per share: Primary $ 0.02 $ (0.22) ======== ======== Fully Diluted $ 0.02 N/A ======== ======== Shares used in computing primary earnings per share 22,974 16,998 ======== ======== Shares used in computing fully diluted earnings per share 23,134 N/A ======== ======== See notes to consolidated financial statements 4 Interleaf, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended June 30 1997 1996 In thousands (unaudited) Cash Flows from Operating Activities Net income (loss) $ 386 $ (3,800) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 997 2,009 Changes in assets and liabilities, net of effect of acquisition: Decrease in accounts receivable, net 3,437 4,491 Decrease in other assets (28) 76 Decrease in accounts payable and accrued expenses (1,840) (911) Decrease in unearned revenue (1,283) (2,312) Decrease in other liabilities (999) (354) Other, net - 62 -------- -------- Net cash provided by (used in) operating activities 670 (739) -------- -------- Cash Flows from Investing Activities Capital expenditures (122) (1,201) Capitalized software development costs - (605) -------- -------- Net cash used in investing activities (122) (1,806) -------- -------- Cash Flows from Financing Activities Net proceeds from issuance of common stock 236 1,237 Repayment of long-term debt and capital leases - (2) -------- ------- Net cash provided by (used in) financing activities 236 1,235 -------- -------- (102) (62) -------- -------- Effect of exchange-rate changes on cash Net increase (decrease) in cash and cash equivalents 682 (1,372) 17,349 12,725 -------- -------- Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ 18,031 $ 11,353 ======== ======== See notes to consolidated financial statements 5 Interleaf, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The consolidated financial statements include the accounts of Interleaf, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Interleaf, Inc. and its subsidiaries are collectively referred to as the "Company." Certain fiscal 1997 amounts have been reclassified to conform to the fiscal 1998 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, 1997. 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. On June 20, 1997, the Board of Directors authorized the repricing of approximately 1,626,000 stock options at $1.25 per share. The original grant prices ranged from $2.00 to $8.25 per share. 3. Credit Agreement The Company has a revolving line of credit of up to $10 million from a major commercial lender. The credit agreement also provides for the issuance of letters of credit of up to $2 million. Borrowings from the line of credit bear interest at the higher of 9% or prime rate plus 2% and are secured by substantially all tangible and intangible domestic assets of the Company. Outstanding letters of credit bear interest at 2%. The agreement contains certain financial covenants relating to the Company's current ratio, tangible net worth, and working capital, as well as restrictions on certain additional indebtedness, acquisitions, capital expenditures, and dividend payments. At June 30, 1997, there were no loans outstanding under this line of credit. Borrowings under the credit agreement are based on the level of eligible North American accounts receivable, modified by cash collections during the previous 90 days. As of June 30, 1997, approximately $0.7 million of standby letters of credit were outstanding to secure the leasing of computer equipment, and the amount available for additional borrowings is approximately $0.7 million. The current credit agreement expired on August 1, 1997 and approval of a new credit agreement was granted by the lender on August 11, 1997. The lender and the Company expect to execute a final agreement shortly. 6 4. Restructuring During the first quarter ended June 30, 1997, the Company paid approximately $1.0 million, net of sublease receipts, related to the fiscal 1997 and 1995 restructurings. During the first quarter ended June 30, 1996, the Company paid approximately $0.4 million, net of sublease receipts, related to the fiscal 1995 restructuring. Expenditures for facility closures, primarily lease payments, are expected to continue through December 2001. 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 in 1990. The Company is appealing this assessment, however, approximately $1.1 million of the cash and cash equivalents balance at June 30, 1997 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 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 $0.4 million, on revenues of $12.8 million, for its first quarter ended June 30, 1997. This compares with a net loss of $3.8 million on revenues of $19.1 million for the same period a year ago. Much of the decline in revenue is due to a decrease in product revenue (61% reduction) caused by the ongoing maturation of the market for complex authoring products which is a main product line at the Company. An effort to focus on developing and supporting integrated document publishing ("IDP") applications for the extended enterprise has been initiated. The improvement in net income for the first quarter ended June 30, 1997 compared to the same period a year ago was due to the impact of significantly reducing the cost structure of the Company during the second and third quarters of fiscal 1997. During these two quarters in fiscal 1997, employment was reduced and facilities were closed or downsized. Revenues Total product revenue decreased by $4.3 million or 61% for the first quarter ended June 30, 1997 compared to the same period a year ago. Revenue declined in all geographic regions. The continuing trend in the reduction in product license revenue is due to several factors. The first is the decline in licensing of the Company's UNIX-based high-end authoring products which is primarily attributable to the increasing popularity of Windows-based publishing software, for which the Company did not have any offerings until January of 1996. A second factor is the saturation of UNIX-based high-end authoring software in the aerospace/defense industry, where the Company had historically derived most of its authoring product license revenue. The Company is refocusing its business strategy on providing integrated document publishing applications targeted toward specific vertical markets. While the Company has built well-accepted integrated document publishing based solutions for individual customers, it has not yet demonstrated the ability to develop, market and sell IDP applications. There is no assurance that the Company will be successful in implementing its strategy and, therefore, the Company is unable to predict if or when product revenues will stabilize or grow. Additionally, since the Company's services and maintenance revenue is largely dependent on new product licenses, these revenue components have also experienced downward pressure. This trend will continue unless product revenue stabilizes. Maintenance revenue declined by $0.8 million or 11% for the first quarter ended June 30, 1997 compared to the same period a year ago. Revenue declined in all geographic areas. 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 IDP application sales. This will be necessary to offset the general downward pricing pressure on maintenance in the software industry and customers perceived value of maintenance services. Services revenue, consisting of consulting and customer training revenue, declined by $1.1 million or 24% for the first quarter ended June 30, 1997 compared to the same period a year ago. Revenue declined in all geographic areas. Future services revenue is dependent on the Company's ability to maintain its existing customer base and to increase consulting and training contracts. 8 Interleaf, Inc. During fiscal 1998, the Company plans to develop several integrated document publishing application offerings which solve specific business problems in several industries. Growth in revenues during fiscal 1998 will be largely dependent on improving sales force productivity, the effectiveness of the Company's increased investment in marketing and lead generation programs, customer acceptance of the new and enhanced software products planned to be released in fiscal 1998 and the next year, and the Company's success in leveraging software products with services to provide IDP solutions to its customers. If the Company is unable to grow or stabilize its revenues in fiscal 1998, further expense reductions will be necessary in order to sustain operations. 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 decreased by $0.9 million or 55% for the first quarter ended June 30, 1997 versus the first quarter ended June 30, 1996. Included in the cost of product revenues were amortization of capitalized software of $0.3 million for the quarter ended June 30, 1997 and $0.9 million for the quarter ended June 30, 1996. The cost of maintenance revenue declined by $0.4 million or 28% for the quarter ended June 30, 1997 versus the quarter ended June 30, 1996. The cost of service revenue declined by $1.4 million or 32% for the quarter ended June 30, 1997 versus the quarter ended June 30, 1996. The decline in the costs of revenues was impacted by the year to year lower revenue and the reduced expenses due to the fiscal 1997 restructurings. Operating Expenses Selling, general and administrative ("SG&A") expenses decreased $5.8 million or 51% for the quarter ended June 30, 1997 versus the quarter ended June 30, 1996. The decline was primarily due to significant personnel and facilities expense reductions related to the Company's fiscal 1997 restructurings. During the quarter, the Company reduced certain accrued liabilities based on an updated assessment of accrual requirements and actual expenditures for certain operating expenses, resulting in an increase to net income of $0.4 million. Research and development ("R&D") expenses consist primarily of personnel expenses to support product development offset by capitalized software development costs. R&D expenses decreased by $1.8 million or 43% for the quarter ended June 30, 1997 versus the quarter ended June 30, 1996. No tax provision was required due to the losses sustained during the previous periods. Liquidity and Capital Resources The Company had approximately $18.0 million of cash and cash equivalents at June 30, 1997, an increase of approximately $0.7 million from March 31, 1997. The increase was primarily attributable to the cash flow from operations. Interleaf's German subsidiary, Interleaf GmbH, has been notified that it is liable for German withholding taxes related to payments remitted to the United States from Germany in 1990. The Company is appealing this assessment. At June 30, 1997 and March 31, 1997, the Company had approximately $1.1 million of cash restricted for potential payment of German withholding taxes. During the quarter ended June 30, 1997, the Company paid approximately $1.0 million, net of sublease receipts, related to the fiscal 1997 and 1995 restructurings, versus $0.4 million for the quarter ended June 30, 1996, related to the fiscal 1995 restructuring. Cash payments related to these restructurings, the majority of which are related to operating lease payments, net of subleases, are anticipated to continue until December 2001. All significant vacant space under lease has been subleased, or is the subject of a letter of understanding. 9 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. At June 30, 1997 and 1996, there were no loans outstanding under this line of credit. However, a letter of credit for $0.7 million is issued and outstanding and, accordingly, the amount available for borrowings was approximately $0.7 million (see Note 3 to the Consolidated Financial Statements regarding borrowing limits and restrictive covenants associated with the credit agreement). This agreement expired on August 1, 1997 and approval of a new credit agreement was granted by the lender on August 11, 1997. The lender and the Company expect to execute a final agreement shortly. While the Company showed a small profit in the first quarter of fiscal 1998, during fiscal year 1997, the Company experienced a substantial decline in revenues and a substantial loss from operations which led to a $10.9 million restructuring charge. These factors resulted in a shareholders' deficit at March 31, 1997. Due to the downward trend in the Company's revenues, the Company is unable to predict future revenues and, if and when, it will achieve a sustainable profitable level of operations. In response to these matters, the Company developed detailed plans relating to its fiscal 1998 operations which, if realized, will restore the Company to profitable operations. Although no assurances can be given that such plans will be achieved, management is committed to taking all appropriate and necessary actions to effect timely cost reductions in the event that anticipated revenue levels are not achieved. In the event such actions are not successful in achieving breakeven or profitable operations, additional financing may be needed. Under such circumstances, no assurance can be given that such financing could be obtained or that it could be obtained at commercially reasonable terms or without incurring substantial dilution to existing shareholders. The financial statements do not include any adjustments to reflect the possible effects of these uncertainties. The Company believes its current cash balances and cash generated from operations will be sufficient to meet the Company's liquidity needs for fiscal 1998 and the foreseeable future. The Company can only fund its long-term growth through increasing revenues, combined with tightly managed cost controls. The Company was notified by the NASDAQ that it no longer meets the technical listing requirements of the NASDAQ's National Market since its net tangible assets were below $4 million at March 31, 1997, and was requested by NASDAQ to respond to this notice. The Company has responded to NASDAQ's inquiry and requested a temporary waiver from this requirement. Risk Factors From time to time, information provided by the Company or statements made by its employees may contain forward-looking information. The Company's actual future results may differ materially from those projections or suggestions made in such forward-looking information as a result of various potential risks and uncertainties including, but not limited to, the factors discussed below. The Company's future operating results are dependent on its ability to develop and market integrated document publishing software products and services that meet the changing needs of organizations with complex document publishing requirements. There are numerous risks associated with this process, including rapid technological change in the information technology industry and the requirement to bring to market IDP applications that solve complicated business needs in a timely manner. In addition, the existing document publishing, electronic distribution, and document management markets are highly competitive. Many of these competitors are larger and better funded than the Company. The Company competes for sales of its software products on both an individual product basis and integrated with services in large IDP solution sales. Sales cycles associated with IDP solution sales are long because organizations frequently require the Company to solve complex business problems that typically involve reengineering of their business processes. In addition, a high percentage of the Company's product license revenues are generally realized in the last month of a fiscal quarter and can be difficult to predict until the end of a fiscal quarter. Accordingly, given the Company's relatively fixed cost structure, a shortfall or increase in product license revenue can have a significant impact on the Company's operating results and liquidity. 10 Interleaf, Inc. The Company markets its software products and services worldwide. Global and/or regional economic factors, currency exchange rate fluctuations, and potential changes in laws and regulations affecting the Company's business could impact the Company's financial condition or future operating results. The market price of the Company's common stock may be volatile at times in response to fluctuations in the Company's quarterly operating results, changes in analysts' earnings estimates, market conditions in the computer software industry, as well as general economic conditions and other factors external to the Company. PART II - OTHER INFORMATION Item 5. Other Information None. 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 June 30, 1997. 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. August 13, 1997 /s/ Robert R. Langer ------------------------------------ Robert R. Langer Vice President of Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer) 11 Interleaf, Inc. EXHIBIT INDEX Exhibit Method of Number Description Filing ------ ----------- ------ 3(a) Restated Articles of Organization of the Company, as [xvi] amended 3(b) By-Laws of the Company, as amended [v] 4(a) Specimen Certificate for Shares of the Company's [xiv] Common Stock 4(b) Rights Agreement, dated July 15, 1988, between the [xv] Company and the First National Bank of Boston 10(a) Company's 1983 Stock Option Plan, as amended [v] 10(a1) 1994 Employee Stock Option Plan, as amended [xiii] 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 [xiii] 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 [ii] issuance of 2,142,857 shares of the Company's Senior Series B Convertible Preferred Stock, dated September 29, 1989. 10(h) Notification to Preferred Shareholder of increase in [iii] conversion ratio, dated May 18, 1992. 10(i) Lease of Prospect Place, Waltham, MA, between [iv] Prospect Place Limited Partnership and Interleaf, Inc., and related Agreements, dated March 30, 1990. 10(j) Employment and severance agreement between the [vii] Company and Edward Koepfler, the Company's President, dated October 3, 1994. 10(k) Loan and Security Agreement between the Company and [ix] Foothill Capital Corporation, dated May 2, 1995. 10(l) 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(m) Net Lease, dated August 14, 1995, between Principal [x] Mutual Insurance Company and the Company. 10(n) Sublease, dated September 15, 1995, between [x] Parametric Technology Corporation and the Company. 10(o) Employment and severance agreement between the [xi] Company and Mark Cieplik, the Company's Vice President, Americas, dated March 17, 1995. 10(p) Agreement between PruTech Research and Development [xii] Partnership III and the Company, dated November 14, 1995. 10(q) Series C Preferred Stock Agreement between [xiii] Interleaf, Inc. and Lindner Investments, dated October 14, 1996. 12 Exhibit Method of Number Description Filing ------ ----------- ------ 10(r) Letter Agreement between the Company and Robert M. Stoddard, as the Company's then Vice President of [xvi] Finance and Administration, and Chief Financial Officer, dated November 11, 1996. 10(s) Letter Agreement between the Company and Rory J. Cowan, the Company's President and Chief Executive [xvi] Officer, dated November 15, 1996, concerning his employment and compensation with the Company. 10(t) Letter Agreement between the Company and Mark H. Cieplik, the Company's Vice President of Sales, [xvi] dated November 15, 1996, concerning his employment and compensation with the Company. 10(u) Letter Agreement between the Company and Michael L. Shanker, the Company's Vice President of [xvi] Professional Services, dated November 15, 1996, concerning his employment and compensation with the Company. 10(v) Letter Agreement between the Company and Stephen J. Hill, the Company's Vice President of Europe, dated [xvi] November 15, 1996, concerning his employment and compensation with the Company. 10(w) Resignation Agreement and Release and Employment Agreement between Ed Koepfler, the Company's former [xvi] President and Chief Executive Officer, and the Company, dated November 15, 1996, concerning his employment and severance with the Company. 10(w1) Resignation Agreement and Release and Employment Agreement between G. Gordon M. Large, the Company's former Executive Vice President of Finance and [xvi] Administration and Chief Financial Officer, and the Company, dated November 12, 1996, concerning his employment and severance with the Company. 10(x) Resignation Agreement and Release and Employment Agreement between Stan Douglas, the Company's former [xvi] Vice President of Engineering Operations, and the Company, dated November 15, 1996, concerning his employment and severance with the Company. 10(y) Terms of Engagement between the Company and Robert R. Langer, Vice President of Finance and [xvi] Administration and Chief Financial Officer, dated December 30, 1996, concerning his employment with the Company. 10(z) Offer Letter and Acceptance between Jaime W. Ellertson, the Company's President and Chief [xvi] Executive Officer, and the Company, dated January 9, 1997. 10(z1) Offer Letter and Acceptance between Michael L. Included Torto, the Company's Vice President, Marketing, and the Company, dated March 28, 1997. 10(z2) Offer Letter and Acceptance between Robert A. Included Fisher, the Company's Vice President, Customer Support, and the Company, dated April 17, 1997. 10(z3) Offer Letter and Acceptance between Christopher Included McKee, the Company's Vice President, Europe, Middle East, Africa, and the Company, dated May 13, 1997. 10(z4) Offer Letter and Acceptance between Gary R. Included Phillips, the Company's Vice President, North American Sales, and the Company, dated May 22, 1997. 10(z5) Resignation Agreement between Mark H. Cieplik, the Included Company's former Vice President, Americas, and the Company, dated May 29, 1997, concerning his employment and severance with the Company. 13 Exhibit Method of Number Description Filing ------ ----------- ------ 10(z6) Resignation Agreement between Stephen J. Hill, the Included Company's former Vice President, Europe, and the Company, dated June 5, 1997, concerning his employment and severance with the Company. 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. [xii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended December 31, 1995, File Number 0-14713. [xiii] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended September 30, 1996, File Number 0-14713. [xiv] Incorporated herein by reference is the applicable Exhibit to Company's Registration Statement on Form S-1, File Number 33-5743. [xv] Incorporated herein by reference is Exhibit 1 to Company's Registration Statement on Form 8-A, filed July 27, 1988. [xvi] Incorporated herein by reference is the applicable Exhibit to Company's Report on Form 10-Q for the quarter ended December 31, 1996, File Number 0-14713. 14