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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:
[_] 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 (S)240.14a-11(c) or (S)240.14a-12
SAVILLE SYSTEMS PLC
------------------------------------------------
(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
----------------
Notice is hereby given that an Extraordinary General Meeting of Saville
Systems PLC (the "Company") will be held at The GlenLo 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.
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' preemptive
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 to the holders of the Company's outstanding Ordinary Shares
as the Directors 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.
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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 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 Depositary Receipts
("ADRs") representing ADSs of the Company (the "Owners") a notice, the form of
which notice will be in the sole discretion of the Depositary, containing (a)
the information included in the notice of meeting received by the
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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, and (c) 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 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.
2
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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
30,000 Deferred Shares, nominal value IR(Pounds)1.00 per share, respectively.
As of September 15, 1997, the Company had 18,639,857 Ordinary Shares issued
and outstanding.
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 into 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 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' preemptive rights, securities
of an aggregate nominal amount of US $140,900.36 during the period expiring
on October 22, 2002.
3
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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 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 remained 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.
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 5,000,000 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
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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, subject to
applicable law, 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 (as defined below), by all current executive officers
as a group, by non-employee Directors as a group or by all current non-
executive officers 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 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.
5
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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.
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.
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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 rate 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.
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
7
<PAGE>
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.
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.
8
<PAGE>
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 $100,000 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARD(S)
----------------- ------------
NAME AND OTHER ANNUAL SECURITIES ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR ($) ($) ($)(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 Consult-
ing 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
$0.73).
(5) Mr. Venator joined the Company in April 1995.
(6) Mr. Kiley joined the Company in October 1995.
(7) Mr. Shulist joined the Company in March 1995.
9
<PAGE>
Option Grant Table. The following table sets forth certain information
regarding options granted during the year ended December 31, 1996 by the
Company to the Named Executive Officers.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------
POTENTIAL
REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTION STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION ------------------
GRANTED (#) YEAR (#/SH) DATE 5% ($) 10% ($)
----------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bruce A.
Saville......... 2,894 2.3% $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.
10
<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>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
NUMBER OF OPTIONS AT FISCAL YEAR- IN THE MONEY OPTIONS AT
SHARES VALUE 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.
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 person's 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.
11
<PAGE>
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.
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%
260 Franklin Street
Boston, MA 02110
James B. Murray, Jr.(5)....................... 704,310 3.8%
Bruce A. Saville(6)........................... 618,708 3.3%
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
(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").
12
<PAGE>
(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., 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.
13
<PAGE>
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 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 connection
with such mailings. 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.
14
<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.
15
<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".
16
