<PAGE>
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 Rule 14a-11(c) or Rule 14a-12
INSIGNIA SOLUTIONS PLC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
June 15, 1998
To Our Shareholders:
You are cordially invited to attend the 1998 Annual General Meeting of
Shareholders of Insignia Solutions plc to be held at Buckingham Court, Kingsmead
Business Park, London Road, High Wycombe, Buckinghamshire HP11 1JU, United
Kingdom, on Tuesday, July 21, 1998, at 12:30 p.m., local time.
The matters expected to be acted upon at the meeting are described in detail
in the following Notice of Annual General Meeting and Proxy Statement.
It is important that you use this opportunity to take part in the affairs of
your Company by voting on the business to come before this meeting. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING.
THE PROXY SHOULD BE RETURNED TO THE OFFICES OF THE COMPANY AT BUCKINGHAM
COURT, KINGSMEAD BUSINESS PARK, LONDON ROAD, HIGH WYCOMBE, BUCKINGHAMSHIRE HP11
1JU, UNITED KINGDOM, NOT LATER THAN 12:30 P.M. ON SUNDAY, JULY 19, 1998, BEING
48 HOURS PRIOR TO THE TIME FIXED FOR THE ANNUAL GENERAL MEETING. Returning the
Proxy does not deprive you of your right to attend the meeting and to vote your
shares in person.
We look forward to seeing you at the meeting.
Sincerely,
[LOGO]
Stephen M. Ambler
Company Secretary
<PAGE>
INSIGNIA SOLUTIONS PLC
----------------
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Insignia Solutions
plc (the "Company") will be held at Buckingham Court, Kingsmead Business Park,
London Road, High Wycombe, Buckinghamshire HP11 1JU, United Kingdom, on Tuesday,
July 21, 1998 at 12:30 p.m., local time, to transact the following business:
1. To receive the U.K. statutory accounts of the Company for the year ended
December 31, 1997 together with the Directors' and Auditors' reports thereon.
2. To re-appoint Price Waterhouse as U.K. statutory auditors of the Company
until the conclusion of the next Annual General Meeting and to authorize the
Directors to fix their remuneration.
3. To elect as a Director Paul L. Borrill, who has been appointed a
Director since the date of the last Annual General Meeting.
4. To re-elect as a Director Richard M. Noling.
5. To consider the following Ordinary Resolution: "THAT the Company's 1995
Employee Share Purchase Plan be amended so that the reference to "two hundred
seventy-five thousand (275,000) of the Company's ordinary shares" in Section 1
thereof be substituted by a reference to "five hundred twenty-five thousand
(525,000) of the Company's ordinary shares."
6. To transact any other ordinary business of the Company.
BY ORDER OF THE BOARD
[LOGO]
Stephen M. Ambler
Company Secretary
Dated June 15, 1998
Registered Office:
Buckingham Court
Kingsmead Business Park
London Road
High Wycombe
Buckinghamshire HP11 1JU
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE>
THE PROXY SHOULD BE RETURNED TO THE OFFICES OF THE COMPANY AT BUCKINGHAM
COURT, KINGSMEAD BUSINESS PARK, LONDON ROAD, HIGH WYCOMBE, BUCKINGHAMSHIRE HP11
1JU, UNITED KINGDOM, NOT LATER THAN 12:30 P.M. ON SUNDAY, JULY 19, 1998, BEING
48 HOURS PRIOR TO THE TIME FIXED FOR THE ANNUAL GENERAL MEETING.
NOTES
1. A member entitled to attend and vote at the meeting is entitled to appoint
one or more proxies to attend and, on a poll, vote in his stead. A proxy
need not be a member of the Company. Completion and return of a form of
proxy will not prevent a member from attending and voting at the meeting.
2. The instrument appointing a proxy and the power of attorney or other
authority (if any) under which it is signed must be deposited at the
Registered Office of the Company, Buckingham Court, Kingsmead Business Park,
London Road, High Wycombe, Buckinghamshire HP11 1JU, not less than 48 hours
before the time of the meeting.
3. There are available for inspection at the registered office of the Company
during usual business hours on any weekday (Saturdays and public holidays
excepted), and, at the place of the Annual General Meeting, from at least
fifteen minutes prior to and until the conclusion of the Annual General
Meeting:
(a) copies of the Directors' service agreements with the Company or any of
its subsidiaries other than those agreements expiring or determinable by
the employing company without payment of compensation within one year;
and
(b) the Register of Directors' Interests.
<PAGE>
INSIGNIA SOLUTIONS PLC
KINGSMEAD BUSINESS PARK
LONDON ROAD
HIGH WYCOMBE, BUCKS, HP11 1JU
UNITED KINGDOM
------------------------
PROXY STATEMENT
---------------------
JUNE 15, 1998
This Proxy Statement is for holders of Ordinary Shares of 20p each
("Ordinary Shares") and holders of American Depositary Shares ("ADSs") evidenced
by American Depositary Receipts of Insignia Solutions plc, a company organized
under the laws of England and Wales (the "Company" or "Insignia"). This Proxy
Statement is furnished by the Board of Directors (the "Board") of the Company in
connection with the solicitation of specific voting instructions ("Voting
Instructions") from holders of ADSs and proxies ("Proxies") from holders of
Ordinary Shares for voting at the Annual General Meeting of the Company to be
held at Buckingham Court, Kingsmead Business Park, London Road, High Wycombe,
Buckinghamshire HP11 1JU, United Kingdom, on Tuesday, July 21, 1998 at 12:30
p.m., local time (the "Meeting"). All Proxies will be voted in accordance with
the instructions contained therein and, if no choice is specified, the person or
persons appointed as proxy will vote or abstain from voting, at their
discretion.
At June 15, 1998, the Company had 12,110,970 Ordinary Shares outstanding and
entitled to vote, of which approximately 75.2% were held in the form of ADSs.
Each ADS represents one Ordinary Share. A minimum of two persons holding
together not less than one-third of the Ordinary Shares in issue will constitute
a quorum for the transaction of business at the Meeting. This Proxy Statement
and the accompanying form of Proxy were first mailed to shareholders on or about
June 15, 1998. Attached beginning at page F-1 of this Proxy Statement is the
Company's U.K. Statutory Directors' Report and Accounts for the year ended
December 31, 1997 prepared in compliance with the U.K. Companies Act 1985 (the
"Act"). In addition, the 1997 Annual Report and Form 10-K is enclosed with this
Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Holders of Ordinary Shares entitled to attend and vote at the Meeting may
appoint a Proxy to attend and, on a poll of such holders, to vote in their
place. A Proxy need not be a shareholder of the Company. Voting will be by a
poll on all the resolutions to be considered. Holders of the Company's Ordinary
Shares are entitled to one vote for each Ordinary Share held. Shares may not be
voted cumulatively.
Proposals 2 through 5 in the Notice are Ordinary Resolutions. An Ordinary
Resolution requires the affirmative vote of a majority of the votes cast at the
Meeting. The Company will tabulate all votes and will separately tabulate, for
each proposal, affirmative and negative votes, abstentions and broker non-votes.
Abstentions and broker non-votes will not be counted in determining the votes. A
form of Proxy is enclosed which, to be effective, must be signed, dated and
deposited at the Registered Office of the Company, Buckingham Court, Kingsmead
Business Park, London Road, High Wycombe, Buckinghamshire HP11 1JU, not less
than forty-eight hours before the time of the Meeting, together with the power
of attorney or other authority (if any) under which it is signed. Holders of
ADSs should complete and return the Voting Instruction form provided to them in
accordance with the instructions contained therein, so that it is received on or
before July 14, 1998. The close of business on June 12, 1998 has been fixed as
the record date for the determination of the holders of ADSs entitled to provide
Voting Instructions to the Depositary.
<PAGE>
The expenses of soliciting Proxies and Voting Instructions will be paid by
the Company. Following the original mailing of the Proxies and other soliciting
materials, the Company and/or its agents may also solicit Proxies and Voting
Instructions by mail, telephone, telegraph or in person. Following the original
mailing of the Proxies and other soliciting materials, the Company will request
that brokers, custodians, nominees, The Bank of New York (the "Depositary") and
other record holders of the Company's Ordinary Shares or ADSs forward copies of
the Proxies and other soliciting materials to persons for whom they hold
Ordinary Shares or ADSs and request authority for the exercise of Proxies and/or
Voting Instructions. In such cases, the Company, upon the request of the record
holders, will reimburse such holders for their reasonable expenses.
REVOCABILITY OF PROXIES
Any person signing a Proxy in the form accompanying this Proxy Statement has
the power to revoke it any time prior to one hour before the commencement of the
Meeting by written instrument delivered to the Company stating that the Proxy is
revoked, by attendance at the Meeting and voting in person or by duly filing a
replacement Proxy. Please note, however, that if a person's shares are held of
record by a broker, bank or other nominee and that person wishes to vote at the
Meeting, the person concerned should ensure that the broker, bank or other
nominee duly appoints such person as its proxy in order that he or she may do
so.
PROPOSAL 1--RECEIPT OF U.K. STATUTORY DIRECTORS' REPORT AND ACCOUNTS
At the Meeting, shareholders will receive the U.K. statutory accounts of the
Company in respect of the financial year ended December 31, 1997, together with
the Directors' and Auditors' reports relating to those accounts. It is a U.K.
legal requirement that the accounts and the reports are laid before the
shareholders of the Company in general meeting, following which they will be
approved by and signed on behalf of the Board of Directors and delivered to
Companies House in the U.K. on or before July 31, 1998. Shareholders are not
being asked to vote on this proposal. The U.K. statutory Directors' Report and
Accounts are attached hereto beginning on page F-1.
PROPOSAL 2--RE-APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has selected Price Waterhouse as its U.K. statutory auditors to
perform the audit of the Company's financial statements for 1998, and the
shareholders are being asked to ratify such selection. Representatives of Price
Waterhouse are expected to be present at the Meeting, will have the opportunity
to make a statement at the Meeting if they desire to do so and are expected to
be available to respond to appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RE-APPOINTMENT OF PRICE WATERHOUSE
PROPOSALS 3 AND 4--ELECTION AND RE-ELECTION OF DIRECTORS
At the Meeting, shareholders will consider the election of Paul L. Borrill,
who has been appointed as a director of the Company since the last annual
general meeting. Shareholders will also consider the re-election of Richard M.
Noling, who retires by rotation. Of the five directors currently on the Board,
John R. Johnston has confirmed that he will resign prior to the Meeting and
accordingly will not stand for re-election.
The Company's Articles of Association stipulate that the minimum number of
directors is two, but do not set any maximum number. Directors may be elected by
the shareholders, or appointed by the Board, and remain in office until they
resign or are removed by the shareholders. In addition, at each Annual General
Meeting the third of the directors who have been in office longest since their
last election, as well as any directors appointed by the Board during the
preceding year, are required to resign and are then
2
<PAGE>
considered for re-election, assuming they wish to stand for re-election. Of the
current directors, Albert E. Sisto will be considered for re-election in 1999
and Nicholas, Viscount Bearsted will be considered for re-election in 2000,
assuming no additional directors are appointed by the Board during the year. In
the election of directors, each shareholder is entitled on a poll to one vote
for each Ordinary Share held. Shares may not be voted cumulatively.
DIRECTORS/NOMINEES
The names of the nominees and the other directors of the Company, and
certain information about them, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE OR DIRECTOR AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------------- --- -------------------------------------- -----------
<S> <C> <C> <C>
NOMINEES
Paul L. Borrill(2).................... 45 Vice President and Chief Architect of 1997
Quantum Corporation
Richard M. Noling..................... 49 President and Chief Executive Officer 1997
of the Company
DIRECTORS
Nicholas, Viscount Bearsted(1)........ 48 Chairman of the Board of the Company 1988
Albert E. Sisto(1).................... 48 Chief Operating Officer of RSA Data 1997
Security, Inc.
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Paul L. Borrill was appointed a director of the Company in July 1997. He has
served as Vice President and Chief Architect of Quantum Corporation's Specialty
Storage Products Group since July 1997. Prior to joining Quantum Corporation,
Dr. Borrill spent eight years at Sun Microsystems, Inc. as director of the
Advanced Systems Group, and most recently as Sun's Chief Scientist for
Information Resources. Dr. Borrill received his BSc in physics (with honors)
from the University of Manchester, England and his PhD in physics from
University College London. He is a member of IEEE, ACM and a chartered engineer
with the Institution of Electrical Engineers in England.
Richard M. Noling was named President and Chief Executive Officer and a
director of the Company in March 1997. He also served as Chief Financial
Officer, Senior Vice President of Finance and Operations and Company Secretary
between April 19, 1996 and October 1, 1997 and Chief Operating Officer between
February and March 1997. From August 1995 to February 1996, Mr. Noling was Vice
President and Chief Financial Officer at Fast Multimedia, Inc., a German-based
computer software and hardware developer. From November 1994 to August 1995, he
was Chief Financial Officer for DocuMagix Inc., a personal paper management
software company. From June 1991 to October 1994, Mr. Noling served as Senior
Vice President and Chief Financial Officer for Gupta Corporation. He received a
Bachelor of Arts degree in aerospace and mechanical engineering science from the
University of California (San Diego) in 1970. He received an M.A. degree in
theology from the Fuller Theological Seminary in 1972, and an M.S. degree in
business administration in 1979 from the University of California (Irvine).
Nicholas, Viscount Bearsted has served as Chairman of the Board of Directors
of the Company since March 1997 and as a director of the Company since January
1988. He also served as Chairman of the Board from January 1988 to March 1995,
and he was the Company's Chief Executive Officer from
3
<PAGE>
September 1988 until September 1993. Since 1980, he has been a corporate and
computer consultant. From January 1996 to May 1996, he served as Chief Executive
Officer and a director, and from April 1994 to January 1996, as Deputy Chief
Executive Officer and a director, of Hulton Deutsch Collection Ltd., a
photographic content provider. He received a Bachelors degree in chemistry from
Oxford University in 1972. He also serves as a Director of Mayborn Group plc.
Albert E. Sisto was appointed as a director of the Company in March 1997. He
has served as Chief Operating Officer of RSA Data Security, Inc., a wholly owned
subsidiary of Security Dynamics Technologies, Inc., since December 1997. He
served as the President, Chief Executive Officer and Chairman of the Board of
Directors of DocuMagix Inc. from October 1994 until December 1997. From
September 1989 to September 1994, Mr. Sisto served as President and Chief
Executive Officer of PixelCraft, an imaging software and equipment company. He
received a B.E. degree in engineering from Stevens Institute of Technologies in
1971. He also serves as a director of Jetfax, Inc. and Tekgraf, Inc.
BOARD MEETINGS AND COMMITTEES
The Board met twelve times, including telephone conference meetings, during
1997. No director attended fewer than 75% of the aggregate of the total number
of meetings of the Board (held during the period for which he was a director)
and the total number of meetings held by all committees of the Board on which
such director served (during the period that such director served).
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
Mr. Sisto and Nicholas, Viscount Bearsted are the current members of the
Audit Committee, which met four times during 1997. Mr. Griffiths served on the
Audit Committee until his resignation as a director in May 1997. Mr. Sisto was
appointed to the Audit Committee in May 1997. The Audit Committee meets with the
Company's independent accountants to review the adequacy of the Company's
internal control systems and financial reporting procedures; reviews the general
scope of the Company's annual audit and the fees charged by the independent
accountants; reviews and monitors the performance of non-audit services by the
Company's auditors, reviews the fairness of any proposed transaction between any
officer, director or other affiliate of the Company and the Company, and after
such review, makes recommendations to the full Board; and performs such further
functions as may be required by any stock exchange or over-the-counter market
upon which the Company's shares may be listed.
Mr. Johnston and Mr. Borrill are the current members of the Compensation
Committee, which met three times during 1997. Mr. Sisto served on the
Compensation Committee from March 1997 until Mr. Borrill was appointed to the
Board in July 1997. Nicholas, Viscount Bearsted served on the Committee until
March 1997, when he became Chairman of the Board of the Company. The
Compensation Committee recommends compensation for officers and employees of the
Company, grants options under the Company's employee option plans (other than
grants to non-officers of options pursuant to guidelines established by the
Board, which may be made by Nicholas, Viscount Bearsted, the Company's Chairman,
and Mr. Noling, the Company's President and Chief Executive Officer) and reviews
and recommends adoption of and amendments to share option and employee benefit
plans.
DIRECTOR COMPENSATION
The Company pays each outside director $1,000 for every regular meeting
attended, $2,500 per quarter of service on the Board, $500 per quarter for
service on each committee, plus $500 for each committee meeting attended, and
reimburses outside directors for reasonable expenses in attending meetings of
the Board. The Chairman of the Board receives an additional $1,500 per quarter.
In addition, each new outside director is granted an option to purchase 15,000
shares and each outside director is granted an option to purchase 5,000 shares
annually for so long as he serves as an outside director.
4
<PAGE>
With effect from April 1, 1997, Nicholas, Viscount Bearsted, Chairman of the
Company, entered into a Consulting Agreement with the Company whereby he acts as
consultant to the Company providing advice and assistance as the Board may from
time to time request. Nicholas, Viscount Bearsted shall be available to perform
such services for at least thirteen days per quarter and shall receive a fee of
$1,000 for each day services are provided, subject to a minimum thirteen days
per quarter, plus reimbursement of reasonable expenses. The agreement is
terminable by either party upon six month's advance written notice and by the
Company for cause at any time. In the event of any business combination
resulting in a change of control of the Company or in the event of disposal of a
majority of the assets of the Company, and termination or constructive
termination of his consultancy, Nicholas, Viscount Bearsted will be entitled to
receive an additional twenty-six week's consultancy fees.
For information concerning the compensation of Mr. Noling, see "Executive
Compensation."
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION AND RE-ELECTION OF
EACH OF THE NOMINATED DIRECTORS
PROPOSAL NO. 5--AMENDMENT OF 1995 EMPLOYEE SHARE PURCHASE PLAN
Shareholders are being asked to approve an amendment to the Company's 1995
Employee Share Purchase Plan (the "Share Purchase Plan") to increase the number
of Ordinary Shares reserved for issuance thereunder by 250,000 shares, from
275,000 shares to 525,000 shares. The Board believes that the increase in the
number of shares reserved for issuance under the Share Purchase Plan is in the
best interests of the Company because of the continuing need to provide equity
participation to attract and retain quality employees and remain competitive in
the industry. The Share Purchase Plan plays an important role in the Company's
efforts to attract and retain employees of outstanding ability.
The Board approved the proposed amendment in April 1998, to be effective
upon shareholder approval. Below is a summary of the principal provisions of the
Share Purchase Plan, assuming shareholder approval of the amendment. The summary
is not necessarily complete, and reference is made to the full text of the Share
Purchase Plan.
SHARE PURCHASE PLAN HISTORY
The Board adopted the Share Purchase Plan in February 1995 and it was
approved by the shareholders in March 1995. The purpose of the Share Purchase
Plan is to provide employees of the Company designated by the Board as eligible
to participate ("Participating Employees") with a convenient means to acquire an
equity interest in the Company through payroll deductions and to provide an
incentive for continued employment.
SHARES SUBJECT TO PURCHASE
The shares subject to purchase under the Share Purchase Plan consist of
525,000 Ordinary Shares. This number of shares is subject to proportional
adjustment to reflect consolidation or subdivision of Ordinary Shares and other
similar events.
ADMINISTRATION
The Share Purchase Plan is administered by the Compensation Committee of the
Board (the "Committee"). The interpretation or construction by the Committee of
any provisions of the Share Purchase Plan or of any option granted under it is
final and binding on all Participating Employees.
5
<PAGE>
ELIGIBILITY
All employees of the Company, or any parent or subsidiary of the Company,
are eligible to participate in an Offering Period (as defined below) under the
Share Purchase Plan except the following: (a) employees who are not employed by
the Company, or any parent or subsidiary, on the 15th day of the month before
the beginning of an Offering Period; (b) employees who are customarily employed
for less than 20 hours per week; (c) employees who are customarily employed for
less than five months in a calendar year; or (d) employees who, together with
any other person whose shares would be attributed to such employee pursuant to
Section 424(b) of the Internal Revenue Code of 1986, as amended (the "Code"),
own shares or hold options to subscribe for shares or who, as a result of
participation in the Share Purchase Plan, would own shares or hold options to
subscribe for shares possessing 5% or more of the total combined voting power or
value of all classes of shares of the Company.
As of December 31, 1997, approximately 167 persons were eligible to
participate in the Share Purchase Plan, 210,282 shares had been issued pursuant
to the Share Purchase Plan and 64,718 shares were available for future issuance
under the Share Purchase Plan. Since inception of the Share Purchase Plan, three
executive officers of the Company, George Buchan, Richard M. Noling and Stephen
M. Ambler, purchased 5,940, 4,946 and 883 shares, respectively, pursuant to the
Share Purchase Plan. Over the term of the Share Purchase Plan through December
31, 1997, all employees as a group, other than executive officers, have
purchased an aggregate of 198,513 shares under the Share Purchase Plan.
Participating Employees participate in the Share Purchase Plan through
payroll deductions. A Participating Employee sets the rate of such payroll
deductions, which may not be less than 2% nor more than 10% of the Participating
Employee's W-2 compensation (in the case of employees in the United States).
Compensation for this purpose includes, but is not limited to, base salary,
wages, commissions, overtime, shift premiums (or the substantial equivalent
thereof for employees outside of the United States), bonuses and draws,
unreduced by the amount by which the Participating Employee's salary is reduced
pursuant to Sections 125 or 401(k) of the Code, not to exceed $25,000 per year
or such lower limit as set by the Committee.
Each offering under the Share Purchase Plan is for a period of six months
(the "Offering Period"). The Offering Periods commence on February 1 and August
1 of each year and end on July 31 and January 31, respectively, of each year.
The first day of each Offering Period is the "Offering Date" for such Offering
Period. A Participating Employee cannot participate simultaneously in more than
one Offering Period. The Board has the power to determine the dates of Offering
Periods or change the duration of Offering Periods without shareholder approval.
Participating Employees may elect to participate in any Offering Period by
enrolling as provided under the terms of the Share Purchase Plan. Once enrolled,
a Participating Employee will automatically participate in each succeeding
Offering Period unless the Participating Employee withdraws from the Offering
Period or the Share Purchase Plan is terminated. After the rate of payroll
deductions for an Offering Period has been set by a Participating Employee, that
rate continues to be effective for the remainder of the Offering Period (and for
all subsequent Offering Periods in which the Participating Employee is
automatically enrolled) unless otherwise changed by the Participating Employee.
The Participating Employee may increase or lower the rate of payroll deductions
for any subsequent Offering Period, but may only lower the rate of payroll
deductions for an ongoing Offering Period. Not more than one change may be made
during a single Offering Period.
PURCHASE PRICE
The purchase price per share at which an Ordinary Share may be acquired in
any Offering Period under the Share Purchase Plan is 85% of the lesser of (a)
the fair market value of a share on the Offering Date or (b) the fair market
value of a share on the last day of the Offering Period. The fair market value
of
6
<PAGE>
a share is the closing price of the Company's ADSs on the Nasdaq National Market
on the date of determination.
PURCHASE OF SHARES UNDER THE SHARE PURCHASE PLAN
The number of whole shares a Participating Employee will be able to purchase
in any Offering Period is determined by dividing the total amount withheld from
the Participating Employee during the Offering Period pursuant to the Share
Purchase Plan by the purchase price for each share determined as described
above. The purchase takes place automatically on the last day of the Offering
Period. Unless otherwise determined by the Board, no more than 200% of the
number of shares determined by using 85% of the fair market value of a share on
the Offering Date as the denominator may be purchased by an employee
participating in the Share Purchase Plan on the last day of any Offering Period.
At any time prior to 30 days before the commencement of an Offering Period, the
Board may set a lower maximum number of shares which may be purchased by any
Participating Employee on the last day of an Offering Period.
WITHDRAWAL
A Participating Employee may withdraw from any Offering Period, provided
such withdrawal is made at least 15 days before the end of the Offering Period.
No further payroll deductions for the purchase of shares will be made for the
succeeding Offering Period unless the Participating Employee enrolls in the new
Offering Period in the same manner as for initial participation in the Share
Purchase Plan.
AMENDMENT OF THE SHARE PURCHASE PLAN
The Board may at any time amend, terminate or extend the term of the Share
Purchase Plan, except that any such termination cannot affect the terms of
shares previously granted under the Share Purchase Plan, nor may any amendment
make any change in the terms of shares previously granted which would adversely
affect the right of any participant, nor may and amendment be made without
shareholder approval if such amendment would: (a) increase the number of shares
that may be issued under the Share Purchase Plan; (b) change the designation of
the employees (or class of employees) eligible for participation in the Share
Purchase Plan; or (c) constitute an amendment for which shareholder approval is
required to comply with any applicable securities laws.
TERM OF THE SHARE PURCHASE PLAN
The Share Purchase Plan will continue until the earlier to occur of: (a)
termination of the Share Purchase Plan by the Board; (b) the issuance of all the
shares reserved for issuance under the Share Purchase Plan; or (c) February
2005, ten years after the date the Board adopted the Share Purchase Plan.
UNITED STATES FEDERAL INCOME TAX INFORMATION
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND
PARTICIPATING EMPLOYEES. THE FEDERAL TAX LAWS MAY CHANGE AND THE FEDERAL, STATE
AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPATING EMPLOYEE WILL DEPEND UPON HIS
OR HER INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPATING EMPLOYEE IS ENCOURAGED TO
SEEK THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE SHARE PURCHASE PLAN. THE FOLLOWING DISCUSSION DOES NOT
PURPORT TO DESCRIBE INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES FOR
PARTICIPATING EMPLOYEES IN COUNTRIES OTHER THAN THE UNITED STATES.
The Share Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Code.
7
<PAGE>
TAX TREATMENT OF THE PARTICIPATING EMPLOYEE. Participating Employees will
not recognize income for federal income tax purposes either upon enrollment in
the Share Purchase Plan or upon the purchase of shares. All tax consequences are
deferred until a Participating Employee sells the shares, disposes of the shares
by gift or dies.
If shares are held for more than one year after the date of purchase and
more than two years from the beginning of the applicable Offering Period, or if
the Participating Employee dies while owning the shares, the Participating
Employee realizes ordinary income on a sale (or a disposition by way of gift or
upon death) to the extent of the lesser of (i) 15% of the fair market value of
the shares at the beginning of the Offering Period or (ii) the actual gain (the
amount by which the market value of the shares on the date of sale, gift or
death exceeds the purchase price). All additional gain upon the sale of the
shares is treated as capital gain. If the shares are sold and the sale price is
less than the purchase price, there is no ordinary income and the Participating
Employee has a capital loss for the difference between the sale price and the
purchase price.
If the shares are sold or are otherwise disposed of including by way of gift
(but not death, bequest or inheritance) (in any case a "disqualifying
disposition") within either the one-year or the two-year holding periods
described above, the Participating Employee realizes ordinary income at the time
of sale or other disposition taxable to the extent that the fair market value of
the shares at the date of purchase is greater than the purchase price. This
excess will constitute ordinary income (currently not subject to withholding) in
the year of the sale or other disposition even if no gain is realized on the
sale or if a gratuitous transfer is made. The difference, if any, between the
proceeds of the sale and the aggregate fair market value of the shares at the
date of purchase is a capital gain or loss. The maximum tax rate applicable to
ordinary income is 39.6%. Long-term capital gain is taxed at a maximum rate of
20% and mid-term capital gain is taxed at a maximum rate of 28%. To receive
long-term capital gain treatment, the shares must be held for more than eighteen
months, and to receive mid-term capital gain treatment, the shares must be held
for more than one year and not more than eighteen months. Capital gains may be
offset by capital losses and up to $3,000 of capital losses may be offset
annually against ordinary income.
TAX TREATMENT OF THE COMPANY. The Company will be entitled to a deduction
in connection with the disposition of shares acquired under the Share Purchase
Plan only to the extent that the Participating Employee recognizes ordinary
income on a disqualifying disposition of the shares. The Company will treat any
transfer of record ownership of shares as a disposition, unless it is notified
to the contrary. In order to enable the Company to learn of disqualifying
dispositions and ascertain the amount of the deductions to which it is entitled,
Participating Employees will be required to notify the Company in writing of the
date and terms of any disposition of shares purchased under the Share Purchase
Plan.
UNITED KINGDOM INCOME TAX INFORMATION
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE UNITED KINGDOM INCOME TAX CONSEQUENCES FOR PARTICIPATING EMPLOYEES WHO ARE
RESIDENT OR ARE ORDINARILY RESIDENT IN THE UNITED KINGDOM AND WHO ORDINARILY
PERFORM ALL OR PART OF THE DUTIES OF THEIR EMPLOYMENT IN THE UNITED KINGDOM.
BECAUSE THE TAX LAWS MAY CHANGE AND BECAUSE INCOME TAX CONSEQUENCES MAY VARY
DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH PARTICIPATING EMPLOYEE, EACH
PARTICIPATING EMPLOYEE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE
INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE SHARE PURCHASE PLAN. THE
FOLLOWING DISCUSSION DOES NOT PURPORT TO DESCRIBE INCOME TAX CONSEQUENCES OR TAX
CONSEQUENCES FOR PARTICIPATING EMPLOYEES IN COUNTRIES OTHER THAN THE UNITED
KINGDOM.
8
<PAGE>
Participating Employees are liable to be assessed to income tax on the
difference between the fair market value of the shares at the time they acquire
the shares and the actual discounted purchase price paid for the shares. Upon
resale of the shares acquired pursuant to the Share Purchase Plan, Participating
Employees may be liable to pay capital gains tax on the difference between the
market value of the shares on the date they are acquired and the price at which
the Participating Employee disposed of such shares. However, if a Participating
Employee disposes of the shares by way of gift or to a "connected person" being
the Participating Employee's spouse, a relative of the Participating Employee or
the Participating Employee's spouse or the spouse of any such relative, then for
the purposes of assessing capital gains tax liability, the Participating
Employee will be deemed to have disposed of the shares at the market value on
the date of disposal.
ERISA
The Share Purchase Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 and is not qualified under
Section 401(a) of the Code.
NEW PLAN BENEFITS
The amounts of future share purchases under the Share Purchase Plan are not
determinable because, under the terms of the Share Purchase Plan, purchases are
based upon elections made by Participating Employees. Future purchase prices are
not determinable because they are based upon the fair market value of the
Company's Ordinary Shares.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT OF
THE SHARE PURCHASE PLAN
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 20, 1998,
with respect to the beneficial ownership of the Company's Ordinary Shares by (i)
each shareholder known by the Company to be the beneficial owner of more than 5%
of the Company's Ordinary Shares, (ii) each director and nominee, (iii) each
Named Officer and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME OF BENEFICIAL OWNER (1) PERCENT OF CLASS
- ---------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
RIT Capital Partners plc (2)........................ 2,032,897 16.8%
John R. Johnston (3) ...............................
Technology Venture Investors IV 1,452,349 12.0
Nicholas, Viscount Bearsted (4)..................... 774,758 6.2
Dr. Robert P. Lee (5)............................... 326,666 2.6
Richard M. Noling (6)............................... 242,190 2.0
George Buchan (7)................................... 113,519 *
William McCarthy (8)................................ 77,811 *
Stephen M. Ambler (9)............................... 21,937 *
Joseph A. Taglia (10)............................... 16,875 *
Albert E. Sisto (11)................................ 4,062 *
Paul L. Borrill (12)................................ 3,125 *
All directors and executive officers as a group (8
persons) (13)..................................... 2,628,812 20.4
</TABLE>
- ------------------------
* Less than 1%
9
<PAGE>
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares subject to options that are currently exercisable or exercisable
within 60 days of March 20, 1998 are deemed to be outstanding and to be
beneficially owned by the person holding such option for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) The address of RIT Capital Partners plc is 27 St. James's Place, London
SW1A 1NR, United Kingdom.
(3) Represents 1,278,376 shares held by Technology Venture Investors-4, L.P.
("TVI"), 149,416 shares held by TVI Partners-4, L.P. and 11,016 shares held
by TVI Affiliates-4, L.P. Mr. Johnston, a director of the Company, is a
general partner of Technology Venture Investors Management IV, L.P., which
is the general partner of these entities. Also includes 13,541 shares
subject to options held by Mr. Johnston that were exercisable within 60
days of March 20, 1998. The address of TVI and Mr. Johnston is 2480 Sand
Hill Road, Suite 101, Menlo Park, California 94025.
(4) Includes 387,812 shares subject to options that were exercisable within 60
days of March 20, 1998. Nicholas, Viscount Bearsted is Chairman of the
Board of the Company. His address is 9 Acacia Road, London, NW8 6AB, United
Kingdom.
(5) Represents shares subject to options that were exercisable within 60 days
of March 20, 1998. Dr. Lee was the President and Chief Executive Officer of
the Company until March 29, 1997 and Vice-Chairman of the Board and a
director of the Company until May 29, 1997.
(6) Includes 221,562 shares subject to options that were exercisable within 60
days of March 20, 1998. Mr. Noling is the President, Chief Executive
Officer and a director of the Company.
(7) Includes 99,999 shares subject to options that were exercisable within 60
days of March 20, 1998. Mr. Buchan is Senior Vice President of Engineering
and UK General Manager of the Company.
(8) Represents shares subject to options that were exercisable within 60 days
of March 20, 1998. Mr. McCarthy served as Senior Vice President of
Strategic Sales and General Manager NTRIGUE from February 1997 to October
1997.
(9) Represents shares subject to options that were exercisable within 60 days
of March 20, 1998. Mr. Ambler is Chief Financial Officer, Company Secretary
and a Vice President of the Company.
(10) Includes 6,875 shares subject to options that were exercisable within 60
days of March 20, 1998. Mr. Taglia is Senior Vice President of Sales and
Marketing of the Company.
(11) Represents shares subject to options that were exercisable within 60 days
of March 20, 1998. Mr. Sisto is a director of the Company.
(12) Represents shares subject to options that were exercisable within 60 days
of March 20, 1998. Mr. Borrill is a director of the Company.
(13) Includes the shares indicated as included in footnotes (3), (4), (6), (7)
and (9) through (12).
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to or earned or paid
for services rendered in all capacities to the Company and its subsidiaries
during each of 1995, 1996 and 1997 by the Company's Chief Executive Officer and
each of the Company's other executive officers who were serving as executive
officers at the end of 1997, as well as the Company's former Chief Executive
Officer and one other former executive officer, both of whom left the Company
during 1997 (the "Named Officers"). This information includes the dollar values
of base salaries and bonus awards, the number of shares subject to options
granted and certain other compensation, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
AWARDS
ANNUAL COMPENSATION -------------
--------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($)(1) COMPENSATION($) OPTION($) COMPENSATION($)(2)
- ---------------------------- --------- --------- ----------- ---------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Noling(3)........ 1997 $ 203,947 $ 93,184 $ -- 415,000 $ 360
President and Chief 1996 128,792 9,800 -- 85,000 405
Executive Officer
George Buchan............... 1997 158,650 51,671 20,265(4) 55,000 15,865
Senior Vice President of 1996 141,300 13,168 12,740(4) -- 14,130
Engineering and UK 1995 126,206 40,440 12,787(4) -- 12,621
General Manager
Joseph A. Taglia(5)......... 1997 108,811 26,747 -- 100,000 292
Senior Vice President of
Sales and Marketing
Stephen M. Ambler(6)........ 1997 122,556 8,889 19,777(7) 88,750 4,338
Chief Financial Officer, 1996 84,072 -- 8,932(4) 3,750 4,203
Company Secretary and 1995 81,195 -- 8,096(4) -- 4,060
Vice President
Robert P. Lee(8)............ 1997 259,619 41,366 70,623(9) 50,000 112
Former President and 1996 225,000 26,625 79,991(9) -- 540
Chief Executive 1995 210,000 60,000 5,767(9) 786 540
Officer
William J. McCarthy......... 1997 244,650 10) 68,978 -- 77,500 135
Former Senior Vice 1996 217,884 10) -- -- 10,000 540
President of Strategic 1995 265,353 10) -- -- -- 540
Sales and General
Manager
NTRIGUE
</TABLE>
- --------------------------
(1) Bonuses paid to the executive officers (other than the Chief Executive
Officer) are based on a target bonus set for each officer each quarter,
adjusted by the Company's operating results over plan and the executive
officer's performance against quarterly qualitative goals. The Chief
Executive Officer's bonus is at the discretion of the Compensation
Committee of the Board.
(2) Represents Company contributions to defined contribution employee benefit
plans.
(3) Mr. Noling joined the Company in April 1996 as Senior Vice President of
Finance and Operations, Chief Financial Officer and Company Secretary. He
was appointed President and Chief Executive Officer of the Company in March
1997.
(4) Represents the incremental cost to the Company of the use of a Company car
for 1995 and 1996 and the payment of a Company car allowance in 1997.
11
<PAGE>
(5) Mr. Taglia joined the Company in May 1997 as Senior Vice President and
General Manager of SoftWindows Business Group. He was appointed Senior Vice
President of Sales and Marketing in October 1997.
(6) Mr. Ambler joined the Company in April 1996 as Director of Finance and
Administration, Europe. He was appointed Chief Financial Officer, Company
Secretary and Vice President in October 1997.
(7) $8,111 of this sum represents the incremental cost to the Company of the
use of a Company car and $11,666 represents a bonus for relocation to the
Company's United States facility.
(8) Dr. Lee left the Company in March 1997. See "Employment Agreements".
(9) Represents loan principal and interest forgiven for 1995, 1996 and 1997
pursuant to a promissory note evidencing a loan from the Company to Dr.
Lee.
(10) Includes sales commissions.
The following table sets forth further information regarding individual
grants of rights to purchase Ordinary Shares during 1997 to each of the Named
Officers. In accordance with the rules of the Securities and Exchange Commission
(the "SEC"), the table sets forth the hypothetical gains or "option spreads"
that would exist for the options at the end of their respective ten-year terms.
These gains are based on assumed rates of annual compounded share price
appreciation of 5% and 10% from the dates the options were granted to the end of
the respective option terms. Actual gains, if any, on option exercises depend
upon the future performance of the Ordinary Shares and ADSs. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES PERCENT OF TOTAL SHARE PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(1)
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME (#) 1997 ($/SH) DATE 5%($) 10%($)
- ------------------------------ --------------- ------------------- ------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Noling............. 15,000(2) 0.8% $ 2.438 3/02/07 $ 22,999 $ 58,283
100,000(2) 5.4 1.969 3/24/07 123,829 313,808
100,000(3) 5.4 1.969 3/24/07 123,829 313,808
100,000(2) 5.4 2.375 5/28/07 149,363 378,514
100,000(4) 5.4 2.375 5/28/07 149,363 378,514
George Buchan................. 15,000(2) 0.8 $ 2.438 3/02/07 $ 22,999 $ 58,283
40,000(4) 2.2 2.375 5/28/07 59,745 151,406
Joseph A. Taglia.............. 30,000(4) 1.6 $ 2.375 5/28/07 $ 44,809 $ 113,555
70,000(5) 3.8 2.375 5/28/07 104,554 264,962
Stephen M. Ambler............. 2,000(2) 0.1 $ 2.438 3/02/07 $ 3,066 $ 7,771
1,500(2)(6) 0.2 2.438 3/02/07 2,299 5,828
2,250(7)(6) 0.2 2.438 3/02/07 3,449 8,742
23,000(2) 1.2 1.562 4/09/07 22,594 57,256
30,000(2) 1.6 2.313 10/21/07 43,639 110,590
30,000(4) 1.6 2.313 10/21/07 43,639 110,590
Robert P. Lee................. 50,000(2)(8) 2.7 $ 2.438 3/02/07 $ 76,662 $ 194,277
William J. McCarthy........... 37,500(2) 2.0 $ 2.438 3/02/07 $ 56,011 $ 141,944
40,000(4) 2.2 2.375 5/28/07 59,745 151,406
</TABLE>
- --------------------------
(1) The 5% and 10% assumed annual compound rates of share price appreciation are
mandated by rules of the SEC and do not represent the Company's estimate or
projection of future Ordinary Share or ADS prices.
(2) These incentive options were granted pursuant to the Company's 1995
Incentive Stock Option Plan for U.S. Employees. These options vest and
become exercisable at the rate of 2.0833% of the shares for each full
12
<PAGE>
month that the optionee renders service to the Company. The option exercise
price is equal to the fair market value of the Company's Ordinary Shares on
the date of grant and the options expire ten years from the date of grant,
subject to earlier termination upon termination of employment.
(3) These incentive options were granted pursuant to the Company's 1995
Incentive Stock Plan for U.S. Employees. These options vest and become
exercisable on the date of grant. The option exercise price is equal to the
fair market value of the Company's Ordinary Shares on the date of grant and
the options expire ten years from the date of grant, subject to earlier
termination upon termination of employment.
(4) These incentive options were granted pursuant to the Company's 1995
Incentive Stock Option Plan for U.S. Employees. These options vest and
become exercisable at the rate of 2.0833% of the shares for each full month
that the optionee renders services to the Company. Should the Company meet
certain earning per share targets, or the Company be subject to a merger or
takeover, accelerated vesting will take place. The option exercise price is
equal to the fair market value of the Company's Ordinary Shares on the date
of grant and the options expire ten years from the date of grant, subject to
earlier termination upon termination of employment.
(5) These incentive options were granted pursuant to the Company's 1995
Incentive Stock Option Plan for U.S. Employees. These options vest and
become exercisable as to 25% of the shares on the first anniversary of the
date of grant and thereafter at the rate of 2.0833% of the shares for each
full month that the optionee renders services to the Company. The option
exercise price is equal to the fair market value of the Company's Ordinary
Shares on the date of grant and the options expire ten years from the date
of grant, subject to earlier termination upon termination of employment.
(6) These incentive options were a regrant of options surrendered as part of the
Company's repricing program in March 1997.
(7) These incentive options were granted pursuant to the Company's 1995
Incentive Stock Option Plan for U.S. Employees. These options commence
vesting and become exercisable on the third anniversary of the date of
grant, at a rate of 8.3333% of the shares for each full month thereafter
that the optionee renders service to the Company. The option exercise price
is equal to the fair market value of the Company's Ordinary Shares on the
date of grant and the options expire ten years from the date of grant,
subject to earlier termination upon termination of employment.
(8) These options terminated on March 31, 1997
In 1997, to respond to the substantial increase in competitive attempts to
recruit employees essential to the success of the Company, the Compensation
Committee elected to reprice non-executive officer options. Competition for
skilled engineers and other key employees in the software industry is intense
and the use of significant options for retention and motivation of such
personnel is pervasive in the high technology industries. The Compensation
Committee believes that share options are a critical component of the
compensation offered by the Company to promote long-term retention of key
employees, motivate high levels of performance and recognize employee
contributions to the success of the Company. The market price of the Company's
ADSs decreased substantially from a high of $12.50 in December 1995 to a low of
$3.375 in January 1997. In light of this substantial decline in the market
price, the Compensation Committee believed that the large numbers of outstanding
stock options with exercise prices in excess of the actual market price were no
longer an effective tool to encourage employee retention or to motivate high
levels of performance. As a result, on January 23, 1997, the Compensation
Committee approved an option repricing program.
All employees except executive officers were eligible to participate under
the repricing program. All eligible optionees with options that were granted
under the Company's option plans, whether vested or unvested, and that had
exercise prices greater than the closing price on the Nasdaq National Market on
March 3, 1997, amended or exchanged such options on a one-for-one basis. The
amended or new options are exercisable at a price of $2.438 per share, which was
the closing price on the Nasdaq National Market on March 3, 1997, and the
vesting schedule of the amended or new options was adjusted to begin on
13
<PAGE>
March 3, 1997, with any prior vesting being forfeited. However, if the original
option was one of a certain group of options with cliff vesting granted in July
1996, the amended or new option vests at the same rate as the original option,
commencing in March 1997.
While no executive officers at the time of the repricing program were
eligible to participate in the repricing program, subsequent to the repricing
Mr. Ambler, who participated in the repricing program, became an executive
officer of the Company. The following table sets out certain information
regarding the repricing of options held by the Named Officers during the last 10
completed fiscal years:
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
MARKET PRICE EXERCISE LENGTH OF ORIGINAL
NUMBER OF SECURITIES OF STOCK AT PRICE OPTION TERM
UNDERLYING OPTIONS TIME OF AT TIME OF NEW EXERCISE REMAINING AT DATE
NAME DATE REPRICED REPRICING REPRICING PRICE OF REPRICING
- ----------------------------- --------- --------------------- ------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Noling............ -- -- -- -- -- --
George Buchan................ -- -- -- -- -- --
Joseph A. Taglia............. -- -- -- -- -- --
Stephen M. Ambler............ 3/03/97 3,750 $ 2.438 $ 5.125 $ 2.438 8.4 years
Robert P. Lee................ -- -- -- -- -- --
William J. McCarthy.......... -- -- -- -- -- --
</TABLE>
The following table sets forth certain information concerning the exercise
of options by each of the Named Officers during 1997, including the aggregate
amount of gains on the date of exercise. In addition, the table includes the
number of shares covered by both exercisable and unexercisable rights to acquire
shares as of December 31, 1997. Also reported are values of "in-the-money"
options that represent the positive spread between the respective exercise
prices of outstanding rights to acquire shares and $2.1562 per share, which was
the closing price of the ADSs as reported on the Nasdaq National Market on
December 31, 1997.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
VALUE OPTIONS AT YEAR-END (#) AT YEAR-END($)(2)
SHARES ACQUIRED REALIZED -------------------------- --------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Noling.............. -- -- 187,950 312,085 $ 22,230 $ 15,210
George Buchan.................. -- -- 94,010 48,490 56,261 1,393
Joseph A. Taglia............... -- -- 4,375 95,620 -- --
Stephen M. Ambler.............. -- -- 13,551 82,699 6,563 12,001
Robert P. Lee.................. 155,000 178,940 638,332 -- 268,900 --
William J. McCarthy............ -- -- 51,405 88,595 40,601 2,041
</TABLE>
- ------------------------
(1) "Value Realized" represents the fair market value of the shares underlying
the options on the date of exercise less the aggregate exercise price of the
options.
(2) For purposes of the table, all amounts in pounds sterling were converted to
U.S. dollars using $1.67 per pound sterling, the exchange rate in effect as
of December 31, 1997.
EMPLOYMENT AGREEMENTS
Effective March 25, 1997, Mr. Noling entered into an employment agreement
with the Company, which is terminable by either party upon six month's notice
and by the Company for cause at any time. In connection with such agreement, Mr.
Noling was granted options to purchase (i) 100,000 Ordinary Shares
14
<PAGE>
at an exercise price of $1.969, such options being 100% vested and immediately
exercisable, (ii) 100,000 Ordinary Shares at an exercise price of $1.969, such
options to vest and become exercisable at the rate of 2.0833% of the shares on
the first day of each month following the date of grant and (iii) 200,000
Ordinary Shares on the day of the 1997 Annual General Meeting, such options to
vest and become exercisable at the rate of 2.0833% of the shares on the first
day of each month following the date of grant. The Annual General Meeting was
held on May 29, 1997 and the options were granted at an exercise price of
$2.375. 100,000 of these options are subject to accelerated vesting and
exercisability should the Company meet certain earnings per share ("EPS")
targets as follows: (a) 25,000 options are accelerated should the EPS exceed
$0.07 for 2 consecutive quarters, (b) 37,500 options are accelerated should the
EPS exceed $0.14 for 2 consecutive quarters and (c) 37,500 options are
accelerated should the EPS exceed $0.21 for 2 consecutive quarters, with a
maximum of one early vesting event per quarter. These 100,000 options fully vest
upon a takeover or merger of the Company.
The employment agreement continues through May 31, 2001, and is
automatically extended for an additional year at the end of the term unless
either party gives notice six months prior to November 30, 2000 to terminate
effective upon the expiration of the then current term. In the event of any
business combination resulting in a change of control of the Company or in the
event of disposal of a majority of the assets of the Company, and the
termination or constructive termination of Mr. Noling's employment, Mr. Noling
shall receive his then current full salary for a period of twelve months
following such termination. In addition he shall be entitled to continued
vesting and exercisability of his options for a period of twelve months after
termination and shall be entitled to participate in the Company's employee
benefits on the same basis as if he were an employee.
In January 1993, Mr. Buchan entered into an employment agreement with the
Company, which may be terminated by either party upon six months' notice and by
the Company for cause at any time. In the event of any business combination,
change in control or disposal of a majority of the assets of the Company, Mr.
Buchan's employment may be terminated with three months' notice, and upon such
termination Mr. Buchan will be entitled to a payment equivalent to his current
annual salary plus estimated bonus for the year following termination and all
his outstanding share options will become exercisable.
As of December 20, 1993, Dr. Lee entered into an employment agreement with
the Company, which was terminable by either party upon six months' notice and by
the Company for cause at any time. In connection with such agreement, Dr. Lee
was granted (i) a fully vested warrant to purchase 226,666 Ordinary Shares at an
exercise price of $3.30 per share (the "Warrant") and (ii) options to purchase
566,666 Ordinary Shares at an exercise price of L0.90 per share, which would
vest monthly and would become fully vested on December 20, 1997. In the event of
any business combination resulting in a change in control of the Company or in
the event of disposal of a majority of the assets of the Company, Dr. Lee's
employment was terminable with three months' notice, and upon such termination
Dr. Lee would have been entitled to (i) a payment equivalent to his current
annual salary plus estimated bonus for the year following termination, (ii) the
immediate vesting of twelve months of outstanding unvested share options and
(iii) medical and life insurance coverage for twelve months following
termination. This agreement also provided for a severance payment of one-half
the previous year's annual bonus upon Dr. Lee's termination of employment in any
other circumstance.
In August 1995, Insignia Solutions Inc. loaned to Robert P. Lee, who was
then the Chairman, President and Chief Executive Officer of the Company,
$275,000 to enable him to repay certain maturing loans from former employers.
The loan was represented by a full recourse promissory note (the "Lee Note") and
bore simple interest at the applicable federal rate. The Company agreed to
forgive interest on the Lee Note for as long as Dr. Lee was employed by the
Company. One quarter of the principal was forgiven on January 1, 1996, one
quarter of the principal was forgiven on January 1, 1997 and the Company agreed
to forgive an additional 25% of the principal on each January 1 from 1998 to
2001, provided that the Company met earnings per share targets established by
the Board for the previous year and Dr. Lee
15
<PAGE>
was employed by the Company for at least six of the previous twelve months. The
Lee Note also provided that any remaining portion of the Lee Note would mature
at the end of 2002. Upon termination of Dr. Lee's employment with the Company
for any reason prior to the end of 2001, the agreement provided that the
remaining principal amount of the Lee Note, plus accrued interest, would be due
and payable within twelve months of such termination.
In March 1997, the Company and Dr. Lee entered into a Confidential
Separation Agreement and Release (the "Agreement") that terminated Dr. Lee's
employment agreement. Pursuant to the Agreement, Dr. Lee served as Vice-Chairman
of the Board until his resignation in May 1997, and was a part time employee of
the Company through December 31, 1997 at a salary of $18,750 per month, plus a
bonus of $37,500. In addition, Dr. Lee surrendered to the Company for
cancellation all of the options granted to him in 1995 and 1997, covering an
aggregate of 50,786 shares. Effective January 1, 1998, Dr. Lee surrendered the
Warrant to the Company for cancellation and the Company cancelled all remaining
principal and interest on the Lee Note. The Agreement also contained a general
release of the Company by Dr. Lee and a release of the Company as to certain
claims by Dr. Lee.
In March 1997, the Company loaned Mr. McCarthy $100,000 to assist in the
purchase of a house. The loan is represented by a full recourse promissory note
(the "McCarthy Note") and bears simple interest at the rate of 6% per annum. One
half of the loan is to be repaid on January 31, 1998, and the remainder on
January 31, 1999.
In October 1997, the Company and Mr. McCarthy entered into a Confidential
Separation Agreement and Release (the "McCarthy Agreement") that terminated Mr.
McCarthy's employment. Pursuant to the McCarthy Agreement, Mr. McCarthy agreed
to act as a part time consultant of the Company until April 30, 1998 at a salary
of $16,666.67 per month, plus a pro-rata percentage of the executive bonus that
would have been due to Mr. McCarthy for the fourth quarter of 1997, the bonus
payable to him being adjusted to take account of the sale of the Company's
NTRIGUE technology as if the sale had taken place in the fourth quarter of 1997.
Under the McCarthy Agreement, bonuses payable to Mr. McCarthy for the third and
fourth quarters of 1997 are used to pay the balance outstanding under the
McCarthy Note. At December 31, 1997, $98,081.51 of principal and interest were
due to the Company under the McCarthy Note. In January 1998, an additional
$41,852.64 of the McCarthy Note was repaid. Also, under the terms of the
McCarthy Agreement, Mr. McCarthy's options to purchase Ordinary Shares in the
Company continue to vest and become exercisable through April 30, 1998, as if he
had continued employment. Any vested options not exercised within 90 days of
April 30, 1998 will lapse.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board (the "Committee") makes all
decisions involving the compensation of executive officers of the Company. The
Committee consists of the following non-employee directors: John R. Johnston and
Paul L. Borrill. Nicholas, Viscount Bearsted served on the Committee until March
1997, when he became Chairman of the Board of the Company. Albert E. Sisto
served on the Committee between March 1997 and October 1997.
REPORT OF THE COMPENSATION COMMITTEE
Final decisions regarding executive compensation and stock option grants to
executives are made by the Committee, which is currently composed of two
independent non-employee directors, neither of whom have any interlocking
relationships as defined by the SEC.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company for all employees of the Company. The
Committee typically reviews base salary levels and target bonuses for the Chief
Executive Officer ("CEO") and other executive officers and employees of the
16
<PAGE>
Company at or about the beginning of each fiscal year. The Committee administers
the Company's incentive and equity plans, including the 1995 Stock Option Plan
for U.S. Employees (the "1995 Plan"), the U.K. Employee Share Option Scheme 1996
(the "1996 Scheme") and the 1995 Employee Share Purchase Plan.
The Committee's philosophy in compensating executive officers, including the
CEO, is to relate compensation directly to corporate performance. Thus, the
Company's compensation policy, which applies to executive officers and other key
employees of the Company, relates a portion of each individual's total
compensation to the Company objectives and individual objectives set forth at
the beginning of the year. Consistent with this policy, a designated portion of
the compensation of the executive officers of the Company is contingent on
corporate performance and, in the case of executive officers, is also based on
the individual officer's performance as measured against personal objectives.
Long-term equity incentives for executive officers are effected through the
granting of share options. Options generally have value for the executive only
if the price of the Company's shares increases above the fair market value on
the grant date and the executive remains in the Company's employ for the period
required for the shares to vest.
The base salaries, incentive compensation and option grants of the executive
officers are determined in part by the Committee's informal review of data on
prevailing compensation practices in technology companies with whom the Company
competes for executive talent and by its evaluation of such information in
connection with the Company's corporate goals. To this end, the Committee
attempted to compare the compensation of the Company's executive officers with
the compensation practices of comparable companies to determine base salary,
target bonuses and target total cash compensation. In addition to their base
salaries, the Company's executive officers, including the CEO, are each eligible
to receive a quarterly cash bonus and option grants.
In preparing the performance graph for this Proxy Statement, the Company
used the S&P Computer Software and Services Index as its published line of
business index. The compensation practices of most of the companies in such
Index were not reviewed by the Company when the Committee reviewed the
compensation information described above because such companies were determined
not to be competitive with the Company for executive talent.
1997 EXECUTIVE COMPENSATION
BASE COMPENSATION. The foregoing information was presented to the Committee
in January 1997. The Committee reviewed the recommendations and performance and
market data outlined above and established a base salary level to be effective
January 1, 1997 for each executive officer, including the CEO.
INCENTIVE COMPENSATION. Cash bonuses are awarded to the extent that an
executive officer achieved predetermined individual objectives and the Company
met predetermined objectives set by the Board at the beginning of the year. The
CEO's subjective judgment of executives' performance (other than his own) is
taken into account in determining whether those objectives have been satisfied.
SHARE OPTIONS. Share options typically have been granted to executive
officers when the executive first joins the Company, in connection with a
significant change in responsibilities and, occasionally, to achieve equity
within a peer group. The Committee may, however, grant additional options to
executives for other reasons. The number of shares subject to each option
granted is within the discretion of the Committee and is based on anticipated
future contribution and ability to impact corporate and/or business unit
results, past performance or consistency within the executive's peer group. In
addition, in 1997, long-term incentives in the form of option grants were
considered appropriate because options generally have value only if the price of
the Company's shares increases above the exercise price and the optionee remains
in the employ of the Company for the time required for the options to vest. The
options generally become exercisable over a four-year period and are granted at
a price that is equal to the fair market value of the ADSs on the date of grant.
In 1997, the Committee considered these factors, as well as the number of
17
<PAGE>
options held by such executive officers as of the date of grant that remained
unvested, and determined that additional grants should be made in 1997.
For 1998, the Committee will be considering whether to grant future options
to executive officers based on the factors described above, with particular
attention to the Company-wide management objectives and the executive officers'
success in obtaining specific individual financial and operational objectives
established or to be established for 1998, to the Company's expected results and
to the number of options currently held by the executive officers that remain
unvested.
COMPANY PERFORMANCE AND CEO COMPENSATION. Mr. Noling was appointed CEO in
March 1997. With his promotion to the position of CEO, the Committee recommended
an increase of $30,000 in Mr. Noling's base salary for 1997. In addition, the
Committee granted options to purchase 400,000 shares to Mr. Noling. Mr. Noling
was responsible for the Company meeting certain of its objectives in 1997. After
careful review of the Company's performance as measured against its objectives
and the criteria set forth above under the discussion of incentive compensation,
the Committee recommended that bonuses in the aggregate amount of $93,184 be
paid to Mr. Noling.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE OF 1986. The
Company intends to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986 for 1998. The 1995 Plan is already in compliance
with Section 162(m) by limiting stock awards to named executive officers. The
Company does not expect cash compensation for 1998 to be in excess of $1,000,000
or consequently affected by the requirements of Section 162(m).
COMPENSATION COMMITTEE
John R. Johnston
Paul L. Borrill
Albert E. Sisto (from March 1997 to
October 1997)
Nicholas, Viscount Bearsted (until
March 1997)
18
<PAGE>
COMPANY SHARE PRICE PERFORMANCE
The share price performance graph below is required by the SEC and shall not
be deemed to be incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933, as amended, or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or filed under such Acts.
The graph below compares the cumulative total shareholder return on the ADSs
of the Company from the effective date of the Company's Registration Statement
with respect to the Company's initial public offering (November 13, 1995) to
December 31, 1997 with the cumulative total return on the Nasdaq Stock Market
(U.S. and Foreign) and the S&P Computer Software and Services Index (assuming
the investment of $100 in the Company's ADSs on the date of the Company's
initial public offering and in each of the indexes on October 31, 1995, and
reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INSIGNIA S&P CMP NASDAQ
<S> <C> <C> <C>
SOLUTION SWR/SVCS US/FOREIGN
Oct-95 $100.00 $100.00 $100.00
1995 $97.92 $94.62 $101.71
1996 $34.89 $147.10 $124.55
1997 $17.97 $204.91 $152.40
</TABLE>
CERTAIN TRANSACTIONS
Since January 1, 1997, there has not been, nor is there currently proposed,
any transaction or series of transactions to which the Company or any of its
subsidiaries was or is to be a party in which the amount involved exceeds
$60,000 and in which any executive officer, director or holder of more than 5%
of the Company's Ordinary Shares had or will have a direct or indirect material
interest other than (i) normal compensation arrangements, which are described
under "Proposals 3 and 4--Election and Re-election of Directors--Director
Compensation" and "Executive Compensation" above and (ii) the transactions
described under "Employment Agreements" above.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1999
Annual General Meeting must be received by the Company at its registered office
no later than February 15, 1999 to be included in the Company's Proxy Statement
and form of proxy relating to the meeting. This is without prejudice to
shareholders' rights under the Act to propose resolutions that may properly be
considered at that meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of the
Company's Ordinary Shares to file initial reports
19
<PAGE>
of ownership and reports of changes in ownership with the SEC. Such persons are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms that they file. Based solely on its review of the copies of such
forms furnished to the Company and written representations from the executive
officers and directors, the Company believes that all Section 16(a) filing
requirements were met.
OTHER BUSINESS
The Board does not intend to bring any other business before the Meeting,
and, so far as is known to the Board, no matters are to be brought before the
Meeting except as specified in the Notice of the Meeting. As to any business
that may properly come before the Meeting, however, it is intended that Proxies,
in the form enclosed, will be voted in respect thereof in accordance with the
judgment of the persons voting such Proxies.
------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
------------------------
THE PROXY SHOULD BE RETURNED TO THE OFFICES OF THE COMPANY AT BUCKINGHAM
COURT, KINGSMEAD BUSINESS PARK, LONDON ROAD, HIGH WYCOMBE, BUCKINGHAMSHIRE HP11
1JU, UNITED KINGDOM, NOT LATER THAN 12:30 P.M. ON SUNDAY, JULY 19, 1998, BEING
48 HOURS PRIOR TO THE TIME FIXED FOR THE ANNUAL GENERAL MEETING.
20
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
(REGISTERED NO: 1961960)
DIRECTORS' REPORT AND ACCOUNTS
YEAR ENDED 31 DECEMBER 1997
F1
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1997
The directors present herewith their report and the audited accounts for the
year ended 31 December 1997 in accordance with the format prescribed by the UK
Companies Act.
PRINCIPAL ACTIVITIES
The principal activities of the company and group are the design;
engineering, development, licensing and maintenance of computer software
products which provide cross platform compatibility solutions.
REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS
During the year the group generated revenues from sales of its packaged
software products to end users from software development and licensing
agreements with a number of international US-based concerns.
In 1997, demand for SoftWindows declined, primarily as a result of declining
market share for Apple Macintosh compatible computers and increased competition,
resulting in turnover down 12% on 1996 at $38,869,000 (1996: $44,246,000) and an
operating loss of $12,045,000 (1996: loss $11,815,000) after recording a
restructuring charge of $1,995,000 (1996: $Nil).
The loss resulted in cash outflows from operations, and at 31 December 1997,
the group had cash and cash equivalent balances and short term investments of
$14,461,000 (1996: $21,772,000).
In light of adverse trading in its subsidiary Insignia Solutions Inc,
investments in subsidiary undertakings have been written down by $8,500,000 in
the balance sheet of the company (see Note 9 to the accounts).
In 1997, the company introduced upgrades of SoftWindows95, a cross-platform
Windows 95 compatibility solution for Power Macintosh users, and upgrades for
NTRIGUE. In 1998, the company sold its NTRIGUE product technology to Citrix
Systems Inc. Further details are set out in Note 19 to the attached accounts.
In January 1998 the company announced plans to launch a new product line in
late 1998 whereby the company intends to deliver an Embedded Virtual Machine
("EVM") for the Java based embedded system marketplace.
SHARE CAPITAL
The company issued 377,124 Ordinary shares on the exercise of share options
and 116,053 Ordinary shares through its employee share purchase plan during the
year.
DIVIDENDS AND TRANSFERS TO RESERVES
The directors are unable to recommend the payment of a dividend in respect
of the year ended 31 December 1997 (1996: Nil). The loss for the year of
$10,658,000 (1996: loss $10,766,000) will be transferred to reserves.
F2
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1997 (CONTINUED)
DIRECTORS
The directors of the company during the year and to the date of this report
were:
<TABLE>
<S> <C>
Viscount Bearsted (Chairman)......................
P L Borrill....................................... Appointed 17 July 1997
P Griffiths....................................... Resigned 29 May 1997
J R Johnston (USA)................................
R P Lee (USA)..................................... Resigned 29 May 1997
R M Noling (USA).................................. Appointed 25 March 1997
A E Sisto (USA)................................... Appointed 25 March 1997
</TABLE>
The interests of the directors at the year end in the shares of the company
were as follows:
<TABLE>
<CAPTION>
OPTIONS TO
ACQUIRE ORDINARY
ORDINARY SHARES SHARES OF 20P SUBSCRIPTION
OF 20P EACH EACH WARRANTS
--------------- ---------------- ------------
<S> <C> <C> <C>
Viscount Bearsted
At 31 December 1996........................ 378,946 375,000 --
At 31 December 1997........................ 386,946 430,000 --
P L Borrill
At date of appointment..................... -- -- --
At 31 December 1997........................ -- 15,000 --
P Griffiths
At 31 December 1996........................ -- -- --
At date of resignation..................... -- 5,000 --
J R Johnston
At 31 December 1996........................ -- 15,000 --
At 31 December 1997........................ -- 20,000 --
R P Lee
At 31 December 1996........................ -- 567,452 226,666
At date of resignation..................... -- 566,666 226,666
R M Noling
At date of appointment..................... 2,692 300,000 --
At 31 December 1997........................ 9,946 500,000 --
A E Sisto
At date of appointment..................... -- -- --
At 31 December 1997........................ -- 15,000 --
</TABLE>
Further details of the share options and subscription warrants are given in
Note 14 to the accounts.
Of the options granted to Viscount Bearsted, 125,000 are exercisable until
21 December 1998 and 125,000 are exercisable until 18 July 1999 at 40p each,
125,000 are exercisable until 3 November 2002 at
F3
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1997 (CONTINUED)
90p each, 5,000 are exercisable until 16 April 2007 at $1.75 each and 50,000 are
exercisable until 28 May 2007 at $2.375 each.
Of the options granted to J R Johnston, 15,000 are exercisable until 25
January 2005 at L4.30 each, and 5,000 are exercisable until 16 April 2007 at
$1.75 each.
Of options granted to R P Lee, 566,666 were exercisable until 19 December
2003 at 90p each, 786 were exercisable until 25 January 2005 at $4.30 each, and
50,000 were exercisable until 2 March 2007 at $2.438 each. Pursuant to an
agreement dated 20 December 1993, R P Lee was, on 31 March 1994, granted a
warrant to subscribe for 226,666 Ordinary shares of 20p each at a price of $3.30
at any time until 19 December 2003 of which 226,666 remained unexercised at 31
December 1997.
In 1995 a loan of $275,000 was made to R P Lee by a subsidiary. The loan was
represented by a full recourse promissory note and bore simple interest at the
applicable US federal rate. Interest was forgiven as long as R P Lee was
employed by the subsidiary. One quarter of the principal was forgiven on 1
January 1996 and a further one quarter was forgiven on 1 January 1997.
In March 1997, the subsidiary and R P Lee entered into a Confidential
Separation Agreement and Release ("the Agreement") that terminated R P Lee's
employment agreement. Pursuant to the Agreement, R P Lee served as Vice-Chairman
of the Board until his resignation as a director on 29 May 1997 and, until 31
December 1997, a part-time employee of the company at a salary of $18,750 per
month, plus a bonus of $37,500. In addition, R P Lee surrendered to the company
for cancellation of all the options granted to him in 1995 and 1997, covering an
aggregate of 50,786 shares. Effective 1 January 1998, R P Lee surrendered the
Warrant to the company for cancellation and the subsidiary forgave and cancelled
all remaining principal and interest on the note. The Agreement also contains a
general release of the company by R P Lee and a release of the company as to
certain claims by R P Lee. R P Lee exercised 155,000 vested options during 1997
and a further 85,000 vested options during 1998. The remaining 326,666 options
lapsed on 31 March 1998.
The options granted to P Griffiths were not exercised and lapsed on 28
August 1997.
The options granted to A E Sisto are exercisable until 16 April 2007 at
$1.75 each.
The options granted to P L Borrill are exercisable until 15 July 2007 at
$2.125 each.
Of the options granted to R M Noling, 85,000 are exercisable until 28 March
2006 at $5.75 each, 15,000 are exercisable until 2 March 2007 at $2.438 each,
200,000 are exercisable until 24 March 2007 at $1.969 each, and 200,000 are
exercisable until 28 May 2007 at $2.375 each.
The vesting arrangements of the above options are set out in Note 14 to the
accounts.
POLICY ON PAYMENT OF CREDITORS
It is the group's policy to agree payment terms with its suppliers, along
with other terms and conditions, when it enters into binding purchase contracts
and to abide by the agreed payment terms provided the supplier has provided the
goods or services in accordance with the terms and conditions of the contract.
YEAR 2000
Many currently installed computer systems and software products are coded to
accept two digit entries in the date code field. These date code fields will
need to accept four digit entries to distinguish 21st century dates from 20th
century dates. As a result, in less than two years, computer systems and
F4
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 1997 (CONTINUED)
software used by many companies may need to be upgraded to comply with such
"Year 2000" requirements. SoftWindows95 version 4.0, version 5.0 and Real PC are
Year 2000 compliant. Earlier versions of SoftWindows and all versions of Soft
PC, a product the company no longer ships, are not Year 2000 compliant, but all
such versions are upgradable to Year 2000 compliant products. Furthermore, the
company has carried out an assessment of its own internal systems and believes
they are all Year 2000 compliant.
STATEMENT OF DIRECTORS RESPONSIBILITIES
Company law requires the directors to prepare accounts for each financial
year which give a true ad fair view of the state of affairs of the group and
company and of the profit or loss of the group for that period. In preparing
those accounts, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the accounts;
- prepare the accounts on the going concern basis unless it is inappropriate
to presume that the group and company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
group and company and enable them to ensure that the accounts comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of the
group and company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
AUDITORS
Price Waterhouse have indicated their willingness to continue in office and
a resolution concerning their reappointment will be proposed at the annual
general meeting.
By Order of the Board
S M Ambler
COMPANY SECRETARY 21 April 1998
F5
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS OF
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
We have audited the accounts on pages F7 to F26 which have been prepared
under the historical cost convention and the accounting policies set out on
pages F13 to F15.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page F5 the company's directors are responsible for the
preparation of accounts. It is our responsibility to form an independent
opinion, based on our audit, on those accounts and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts, and of whether the accounting
policies are appropriate to the group's and company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the accounts.
OPINION
In our opinion the accounts give a true and fair view of the state of
affairs of the company and the group as at 31 December 1997 and of the loss and
cash flows of the group for the year then ended and have been properly prepared
in accordance with the Companies Act 1985.
PRICE WATERHOUSE
Chartered Accountants
and Registered Auditors
Thames Court
1 Victoria Street
Windsor
Berkshire
SL4 1HB 21 April 1998
F6
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 1997
<TABLE>
<CAPTION>
NOTE 1997 1996
-------------------- --------------------
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C> <C>
TURNOVER.......................................................... 2 38,869 44,246
Cost of products sold and royalties payable....................... 15,068 14,814
--------- ---------
23,801 29,432
GROSS PROFIT
Selling and marketing expenses.................................... 15,804 21,782
Research and development costs.................................... 11,123 13,214
Administration expenses........................................... 6,788 6,330
Restructuring..................................................... 1,995 --
Exchange loss/(gain).............................................. 136 (79)
--------- ---------
Total operating expenses.......................................... 35,846 41,247
--------- ---------
OPERATING LOSS.................................................... 3 (12,045) (11,815)
Interest receivable and similar income............................ 722 1,456
Interest payable and similar charges.............................. 6 (55) (77)
--------- ---------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION....................... (11,378) (10,436)
Tax on loss on ordinary activities................................ 7 (720) 330
--------- ---------
LOSS FOR THE FINANCIAL YEAR....................................... 15 (10,658) (10,766)
--------- ---------
--------- ---------
</TABLE>
The only recognised gain or loss is the loss for the year.
The notes on pages F13 to F26 form part of these accounts.
F7
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--31 DECEMBER 1997
<TABLE>
<CAPTION>
NOTE 1997 1996
--------- ---------
$'000 $'000
<S> <C> <C> <C>
FIXED ASSETS....................................................................... 8 2,175 3,803
Tangible assets.................................................................... 9 325 325
--------- ---------
Investments........................................................................ 2,500 4,128
--------- ---------
CURRENT ASSETS.....................................................................
Stocks............................................................................. 10 185 415
Debtors, of which $85,000 (1996: $586,000) falls due in more than one year......... 11 10,785 13,554
Short term investments............................................................. 3,820 6,231
Cash at bank and in hand........................................................... 10,641 15,541
--------- ---------
25,431 35,741
CREDITORS: Amounts falling due within one year..................................... 12 17,280 19,378
--------- ---------
NET CURRENT ASSETS................................................................. 8,151 16,363
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES.............................................. 10,651 20,491
CREDITORS: Amounts falling due after more than one year............................ 13 128 276
--------- ---------
10,523 20,215
--------- ---------
--------- ---------
CAPITAL AND RESERVES
Called up share capital............................................................ 14, 15 3,954 3,795
Share premium account.............................................................. 15 31,773 30,966
Profit and loss account--deficit................................................... 15 (25,256) (14,598)
Capital reserve.................................................................... 15 52 52
--------- ---------
Total shareholders' funds.......................................................... 15 10,523 20,215
--------- ---------
--------- ---------
</TABLE>
Approved by the Board on 21 April 1998
R M Noling
Director
The notes on pages F13 to F26 form part of these accounts.
F8
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
COMPANY BALANCE SHEET--31 DECEMBER 1997
<TABLE>
<CAPTION>
1997 1996
NOTE --------- ---------
$'000 $'000
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets..................................................................... 8 930 1,592
Investments......................................................................... 9 2,325 2,325
--------- ---------
3,255 3,917
--------- ---------
CURRENT ASSETS
Debtors, of which $4,607,000 (1996: $5,027,000) falls due in more than one year..... 11 20,887 25,736
Short term investments.............................................................. 1,000 --
Cash at bank and in hand............................................................ 830 11,721
--------- ---------
22,717 37,457
CREDITORS: Amounts falling due within one year...................................... 12 1,845 3,212
--------- ---------
NET CURRENT ASSETS.................................................................. 20,872 34,245
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES............................................... 24,127 38,162
CREDITORS: Amounts falling due after more than one year............................. 13 110 217
--------- ---------
24,017 37,945
--------- ---------
--------- ---------
CAPITAL AND RESERVES
Called up share capital............................................................. 14, 15 3,954 3,795
Share premium account............................................................... 15 31,914 31,107
Profit and loss account............................................................. 15 (11,851) 3,043
--------- ---------
Total shareholders' funds........................................................... 15 24,017 37,945
--------- ---------
--------- ---------
</TABLE>
Approved by the Board on 21 April 1998
R M Noling
Director
The notes on pages F13 to F26 form part of these accounts
F9
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1997
<TABLE>
<CAPTION>
1997 1996
---------------------- --------------------
NOTE $'000 $'000 $'000 $'000
<S> <C> <C> <C> <C> <C>
NET CASH (OUTFLOW) FROM OPERATING ACTIVITIES......................... a (7,835) (12,652)
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received.................................................... 722 1,456
Interest element of finance lease rental payments.................... (55) (77)
--- ---------
667 1,379
TAXATION............................................................. 47 (2,537)
CAPITAL EXPENDITURE
Purchase of tangible fixed assets.................................... (753) (1,985)
Sale of tangible fixed assets........................................ 188 288
--- ---------
(565) (1,697)
MANAGEMENT OF LIQUID RESOURCES
Sale of short term investments....................................... 2,411 18,819
FINANCING
Issue of share capital............................................... d 760 583
Capital element of finance lease rental payments..................... d (385) (303)
--- ---------
375 280
--------- ---------
(DECREASE)/INCREASE IN CASH.......................................... b (4,900) 3,592
--------- ---------
--------- ---------
</TABLE>
The notes on pages F13 to F26 form part of these accounts.
F10
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 1997
A) RECONCILIATION OF OPERATING LOSS TO NET CASH (OUTFLOW) FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1996
1997 ---------
--------- $'000
$'000
<S> <C> <C>
Operating loss............................................................................... (12,045) (11,815)
Depreciation of tangible fixed assets........................................................ 2,239 2,165
Non cash restructuring charge................................................................ 206 --
Decrease/(increase) in stocks................................................................ 230 (81)
Decrease/(increase) in debtors............................................................... 3,442 (5,258)
(Decrease)/increase in creditors............................................................. (1,907) 2,337
--------- ---------
Net cash (outflow) from operating activities................................................. (7,835) (12,652)
--------- ---------
--------- ---------
</TABLE>
B) RECONCILIATION TO NET FUNDS
<TABLE>
<CAPTION>
1996
1997 ---------
--------- $'000
$'000
<S> <C> <C>
(Decrease)/Increase in cash in the period.................................................... (4,900) 3,592
Decrease in debt and lease financing......................................................... 385 303
Decrease in short term investment............................................................ (2,411) (18,819)
--------- ---------
Change in net funds from cash flows.......................................................... (6,926) (14,924)
New finance leases........................................................................... (46) (259)
--------- ---------
Movements in net funds in period............................................................. (6,972) (15,183)
Net funds at 1 January....................................................................... 21,218 36,401
--------- ---------
Net funds at 31 December..................................................................... 14,246 21,218
--------- ---------
--------- ---------
</TABLE>
C) ANALYSIS OF NET FUNDS
<TABLE>
<CAPTION>
OTHER NON 31 DECEMBER
CASH FLOW CASH 1997
--------- ------------- -----------
1 JANUARY
1997 $'000 $'000 $'000
-----------
$'000
Cash in hand, at bank................................. 15,541 (4,900) -- 10,641
<S> <C> <C> <C> <C>
Finance leases........................................ (554) 385 (46) (215)
Short term investment................................. 6,231 (2,411) -- 3,820
--
----------- --------- -----------
TOTAL................................................. 21,218 (6,926) (46) 14,246
--
--
----------- --------- -----------
----------- --------- -----------
</TABLE>
F11
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 1997
D) ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
<TABLE>
<CAPTION>
SHARE CAPITAL FINANCE LEASE
OBLIGATIONS
(INCLUDING PREMIUM) ------------------------
-------------------- 1997 1996
1996 ----------- -----------
--------- $'000 $'000
1997 $'000
---------
$'000
<S> <C> <C> <C> <C>
1 January...................................................................... 34,761 34,178 554 598
Cash inflow/(outflow) from financing........................................... 760 583 (385) (303)
Non cash restructuring......................................................... 206 -- -- --
Inception of finance lease and hire purchase contracts......................... -- -- 46 259
--------- --------- --- ---
31 December.................................................................... 35,727 34,761 215 554
--------- --------- --- ---
--------- --------- --- ---
</TABLE>
F12
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997
1 PRINCIPLE ACCOUNTING POLICIES
The accounts have been prepared in US dollars and in accordance with
applicable accounting standards in the United Kingdom. A summary of the
principal group accounting policies, which have been applied consistently, is
set out below.
BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost convention.
BASIS OF CONSOLIDATION
The consolidated accounts include the company and all its subsidiaries.
Intragroup sales and profits are eliminated on consolidation and all sales and
profit figures relate to external transactions only.
TURNOVER
Turnover, which excludes value added tax and sales tax, represents sales of
packaged software, software development fees and licence royalties.
The company's licence revenues are derived from product licensing fees
relating to the sale of packaged software products and royalties from original
equipment manufacturers ("OEM's") and site licences. The company's service
revenues are derived from OEM's for customer funded engineering and from annual
maintenance contracts.
Product licensing fees are recognised upon shipment if no significant vendor
obligations remain and if collection of the resulting receivable is deemed
probable. The company grants distributors and resellers certain rights of return
and price protection on unsold merchandise held by those distributors and
resellers. Accordingly, reserves for estimated future returns, exchanges and
credits for price protection are accrued upon product shipment.
The company has limited control over the extent to which products sold to
distributors and resellers are sold through to end users. Accordingly, a portion
of the company's sales may from time to time result in increased inventory at
its distributors and resellers. The company provides sales returns reserves for
distributor inventories. These reserves are based on the company's estimates of
expected sell-through by distributors and resellers of its products. Actual
results could differ from these estimates.
The company provides a limited amount of free telephone technical support to
customers. These activities are generally considered to be insignificant
postcontract customer obligations. Estimated costs of these activities are
accrued at the time of product shipment. Revenues from annual maintenance
contracts are recognised rateably over the term of the contract.
Revenues from OEM's for funded engineering are recognised on a percentage of
completion basis, which is computed using the input measure of labour cost.
Minimum guaranteed royalty revenues not subject to significant future
obligations are generally recognised on shipment of software. Royalty revenues
that are subject to significant future obligations are recognised when earned.
Royalty revenues that exceed the minimum guarantees are recognised when
reported.
Payments from OEM's and maintenance contracts received in advance of revenue
recognition are recorded as deferred revenue.
F13
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
1 PRINCIPLE ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT EXPENDITURE
The company capitalises internal software development costs incurred after
technological feasibility has been demonstrated. The company defines
establishment of technological feasibility as the completion of a working model.
Such capitalised amounts are amortised commencing with the introduction of that
product at the greater of the straight-line basis utilising estimated economic
life, generally six months to one year, or the ratio of actual revenues achieved
to the total anticipated revenues over the life of the product.
FOREIGN CURRENCIES
The directors have determined that the group's and company's functional
currency is the US dollar.
Accordingly non-monetary assets and liabilities whose original values are in
currencies other than dollars are stated at their historic dollar value.
Monetary assets and liabilities expressed in other currencies are translated
into dollars at the rate of exchange ruling at the year end. Transactions in
other currencies are translated into dollars at the average rate for the month
in which the transaction occurred or at the forward contract or option rate
where such a hedging transaction has been undertaken. All foreign exchange
differences are taken to the profit and loss account in the year in which they
arise.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at their purchase price, together with any
incidental expenses of acquisition.
Provision for depreciation is made so as to write off the cost of tangible
fixed assets on a straight line basis over the expected useful economic lives of
the assets concerned. The principal annual rates used for this purpose are:
<TABLE>
<S> <C>
Leasehold improvements shorter of estimated useful life or
remaining lease term
Computers and other equipment 33%
Fixtures and fittings 25-33%
</TABLE>
STOCKS
Stocks are stated at the lower of cost and net realisable value. Cost is
determined on a first in first out basis and includes transport and handling
costs. Net realisable value is the price at which stocks can be sold in the
normal course of business after allowing for the costs of realisation and, where
appropriate, the cost of conversion from their existing state to a finished
condition. Provision is made where necessary for stocks which are slow moving,
obsolete or defective.
DEFERRED TAXATION
Deferred taxation is provided on the liability method in respect of timing
differences between profit as computed for taxation purposes and profit as
stated in the accounts to the extent that it is probable that a liability will
become payable in the foreseeable future. Deferred tax assets are only
recognised to the extent that they are expected to be recoverable.
F14
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
1 PRINCIPLE ACCOUNTING POLICIES (CONTINUED)
OPERATING LEASES
Rentals payable under operating leases are charged on a straight line basis
over the lease term in arriving at operating profit.
FINANCE LEASE AND HIRE PURCHASE AGREEMENTS
Where fixed assets are financed by leasing agreements or hire purchase
contracts which transfer to the group substantially all the benefits and risks
of ownership, the assets are treated as if they had been purchased outright and
are included in tangible fixed assets. The capital element of these commitments
is shown as obligations under finance lease and hire purchase contracts.
Finance lease rentals are treated as consisting of capital and interest
elements; the capital element is applied to reduce the outstanding obligations
and the interest element is charged against profit in proportion to the reducing
capital element outstanding. Assets held under finance leases are depreciated
over the shorter of the lease term or the useful economic life of equivalent
owned assets.
PENSION COSTS
Pension costs in respect of the group's defined contribution scheme and
401(k) plans are accounted for in the period to which they relate.
2 TURNOVER
The geographical analysis of turnover by destination is as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
$'000 $'000
<S> <C> <C>
United States.............................................................. 29,371 30,576
Europe..................................................................... 6,411 7,875
Asia....................................................................... 3,087 5,795
--------- ---------
38,869 44,246
--------- ---------
--------- ---------
</TABLE>
The directors consider that all of the group's activities fall within one
class of business.
F15
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
3 OPERATING LOSS
The operating loss is stated after charging:
<TABLE>
<CAPTION>
NOTE 1997 1996
--------- ---------
$'000 $'000
<S> <C> <C> <C>
Depreciation of owned assets........................................ 1,987 1,892
Depreciation of assets held under finance lease and hire purchase
contracts......................................................... 252 273
Hire of equipment under operating leases............................ 92 410
Rental of land and buildings........................................ 829 1,360
Directors' emoluments............................................... 4 725 369
Auditors' remuneration--audit services.............................. 200 557
--------- ---------
--------- ---------
</TABLE>
Audit fees paid to the parent company auditors were $50,000 (1996: $30,000).
Other fees paid by the company and its UK subsidiaries to the auditors in the
United Kingdom were $185,000 (1996: $124,000).
4 DIRECTORS' EMOLUMENTS
<TABLE>
<CAPTION>
1997 1996
----- -----
$'000 $'000
<S> <C> <C>
Aggregate emoluments........................................................... 427 368
Aggregate amounts (excluding shares) receivable under long term incentive
schemes...................................................................... -- --
Company contributions paid to money purchase pension schemes................... -- 1
Aggregate compensation for loss of office...................................... 298 --
</TABLE>
Included above are amounts totalling $22,000 (1996: $22,000) payable to
third parties for making available the services of non-executive directors to
the company.
No non-executive directors waived rights to fees in 1997 and 1996.
Directors' emoluments of the highest paid director:
<TABLE>
<CAPTION>
1997 1996
----- -----
$'000 $'000
<S> <C> <C>
Total amount of emoluments and amounts (excluding shares) receivable under long
term incentives scheme....................................................... 164 331
Defined pension scheme (accrued pension at year end)........................... -- 1
</TABLE>
In addition the directors have been granted share options, the details of
which are set out in the directors' report.
A loan of $137,500 to R P Lee remained outstanding at 31 December 1997
(1996: $206,250). On 1 January 1998 the company forgave and cancelled the
remaining principal and interest on the loan. This expense has been included in
compensation for loss of office in 1997.
F16
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
5 EMPLOYEE INFORMATION
(1) The average number of persons employed by the group during the year,
including executive directors, was:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Sales and marketing........................................................ 81 99
Research and development................................................... 97 105
General and administrative................................................. 37 37
--------- ---------
215 241
--------- ---------
--------- ---------
</TABLE>
(2) Group employment costs of all employees including executive directors:
<TABLE>
<CAPTION>
NOTE 1997 1996
--------- ---------
$'000 $'000
<S> <C> <C> <C>
Wages and salaries.................................................. 13,305 14,442
Social security costs............................................... 990 686
Other pension costs................................................. 16 315 340
--------- ---------
14,610 15,468
--------- ---------
--------- ---------
</TABLE>
6 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1997 1996
--------- ---------
$'000 $'000
<S> <C> <C>
On finance leases and hire purchase contracts.............................. 55 77
</TABLE>
7 TAXATION
(1) Current taxation
Tax on loss on ordinary activities is:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
$'000 $'000
<S> <C> <C>
Corporation taxation (@31.5%).............................................. (895) (200)
Overseas taxation.......................................................... 175 530
--------- ---------
(720) 330
--------- ---------
--------- ---------
</TABLE>
At 31 December 1997 the accumulated tax losses carried forward and available
for offset against future profits amounted to approximately $8,000,000 (1996:
$1,080,000) in the United States and $3,000,000 (1996: $330,000) in the United
Kingdom.
No provision has been made for any taxation that would become payable if
reserves retained in overseas subsidiaries were distributed as no such
distributions are planned.
F17
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
7 TAXATION (CONTINUED)
(2) Deferred taxation
The full potential deferred tax asset comprises the following components:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
$'000 $'000
<S> <C> <C>
Net operating loss carryforwards........................................... 4,342 1,410
Tax credit carryforwards................................................... 789 611
Deferred revenue........................................................... -- 789
Sales return reserve....................................................... 684 1,706
Accrued expenses, reserves and other temporary differences................. 1,584 2,210
--------- ---------
7,399 6,726
--------- ---------
--------- ---------
Amount recognised in these financial statements............................ -- --
--------- ---------
--------- ---------
</TABLE>
8 TANGIBLE FIXED ASSETS
GROUP
<TABLE>
<CAPTION>
LEASEHOLD COMPUTERS FIXTURES AND TOTAL
IMPROVEMENTS AND OTHER FITTINGS ---------
--------------- EQUIPMENT -------------
$'000 ----------- $'000 $'000
$'000
<S> <C> <C> <C> <C>
COST
1 January 1997.................................................. 1,454 7,971 888 10,313
Additions....................................................... -- 768 31 799
Disposals....................................................... (19) (124) (109) (252)
----- ----- --- ---------
31 December 1997................................................ 1,435 8,615 810 10,860
----- ----- --- ---------
ACCUMULATED DEPRECIATION
1 January 1997 597 5,597 316 6,510
Charge for the year............................................. 544 1,215 480 2,239
Disposals....................................................... (17) (36) (11) (64)
----- ----- --- ---------
31 December 1997................................................ 1,124 6,776 785 8,685
----- ----- --- ---------
NET BOOK AMOUNT
31 December 1997................................................ 311 1,839 25 2,175
----- ----- --- ---------
----- ----- --- ---------
31 December 1996................................................ 857 2,374 572 3,803
----- ----- --- ---------
----- ----- --- ---------
</TABLE>
The net book amount of tangible fixed assets includes an amount of $208,000
(1996: $500,000) in respect of assets, principally computers and other
equipment, held under finance leases and hire purchase contracts.
Disposals include retirements of fully depreciated assets.
F18
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
8 TANGIBLE FIXED ASSETS (CONTINUED)
COMPANY
<TABLE>
<CAPTION>
LEASEHOLD COMPUTERS FIXTURES AND TOTAL
IMPROVEMENTS AND OTHER FITTINGS ---------
----------------- EQUIPMENT ---------------
$'000 ----------- $'000 $'000
$'000
<S> <C> <C> <C> <C>
COST
1 January 1997................................................... 636 4,161 265 5,062
Additions........................................................ -- 377 3 380
Disposals........................................................ -- (259) -- (259)
--- ----- --- ---------
31 December 1997................................................. 636 4,279 268 5,183
--- ----- --- ---------
ACCUMULATED DEPRECIATION
1 January 1997................................................... 457 2,780 233 3,470
Charge for the year.............................................. 125 770 14 909
Disposals........................................................ -- (126) -- (126)
--- ----- --- ---------
31 December 1997................................................. 582 3,424 247 4,253
--- ----- --- ---------
NET BOOK AMOUNT
31 December 1997................................................. 54 855 21 930
--- ----- --- ---------
--- ----- --- ---------
31 December 1996................................................. 179 1,381 32 1,592
--- ----- --- ---------
--- ----- --- ---------
</TABLE>
The net book amount of tangible fixed assets includes an amount of $188,000
(1996: $369,000) in respect of assets, principally computers and other
equipment, held under finance leases and hire purchase contracts.
Disposals include retirements of fully depreciated assets.
F19
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
9 FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
GROUP COMPANY
--------------- ----------------------------------------
OTHER SHARES IN OTHER TOTAL
INVESTMENTS SUBSIDIARY INVESTMENTS ---------
--------------- UNDERTAKINGS ---------------
$'000 ------------ $'000 $'000
$'000
<S> <C> <C> <C> <C>
Cost at 1 January 1997........................................ 325 2,000 325 2,325
Investment in 1997............................................ -- 8,500 -- 8,500
--- ------------ --- ---------
Cost at 31 December 1997...................................... 325 10,500 325 10,825
Provision made in 1997........................................ -- (8,500) -- (8,500)
--- ------------ --- ---------
Net book amount at beginning and end of year.................. 325 2,000 325 2,325
--- ------------ --- ---------
--- ------------ --- ---------
</TABLE>
The company's subsidiary undertakings are:
<TABLE>
<CAPTION>
DESCRIPTION OF
NAME OF COMPANY AND COUNTRY OF INCORPORATION AND OPERATION SHARES HELD
- ------------------------------------------------------------------------ ------------------ PROPORTION OF NOMINAL
VALUE OF ISSUED SHARES
AND VOTING RIGHTS HELD
-----------------------
%
<S> <C> <C>
Insignia Solutions International Limited
(England & Wales)..................................................... L1 ordinary 100
Insignia Solutions Overseas Limited
(England & Wales)..................................................... L1 ordinary 100
Insignia Solutions Inc (USA) Common stock, no
(Subsidiary of Insignia Solutions Overseas Limited)................... par value 100
Insignia Solutions Foreign Sales Inc (Barbados)......................... $10 par value 100
Common stock, no
Emulation Technologies Inc (USA)........................................ par value 100
Insignia Solutions France SARL (France)................................. FF100 shares 100
</TABLE>
The principal activities of Insignia Solutions Inc, Insignia Solutions
International Limited and Insignia Solutions France SARL are the marketing,
licensing and support of computer software products. Emulation Technologies Inc
has been dormant since 1990.
The principal activity of Insignia Solutions Overseas Limited is that of a
holding company.
The principal activity of Insignia Solutions Foreign Sales Inc is that of a
sales company.
The company owns 65,400 shares of no par value in Bristol Technology Inc, a
company incorporated in the USA, being approximately 10% of the issued common
stock.
F20
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
10 STOCKS
GROUP
<TABLE>
<CAPTION>
1997 1996
----- -----
$'000 $'000
<S> <C> <C>
Finished software products, manuals and related supplies....................... 185 415
--- ---
--- ---
</TABLE>
11 DEBTORS
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
COMPANY GROUP COMPANY GROUP
----------- --------- ----------- ---------
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Amounts falling due within one year:
Trade debtors........................................................... 27 9,228 -- 12,235
Amounts owed by subsidiary undertakings................................. 14,737 -- 20,452 --
Prepayments............................................................. 769 608 257 542
Taxation recoverable.................................................... 747 864 -- 191
----------- --------- ----------- ---------
16,280 10,700 20,709 12,968
----------- --------- ----------- ---------
Amounts falling due after more than one year:
Loan to subsidiary undertaking.......................................... 4,607 -- 4,607 --
Other debtors........................................................... -- 85 420 586
----------- --------- ----------- ---------
4,607 85 5,027 586
----------- --------- ----------- ---------
20,887 10,785 25,736 13,554
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
The loan to subsidiary undertaking is an unsecured long term loan bearing
interest at 8.02% per annum repayable on 31 December 2089, including accrued
interest.
Included within other debtors at 31 December 1996 is a loan of $206,250 made
by a subsidiary in August 1995 to R P Lee, the Chairman of the company at the
time. The loan, represented by a full recourse promissory note, bore simple
interest at the applicable US federal rate. Interest was forgiven as long as R P
Lee was employed by the subsidiary. One quarter of the principal was forgiven on
1 January 1996, and a further one quarter was forgiven on 1 January 1997.
In March 1997, the subsidiary and R P Lee entered into a confidential
separation Agreement and Release ("the Agreement") that terminated R P Lee's
employment agreement. Pursuant to the Agreement, effective 1 January 1998 the
company forgave and cancelled all remaining principal and interest on the note.
The company expensed the $206,250 principal and accrued interest into
Restructuring costs during 1997.
F21
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
12 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
COMPANY GROUP COMPANY GROUP
----------- --------- ----------- ---------
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Trade creditors......................................................... 477 1,683 711 2,157
Other creditors......................................................... -- 617 -- 457
Social security......................................................... 211 211 223 223
Accruals................................................................ 1,081 11,348 1,439 8,049
Taxation................................................................ -- -- 175 --
Obligations under finance leases and hire purchase contracts............ 76 104 159 295
Sales return reserve.................................................... -- 2,474 -- 5,298
Deferred revenue........................................................ -- 843 505 2,899
----- --------- ----- ---------
1,845 17,280 3,212 19,378
----- --------- ----- ---------
----- --------- ----- ---------
</TABLE>
13 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
COMPANY GROUP COMPANY GROUP
------------- ----------- ------------- -----------
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Obligations under finance leases and hire purchase contracts............... 110 111 217 259
Other creditors............................................................ -- 17 -- 17
--- --- --- ---
110 128 217 276
--- --- --- ---
--- --- --- ---
</TABLE>
All finance lease and hire purchase obligations are payable within five
years.
14 SHARE CAPITAL
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
COMPANY GROUP COMPANY GROUP
------------ --------- ------------ ---------
NUMBER L'000 NUMBER L'000
<S> <C> <C> <C> <C>
AUTHORISED
Equity interests (Ordinary shares of 20p)............................ 30,000,000 6,000 30,000,000 6,000
Non-equity interests (Preferred shares of 20p each).................. 3,000,000 600 3,000,000 600
--------- ---------
6,600 6,600
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
COMPANY GROUP COMPANY GROUP
------------ --------- ------------ ---------
NUMBER $'000 NUMBER $'000
<S> <C> <C> <C> <C>
ALLOTTED AND FULLY PAID
Equity interests (Ordinary shares of 20p each)....................... 11,971,213 3,954 11,478,036 3,795
------------ --------- ------------ ---------
------------ --------- ------------ ---------
</TABLE>
F22
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
14 SHARE CAPITAL (CONTINUED)
ALLOTMENTS OF SHARES
During the year 377,124 Ordinary shares of 20p each were issued for cash on
the exercise of share options, of which 88,596 were issued at 40p, 4,250 were
issued at 70p, 500 were issued at 86p, 283,571 were issued at 90p and 207 were
issued at $2.438 providing total proceeds of $476,000.
In addition 116,053 Ordinary shares of 20p each were issued for cash through
participation in the Company's Employee Share Purchase plan. Of these 60,260
were issued at $3.5594 each and 55,793 were issued at $1.9125 each providing
total proceeds of $320,000.
OPTIONS OF SHARES OF INSIGNIA SOLUTIONS PLC
The company has four share option schemes which provide for issuance of
share options to employees of the company to purchase Ordinary shares of 20p par
value. A total of 3,922,071 (1996: 3,372,071) Ordinary shares have been reserved
for issuance of options. At 31 December 1997 and 31 December 1996, approximately
245,290 and 694,279, respectively, Ordinary shares were available for future
grants of share options. Share options are generally granted at prices of not
less than 100% of the fair market value of the Ordinary shares on the date of
the grant, as determined by the Board of Directors.
The following table summarises activity on share options:
<TABLE>
<CAPTION>
UK SHARE US SHARE
OPTION SCHEMES OPTION SCHEMES TOTAL
-------------- -------------- ----------
<S> <C> <C> <C>
1 January 1997....................................................... 1,106,248 1,242,741 2,348,989
Granted in the year.................................................. 187,000 1,671,925 1,858,925
Exercised in the year................................................ (74,756) (302,368) (377,124)
Cancelled/surrendered................................................ (141,375) (202,736) (344,111)
Lapsed in the year................................................... (50,598) (465,227) (515,825)
-------------- -------------- ----------
31 December 1997..................................................... 1,026,519 1,944,335 2,970,854
-------------- -------------- ----------
-------------- -------------- ----------
</TABLE>
During 1997, the company carried out an option repricing program.
Options granted to new employees generally vest 25% on the first anniversary
of the date of grant and 1/48 per month thereafter through the fourth
anniversary of the date of grant. Options granted to existing employees will
generally vest at the rate if 1/48 per month from the date of grant through to
the fourth anniversary of the date of grant. Options are exercisable until the
tenth anniversary of the date of grant unless they lapse before that date.
1,677,062 and 1,468,165 options were exercisable at 31 December 1997 and 31
December 1996, respectively.
F23
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
14 SHARE CAPITAL (CONTINUED)
Options outstanding at 31 December 1997 were as follows:
<TABLE>
<CAPTION>
UK SHARE OPTION SCHEME US SHARE OPTION SCHEMES
----------------------- -----------------------
PERIOD OF PERIOD OF
NUMBER EXERCISE NUMBER EXERCISE
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
40p per share................................................ 429,000 1990-1999 10,000 1989-1999
70p per share................................................ 28,750 1993-2001 -- --
86p per share................................................ 16,832 1994-2001 500 1992-2001
90p per share................................................ 365,147 1995-2004 495,451 1993-2004
350p per share............................................... -- -- 11,104 1995-2004
430p per share............................................... 1,750 1998-2005 15,333 1995-2005
530p per share............................................... -- -- 2,802 1995-2005
650p per share............................................... -- -- 1,500 1995-2005
$1.562 per share............................................. 19,500 1997-2007 32,963 1997-2007
$1.750 per share............................................. -- -- 26,500 1997-2007
$1.969 per share............................................. -- -- 202,000 1997-2007
$2.063 per share............................................. 1,000 1997-2007 1,500 1997-2007
$2.125 per share............................................. 3,000 1997-2007 19,000 1997-2007
$2.313 per share............................................. 130,040 1997-2007 115,872 1997-2007
$2.375 per share............................................. 11,500 1997-2007 444,875 1997-2007
$2.438 per share............................................. 4,500 1997-2007 435,999 1997-2007
$2.500 per share............................................. 13,000 1997-2007 -- 1997-2007
$2.563 per share............................................. 1,500 1997-2007 4,250 1997-2007
$5.125 per share............................................. -- -- 14,552 1996-2006
$5.750 per share............................................. 1,000 1996-2006 92,989 1996-2006
$5.875 per share............................................. -- -- 17,145 1996-2006
---------- ----------
1,026,519 1,944,335
---------- ----------
---------- ----------
</TABLE>
SUBSCRIPTION WARRANTS
During 1994, a warrant for 226,666 Ordinary shares of 20p par value at a
price of $3.30 per share was granted to R P Lee, the then Chairman of the
company. Effective 1 January 1998, R P Lee surrendered the Warrant to the
company for cancellation.
EMPLOYEE SHARE PURCHASE PLAN
In March 1995, the company's shareholders adopted the 1995 Employee Share
Purchase Plan (the Plan) with 275,000 Ordinary shares reserved for issuance
thereunder. The Plan became effective 17 November 1995 and enables employees to
purchase Ordinary shares at approximately 85% of fair market value of Ordinary
shares at the beginning or end of each six month offering period. The Plan
qualifies as an "employee stock purchase plan" under the US Internal Revenue
Code. 210,282 Ordinary shares have been issued under the plan at 31 December
1997 (1996: 94,229).
F24
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
15 RECONCILIATION OF MOVEMENT IN TOTAL SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
SHARE SHARE PROFIT AND CAPITAL TOTAL SHAREHOLDERS'
CAPITAL PREMIUM LOSS RESERVE FUNDS
----------- ACCOUNT ACCOUNT ----------- --------------------
----------- ----------- 1997 1996
$'000 $'000 $'000 $'000 --------- ---------
$'000 $'000
<S> <C> <C> <C> <C> <C> <C>
GROUP
1 January......................................... 3,795 30,966 (14,598) 52 20,215 30,398
Shares issued in year............................. 159 843 -- -- 1,002 725
Share issue expenses.............................. -- (36) -- -- (36) (142)
(Loss) for year................................... -- -- (10,658) -- (10,658) (10,766)
--
----- ----------- ----------- --------- ---------
31 December....................................... 3,954 31,773 (25,256) 52 10,523 20,215
--
--
----- ----------- ----------- --------- ---------
----- ----------- ----------- --------- ---------
COMPANY
1 January......................................... 3,795 31,107 3,043 -- 37,945 37,762
Shares issued in year............................. 159 843 -- -- 1,002 725
Share issue expenses.............................. -- (36) -- -- (36) (142)
(Loss) for year................................... -- -- (14,894) -- (14,894) (400)
--
----- ----------- ----------- --------- ---------
31 December....................................... 3,954 31,914 (11,851) -- 24,017 37,945
--
--
----- ----------- ----------- --------- ---------
----- ----------- ----------- --------- ---------
</TABLE>
As permitted by Section 230(1)(b) of the Companies Act 1985, Insignia
Solutions plc has not published its separate profit and loss account. The amount
of the loss dealt with in the group's financial statements is $14,894,000 (1996:
loss $400,000).
16 PENSION COSTS
The group has a 401(k) plan covering all of its US employees and a defined
contribution pension plan covering all its UK employees. Under both these plans,
employees may contribute a percentage of their compensation and the group makes
certain matching contributions. Both the employees' and the groups'
contributions are fully vested and nonforfeitable at all times. The assets of
both these plans are held separately from those of the group in independently
managed and administered funds. The group's contributions to these plans
aggregated $315,000 in 1997 (1996: $340,000).
17 COMMITMENTS
(1) Lease commitments
The group has financial commitments in respect of non-cancellable operating
leases. The rentals payable under these leases in the next year are:
<TABLE>
<CAPTION>
PROPERTIES EQUIPMENT
-------------------- ------------------------
1997 1996 1997 1996
--------- --------- ----- -----
$'000 $'000 $'000 $'000
<S> <C> <C> <C> <C>
Date of lease termination:
Within one year................................................................... 583 541 29 38
In second to fifth inclusive...................................................... 2,415 586 14 28
-- --
--------- ---------
2,998 1,127 43 66
-- --
-- --
--------- ---------
--------- ---------
</TABLE>
F25
<PAGE>
INSIGNIA SOLUTIONS PLC AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS--31 DECEMBER 1997 (CONTINUED)
17 COMMITMENTS (CONTINUED)
(2) Finance lease commitments
Commitments for future minimum payments under finance leases are as follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
$'000 $'000
<S> <C> <C>
Within one year.................................................................................... 125 367
Between one and five years......................................................................... 119 281
--- ---
244 648
Less: amount representing interest................................................................. (29) (94)
--- ---
Obligations under finance leases (Notes 12 and 13)................................................. 215 554
--- ---
--- ---
</TABLE>
18 CURRENCY OPTIONS
The group enters into currency option contracts to hedge the short-term
impact of sterling fluctuations against the US dollar. The gains and losses on
these contracts are included in the profit and loss account when the related
operating revenues and expenses are recognised. At 31 December 1997, currency
options of $2.0 million were outstanding (1996: $2.0 million outstanding). All
contracts mature within one year of purchase.
19 SIGNIFICANT POST BALANCE SHEET EVENTS
On February 5, 1998 the company completed the sale of its NTRIGUE technology
to Citrix for $17.687 million. On February 5, 1998 the company received $8.937
million in cash. The total consideration was subject to a holdback into escrow
of $8.75 million for the sole purpose of satisfying any obligations to Citrix
arising from or in connection with an event against which the company would be
required to indemnify Citrix. Subject to the foregoing, $2.5 million of such
funds will be paid to the company in February 1999 and the remaining $6.25
million of such funds will be paid to the company in August 1999. In 1997 and
1996, the NTRIGUE products accounted for 34% and 16% of total revenues,
respectively.
As part of the sale of the Company's NTRIGUE technology, the company
transferred 45 employees to Citrix, of which 43 were development engineers. In
addition the company, as part of the sale in February 1998 of its NTRIGUE
technology to Citrix, sublet the Citrix approximately 50% of its High Wycombe,
United Kingdom facility.
20 RELATED PARTY TRANSACTIONS
The company has taken advantage of the exemption in Financial Reporting
Standard No 8 not to disclose transactions and balances between group entities
that have been eliminated on consolidation.
Transactions involving directors are disclosed in Notes 4 and 11 to the
accounts and in the Directors' Report on pages F2 to F5.
F26
<PAGE>
INSIGNIA SOLUTIONS PLC
INSTRUCTIONS TO THE BANK OF NEW YORK, AS DEPOSITARY
MUST BE RECEIVED PRIOR TO THE CLOSE OF BUSINESS ON JULY 14, 1998)
The undersigned registered holder of American Depositary Receipts hereby
requests and instructs The Bank of New York, as Depositary, through its Agent,
to endeavor, insofar as practicable, to vote or cause to be voted the number of
shares or other Deposited Securities underlying the American Depositary Shares
evidenced by Receipts registered in the name of the undersigned on the books of
the Depositary as of the close of business on June 12, 1998, at the Annual
General Meeting of the Members of INSIGNIA SOLUTIONS plc to be held in High
Wycombe, England, on July 21, 1998 in respect of the resolutions specified on
the reverse.
NOTE:
PLEASE DIRECT THE DEPOSITARY HOW IT IS TO VOTE BY PLACING AN X IN THE
APPROPRIATE BOX OPPOSITE THE RESOLUTIONS. THE DEPOSITARY SHALL NOT VOTE
THE AMOUNT OF SHARES OR OTHER DEPOSITED SECURITIES UNDERLYING A RECEIPT
EXCEPT IN ACCORDANCE WITH INSTRUCTIONS FROM THE HOLDER OF SUCH RECEIPT.
INSIGNIA SOLUTIONS plc
P.O BOX 11230
NEW YORK, N.Y. 10203-0290
(Continued and to be dated and signed on the reverse side.)
3
<PAGE>
2. TO RE-APPOINT PRICE WATERHOUSE AS UK STATUTORY AUDITORS OF THE COMPANY
UNTIL THE CONCLUSION OF THE NEXT ANNUAL GENERAL MEETING AND TO AUTHORIZE
THE DIRECTORS TO FIX THEIR REMUNERATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO ELECT AS A DIRECTOR PAUL L. BORRILL.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. TO RE-ELECT AS A DIRECTOR RICHARD M. NOLING.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S 1995 EMPLOYEE SHARE PURCHASE
PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. The transaction of such other business as may properly come before the
meeting or any adjournments or postponements of the meeting.
Change of Address Mark Here [ ]
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: __________, 1998
-------------------------------------------
(Signature)
-------------------------------------------
Signature, if held jointly
Sign, date and return the Proxy Card promptly using the enclosed envelope.
Votes MUST be indicated (X) in Black or Blue ink.
[REVERSE SIDE]
4
<PAGE>
THE BANK OF NEW YORK
NEW YORK'S FIRST BANK - FOUNDED 1784 BY ALEXANDER HAMILTON
101 BARCLAY STREET, NEW YORK, N.Y. 10286
AMERICAN DEPOSITARY RECEIPTS
INSIGNIA SOLUTIONS PLC
NOTICE TO OWNERS OF AMERICAN DEPOSITARY RECEIPTS
************
Owners of American Depositary Receipts of Insignia Solutions Plc are
hereby notified that The Bank of New York, as Depositary, under the Deposit
Agreement dated as of November 17, 1995, has received Notice of an Annual
General Meeting of Insignia Solutions Plc to be held on July 21, 1998 in
Berkshire, England. A copy of the Notice of Annual General Meeting is
enclosed.
By provision of Section 4.07 of the Deposit Agreement, Owners of record
at the close of business on June 12, 1998 of Receipts are entitled, subject
to applicable law and the provisions of the Memorandum and Articles of
Association of the Company and the provisions of or governing the Deposited
Securities, to instruct The Bank of New York, as Depositary, as to the
exercise of the voting rights, if any, pertaining to the Deposited Securities
represented by the American Depositary Shares evidenced by such Owner's
Receipts. Upon the written request of an Owner on the record date, received
by the close of business on July 14, 1998, The Bank of New York, as
Depositary, shall endeavor, insofar as practicable, to vote or cause to be
voted the number of shares or other Deposited Securities underlying the
American Depositary Shares evidenced by such Receipt in accordance with the
instructions set forth in such request. In the absence of instructions, the
Depositary shall deliver a discretionary proxy for the shares evidenced by
such Receipt in such form as provided by the Company to a person designated
by the Company. The Depositary shall not itself exercise any voting
discretion over any Deposited Securities.
In view of the fact that requests from Owners must be received before
the close of business on July 14, 1998 to be effective, there is enclosed a
form for instructing the Depositary as to the exercise of voting rights
together with a postage paid and addressed envelope for the return of such
form.
The Bank of New York,
As Depositary
Dated: June 16, 1998
<PAGE>
INSIGNIA SOLUTIONS PLC
1995 EMPLOYEE SHARE PURCHASE PLAN
Adopted by the Board of Directors on February 9, 1995
and Amended on December 15, 1995 and April 21, 1998
1. ESTABLISHMENT OF PLAN
Insignia Solutions plc (the "COMPANY") proposes to grant options to
subscribe for the Company's ordinary shares of 20p each, or any instruments
evidencing such ordinary shares (e.g., American Depositary Shares or American
Depositary Receipts), to eligible employees of the Company and its Subsidiaries
(as hereinafter defined) pursuant to this Insignia Solutions plc 1995 Employee
Share Purchase Plan (this "PLAN"). For purposes of this Plan, "Parent
Corporation" and "Subsidiary" (collectively, "SUBSIDIARIES") shall have the same
meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"CODE"). The Company intends the Plan to qualify as an "employee stock purchase
plan" under Section 423 of the Code (including any amendments to or replacements
of such section), and the Plan shall be so construed. Any term not expressly
defined in the Plan but defined for purposes of Section 423 of the Code shall
have the same definition herein. A total of five hundred twenty five thousand
(525,000) of the Company's ordinary shares is reserved for issue under the Plan.
Such number shall be subject to adjustments effected in accordance with Section
14 of the Plan.
2. PURPOSES
The purpose of the Plan is to provide employees of the Company and
Subsidiaries designated by the Board of Directors of the Company (the "BOARD")
as eligible to participate in the Plan with a convenient means of acquiring an
equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Subsidiaries, and to provide an incentive for continued employment.
3. ADMINISTRATION
This Plan may be administered by the Board or a committee appointed by the
Board (the "COMMITTEE"). If, at the time the Company becomes subject to Section
16 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), a
majority of the Board is not comprised of Disinterested Persons as defined in
Rule 16b-3(d) promulgated under the Exchange Act, the Board shall appoint a
committee consisting of at least two (2) members of the Board, each of whom is a
Disinterested Person. As used in this Plan, references to the "Committee" shall
mean either such committee or the Board if no committee has been established.
After registration of the Company under the Exchange Act, Board members who are
not
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
Disinterested Persons may not vote on any matters affecting the
administration of this Plan, but any such member may be counted for
determining the existence of a quorum at any meeting of the Board. Subject
to the provisions of the Plan and the limitations of Section 423 of the Code
or any successor provision in the Code, all questions of interpretation or
application of the Plan shall be determined by the Board and its decisions
shall be final and binding upon all participants. Members of the Board shall
receive no compensation for their services in connection with the
administration of the Plan, other than standard fees as established from time
to time by the Board for services rendered by Board members serving on Board
committees. All expenses incurred in connection with the administration of
the Plan shall be paid by the Company.
4. ELIGIBILITY
Any employee of the Company or the Subsidiaries is eligible to participate
in an Offering Period (as hereinafter defined) under the Plan except the
following:
(a) employees who are not employed by the Company or Subsidiaries on
the fifteenth (15th) day of the month before the beginning of such Offering
Period;
(b) employees who are customarily employed for less than 20 hours per
week;
(c) employees who are customarily employed for less than 5 months in
a calendar year;
(d) employees who, together with any other person whose stock or
shares would be attributed to such employee pursuant to Section 424(d) of the
Code, own stock or shares or hold options to subscribe for ordinary shares or
who, as a result of being granted an option under the Plan with respect to such
Offering Period, would own shares or hold options to subscribe for shares
possessing 5 percent or more of the total combined voting power or value of all
classes of stock or shares of the Company or any of its Subsidiaries.
5. OFFERING DATES
The Offering Periods of the Plan (the "OFFERING PERIOD") shall be of six
(6) months duration commencing February 1 and August 1 of each year and ending
on July 31 and January 31 respectively. Notwithstanding the foregoing, the
first Offering Period shall commence on the date of the initial public offering
and shall end on the earlier of the first July 31 or January 31 thereafter (the
"FIRST OFFERING PERIOD"). Payroll deductions of each participant are
accumulated under the Plan during the Offering Periods. The first day of each
Offering Period is referred to as the "Offering Date". The last business day of
each Offering Period is referred to as the "Purchase Date". The Board shall
have the power to change the duration of Offering Periods with respect to future
offerings without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering Period
to be affected.
2
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
6. PARTICIPATION IN THE PLAN
Eligible employees may become participants in an Offering Period under the
Plan on the first Offering Date after satisfying the eligibility requirements by
delivering a subscription agreement to the Company's or Subsidiary's (whichever
employs such employee) payroll department (the "PAYROLL DEPARTMENT") not later
than five (5) days prior to such Offering Date unless a later time for filing
the subscription agreement authorizing payroll deductions is set by the Board
for all eligible employees with respect to a given Offering Period. An eligible
employee who does not deliver a subscription agreement to the Payroll Department
by such date after becoming eligible to participate in such Offering Period
shall not participate in that Offering Period or any subsequent Offering Period
unless such employee enrolls in the Plan by filing a subscription agreement with
the Payroll Department not later than five (5) days prior to such subsequent
Offering Date. Once an employee becomes a participant in an Offering Period,
such employee will automatically participate in the Offering Period commencing
immediately following the last day of the prior Offering Period unless the
employee withdraws from the Plan or terminates further participation in the
Offering Period as set forth in Section 11 below. Such participant is not
required to file any additional subscription agreement in order to continue
participation in the Plan.
7. GRANT OF OPTION ON ENROLLMENT
Enrollment by an eligible employee in the Plan with respect to an
Offering Period will constitute the grant (as of the Offering Date) by the
Company to such employee of an option to subscribe on the Purchase Date for
up to that number of ordinary shares of the Company determined by dividing
the amount accumulated in such employee's payroll deduction account during
such Offering Period, and if applicable, as converted into U.S. Dollars at
the Conversion Rate (as defined in Section 9(g)) on the Purchase Date, by the
lower of (i) eighty-five percent (85%) of the fair market value of an
ordinary share of the Company on the Offering Date (the "ENTRY PRICE") or
(ii) eighty-five percent (85%) of the fair market value of an ordinary share
of the Company on the Purchase Date; provided, however, that the number of
ordinary shares of the Company subject to any option granted pursuant to this
Plan shall not exceed the lesser of (a) the maximum number of shares set by
the Board pursuant to Section 10(c) below with respect to the applicable
Offering Period, or (b) 200% of the number of shares determined by using 85%
of the fair market value of an ordinary share of the Company on the Offering
Date as the denominator. Fair market value of an ordinary share of the
Company shall be determined as provided in Section 8 hereof.
8. PURCHASE PRICE
The purchase price of shares issued pursuant to this Plan shall be payable
in U.S. Dollars. The purchase price per share at which a share will be issued
in any Offering Period shall be 85 percent of the lesser of:
(a) The fair market value on the Offering Date; or
3
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
(b) The fair market value on the Purchase Date.
Notwithstanding the foregoing, the purchase price per ordinary share shall not
in any circumstances be less than the U.S. Dollar equivalent, at the Conversion
Rate (as defined in Section 9(g)) on the Purchase Date, of 20p (being the par
value of an ordinary share).
For purposes of the Plan, the term "fair market value" on a given date
shall mean the fair market value of an ordinary share of the Company, or
instrument evidencing such ordinary shares (e.g., American Depositary Shares or
American Depositary Receipts) in U.S. Dollars, as determined by the Committee
from time to time in good faith. If a public market exists for the shares, or
instrument evidencing such ordinary shares (e.g., American Depositary Shares or
American Depositary Receipts), the fair market value shall be the average of the
last reported bid and asked prices for an ordinary share of the Company on the
last trading day prior to the date of determination, or, in the event ordinary
shares of the Company, or instruments evidencing such ordinary shares (e.g.,
American Depositary Shares or American Depositary Receipts), are listed on the
Nasdaq National Market, the fair market value shall be the closing price of a
share, or instrument evidencing such ordinary shares (e.g., American Depositary
Shares or American Depositary Receipts), on the determination date as quoted on
the Nasdaq National Market or if no such reported sale takes place on such date,
the closing price on the next preceding trading date on which a reported sale
occurred. Notwithstanding the foregoing, the fair market value of a share, or
instrument evidencing such ordinary shares (e.g., American Depositary Shares or
American Depositary Receipts), on the First Offering Date (which is the first
business day of the First Offering Period under this Plan) shall be the price
per share at which such shares or instruments are initially offered for sale to
the public in the Company's initial public offering.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL
DEDUCTIONS; ISSUE OF SHARES
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Offering Period. The deductions are made as a
percentage of the participant's compensation in one percent increments not less
than 2 percent nor greater than 10 percent, not to exceed $25,000 per year, or
the U.S. Dollar equivalent determined at the Conversion Rate (as defined in
Section 9(g)) on the Offering Date, or such lower limit set by the Committee.
Compensation for U.S. employees shall mean all W-2 compensation, including, but
not limited to base salary, wages, commissions, overtime, shift premiums and
bonuses, plus draws against commissions and excluding car allowances and any
other in kind employment related benefits; provided, however, that for purposes
of determining a participant's compensation, any election by such participant to
reduce his or her regular cash remuneration under Sections 125 or 401(k) of the
Code shall be treated as if the participant did not make such election.
Compensation for U.K. employees shall mean all compensation, including, but not
limited to base salary, wages, commissions, overtime, the substantial equivalent
of U.S. "shift premiums" and bonuses, plus draws against commissions and
excluding car allowances and any other in kind employment related benefits.
Payroll deductions shall commence on the first payday following the Offering
4
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
Date and shall continue to the end of the Offering Period unless sooner altered
or terminated as provided in the Plan.
(b) A participant may lower (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Payroll Department a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing more than 15 days after the
Payroll Department's receipt of the authorization and shall continue for the
remainder of the Offering Period unless changed as described below. Such change
in the rate of payroll deductions may be made at any time during an Offering
Period, but not more than one change may be made effective during any Offering
Period. A participant may increase or decrease the rate of payroll deductions
for any subsequent Offering Period by filing with the Payroll Department a new
authorization for payroll deductions not later than five (5) days prior to the
beginning of such subsequent Offering Period.
(c) All payroll deductions made for a participant are credited to his or
her account under the Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(d) On each Purchase Date, so long as the Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date, as set forth in Section 11 below, which
notifies the Company that the participant wishes to withdraw from that Offering
Period under the Plan and have all payroll deductions accumulated in the account
maintained on behalf of the participant as of that date returned to the
participant, the Company shall apply the funds, and if applicable, as converted
into U.S. Dollars at the Conversion Rate (as defined in Section 9(g)) on the
Purchase Date, then in the participant's account to the subscription for a whole
number of ordinary shares reserved under the option granted to such participant
with respect to the Offering Period to the extent that such option is
exercisable on the Purchase Date. The purchase price per share shall be as
specified in Section 8 of the Plan. Any cash remaining in a participant's
account after such subscription for ordinary shares shall be refunded to such
participant in cash, without interest; provided, however, that any amount
remaining in such participant's account on a Purchase Date which is less than
the amount necessary to subscribe for a single ordinary share shall be carried
forward, without interest, into the next Offering Period. In the event that the
Plan has been oversubscribed, all funds not used to subscribe for ordinary
shares on the Purchase Date shall be returned to the participant, without
interest. No ordinary shares shall be subscribed for on a Purchase Date on
behalf of any employee whose participation in the Plan has terminated prior to
such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the Company shall
arrange the delivery to each participant of a certificate representing the
shares issued upon exercise of his option.
(f) During a participant's lifetime, such participant's option to
subscribe for shares hereunder is exercisable only by him or her. The
participant will have no interest or voting right
5
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
in shares covered by his or her option until such option has been exercised.
Shares to be delivered to a participant under the Plan will be registered in
the name of the participant or in the name of the participant and his or her
spouse.
(g) "Conversion Rate" means the average currency conversion rate quoted by
the Bank of America in London for converting Pounds Sterling into U.S. Dollars.
10. LIMITATIONS ON SHARES TO BE PURCHASED
(a) No employee shall be entitled to subscribe for shares under the Plan
at a rate which, when aggregated with his or her rights to subscribe for shares
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 (or if applicable, the U.S. Dollars equivalent determined at the
Conversion Rate (as defined in Section 9(g)) as of the Offering Date) in fair
market value, determined as of the Offering Date (or such other limit as may be
imposed by the Code) for each calendar year in which the employee participates
in the Plan.
(b) No more than 200% of the number of shares determined by using 85% of
the fair market value of an ordinary share of the Company on the Offering Date
as the denominator may be subscribed for by a participant on any single Purchase
Date.
(c) No employee shall be entitled to subscribe for more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
thirty days prior to the commencement of any Offering Period, the Board may, in
its sole discretion, set a maximum number of shares which may be subscribed for
by any employee at any single Purchase Date (hereinafter the "MAXIMUM SHARE
AMOUNT"). In no event shall the Maximum Share Amount exceed the amounts
permitted under Section 10(b) above. If a new Maximum Share Amount is set, then
all participants must be notified of such Maximum Share Amount not less than
fifteen days prior to the commencement of the next Offering Period. Once the
Maximum Share Amount is set, it shall continue to apply with respect to all
succeeding Purchase Dates and Offering Periods unless revised by the Board as
set forth above.
(d) If the number of shares to be subscribed for on a Purchase Date by all
employees participating in the Plan exceeds the number of shares then available
for issue under the Plan, the Company will make a pro rata allocation of the
remaining shares in as uniform a manner as shall be practicable and as the Board
shall determine to be equitable. In such event, the Company shall give written
notice of such reduction of the number of shares to be subscribed for under a
participant's option to each participant affected thereby.
(e) Any payroll deductions accumulated in a participant's account which
are not used to subscribe for ordinary shares due to the limitations in this
Section 10 shall be returned to the participant as soon as practicable after the
end of the Offering Period, without interest.
6
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
11. WITHDRAWAL
(a) Each participant may withdraw from an Offering Period under the Plan
by signing and delivering to the Payroll Department notice on a form provided
for such purpose. Such withdrawal may be elected at any time at least 15 days
prior to the end of an Offering Period.
(b) Upon withdrawal from the Plan, the accumulated payroll deductions
shall be returned to the withdrawn participant, without interest, and his or her
interest in the Plan shall terminate. In the event a participant voluntarily
elects to withdraw from the Plan, he or she may not resume his or her
participation in the Plan during the same Offering Period, but he or she may
participate in any Offering Period under the Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in the Plan.
12. TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement, death or the failure of a participant to remain an eligible
employee, immediately terminates his or her participation in the Plan. In such
event, the payroll deductions credited to the participant's account will be
returned to him or her or, in the case of his or her death, to his or her legal
representative, without interest. For purposes of this Section 12, an employee
will not be deemed to have terminated employment or failed to remain in the
continuous employ of the Company in the case of sick leave, military leave, or
any other leave of absence approved by the Board; provided that such leave is
for a period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
13. RETURN OF PAYROLL DEDUCTIONS
In the event a participant's interest in the Plan is terminated by
withdrawal, termination of employment or otherwise, or in the event the Plan is
terminated by the Board, the Company shall promptly deliver to the participant
all payroll deductions credited to his account. No interest shall accrue on the
payroll deductions of a participant in the Plan.
14. CAPITAL CHANGES
Subject to any required action by the shareholders of the Company, the
number of ordinary shares covered by each option under the Plan which has not
yet been exercised and the number of ordinary shares which have been authorized
for issue under the Plan but have not yet been placed under option
(collectively, the "RESERVES"), as well as the price per ordinary share covered
by each option under the Plan which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the number of issued
ordinary shares resulting from any consolidation or subdivision of ordinary
shares of the Company, or any bonus or other capitalization issue of ordinary
shares or any other increase or decrease in the number of issued ordinary shares
effected without receipt of consideration by the Company; provided, however,
7
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination shall be final, binding and
conclusive. Except as expressly provided herein, no issue by the Company of
shares of any class, or securities convertible into shares of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of ordinary shares subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under the Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the ordinary
shares comprised in the option, including shares in respect of which the option
would not otherwise be exercisable. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the sale of the entire share
capital of the Company to another corporation, (whether for consideration in
cash or in the form of securities of any kind) (a "merger"), each option under
the Plan shall be assumed or an equivalent option shall be substituted by the
purchasing corporation or a parent or subsidiary of such purchasing corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the ordinary shares comprised in the option.
If the Board makes an option exercisable in lieu of assumption or substitution
in the event of a merger or sale of assets, the Board shall notify the
participant that the option shall be fully exercisable for a period of twenty
(20) days from the date of such notice, and the option will terminate upon the
expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per
ordinary share comprised in each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of share capital, or in the event of a merger.
15. NONASSIGNABILITY
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, the laws of descent and distribution or as provided in
Section 22 hereof) by the participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect.
8
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
16. REPORTS
Individual accounts will be maintained for each participant in the Plan.
Each participant shall receive promptly after the end of each Offering Period a
report of his or her account setting forth the total payroll deductions
accumulated (and if applicable, the Conversion Rate (as defined in Section 9(g))
at which such participant's payroll deductions were converted into U.S.
Dollars), the number of shares subscribed for, the per share price thereof and
the remaining cash balance, if any, carried forward to the next Offering Period.
17. NOTICE OF DISPOSITION
Each participant shall notify the Company if the participant disposes of
any of the shares subscribed for in any Offering Period pursuant to this Plan
if such disposition occurs within two years from the Offering Date or within
one year from the Purchase Date on which such shares were subscribed for (the
"NOTICE PERIOD"). Unless such participant is disposing of any of such shares
during the Notice Period, such participant shall keep the certificates
representing such shares in his or her name (and not in the name of a
nominee) during the Notice Period. The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing
shares acquired pursuant to the Plan requesting the Company's transfer agent
to notify the Company of any transfer of the shares. The obligation of the
participant to provide such notice shall continue notwithstanding the
placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT
(a) Neither this Plan nor the grant of any option hereunder shall confer
any right on any employee to remain in the employ of the Company or any
Subsidiary, or restrict the right of the Company or any Subsidiary to terminate
such employee's employment.
(b) In the event that any person holding an option under the Plan ceases
to be employed by the Company or a Subsidiary for whatever reason, he shall have
no right to any compensation in respect of the loss of his right to receive
shares under this Plan.
19. EQUAL RIGHTS AND PRIVILEGES
All eligible employees shall have equal rights and privileges with respect
to the Plan so that the Plan qualifies as an "employee stock purchase plan"
within the meaning of Section 423 or any successor provision of the Code and the
related regulations. Any provision of the Plan which is inconsistent with
Section 423 or any successor provision of the Code shall, without further act or
amendment by the Company or the Board, be reformed to comply with the
requirements of Section 423. This Section 19 shall take precedence over all
other provisions in the Plan.
9
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
20. NOTICES
All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
21. TERM; SHAREHOLDER APPROVAL
This Plan shall become effective at such date and time as the Registration
Statement filed with the Securities and Exchange Commission relating to the
Company's securities is declared effective (and then only provided that the
initial public offering later closes). This Plan shall be approved by the
shareholders of the Company, in any manner permitted by applicable corporate
law, within twelve months before or after the date this Plan is adopted by the
Board. No subscription for shares pursuant to the Plan shall occur prior to
such shareholder approval. Thereafter, no later than twelve (12) months after
the Company becomes subject to Section 16(b) of the Exchange Act, the Company
will comply with the requirements of Rule 16b-3 with respect to shareholder
approval. The Plan shall continue until the earlier to occur of termination by
the Board, issue of all of the ordinary shares reserved for issue under the
Plan, or ten (10) years from the adoption of the Plan by the Board.
22. DESIGNATION OF BENEFICIARY
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
23. CONDITIONS UPON ISSUE OF SHARES; LIMITATION ON SALE OF SHARES
Shares shall not be issued with respect to an option unless the exercise of
such option and the issue and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as
10
<PAGE>
1995 Employee Share Purchase Plan
as Amended on April 21, 1998
amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
24. AMENDMENT OR TERMINATION OF THE PLAN
The Board may at any time amend, terminate or extend the term of the Plan,
except that any such termination cannot affect options previously granted under
the Plan, nor may any amendment make any change in an option previously granted
which would adversely affect the right of any participant, nor may any amendment
be made without approval of the shareholders of the Company obtained in
accordance with Section 21 hereof within 12 months of the adoption of such
amendment (or earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under the Plan;
(b) change the designation of the employees (or class of employees)
eligible for participation in the Plan; or
(c) constitute an amendment for which shareholder approval is required in
order to comply with Rule 16b-3 (or any successor rule) of the Exchange Act.
25. GOVERNING LAW
The Plan and all agreements, documents and instruments entered into
pursuant to the Plan shall be governed by and construed in accordance with the
internal laws of the State of California, excluding that body of law pertaining
to conflict of laws.
11
<PAGE>
INSIGNIA SOLUTIONS PLC
PROXY FOR ANNUAL GENERAL MEETING
JULY 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints as proxies, or proxy, Nicholas, Viscount
Bearsted and Richard M. Noling, or either of them, or __________________________
(see Note below), each with full power of substitution, and hereby authorizes
them or him to represent and to vote, as designated below, all Ordinary Shares,
20p each, of Insignia Solutions plc (the "Company"), held by the undersigned, at
the Annual General Meeting of the Company to be held at Kingsmead Business Park,
London Road, High Wycombe, Buckinghamshire, HP11 1JU, United Kingdom, on
Tuesday, July 21, 1998, at 12:30 p.m., local time, and at any adjournments or
postponements thereof.
2. TO RE-APPOINT PRICE WATERHOUSE AS UK STATUTORY AUDITORS OF THE COMPANY UNTIL
THE CONCLUSION OF THE NEXT ANNUAL GENERAL MEETING AND TO AUTHORIZE THE
DIRECTORS TO FIX THEIR REMUNERATION.
/ / FOR / / AGAINST / / ABSTAIN
3. TO ELECT AS A DIRECTOR PAUL L. BORRILL.
/ / FOR / / AGAINST / / ABSTAIN
4. TO RE-ELECT AS A DIRECTOR RICHARD M. NOLING.
/ / FOR / / AGAINST / / ABSTAIN
5. TO APPROVE A RESOLUTION TO AMEND THE COMPANY'S 1995 EMPLOYEE SHARE PURCHASE
PLAN.
/ / FOR / / AGAINST / / ABSTAIN
6. The transaction of such other business as may properly come before the
meeting or any adjournments or postponements of the meeting.
The Board of Directors recommends that you vote FOR all Proposals.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. WHEN NO CHOICE IS INDICATED, THE
PROXY OR PROXIES WILL VOTE OR ABSTAIN FROM VOTING AT THEIR DISCRETION. In their
discretion, the proxy holders are authorized to vote upon such other business as
may properly come before the meeting or any adjournments or postponements
thereof to the extent authorized by Rule 14a-4(c) promulgated under the
Securities Exchange Act of 1934, as amended.
--------------------------------
(Print Shareholder(s) name)
--------------------------------
(Signature(s) of Shareholder or
Authorized Signatory)
--------------------------------
Dated:
------------------------------------------------------------------ ,
1998
Please sign exactly as your name(s) appear(s) on your share certificate. If
shares stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, any such person may
give a proxy; however, if more than one of such joint holders is present at the
meeting, either personally or by proxy, the person whose name stands first in
the Register as one of such holders shall be entitled to vote in respect of the
shares. If shares are held of record by a corporation, the proxy should be
executed by one or more duly authorized officers. Please date the proxy. A proxy
should be filed together with the power of attorney or other authority, if any,
under which it was signed.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
The proxy should be returned to the offices of the Company at Buckingham Court,
Kingsmead Business Park, London Road, High Wycombe, Buckinghamshire HP11 1JU not
later than 12:30 p.m. on July 19, 1998, being 48 hours prior to the time fixed
for the Annual General Meeting.
- ------------------------------
Note: If you wish to appoint someone other than Viscount Bearsted or Mr. Noling
as proxy, references to Viscount Bearsted and Mr. Noling should be deleted, and
the name of the intended proxy inserted in the space provided. A proxy need not
be a member of the Company but must attend the meeting in person to represent
you.
[REVERSE SIDE]
