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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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
SAVILLE SYSTEMS PLC
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(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
Saville Systems PLC
________________________________________________________________________
(4) Date Filed:
September , 1997
________________________________________________________________________
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NOTICE OF EXTRAORDINARY GENERAL MEETING
OF
SAVILLE SYSTEMS PLC
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Notice is hereby given that an Extraordinary General Meeting of Saville
Systems PLC (the "Company'') will be held at The Glen Lo Abbey, Bushypark,
Galway, the Republic of Ireland, on October 23, 1997 at 1:00 p.m. local time, to
consider and act upon the matters summarized below. Shareholders are referred to
and should review carefully the accompanying Proxy Statement, including the full
text of the resolutions set forth in Annex A and Annex B thereto.
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1. To pass the special resolution set forth in Annex A to the accompanying
-------
Proxy Statement, which resolution, among other things:
a.) authorizes an increase in the Company's authorized share capital
by US $87,500 divided into 35,000,000 Ordinary Shares of US $0.0025 each;
b.) authorizes an amendment to the Articles of Association of the
Company to document the increase in share capital described above; and
c.) authorizes the Directors of the Company to exercise all the
powers of the Company to allot, free of shareholders' preemption rights,
securities of an aggregate nominal amount of US $140,900.36 during the
period expiring on October 22, 2002.
2. To pass the special resolution set forth in Annex B to the accompanying
-------
Proxy Statement, which resolution, among other things, authorizes an amendment
to the Articles of Association of the Company to authorize the Directors of the
Company, without shareholder approval, to capitalize reserves of the Company for
the purpose of issuing paid up Ordinary Shares of the Company to the holders of
the Company's outstanding Ordinary Shares as the Directors of the Company
determine to be appropriate.
3. To authorize an amendment to the Company's 1995 Share Option Plan
increasing from 2,890,000 to 5,000,000 the number of Ordinary Shares, nominal
value $0.0025 per share, reserved for issuance under the Plan.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Peter H. Quinlan
Secretary
September 29, 1997
Registered Office: 67 Lansdowne Road, Dublin 4
A SHAREHOLDER ENTITLED TO ATTEND AND VOTE AT THE EXTRAORDINARY GENERAL MEETING
IS ENTITLED TO APPOINT A PROXY (WHO NEED NOT BE A MEMBER OF THE COMPANY) TO
ATTEND, SPEAK AND VOTE INSTEAD OF SUCH SHAREHOLDER. A FORM OF PROXY IS ENCLOSED.
WHETHER OR NOT YOU EXPECT TO ATTEND THE EXTRAORDINARY GENERAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE
AFFIXED TO THE ENCLOSED PROXY IF MAILED IN THE REPUBLIC OF IRELAND.
<PAGE>
SAVILLE SYSTEMS PLC
IDA BUSINESS PARK
DANGAN
GALWAY, IRELAND
PROXY STATEMENT
FOR THE EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 23, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the ''Board'') of Saville Systems PLC (the
''Company'') for use at the Extraordinary General Meeting of Shareholders to be
held on October 23, 1997 (the ''Extraordinary General Meeting'') and at any
adjournment of that meeting. All proxies will be voted in accordance with the
shareholders' instructions, and if no choice is specified, the proxies will be
voted in favor of the matters set forth in the accompanying Notice of
Extraordinary General Meeting.
To be valid, a proxy must be deposited not less than 48 hours prior to the
time appointed for the holding of the Extraordinary General Meeting at (i) the
registered office of the Company or (ii) the registered office of the Registrar
for the Ordinary Shares, AIB Bank, Registrars' & New Issue Department,
Bankcentre, P.O. Box 954, Ballsbridge, Dublin 4, Ireland (each, the ''Registered
Office''). Any proxy may be revoked by a shareholder at any time before its
exercise by (i) voting in person at the Extraordinary General Meeting, (ii)
delivery of a subsequently dated proxy to the Registered Office, provided that
such subsequently dated proxy must be received at the Registered Office not less
than 48 hours prior to the time appointed for the holding of the Extraordinary
General Meeting or (iii) delivery of written revocation of such proxy, provided
that such written revocation must be received at the Registered Office not less
than one hour prior to the time appointed for the holding of the Extraordinary
General Meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
(''SEC''), EXCEPT FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY
SHAREHOLDER UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY AT SAVILLE
SYSTEMS PLC, IDA BUSINESS PARK, DANGAN, GALWAY, IRELAND OR AT ONE VAN DE GRAAFF
DRIVE, SIXTH FLOOR, BURLINGTON, MASSACHUSETTS 01803, U.S.A.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on September 15, 1997, there were outstanding and
entitled to vote an aggregate of 18,639,857 ordinary shares of the Company,
$0.0025 nominal value per share, constituting all of the voting shares of the
Company. All shareholders of record at the time appointed for the holding of the
Extraordinary General Meeting are entitled to vote at the Extraordinary General
Meeting. All Ordinary Shares of the Company, including those represented by
American Depositary Shares of the Company (''ADSs'') are referred to herein as
the ''Ordinary Shares.'' All references in this Proxy Statement to past
transactions in the Company's Ordinary Shares reflect the 400-for-1 division of
the Company's Ordinary Shares which occurred on September 27, 1995, and the
subsequent share dividend of 2.725 Ordinary Shares for each post-division share.
Three holders of Ordinary Shares, each appearing in person or represented
by proxy, shall constitute a quorum for the transaction of business at the
Extraordinary General Meeting.
The Bank of New York, as depositary (the ''Depositary''), is the
shareholder of record in respect of those Ordinary Shares represented by ADSs.
The Company has requested the Depositary, and the Depositary is required
pursuant to the Deposit Agreement, to mail to all owners of American Depository
Receipts (''ADRs'') representing ADSs of the Company (the ''Owners'') a notice,
the form of which notice
<PAGE>
will be in the sole discretion of the Depositary, containing (a) the information
included in the notice of meeting received by the Depositary from the Company,
(b) a statement that the Owners as of the close of business on a specified
record date will be entitled, subject to any applicable provision of Irish law
and of the Memorandum and Articles of Association of the Company, to instruct
the Depositary as to the exercise of the voting rights, if any, pertaining to
the amount of Ordinary Shares or other deposited securities represented by their
respective ADSs, (c) a statement that Owners who instruct the Depositary as to
the exercise of their voting rights will be deemed to have instructed the
Depositary or its authorized representative to call for a poll (i.e., a written
vote) with respect to each matter for which instructions are given, subject to
any applicable provisions of Irish law and of the Company's Memorandum and
Articles of Association and (d) a statement as to the manner in which such
instructions may be given, including an express indication that instructions may
be given or deemed given to the Depositary to give a discretionary proxy to a
person designated by the Company, as described in the next paragraph. Upon the
written request of an Owner, received on or before the date established by the
Depositary for such purpose, the Depositary will endeavor, insofar as
practicable, to vote or cause to be voted the amount of Ordinary Shares or other
deposited securities represented by the ADSs evidenced by such Owner's ADRs in
accordance with the nondiscretionary instructions set forth in such request.
Accordingly, pursuant to the Company's Memorandum and Articles of Association
and applicable Irish law, the Depositary will cause its authorized
representative to attend each meeting of holders of Ordinary Shares and call for
a poll as instructed in accordance with clause (c) above for the purpose of
effecting such vote. The Depositary will not vote or attempt to exercise the
right to vote that attaches to the Ordinary Shares or other depositary
securities, other than in accordance with such instructions or deemed
instructions.
The Deposit Agreement provides that if no instructions are received by the
Depositary from any Owner with respect to any of the deposited securities
represented by the ADSs evidenced by such Owner's ADRs on or before the date
established by the Depositary for such purpose, the Depositary will deem such
Owner to have instructed the Depositary to give a discretionary proxy to a
person designated by the Company with respect to such deposited securities and
the Depositary will give a discretionary proxy to a person designated by the
Company to vote such deposited securities, under circumstances and according to
the terms as set forth in the Deposit Agreement; provided, that no such
instructions will be deemed given and no such discretionary proxy will be given
with respect to any matter as to which the Company informs the Depositary in
writing that the Company does not wish such proxy to be given.
Voting at the Extraordinary General Meeting of Shareholders is by a show of
hands unless a poll (i.e., a written vote) is duly demanded. Votes may be given
either personally or by proxy. Subject to the Company's Memorandum and Articles
of Association and to any rights or restrictions attaching to any class or
classes of shares, on a show of hands each shareholder present in person and
every proxy has one vote but so that no individual can have more than one vote,
and on a poll each shareholder shall have one vote for each share of which he is
the holder. Where there is an equality of votes, whether on a show of hands or
on a poll, the Chairman of the meeting is entitled to a casting vote in addition
to any other vote he may have. A poll may be demanded by (i) the Chairman of the
meeting, or (ii) at least three shareholders present (in person or by proxy)
entitled to vote at the meeting, or (iii) any shareholder or shareholders
present (in person or by proxy) representing not less than one-tenth of the
total voting rights of all the shareholders entitled to vote at the meeting, or
(iv) any shareholder or shareholders present (in person or by proxy) holding
shares conferring the right to vote at the meeting being shares on which there
have been paid up sums in the aggregate equal to not less than one-tenth of the
total sum paid up on all the shares conferring that right. The Depositary has
agreed to demand a poll at general meetings of shareholders in respect of every
resolution on which the Depositary has been instructed by an owner to vote.
The affirmative vote of 75% of the votes cast by the holders of outstanding
Ordinary Shares is required for the approval of Proposal 1 and Proposal 2 set
forth below for consideration at this Extraordinary General Meeting. The
affirmative vote of a majority of the votes cast by the holders of
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outstanding Ordinary Shares is required for the approval of Proposal 3 set forth
below for consideration at this Extraordinary General Meeting.
Ordinary Shares that abstain from voting as to a particular matter, and
shares held in "street name'' by a broker or nominee who indicates on a proxy
that he or she does not have discretionary authority to vote such shares as to a
particular matter, will not be counted as votes in favor of such matter, and
also will not be counted as shares voted on such matter. Accordingly,
abstentions and "'broker non-votes'' will have no effect on the voting on
matters, including all proposals, presented for shareholder approval at this
Extraordinary General Meeting, that require the affirmative vote of a certain
percentage of the shares voting on the matter.
PROPOSAL 1
The following brief descriptions of the Company's share capital and certain
provisions of the Company's Memorandum and Articles of Association do not
purport to be complete and are subject to and are qualified in their entirety by
reference to the provisions of the Company's Memorandum and Articles of
Association.
The authorized share capital of the Company is $100,000 and
IR(Pounds)30,000 divided by 40,000,000 Ordinary Shares, nominal value $0.0025
per share, and 30,0000 Deferred Shares, nominal value IR(Pounds)1.00 per share,
respectively.
Irish law requires that a certain amount of the Company's share capital be
denominated in Irish pounds, and the Deferred Shares meet this requirement. The
Deferred Shares carry no voting or dividend rights and carry only minimal rights
on a liquidation.
Irish law restricts the power of the directors of a company (other than
under certain employee share plans) to allot shares or to grant share
subscription rights and rights to convert any security into shares unless either
the articles of association of such company or a resolution of the shareholders
authorizes the board of directors to do so. No such authority may be given for a
period in excess of five years. By an ordinary resolution of the Company's
shareholders passed on September 27, 1995, the Board of Directors has been
authorized to allot up to 35,972,000 Ordinary Shares during the period ending on
September 27, 2000.
Irish law also provides that, in general, a company may not allot any
shares (or grant a right to subscribe for or to convert any securities into
shares in a company) for cash unless it has first offered those shares, on a pro
rata basis, to the existing shareholders of the company. This preemptive right
may be disapplied for a period of up to five years by the articles of
association of the company or by a special resolution passed by the shareholders
of the company. By a special resolution of the shareholders of the Company
passed on September 27, 1995, this preemptive right was disapplied in respect of
all allotments of shares to be made by the Board of Directors pursuant to the
authorization given to them by the ordinary resolution referred to above in the
preceding paragraph.
BOARD RECOMMENDATION
The Board of Directors believes that in order to maintain maximum
flexibility, it is in the best interests of the Company to increase the
Company's authorized share capital to $187,500 divided by 75,000,000 Ordinary
Shares, and for the shareholders to authorize the Board of Directors to allot up
to such number of shares as are authorized but unissued from time to time during
the period ending on October 22, 2002. Such shares may be allotted pursuant to
existing and other share option plans and for
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<PAGE>
other general corporate purposes and may be allotted for cash. Therefore, the
Board of Directors recommends a vote FOR the resolution attached hereto in Annex
-----
A, which resolution, among other things:
- -
a.) authorizes an increase in the Company's authorized share capital
by US $87,500 divided into 35,000,000 Ordinary Shares of US $0.0025 each;
b.) authorizes an amendment to the Articles of Association of the
Company to document the increase in share capital described above; and
c.) authorizes the Directors of the Company to exercise all the
powers of the Company to allot, free of shareholders' preemption rights,
securities of an aggregate nominal amount of US $140,900.36 during the
period expiring on October 22, 2002.
PROPOSAL 2
Under the existing Articles of Association, the Directors require the
authorization of shareholders in order to make a capitalization issue of
securities of the Company to the holders of the Company's Ordinary Shares, a
process whereby reserves of the Company are applied in paying up shares or
debentures of the Company which are then issued fully paid up to the holders of
the Company's Ordinary Shares, in proportion to their existing shareholdings. A
capitalization issue is equivalent to a "stock split" via a share dividend by a
U.S. corporation.
BOARD RECOMMENDATIONS
The Board of Directors believes that it is desirable that the Directors
should have the power to make capitalization issues of securities to the holders
of the Company's Ordinary Shares, without the requirement for shareholder
approval. In particular, the Board considers it desirable that it should be
competent to make such issues for the purpose of effecting a reduction in the
per share price, when appropriate, without incurring the cost and delay of
obtaining shareholders' authorization. Therefore, the Board of Directors
recommends a vote FOR the resolution attached hereto in Annex B, which, among
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other things, amends the Articles of Association to authorize the Board of
Directors, without the approval of shareholders, to make capitalization issues
of securities to the Company's Ordinary Shareholders.
PROPOSAL 3
The Board of Directors believes the continued growth and profitability of
the Company depends, in large part, upon the ability, of the Company to maintain
a competitive position in attracting and retaining key personnel. On April 24,
1997, the Board of Directors adopted, subject to shareholder approval, an
amendment to the Company's 1995 Share Option Plan (the "1995 Option Plan"), that
increased from 2,890,000 to 5,000,000 the number of Ordinary Shares available
for issuance under the 1995 Option Plan (subject to a proportionate adjustment
for certain changes in the Company's capitalization, such as a stock split) (the
''Plan Amendment''). As of September 15, 1997, approximately 581,000 Ordinary
Shares remain available for future awards under the 1995 Option Plan.
The following summary describes the 1995 Option Plan, as amended by the
Plan Amendment. This summary is qualified in all respects by reference to the
full text of the 1995 Option Plan, a copy of which is available upon request
from the Secretary of the Company.
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The 1995 Option Plan was adopted by the Board of Directors in August 1995
and approved by the shareholders of the Company in September 1995. The 1995
Option Plan provides for the grant of options to purchase Ordinary Shares to
employees, officers and directors of, and consultants and advisers to, the
Company and its subsidiaries. As of September 1, 1997, approximately 969 persons
were eligible to participate in the 1995 Option Plan.
Under the 1995 Option Plan, the Company may grant options that are intended
to qualify as incentive stock options within the meaning of Section 422 of the
United States Internal Revenue Code of 1986, as amended (the ''Code'')
(''incentive stock options''), or options not intended to qualify as incentive
stock options (''non-statutory options''). Incentive stock options may only be
granted to employees of the Company. A total of 2,890,000 Ordinary Shares may be
issued upon the exercise of options granted under the 1995 Option Plan. The
maximum number of shares with respect to which options may be granted to any
employee under the 1995 Option Plan shall not exceed 223,500 Ordinary Shares
during any calendar year.
The 1995 Option Plan is administered by the Compensation Committee of the
Board of Directors. Subject to the provisions of the 1995 Option Plan, the
Compensation Committee has the authority to select the employees to whom options
are granted and determine the terms of each option, including (i) the number of
Ordinary Shares subject to the option, (ii) when the option becomes exercisable,
(iii) the option exercise price, which, in the case of incentive stock options,
must be at least 100% (110% in the case of incentive stock options granted to a
shareholder owning in excess of 10% of the Company's Ordinary Shares) of the
fair market value of the Ordinary Shares as of the date of grant, and (iv) the
duration of the option (which, in the case of incentive stock options, may not
exceed ten years).
Payment of the option exercise price may be made in cash (or by delivery of
a promissory note payable on terms specified by the Compensation Committee) in a
manner consistent with Section 422 of the Code and Rule 16b-3 (''Rule 16b-3'')
under the Securities Exchange Act of 1934, as amended (the ''Exchange Act'').
Options are not assignable or transferable except by will or the laws of descent
and distribution and, in the case of non-statutory options, pursuant to a
qualified domestic relations order (as defined in the Code).
The Compensation Committee may, in its sole discretion, include additional
provisions in any option or award granted or made under the 1995 Option Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or such other
provisions as shall be determined by the Compensation Committee, so long as such
provisions are not inconsistent with the 1995 Option Plan or applicable law. The
Compensation Committee may also, in its sole discretion, accelerate or extend
the date or dates on which all or any particular option or options granted under
the 1995 Option Plan may be exercised.
The Compensation Committee may amend the 1995 Option Plan at any time.
However, no such amendment shall be made without prior approval of the
shareholders of the Company if such amendment requires shareholder approval
under Section 422 of the Code or any successor provision with respect to
incentive stock options, or under Rule 16b-3.
As option grants under the 1995 Option Plan are discretionary, the Company
cannot now determine the number of options to be received by the Company's Named
Executive Officers, by all current executive officers as a group, by non-
employee directors as a group or by non-executive officer employees as a group.
The number of such options shall be determined by the Compensation Committee
pursuant to the terms of the 1995 Option Plan. During 1996, the Named Executive
Officers received options under the 1995 Option Plan to purchase an aggregate of
14,861 Ordinary Shares, at a weighted average exercise price of $16.92 per
share, all current executive officers as a group received options to purchase an
aggregate of 17,445 Ordinary Shares, at a weighted average exercise price of
$16.91 per share, and all employees, excluding current executive officers as a
group, received options to purchase an aggregate of 111,142 Ordinary Shares, at
a weighted
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average exercise price of $26.81 per share. During 1996, no non-employee
director received options under the 1995 Option Plan. For additional information
regarding the ownership of options by the Named Executive Officers, see
''Executive Compensation--Option Grants'' and ''--Option Exercises and
Holdings.'' On September 15, 1997, the closing price of the ADSs on the Nasdaq
National Market was $64.75, and options to purchase an aggregate of 1,845,662
Ordinary Shares were outstanding under the 1995 Option Plan.
Tax Consequences
The following summary of certain tax consequences of the grant and exercise
of options under the 1995 Option Plan is based on the laws, regulations,
administrative rulings and revenue practices of the Republic of Ireland, the
United States and Canada in force and as interpreted by the relevant authorities
as of the date of this Proxy Statement, and such laws, regulations and
administrative rulings are subject to change in the future.
This summary is of a general nature only and does not discuss all aspects
of Irish, U.S. or Canadian tax that may be relevant to a particular optionee.
Optionees are advised to consult their own tax advisers with respect to the tax
consequences in the Republic of Ireland, the United States and Canada of being
an optionee. Each person who receives options under the 1995 Option Plan is
given a copy of the Prospectus relating to the 1995 Option Plan, which contains
more detailed information regarding the tax consequences of being an optionee.
Irish Tax Consequences
Resident Optionees. The grant of an option to a person who is domiciled
and resident in the Republic of Ireland and not a resident in any other
jurisdiction and is an employee or director of the Company (a "Resident
Optionee"), does not create a taxable benefit for the Resident Optionee at the
date of grant. The optionee will, however, realize taxable income for Irish
income tax purposes upon the exercise of the option in an amount equal to the
excess of the market value of the Ordinary Shares at the date of exercise of the
option over the amount paid for the Ordinary Shares by the Resident Optionee.
The amount is treated as taxable income of the Resident Optionee for the tax
year in which the option is exercised and is taxable at the Resident Optionee's
appropriate rate of tax.
Upon the sale of the Ordinary Shares, Irish capital gains tax will be
imposed. The taxable gain is calculated by taking the indexed cost of the shares
and subtracting it from the sale proceeds. However, added to the cost is the
amount of income, if any, realized upon the exercise of the option. The
allowable cost of the Ordinary Shares can be indexed by reference to the rate of
inflation as published in official statistics between the date of acquisition
and the date of disposal, provided that the length of time exceeds twelve
months.
Non-Resident Optionees. The Irish income tax consequences for a person
who is not domiciled, a resident of or ordinarily resident in the Republic of
Ireland, but is an employee or director of the Company (a "Non-resident
Optionee"), on the exercise of options are uncertain as such consequences depend
on a number of variable factors, for example the applicable double taxation
treaty. Non-resident Optionees should consult their own tax advisors to
determine the Irish tax consequences for them of being Non-resident Optionees.
Assuming that the ADSs representing the Ordinary Shares issuable upon the
exercise of options under the 1995 Option Plan will be quoted on the Nasdaq
National Market, Non-resident Optionees will have no liability for Irish capital
gains tax in respect of disposal of the Ordinary Shares.
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U.S. Federal Income Tax Consequences
The following is a summary of the U.S. federal income tax treatment of
incentive and non-statutory stock options received by persons who are resident
in (or are citizens of) the United States for U.S. federal income tax purposes.
Generally, persons who are not resident in (nor citizens of) the United States
for U.S. federal income tax purposes and who have not performed services in the
United States will not be subject to any United States taxes upon the grant or
exercise of options or upon the disposition of Ordinary Shares.
Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of Ordinary Shares acquired through the exercise of
the option (''ISO Stock''). The exercise of an incentive stock option, however,
may subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the ''Grant Date'') and one year
from the date the option was exercised (the ''Exercise Date''), then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a ''Disqualifying Disposition''), then all or a portion of
the gain recognized by the participant will be ordinary compensation income and
the remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If the participant sells ISO Stock for less than the exercise price, then
the participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a long-
term capital loss if the participant has held the ISO Stock for more than one
year prior to the date of sale.
For purposes of the ''alternative minimum tax'' applicable to individuals,
the exercise of an incentive stock option is treated in the same manner as the
exercise of a non-qualified option. Thus, in the year of option exercise an
optionee must include the difference between the exercise price and the fair
market value of the shares on the date of exercise in alternative minimum
taxable income. The alternative minimum tax is imposed upon an individual's
alternative minimum taxable income at a rates of 26% to 28% but only to the
extent that such tax exceeds the taxpayer's regular income tax liability for the
taxable year.
Non-Qualified Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the Ordinary Shares acquired through the exercise of the option (''NSO
Stock'') on the Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NSO Stock over
the participant's tax basis in the NSO Stock. This capital gain or loss will be
a long-term gain or loss if the participant has held the NSO Stock for more than
one year prior to the date of sale.
Maximum Income Tax Rates on Capital Gain and Ordinary Income
Long-term capital gain will be taxable at a maximum rate of 20% if
attributable to Ordinary Shares held for more than eighteen months and at a
maximum rate of 28% if attributable to Ordinary Shares held for more than one
year but not more than eighteen months. Short-term capital gain and ordinary
income will be taxable at a maximum rate of 39.6%. Phaseouts of personal
exemptions and reductions of allowable itemized deductions at higher levels of
income may result in slightly higher marginal tax rates. Ordinary compensation
income will also be subject to a medicare tax and, under certain circumstances,
a social security tax.
Tax Consequences to the Company
The grant of an incentive or non-statutory stock option under the 1995
Option Plan will have no tax consequences to the Company. Moreover, in general,
neither the exercise of an incentive stock option nor the sale of any Ordinary
Shares acquired under the 1995 Option Plan will have any tax consequences to the
Company. The Company generally will be entitled to a business-expense deduction,
however, with respect to any ordinary compensation income recognized by a
participant under the 1995 Option Plan, including as a result of the exercise of
a non-statutory stock option or a Disqualifying Disposition. Any such deduction
will be subject to the limitations of Section 162(m) of the Code. The Company
will have a withholding obligation with respect to any ordinary compensation
income recognized under the 1995 Option Plan (other than income recognized as a
result of a Disqualifying Disposition) by participants who are employees or are
otherwise subject to United States income tax withholding.
-7-
<PAGE>
Canadian Federal Income Tax Consequences
There are no Canadian federal income tax consequences to the Company or to
an optionee upon the grant of an option under the 1995 Option Plan.
An optionee who is a resident of Canada at the time an option is exercised
will be subject to Canadian federal income tax in respect of the benefit
received upon exercising the option, as described below. To the extent that the
stock option benefit relates to duties of an office (including the position of
director) or employment performed in a country other than Canada and such
benefit is subject to tax in that country, an optionee may claim a deduction
from Canadian tax otherwise payable in respect of such foreign tax paid.
To the extent that the granting of an option relates to the duties of an
office (including the position of director) or employment performed in Canada by
an optionee who is non-resident in Canada at the time of exercising, the
optionee will be subject to Canadian federal income tax in respect of the
benefit received upon exercising the option.
An optionee who is a resident of the United States will be exempt by virtue
of the Canada-United States Income Tax Convention from the otherwise applicable
Canadian federal income tax in respect of the benefit received upon exercising
an option that represents remuneration for the duties of employment performed in
a particular year in Canada, provided that the amount of the benefit, together
with all other remuneration in respect of those duties, does not exceed CDN
$10,000, or provided that the optionee is present in Canada for a period or
periods not exceeding a total of 183 days in that year.
An optionee who is a resident of the Republic of Ireland will be exempt by
virtue of the Canada-Ireland Income Tax Agreement from the otherwise applicable
Canadian federal income tax in respect of the benefit received upon exercising
an option that represents remuneration for the duties of employment performed in
a particular year in Canada, provided that the optionee is present in Canada for
a period or periods not exceeding a total of 183 days in that year, the
remuneration is not paid by or on behalf of a Canadian resident employer, and
the remuneration is not deducted from the profits of a permanent establishment
or a fixed base which the Company has in Canada.
Where an optionee subject to Canadian federal income tax acquires shares in
a particular year by exercising an option under the 1995 Option Plan, the
excess, if any, of the value of those shares at the time of acquisition over the
price paid for the shares will be a taxable benefit from employment to the
optionee in that year. An amount equal to one-quarter of this taxable benefit
may be deducted in computing the taxable income of the optionee, provided that
(a) the option was granted after February 15, 1984, (b) the exercise price is
not less than the fair market value of the shares at the time the option was
granted and (c) immediately after the option was granted, the optionee was
dealing at arm's-length with the Company.
The amount of the taxable benefit, if any, received by an optionee upon
exercise of an option will be added to the adjusted cost base of the Ordinary
Shares acquired pursuant to the option. The adjusted cost base to an optionee of
shares acquired under the 1995 Option Plan will be averaged with the adjusted
cost base to the optionee of any shares acquired otherwise than under the 1995
Option Plan.
The excess of proceeds of disposition of the shares over their adjusted
cost base is treated as a capital gain, 75% of which is included in income for
Canadian tax purposes. Non-residents of Canada will generally be exempt from
Canadian tax on the gain.
-8-
<PAGE>
BOARD RECOMMENDATION
The Board of Directors believes that the future growth and profitability of
the Company depends, in large part, upon the ability of the Company to maintain
a competitive position in attracting, retaining and motivating key personnel.
Accordingly, the Board of Directors believes that the amendment to the 1995
Option Plan is in the best interests of the Company and its shareholders and
recommends a vote FOR Proposal 3.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table sets forth certain
information with respect to the annual and long-term compensation for the last
two fiscal years of the Company's Chief Executive Officer and the Company's four
other most highly paid executive officers whose annual salary and bonus for 1996
exceeded $100,000 (collectively, the ''Named Executive Officers''):
-9-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Award(s)
-------------
Annual Compensation Other Annual Securities All Other
------------------- Compensation Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) Options(#) ($)(3)
- --------------------------- ---- --------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Saville(4) .......... 1996 $ 210,000 $ -- $ -- 2,894 $ --
Chairman 1995 200,000 $ -- -- 23,095 --
John J. Boyle, III ........... 1996 224,700 168,525 -- 6,094 --
Chief Executive Officer 1995 214,000 160,500 -- 371,684 --
Marc J. Venator(5) ............ 1996 157,500 47,250 -- 2,821 15,591
Chief Operating Officer 1995 102,116 30,082 -- 180,940 21,574
John Kiley(6).................. 1996 150,000 85,000 -- 450 --
Senior Vice President, 1995 25,962 10,192 -- 100,000 --
Global Sales and Marketing
Michael Shulist(4)(7).......... 1996 122,640 61,792 -- 2,602 3,218
Senior Vice President, 1995 91,832 27,456 -- 132,728 1,184
Global Consulting Services
</TABLE>
- ------
(1) In accordance with the rules of the SEC, other compensation in the form of
prerequisites and other personal benefits has been omitted because such
prerequisites and other personal benefits constituted less than the lesser
of $50,000 or 10% of the total annual salary and bonus for the Named
Executive Officer.
(2) The Company does not have a long-term compensation program that includes
long-term incentive payouts. No restricted stock awards or stock
appreciation rights were granted to any of the Named Executive Officers
during the years ended December 31, 1995 or December 31, 1996.
(3) Consists of amounts paid by the Company for relocation expenses in the case
of Mr. Venator. Consists of amounts paid by the Company for automobile
lease payments in the case of Mr. Shulist.
(4) Amounts reflected in this section have been converted into U.S. dollars at
the conversion ratio in effect on December 31, 1996 as reported in the New
York Times on that date (US $1.00 = CDN $1.36 equivalent to CDN $1.00 = US
$0.73).
(5) Mr. Venator joined the Company in April 1995. See ''--Agreements with Named
Executive Officers.''
(6) Mr. Kiley joined the Company in October 1995. See ''--Agreements with Named
Executive Officers.''
(7) Mr. Shulist joined the Company in March 1995. See ''--Agreements with Named
Executive Officers.''
-10-
<PAGE>
Option Grant Table. The following table sets forth certain information
regarding options granted during the year ended December 31, 1996 by the Company
to the Named Executive Officers.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTION ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
GRANTED (#) YEAR (#/SH) DATE 5% ($) 10% ($)
---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Saville ..... 2,894 2.30% $16.38 1/1/06 $ 29,812 $ 75,549
John J. Boyle, III ... 5,419 4.2% 16.38 1/1/06 55,823 141,466
675 0.5% 21.76 2/28/97 489 978
Marc J. Venator ...... 2,821 2.2% 16.38 1/1/06 29,060 73,644
John J. Kiley ........ 450 0.3% 21.76 2/28/97 326 652
Michael Shulist ....... 2,227 1.7% 16.38 1/1/06 22,941 58,137
375 0.3% 21.76 2/28/97 272 543
</TABLE>
- -------------
(1) These columns show the hypothetical gains or option spreads of the options
granted during the fiscal year ended December 31, 1996 based on the fair
market value of the Ordinary Shares on the date of grant and assumed annual
compound share appreciation rates of 5% and 10% over the full term of the
options. The assumed rates of appreciation are mandated by the rules of the
SEC and do not represent the Company's estimate or projection of future
share prices. Actual gains, if any, on option exercises will depend on the
timing of such exercise and the future performance of the Company's ADSs.
Values shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise.
-11-
<PAGE>
Year-End Option Table. The following table sets forth certain information
regarding options exercised during the year ended December 31, 1996 and stock
options held as of December 31, 1996 by the Named Executive Officers.
AGGREGATE OPTION EXERCISES AS OF DECEMBER 31, 1996
AND YEAR-END OPTION VALUES
<TABLE>
Number of Securities
Underlying Unexercised In The Money
Number of Options at Options at
Shares Value Fiscal Year-End Fiscal Year End(2)
Acquired On Realized --------------------------- --------------------------
Exercise ($)(1) Exercisable Unexercisable Exercisable Unexercisable
------------ -------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce A. Saville 0 0 10,592 15,397 $ 316,232 $ 492,165
John J. Boyle, III 10,000 229,471 310,603 87,165 10,970,611 2,777,387
20,000 610,819
50,000 2,061,262
25,000 1,071,179
8,000 330,577
17,000 703,726
Marc J. Venator 30,000 666,806 334 67,552 10,676 2,159,300
11,612 287,070
1,763 30,191
20,000 444,376
30,000 1,027,293
15,737 566,532
2,821 83,558
3,442 128,524
John J. Kiley 30,000 1,040,625 3,333 67,117 102,073 2,050,166
Michael Shulist 22,600 502,327 76,611 36,119 2,500,384 1,149,631
</TABLE>
- -------------
(1) The values in this column represent the last reported sale price of the
ADSs on the respective date of exercise, less the respective option
exercise price.
(2) Value is based on the closing sales price of the Company's ADSs on December
31, 1996 ($40.625), the last trading day of the Company's 1996 fiscal year,
less the applicable option exercise price.
-12-
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company filed a Registration Statement on Form S-1 (the ''Registration
Statement'') which was declared effective on June 20, 1996. In connection with
the Registration Statement, each of the Company's directors and executive
officers filed a Form 4 reporting such persons beneficial ownership Ordinary
Shares as of June 20, 1996. Since the Registration Statement was declared
effective based solely on its review of copies of reports filed by all persons
required to file reports (''Reporting Persons'') pursuant to Section 16(a) of
the Exchange Act of 1934 or written representations from certain Reporting
Persons that no Form 5 filing was required for such persons, the Company
believes that during fiscal 1996 all filings required to be made by its
Reporting Persons were timely made in accordance with the requirements of the
Exchange Act.
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company's employment agreement with Messrs. Saville and Boyle have
expired by their terms. The Company is currently negotiating the terms for a
new employment agreement with each of Messrs. Boyle and Saville.
The Company has entered into employment agreements with Messrs. Venator,
Shulist and Kiley. Pursuant to such agreements, such officers are entitled to
receive, in addition to base salary, a bonus, the amount of which is dependent
upon such officer's individual performance and the overall performance of the
Company. The Company may terminate such officers' employment with or without
cause.
-13-
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Ordinary Shares as of September 15, 1997 (i) by each person who is known by the
Company to beneficially own more than 5% of the outstanding Ordinary Shares,
(ii) by each director, (iii) by each of the Named Executive Officers, and (iv)
by all current directors and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) ORDINARY SHARES(2)
- ------------------------------------ ------------- ------------------
<S> <C> <C>
FMR Corp.(3)....................................... 1,956,700 10.5%
82 Devonshire Street
Boston, MA 02109
Entities affiliated with Vinik Partners, L.P.
and Vinik Asset Management, L.P.(4)................ 1,401,200 7.6%
James B. Murray, Jr.(5)............................ 704,310 3.8%
Bruce A. Saville(6)................................ 618,708 3.3%
Saville Systems PLC
4445 Calgary Trail
Edmonton, AB
Canada, T6H 5R7
David P. Mixer(7).................................. 446,590 2.4%
John J. Boyle, III(8).............................. 274,679 1.5%
Michael Shulist(9)................................. 95,363 *
John A. Blanchard, III(10)......................... 21,256 *
Brian E. Boyle(11)................................. 20,806 *
John W. Sidgmore(12)............................... 20,806 *
Fergus G. McGovern(12)............................. 15,000 *
William F. Cunningham(12).......................... 10,806 *
Richard A. Licursi(12)............................. 10,406 *
Marc J. Venator(12)................................ 10,000 *
John J. Kiley(13).................................. 3,783 *
All current directors and executive officers as a group
(15 persons)(14)................................ 2,272,364 11.9%
</TABLE>
- -------------
* Less than 1% of the outstanding Ordinary Shares
-14-
<PAGE>
(1) Each person has sole investment and voting power with respect to the
shares indicated, except as otherwise noted. The number of Ordinary
Shares beneficially owned by each director or executive officer is
determined under the rules of the SEC and the information is not
necessarily indicative of beneficial ownership for any other purpose.
The inclusion herein of any shares as beneficially owned does not
constitute an admission of beneficial ownership. Any reference in
these footnotes to shares subject to share options held by the person
in question refers to share options held by such person that are
currently exercisable or exercisable within 60 days after September
15, 1997 (''Presently Exercisable Options'').
(2) The number of shares deemed outstanding includes 18,639,857 shares
outstanding as of September 15, 1997 and any shares subject to share
options held by the person or entity in question that are Presently
Exercisable Options.
(3) Includes 715,400 shares owned by Fidelity Contrafund, a wholly owned
subsidiary of FMR Corp.
(4) Includes 582,900 Ordinary Shares beneficially owned by Vinik Partners,
L.P., 772,100 Ordinary Shares owned by Vinik Overseas Fund, Ltd., and
46,200 Ordinary Shares owned by a discretionary account (the
"Discretionary Account") managed by Vinik Asset Management, L.P. Each
of Vinik Overseas Fund, Ltd. and the Discretionary Account is party to
an investment management agreement with Vinik Asset Management, L.P.,
pursuant to which Vinik Asset Management, L.P., L.P., has investment
authority with respect to securities held in such account. The General
partners of Vinik Partners, L.P., and Vinik Management, L.P., share
the same managing members.
(5) Includes 31,506 shares held by The James B. and Bruce R. Murray, Jr.
Foundation, of which Mr. Murray is the sole trustee.
(6) All shares are owned of record by Grannarville Interest Group Inc. Mr.
Saville owns 100% of the voting securities of Grannarville Interest
Group Inc. Includes 18,290 shares issuable pursuant to Presently
Exercisable Options.
(7) Includes 30,287 shares held by the Trimix Foundation, of which Mr.
Mixer is one of three directors.
(8) Includes 273,848 shares issuable pursuant to Presently Exercisable
Options.
(9) Includes 94,483 shares issuable pursuant to Presently Exercisable
Options.
(10) Includes 20,806 shares issuable pursuant to Presently Exercisable
Options.
(11) Comprised solely of shares issuable pursuant to Presently Exercisable
Options that are held in trust for the benefit of Mr. Boyle's
children. Mr. Boyle disclaims beneficial ownership of these shares.
(12) Comprised solely of shares issuable pursuant to Presently Exercisable
Options.
(13) Includes 3,333 shares issuable pursuant to Presently Exercisable
Options.
(14) Includes 514,082 shares issuable pursuant to Presently Exercisable
Options.
OTHER MATTERS
The Board of Directors does not know of any other matters that may come
before the Extraordinary General Meeting. However, if any other matters are
properly presented to the Extraordinary General Meeting, it is the intention of
the Chairman of the Extraordinary General Meeting, as the person named in the
accompanying proxy, to vote, or otherwise act, in accordance with his judgment
on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be
-15-
<PAGE>
requested to forward proxy soliciting material to the owners of shares held in
their names, and the Company will reimburse them for their out-of-pocket
expenses in this connection. The Depositary is required pursuant to the Deposit
Agreement to mail to all Owners a notice, which indicates the voting rights of
such Owners with respect to their ADRs as more fully described in this Proxy
Statement.
By Order of the Board of Directors,
Peter M. Quinlan, Secretary
September 29, 1997
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE
EXTRAORDINARY GENERAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED
TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. PROMPT RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE
EXTRAORDINARY GENERAL MEETING AND YOUR COOPERATION WILL BE APPRECIATED.
SHAREHOLDERS WHO ATTEND THE EXTRAORDINARY GENERAL MEETING MAY VOTE THEIR SHARES
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
-16-
<PAGE>
Annex A
-------
PROPOSAL 1
As a special resolution:
THAT:
a. the authorized share capital be increased by US $87,500 to US $187,500
and IR(Pounds)30,000 by the creation of 35,000,000 new Ordinary Shares
of US $0.0025 each;
b. the Articles of Association of the Company be altered by the
substitution for paragraph (A) of Article 2 of the following new
paragraph:
i. "The capital of the Company is US $187,500 and IR(Pounds)30,000
divided into 75,000,000 Ordinary Shares of US $0.0025 each and
30,000 Deferred Shares of IR(Pounds)1.00 each.";
c. the Directors of the Company be and are hereby generally and
unconditionally authorized, pursuant to and in accordance with section
20 of the Companies (Amendment) Act, 1983 (the "Act"), to exercise all
the powers of the Company to allot relevant securities (as defined by
section 20(1) of the Act) up to an aggregate nominal amount of US
$140,900.36 (but in any case not exceeding the amount of the
authorized but unissued ordinary share capital immediately after the
passing of this Resolution) during the period commencing on and
including the date of the passing of this Resolution and expiring on
October 22, 2002, save that the Company may, before such expiry, make
offers or agreements which would or might require relevant securities
to be allotted after such expiry and the Directors may allot relevant
securities in pursuance of such offers or agreements as if the
authority hereby conferred had not expired;
d. the Directors of the Company be and are hereby empowered, pursuant to
section 24 of the Act, to allot equity securities (within the meaning
of section 23 of the Act) for cash pursuant to the authority conferred
on the Directors by paragraph (c) of this Resolution, as if section
23(1) of the Act did not apply to any such allotment, save that the
Company may, before the expiry of the power hereby conferred, make
offers or agreements which would or might require equity securities to
be allotted after such expiry and the Directors may allot equity
securities in pursuance of such offers or agreements as if the power
hereby conferred had not expired; and
e. all authorities and powers previously conferred on the Directors under
sections 20 and 24 of the Act be and are hereby revoked, provided that
such revocation shall not have retrospective effect.
-17-
<PAGE>
Annex B
-------
PROPOSAL 2
As a special resolution:
THAT the Articles of Association of the Company be altered by the deletion
from Article 115 of the words "Without prejudice to any powers conferred on
the Directors by these Articles, the Company in general meeting may
resolve, upon the recommendation of the Directors,", by the deletion from
Article 116 of the words "Without prejudice to any powers conferred on the
Directors as aforesaid, the Company in general meeting may resolve, on the
recommendation of the Directors," and by the substitution for the words so
deleted from each of those Articles of the words "The Directors may
resolve".
-18-
