<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FROM THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-27012
INSIGNIA SOLUTIONS plc
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ENGLAND AND WALES NOT APPLICABLE
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
______________________
41300 CHRISTY STREET INSIGNIA HOUSE
FREMONT THE MERCURY CENTRE, WYCOMBE
CALIFORNIA 94538 LANE, WOOBURN GREEN
UNITED STATES OF AMERICA HIGH WYCOMBE, BUCKS HP10 0HH
(510)360-3700 UNITED KINGDOM
(44)1628-539500
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
PLACES OF BUSINESS)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of November 6, 1998, there were 12,194,316 Ordinary shares of L0.20 each
nominal value, outstanding.
<PAGE>
INSIGNIA SOLUTIONS PLC
PART 1 - FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1. FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheet at September 30, 1998
and December 31, 1997 (Unaudited). . . . . . . . . . . . . . . . . . . . .3
Condensed Consolidated Statement of Operations for the three months
and nine months ended September 30, 1998 and 1997 (Unaudited). . . . . . .4
Condensed Consolidated Statement of Cash Flows for the nine months
ended September 30, 1998 and 1997 (Unaudited). . . . . . . . . . . . . . .5
Notes to Unaudited Condensed Consolidated Financial Statements . . . . . .6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . .8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . 16
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . . . . 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INSIGNIA SOLUTIONS PLC
CONDENSED CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,320 $ 10,641
Short-term investments 2,500 3,820
Cash and cash equivalents held in escrow 9,000 -
Accounts receivable, net of allowances
of $1,644 and $2,818, respectively 2,586 6,754
Inventories 26 185
Prepaid expenses 848 608
Prepaid income taxes - 864
--------------- --------------
Total current assets 22,280 22,872
Property and equipment, net 976 2,175
Other noncurrent assets 826 410
--------------- --------------
Total assets $ 24,082 $ 25,457
--------------- --------------
--------------- --------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 1,164 $ 1,683
Accrued liabilities 2,541 2,685
Customer deposits 119 617
Accrued royalties 4,555 8,874
Deferred revenue 284 843
Current obligations under capital leases 58 104
Income taxes payable 1,253 -
--------------- --------------
Total current liabilities 9,974 14,806
Noncurrent liabilities 78 128
--------------- --------------
Total liabilities 10,052 14,934
--------------- --------------
Contingency (Note 6)
Shareholders' equity:
Preferred shares - -
Ordinary shares 4,028 3,954
Additional paid-in capital 34,607 34,462
Accumulated deficit (24,144) (27,432)
Cumulative currency translation adjustment (461) (461)
--------------- --------------
Total shareholders' equity 14,030 10,523
--------------- --------------
Total liabilities and shareholders equity $ 24,082 $ 25,457
--------------- --------------
--------------- --------------
</TABLE>
See accompanying notes
Page 3
<PAGE>
INSIGNIA SOLUTIONS PLC
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
License revenue $ 3,325 $ 12,816 $ 10,123 $ 30,648
Service revenue 295 561 813 1,609
------------- ------------- ------------- -------------
Total revenues 3,620 13,377 10,936 32,257
------------- ------------- ------------- -------------
Cost of revenues:
Cost of license revenue 2,154 4,524 6,308 12,094
Cost of service revenue 170 530 859 1,616
------------- ------------- ------------- -------------
Total cost of revenues 2,324 5,054 7,167 13,710
------------- ------------- ------------- -------------
Gross profit 1,296 8,323 3,769 18,547
------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing 1,743 4,120 6,344 13,027
Research and development 1,407 2,317 4,593 7,202
General and administrative 794 2,620 3,229 5,535
Restructuring - - - 857
------------- ------------- ------------- -------------
Total operating expenses 3,944 9,057 14,166 26,621
------------- ------------- ------------- -------------
Operating loss (2,648) (734) (10,397) (8,074)
Interest income, net 263 155 772 536
Other income (expense), net 6 (45) 14,837 (145)
------------- ------------- ------------- -------------
Income (loss) before income taxes (2,379) (624) 5,212 (7,683)
Income tax provision (benefit) (1,712) 17 1,924 183
------------- ------------- ------------- -------------
Net income (loss) $ (667) $ (641) $ 3,288 $ (7,866)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Earnings (loss) per share:
Basic $ (0.05) $ (0.05) $ 0.27 $ (0.68)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted $ (0.05) $ (0.05) $ 0.27 $ (0.68)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares and share equivalents used in per share
calculations:
Basic 12,164 11,695 12,118 11,614
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted 12,164 11,695 12,352 11,614
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See accompanying notes
Page 4
<PAGE>
INSIGNIA SOLUTIONS PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,288 $ (7,866)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 533 1,707
Other (14,731) 206
Net changes in assets and liabilities:
Accounts receivable, net 4,168 (4,500)
Inventories 159 214
Prepaid expenses (240) (209)
Prepaid income taxes 864 -
Other noncurrent assets (416) 508
Accounts payable (519) 507
Accrued liabilities (144) (435)
Customer deposits (498) 107
Accrued royalties (4,319) 3,169
Deferred revenue (559) (1,964)
Income taxes payable 1,253 100
Noncurrent liabilities 78 -
------------ ------------
Net cash used in operating activities (11,083) (8,456)
------------ ------------
Cash flows from investing activities:
Proceeds from the sale of property and 86 45
equipment
Purchases of property and equipment (645) (641)
Purchases (sales) of short-term investments, 1,320 (3,674)
net
Net proceeds from sale of product line 15,862 -
Product line sale proceeds held in escrow (9,000) -
------------ ------------
Net cash provided by (used in) investing
activities 7,623 (4,270)
------------ ------------
Cash flows from financing activities:
Payments made under capital leases (80) (253)
Proceeds from issuance of shares, net 219 532
------------ ------------
Net cash provided by financing activities 139 279
------------ ------------
Net decrease in cash and cash equivalents (3,321) (12,447)
Cash and cash equivalents at beginning of the period 10,641 15,541
------------ ------------
Cash and cash equivalents at end of the period $ 7,320 $ 3,094
------------ ------------
------------ ------------
</TABLE>
See accompanying notes
Page 5
<PAGE>
INSIGNIA SOLUTIONS PLC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The condensed consolidated financial statements are unaudited. However, in
the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary for a fair presentation of the
financial position and results for the interim period have been included.
The results of operations for the nine months ended September 30, 1998 are
not necessarily indicative of the results to be expected for the entire
fiscal year, which ends on December 31, 1998.
These unaudited condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto for the year
ended December 31, 1997 included in the Company's 1997 Annual Report and Form
10-K.
NOTE 2. INCOME TAX PROVISION (BENEFIT)
The Company's income tax provision (benefit) for the three months and nine
months ended September 30, 1998 primarily represents certain non-U.S. taxes
arising upon the disposal of the Company's NTRIGUE product line, net of
offsetting operating losses. The Company has recorded a full valuation
allowance against all deferred tax assets on the basis that significant
uncertainty exists with respect to realization.
NOTE 3. EARNINGS (LOSS) PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
("SFAS 128") "Earnings Per Share", during the year ended December 31, 1997.
Earnings (loss) per share ("EPS") is presented on a basic and diluted basis,
and is based upon the weighted average number of ordinary and ordinary
equivalent shares outstanding during the period. Ordinary equivalent shares
consist of preferred shares (using the as-if-converted method) and stock
options (using the modified treasury stock method). Under the basic
calculation, ordinary equivalent shares are excluded from the computation.
Under the diluted calculation, ordinary share equivalents are excluded from
the computation if their effect is anti-dilutive. All prior period amounts
have been restated to conform with SFAS 128.
NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition", which the Company has adopted for transactions entered into during
the fiscal year beginning January 1, 1998. SOP 97-2 provides guidance for
recognizing revenue on software transactions and supersedes Statement of
Position 91-1, "Software Revenue Recognition". In March 1998, the AICPA issued
Statement of Position No. 98-4 ("SOP 98-4"), "Deferral of the Effective Date of
a Provision of SOP 97-2, Software Revenue Recognition". SOP 98-4 defers, for
one year, the application of certain passages in SOP 97-2 which limit what is
considered vendor-specific
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<PAGE>
objective evidence ("VSOE") necessary to recognize revenue for software
licenses in multiple-element arrangements when undelivered elements exist.
Additional guidance is expected to be provided prior to adoption of the
deferred provision of SOP 97-2. The Company will determine the impact, if
any, the additional guidance will have on current revenue recognition
practices when issued. Adoption of the remaining provisions of SOP 97-2 did
not have a material impact on revenue recognition during the three months and
nine months ended September 30, 1998.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of An
Enterprise and Related Information" ("SFAS 131"). SFAS 131 revises
information regarding the reporting of operating segments and is required to
be adopted in periods beginning after December 15, 1997. It also establishes
standards for related disclosures about products and services, geographic
areas and major customers. The Company will adopt SFAS 131 in 1998 and does
not expect such adoption to have a material effect on disclosures made in its
consolidated financial statements.
NOTE 5. COMPREHENSIVE INCOME (LOSS)
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). The Company adopted SFAS 130 effective January 1, 1998 and
such adoption did not have a material effect on its consolidated financial
statements. SFAS 130 requires that all items recognized under accounting
standards as components of comprehensive earnings be reported in an annual
statement that is displayed with the same prominence as other annual
financial statements. SFAS 130 also requires that an entity classify items
of other comprehensive earnings by their nature in an annual financial
statement. For example, unrealized gains and losses on foreign exchange
contracts, and unrealized gains and losses on marketable securities
classified as available-for-sale. Annual financial statements for prior
periods will be reclassified, as required.
Total comprehensive income (loss) was not materially different from the net
income (loss) reported for the three months and nine months ended September
30, 1998.
NOTE 6. CONTINGENCY
In February 1998, the Company disposed of its NTRIGUE technology for $17.687
million. A substantial portion of the total purchase price paid by the Buyer
was placed in escrow to secure the Company's agreement to indemnify the Buyer
with respect to certain matters. All moneys placed in escrow and against
which no claims have been made will be released after a specified period and
the remainder shall be released at such time as pending claims, if any, are
concluded.
Page 7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements and notes thereto
included in Part I - Item 1 of this Form 10-Q and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" set
forth in the Company's Form 10-K for the year ended December 31, 1997 (the
"Form 10-K").
FUTURE OPERATING RESULTS
This Form 10-Q contains forward looking statements. These forward looking
statements concern matters which include, but are not limited to, the
development of new products, enhancements or technologies, particularly
JENE-TM-, the Company's implementation of Java-TM- specifically designed for
embedded systems, which is currently under development, changes in the
Macintosh and UNIX markets for the Company's products, competitive conditions
in the industry, matters relating to exchange rate fluctuations and the
Company's liquidity and capital needs. These matters involve risks and
uncertainties that could cause actual results to differ materially from those
in the forward looking statements. In addition to the factors discussed
above, other factors that could cause actual results to differ materially
include, without limitation, the following: Completion of development of
JENE, market acceptance of JENE; the Company's ability to deliver on time,
and market acceptance of new products or upgrades of existing products; the
demand for Macintosh computers and UNIX workstations; the timing of, or delay
in, large customer orders; continued availability of technology and
intellectual property license rights; product life cycles; the introduction,
acceptance and delivery of embedded systems by embedded system vendors; the
introduction, acceptance and delivery of hardware and/or operating systems by
Macintosh and UNIX vendors, Microsoft Corporation or their competitors;
customer order deferrals in anticipation of new products; changes in the mix
of distribution channels through which the Company's products are offered;
purchasing patterns of distributors and retailers; quality control of
products sold; economic conditions generally or in various geographic areas;
and the risks listed from time to time in the reports that the Company files
with the U.S. Securities and Exchange Commission. There can be no assurance
that revenue levels, growth rates or profitability levels achieved during
1995 and prior years will be achieved in the future or that the Company will
experience growth in revenues and net income in any particular period when
compared to prior periods. Any quarterly or annual shortfall in net revenues
and/or earnings from the levels expected by securities analysts and
shareholders would result in a substantial decline in the trading price of
the Company's shares and could have an adverse effect on the liquidity of the
Company's shares.
During the last twelve months, the Company has been developing JENE, its
implementation of Java specifically designed for embedded systems. The
Company is entering the embedded systems market for the first time with its
JENE product. There can be no assurance that the Company will successfully
and timely complete development of JENE, or that JENE, if developed, will
achieve market acceptance. The inability of the Company, due to resource
constraints or technological or other reasons, to develop and introduce JENE
in a timely manner would have a material adverse effect on the Company's
business, financial condition and results of operations. If JENE is
successfully and timely developed, the Company will be required to develop
distribution channels in the embedded systems market and to hire and train
direct sales personnel. Competition for qualified sales personnel is intense
and there can be no assurance that the Company will be able to attract the
personnel needed to market and sell products in the embedded systems market.
The Company anticipates increased operating expenses as it completes
development of the product and develops the organization to market, sell and
support
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the product, before any revenue is recognized from sales of the product. The
market for embedded applications is fragmented and is characterized by
ongoing technological developments, evolving industry standards and rapid
changes in customer requirements. Most of the Company's competitors in the
embedded systems market have greater financial, technical, marketing and
sales resources than the Company, and more experience in developing,
marketing and supporting embedded systems products. Further, the Company
could face price competition or other competitive pressures that could cause
the Company to reduce the price of its product, which would result in reduced
profit margins. Prolonged price competition would have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Form 10-K includes an analysis of certain risks of the Company's
business, including risks which are inherent to software development, as well
as specific risks relating to the competitive environment in which the
Company operates. Although the Company has sought to identify the most
significant risks to its business, the Company cannot predict whether, or to
what extent any such risks may be realized, nor can there be any assurance
that the Company has identified all possible issues which the Company might
face. Potential risks and uncertainties include, without limitation, those
mentioned in the Company's Form 10-K; and in particular the continued
acceptance by the marketplace of the Company's products and the Company's
ability to successfully develop new products in the future. Investors should
carefully read the Company's filings with the Securities and Exchange
Commission, together with this Form 10-Q, and consider all trends and
uncertainties concerning the Company's business before making an investment
decision with respect to the Company's stock.
Page 9
<PAGE>
The following table sets forth the unaudited condensed consolidated results
of operations as a percentage of total revenues for the three and nine month
periods ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Revenues:
License revenue 91.9% 95.8% 92.6% 95.0%
Service revenue 8.1% 4.2% 7.4% 5.0%
-------- -------- -------- -------
Total revenues 100.0% 100.0% 100.0% 100.0%
-------- -------- -------- -------
Cost of revenues:
Cost of license revenue 59.5% 33.8% 57.7% 37.5%
Cost of service revenue 4.7% 4.0% 7.9% 5.0%
-------- -------- -------- -------
Total cost of revenues 64.2% 37.8% 65.6% 42.5%
-------- -------- -------- -------
Gross profit 35.8% 62.2% 34.4% 57.5%
-------- -------- -------- -------
Operating expenses:
Sales and marketing 48.1% 30.8% 58.0% 40.4%
Research and development 38.9% 17.3% 42.0% 22.3%
General and administrative 21.9% 19.6% 29.5% 17.2%
Restructuring 0.0% 0.0% 0.0% 2.6%
-------- -------- -------- -------
Total operating expenses 108.9% 67.7% 129.5% 82.5%
-------- -------- -------- -------
Operating loss (73.1%) (5.5%) (95.1%) (25.0%)
Interest income, net 7.3% 1.1% 7.1% 1.7%
Other income (expense), net 0.2% (0.3%) 135.7% (0.5%)
-------- -------- -------- -------
Income (loss) before (65.6%) (4.7%) 47.7% (23.8%)
income taxes
Income tax provision (benefit) (47.3%) 0.1% 17.6% 0.6%
-------- -------- -------- -------
Net income (loss) (18.3%) (4.8%) 30.1% (24.4%)
-------- -------- -------- -------
-------- -------- -------- -------
</TABLE>
REVENUES
The Company currently derives its revenues from the sale of packaged software
products, royalties received from bundling agreements with OEMs,
customer-funded engineering activities under OEM contracts, and annual
maintenance contracts. Revenues from the sale of packaged products and
royalties received from OEMs are classified as license revenue, while
revenues from customer-funded engineering activities and annual maintenance
contracts are classified as service revenue.
In the third quarter of 1998, total revenues declined by 73% compared to such
revenues for the third quarter of 1997, but increased 55% compared to the
second quarter ended June 30, 1998. Revenues in the quarter ended September
30, 1997 were materially impacted by a large source
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code licensing arrangement with Silicon Graphics. In the nine months ended
September 30, 1998, total revenues declined by 66% compared to revenues for
the first nine months of 1997. The decline is primarily due to increased
competition in the Macintosh and UNIX markets, a declining market share for
Apple Macintosh compatible computers, and the sale of the Company's NTRIGUE
business.
License revenue in the three months ended September 30, 1998 and 1997 was 92%
and 96% of total revenues, respectively. In the nine months ended September
30, 1998 and 1997, license revenues were 93% and 95% of total revenues,
respectively. In the third quarter of 1998, license revenues declined 74%
compared to license revenues in the third quarter of 1997. For the nine
months ended September 30, 1998, license revenues declined 67% compared to
the same period in 1997.
Service revenue in the third quarter of 1998 was 47% lower than service
revenue in the third quarter of 1997. Service revenue for the nine months
ended September 30, 1998 was 49% lower than service revenue for the same
period in 1997, primarily as a result of the Company no longer selling
NTRIGUE maintenance or support contracts. Revenues from customer-funded
engineering activities under OEM contracts also declined. The Company
discontinued supporting the NTRIGUE product in September 1998.
Sales of Macintosh-based products, in the third quarter of 1998, decreased by
10% compared to sales in the third quarter of 1997, but increased 186%
compared to the second quarter of 1998. For the nine months ended September
30, 1998, sales of Macintosh-based products decreased 42% compared to the
same period in 1997. In the three months ended September 30, 1998 and
September 30, 1997, revenue from the sale of the Company's products for
Macintosh computers accounted for 54% and 16% of total revenues,
respectively. In the nine months ended September 30, 1998 and September 30,
1997, revenue from the sale of the Company's products for Macintosh computers
accounted for 50% and 29% of total revenues, respectively. During the third
quarter the Company commenced shipping SoftWindows98 for the Macintosh.
License revenue from sales of Macintosh-based products increased in the third
quarter of 1998 compared to the second quarter of 1998, primarily due to
increased sell-through of SoftWindows95 for the Macintosh as a result of
reduced pricing, and initial volume shipments of SoftWindows98 for the
Macintosh to end-user customers. The decrease in license revenue from sales
of Macintosh-based products in the first nine months of 1998 compared to the
first nine months of 1997 is primarily the result of severe competitive
pressures faced by the Company's North American Macintosh business. Continued
severe competitive pressure may result in further reduced demand for the
Company's Macintosh-based products which would have a material adverse effect
on the Company's total revenues. Similarly, any future declines in sales of
Macintosh computers would also decrease the demand for the Company's
products, and would also have a material adverse effect on the Company's
total revenues.
In the three months ended September 30, 1998 and 1997, revenues from the sale
of the Company's products for UNIX computers accounted for 43% and 53% of
total revenues, respectively. In the nine months ended September 30, 1998 and
1997, revenues from the sale of the Company's products for UNIX computers
accounted for 42% and 36% of total revenues, respectively. In the third
quarter of 1998, sales of UNIX based products decreased by 78% compared to
sales in the third quarter of 1997 which included the large source code
licensing arrangement with Silicon Graphics. For the nine months ended
September 30, 1998, UNIX sales decreased by 60% compared to the same period
in 1997.
In the three months ended September 30, 1998 and September 30, 1997, revenue
from the sale of NTRIGUE products accounted for 3% and 29% of total revenues,
respectively. In the nine
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months ended September 30, 1998 and 1997 revenue from the sale of NTRIGUE
products accounted for 8% and 33% of total revenues, respectively. Revenues
declined as a result of the sale of the Company's NTRIGUE product line.
There will be no significant NTRIGUE revenues in the future.
The Company distributes its packaged products within the United States and
internationally through multiple distribution channels, including
distributors, resellers, direct sales, telesales, and OEMs. The Company
offers certain return privileges to its customers including product exchange
privileges and price protection. The Company recognizes revenues from
packaged products upon shipment; reserves for estimated future returns,
exchanges and price protection are recorded as a reduction of total revenues.
Sales to distributors and OEM's representing more than 10% of total revenue
in each period accounted for the following percentages of total revenues.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- -----------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Distributors:
Sun Microsystems 31% - 26% -
Mitsubishi 26% - 10% -
Ingram Micro 7% 7% 17% 10%
All Distributors: 83% less than 10% 73% 32%
OEM's:
Silicon Graphics - 45% - 27%
</TABLE>
No other customers accounted for more than 10% of the Company's total
revenues in the three or nine months ended September 30, 1998 and September
30, 1997.
Sales to customers outside the United States, derived mainly from customers
in Europe and Asia, represented approximately 35% and 17% of total revenues
in the three months ended September 30, 1998 and 1997, respectively, and 26%
and 24% of total revenues in the nine months ended September 30, 1998 and
1997, respectively.
Movements in currency exchange rates did not have a material impact on total
revenues in the three months or nine months ended September 30, 1998 or
September 30, 1997. However, there can be no assurance that movements in
currency exchange rates will not have a material adverse effect on the
Company's future revenues and results of operations.
Introductions of major new products and enhancements of existing products can
have a significant impact on the Company's quarterly and annual revenues.
Generally, sales volumes of new products increase in the first few months
following the introduction of a new product, due to the purchase of upgrades
by existing users and the purchase of initial inventory by distribution
channels. Thereafter, revenues may decline and/or stabilize to a relatively
constant level. Toward the end of a product's life cycle, revenues tend to
decline significantly. Due to the inherent difficulties of software
development, the Company cannot predict the exact quarter in which a new
product or version will be ready to ship. Any delays in the scheduled release
of major new products and enhancements would have a material adverse impact
on the Company's revenues and results of operations.
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COST OF REVENUES AND GROSS MARGIN
Cost of license revenue primarily includes Windows, DOS and WinFrame
royalties paid to Microsoft, IBM and Citrix, respectively, and costs of
documentation, duplication and packaging. Cost of service revenue includes
costs associated with customer-funded engineering activities and end-user
support under maintenance contracts.
The Company's gross margin for license revenue is significantly affected by
many factors, including pricing of the Company's products, royalties paid to
third parties, the mix of products licensed, the channels through which the
Company's products are distributed, and product maturity. License revenue
gross margins in the quarter ended September 30, 1998 were 35%, compared to
65% for the same period in 1997. For the nine months ended September 30,
1998 license revenue gross margins were 38%, compared to 61% for the same
period in 1997. The Company's gross margin in the period was significantly
affected by pricing strategies, unrecoverable third party royalties on
product returns, rebate programs, and obsolescence of inventory.
The Company's distribution agreement with Microsoft Corporation expired on
March 31, 1997, but was extended until September 30, 1998 on substantially
the same terms. The Company subsequently entered into a new distribution
agreement dated October 1, 1998 on substantially the same terms, effective
for one year.
The Microsoft Source Code Agreement, effective May 4, 1993, expired on May
30, 1996, except that the Source Code Agreement provided that the Company
maintained the right to use the licensed source code until May 30, 1998 for
product support purposes. The Company has not entered and does not
anticipate that it will enter into a renewal or replacement of the Source
Code Agreement for future Windows products. The Company has developed an
alternative approach to the code in the Company's products for future
versions of Windows. SoftWindows98 was developed using this alternative
approach.
Gross margin for service revenue increased in the third quarter of 1998 to
42% from 6% in the same period of 1997. The increase was primarily due to a
customer-funded engineering contract with one customer. Service revenue
gross margins decreased in the first nine months of 1998 to (6)% from 0% in
the same period of 1997 as a result of the Company incurring costs supporting
NTRIGUE with minimal matching revenue. The Company was obliged to support
NTRIGUE through September 1998.
OPERATING EXPENSES
Sales and marketing expenses include advertising and promotional expenses,
trade shows, personnel and related overhead costs, and salesperson
commissions. Sales and marketing expenses declined by 58% in the quarter
ended September 30, 1998 from the quarter ended September 30, 1997, and by
51% for the nine months ended September 30, 1998 from the same period of
1997. The decline is due to reduced spending in advertising programs and
staffing reductions.
Research and development expenses consist primarily of personnel costs,
overhead costs relating to occupancy and equipment depreciation. Research and
development expenses declined by 39% in the three months ended September 30,
1998 over the same period in 1997, and by 36% in the nine months ended
September 30, 1998 over the nine months ended September 30, 1997. The decline
in 1998 resulted from staffing reductions associated with the sale of the
NTRIGUE
Page 13
<PAGE>
product line. During the quarter ended September 30, 1998, the Company
invested further in JENE, its forthcoming implementation of Java for embedded
systems. Research and development expenses are expected to increase in the
three months ended December 31, 1998. In accordance with Statement of
Financial Accounting Standards No. 86, software development costs are
expensed as incurred until technological feasibility is established, after
which any additional costs are capitalized. In 1998 and 1997, no development
costs were capitalized.
General and administrative expenses consist primarily of personnel and
related overhead costs for finance, information systems, human resources and
general management. General and administrative expenses decreased by 70% in
the three months ended September 30, 1998 over the same period of 1997, and
by 42% for the nine months ended September 30, 1998 over the same period in
1997. The decline is due to reduced headcount and reduced legal fees.
RESTRUCTURING
In the first quarter of 1997, the Company completed a worldwide
reorganization that integrated the Company's product development, product
marketing and sales organizations into two business units to focus on the
NTRIGUE and SoftWindows product lines, and reduced headcount. Restructuring
expenses consisted principally of costs related to terminated employees,
including severance payments and stock option expenses.
INTEREST INCOME, NET
Interest income, net increased from $155,000 in the three months ended
September 30, 1997 to $263,000 in the three months ended September 30, 1998
due primarily to increased interest income earned on the Company's cash and
cash equivalents held in escrow. Interest income, net increased to $772,000
for the nine months ended September 30, 1998 from $536,000 for the nine
months ended September 30, 1997.
OTHER INCOME (EXPENSE), NET
Other income (expense), net increased from an expense of $45,000 in the three
months ended September 30, 1997 to income of $6,000 in the three months ended
September 30, 1998, and was primarily comprised of foreign exchange
gains/losses in both periods. In the nine months ended September 30, 1998,
other income (expense), net increased to $14,837,000 of which 99% was the net
gain on the sale of the Company's NTRIGUE product line and the majority of
the remainder was foreign exchange gains. In the nine months ended September
30, 1997, other income (expense), net comprised primarily foreign exchange
losses.
Over 80% of the Company's total revenues and over 50% of its operating
expenses are denominated in United States dollars. Most of the remaining
revenues and expenses of the Company are pound sterling denominated and
consequently the Company is exposed to fluctuations in pound sterling
exchange rates. To hedge against this currency exposure, the Company enters
into foreign currency options and forward exchange contracts for periods and
amounts consistent with the amounts and timing of its anticipated pound
sterling denominated operating cash flow requirements. Unrealized gains and
losses on foreign currency option contracts are deferred and were not
material at September 30, 1998 and December 31, 1997. There can be no
assurance that such fluctuations will not have a material effect on the
Company's results of operations in the future.
The Company has an investment portfolio of fixed income securities that are
classified as "available-for-sale securities." These securities, like all
fixed income instruments, are subject to
Page 14
<PAGE>
interest rate risk and will fall in value if market interest rates increase.
The Company attempts to limit this exposure by investing primarily in
short-term securities.
INCOME TAX PROVISION (BENEFIT)
The Company's income tax provision (benefit) for the three months and nine
months ended September 30, 1998 primarily represents certain non-U.S. taxes
arising upon the disposal of the Company's NTRIGUE product line, net of
offsetting operating losses. The Company no longer anticipates the income
tax liability from the gain on the disposal of the NTRIGUE product line in
the quarter ended March 31, 1998 will be as significant as first accounted
for, and has accordingly reduced its liability to reflect its current
expected liability. As a result, the Company reported an income tax benefit
of $1.7 million in the quarter ended September 30, 1998. The Company has
recorded a full valuation allowance, primarily comprising net operating
losses, against all deferred tax assets on the basis that significant
uncertainty exists with respect to their realization.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and short-term investments, including
cash and cash equivalents of $9.0 million held in escrow, were $18.8 million
at September 30, 1998, an increase of $4.3 million from $14.5 million at
December 31, 1997. Working capital increased to $12.3 million at September
30, 1998, from $8.1 million at December 31, 1997. The cash and cash
equivalents held in escrow at September 30, 1998 are 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 under
the terms of the Company's sale of its NTRIGUE product line to Citrix.
Subject to the foregoing, $2.5 million of such funds will be released from
escrow in February 1999, and the remaining $6.5 million of such funds will be
released in August 1999. Net cash used by the Company for operating
activities in the nine months ended September 30, 1998 was $11.1 million.
Accounts receivable DSO has decreased to 65 days at September 30, 1998
compared to 93 days at December 31, 1997.
The Company uses its working capital to finance ongoing operations and to
fund development of its product lines. Management believes that the
Company's existing cash, cash equivalents and short-term investment balances
and cash generated from operations, if any, will be sufficient to meet the
Company's expected liquidity requirements through at least December 31, 1998.
YEAR 2000 COMPLIANCE
It is generally anticipated that many organizations will experience
operational difficulties at the beginning of the Year 2000 as a result of the
fact that many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Significant
uncertainty exists in the software and other industries concerning the scope
and magnitude of problems associated with the century change. Based on the
Company's assessment to date, the Company believes that all versions of
SoftWindows98 products, SoftWindows95 products, Real PC and NTRIGUE, a
product the Company no longer ships, 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. However, there can be no
assurance that all of the Company's customers will install the Year 2000
compliant version of the Company's products in a timely manner, which could
lead to failure of customer systems and product liability claims against the
Company. Even if the Company's products are Year 2000 compliant, the Company
may in the future be subject to claims based on Year 2000 issues in the
products of other companies, or
Page 15
<PAGE>
issues arising from the integration of multiple products within a system.
The costs of defending and resolving Year 2000 related disputes, and any
liability of the Company for Year 2000 damages, including consequential
damages, could have a material adverse effect on the Company's business,
financial condition and results of operations. Further, the Company's
products are generally used with systems and software involving complicated
software products developed by other vendors, which may not be Year 2000
compliant. Failure of the information systems of the Company's customers
because of the failure of such noncompliant systems or software or for any
other reason, could also affect the perceived performance of the Company's
products, which could have a negative effect on the Company's competitive
position. In addition, the Company believes that the purchasing patterns of
customers and potential customers may be affected by Year 2000 issues as
companies expend significant resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase software products such as those offered
by the Company, which could result in a material adverse effect on the
Company's business, financial condition and results of operations.
The Company has carried out an assessment of its own internal systems and
believes that they are all Year 2000 compliant. The total cost associated
with preparation for the Year 2000 has not been, and is not expected to be,
material to the Company's business, financial condition or results of
operations. Nevertheless, the Company may not timely identify and remediate
all significant Year 2000 problems and remedial efforts may involve
significant time and expense. There can be no assurance that any Year 2000
compliance problems of the Company or its customers or suppliers will not
have a material adverse effect on the Company's business, financial condition
and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
Page 16
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual General Meeting on July 21, 1998. Proxies for
the meeting were solicited pursuant to Regulation 14A.
(b) At each Annual General Meeting, the third of the Company's Board of
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 considered for re-election, assuming
they wish to stand for re-election. Richard M. Noling was re-elected and
Paul L. Borrill was elected as Directors at the meeting. The Directors
whose term of office continues after the meeting are Nicholas, Viscount
Bearsted and Albert E. Sisto.
(c) The matters described below were voted on at the Annual General
Meeting, and the number of votes cast with respect to each matter and,
with respect to the election of directors, for each nominee, were as
indicated:
1. 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
2,971,361 82,268
2. To elect as a Director Paul L. Borrill
FOR AGAINST
2,884,425 139,456
3. To re-elect as a Director Richard M. Noling
FOR AGAINST
2,849,558 185,311
4. To approve a resolution to amend the Company's 1995 Employee Share Purchase
Plan
FOR AGAINST
2,748,835 284,454
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this Report:
Exhibit 10.41 Microsoft License Agreement for Desktop Operating System Products
dated October 1, 1998 between Microsoft Licensing, Inc. and
Insignia Solutions, Inc.*
- --------------------
*Confidential treatment has been requested with respect to certain portions of
this Exhibit. Such portions have been omitted from this filing and have been
filed separately with the Commission.
Page 17
<PAGE>
Exhibit 10.42 Registrant's 1995 Employee Share Purchase Plan, as amended
Exhibit 10.43 Promissory Note dated July 1, 1998 between Insignia Solutions,
Inc. and David Winterburn
Exhibit 11.01 Statement Regarding Computation of Earnings (Loss) per Share
Exhibit 27.01 Financial Data Schedule
(b) Reports on Form 8-K
None
Page 18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INSIGNIA SOLUTIONS PLC
(Registrant)
Date: November 12, 1998
S/STEPHEN M. AMBLER
-----------------------
STEPHEN M. AMBLER
Chief Financial Officer
Page 19
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT TITLE
- --------------------------------------------------------------------------------
Exhibit 10.41 Microsoft License Agreement for Desktop Operating System Products
dated October 1, 1998 between Microsoft Licensing, Inc. and
Insignia Solutions, Inc.*
Exhibit 10.42 Registrant's 1995 Employee Share Purchase Plan, as amended
Exhibit 10.43 Promissory Note dated July 1, 1998 between Insignia Solutions,
Inc. and David Winterburn
Exhibit 11.01 Statement Regarding Computation of Earnings (Loss) per Share
Exhibit 27.01 Financial Data Schedule
- ------------------
*Confidential treatment has been requested with respect to certain portions of
this Exhibit. Such portions have been omitted from this filing and have been
filed separately with the Commission.
Page 20
<PAGE>
Exhibit 10.41
"Confidential treatment has been requested with respect to certain
information contained in this document. Confidential portions have been
omitted from the public filing and have been filed separately with the
Securities and Exchange Commission."
MICROSOFT LICENSE AGREEMENT FOR DESKTOP OPERATING SYSTEM PRODUCTS
#O5llO550216 dated October 1, 1998
with INSIGNIA SOLUTIONS, INC., a corporation of Delaware, USA
This License Agreement ("License Agreement") is made and entered into as of the
date first set forth above ("License Effective Date"), by and between MICROSOFT
LICENSING, INC., a Nevada, U.S.A. corporation, ("MS"), and the company specified
above ("COMPANY").
I. INCORPORATION OF BUSINESS TERMS DOCUMENT.
This License Agreement hereby incorporates by reference all of the terms of the
Microsoft General OEM Business Terms Document dated October 1, 1998, Number
5110550206 executed by MS and COMPANY (or by Microsoft Corporation and COMPANY
before January 1, 1998), as may be revised from time to time during the term of
this License Agreement by agreement of the parties ("Business Terms Document").
In the event the above-referenced Business Terms Document has not been executed
by the parties as of the date of MS' execution of this License Agreement, this
License Agreement shall be considered void. In the event of any inconsistencies
between this License Agreement and the Business Terms Document, the terms of
this License Agreement shall control.
II. LICENSE GRANT.
(a) Subject to limitations in, and COMPANY's compliance with, this License
Agreement, including the Business Terms Document incorporated herein and the
attached Exhibits, MS grants to COMPANY a non-exclusive, limited license to:
(i) install one (1) copy of Preinstalled Product Software; and
(ii) distribute inside the Customer System package:
(A) one (1) copy of Preinstalled Product Software;
(B) one (1) copy of Product software on external media (i.e., diskette
or CD-ROM) as acquired from Authorized Replicator; and
(C) one (1) copy of Product end user documentation as acquired from
Authorized Replicator.
(b) COMPANY's license shall extend to new Supplements, Update Releases, and
Version Releases following the release listed in Exhibit C.
(c) Except as otherwise provided in the applicable Exhibit C, COMPANY's license
rights shall be worldwide.
(d) COMPANY may grant to COMPANY Subsidiaries the limited rights granted to
COMPANY in (a) and (b) of this License Grant Section as well as any rights MS
may grant to COMPANY for Products licensed herein under a Supplement Addendum
during the term hereof, subject to all the terms and conditions set forth in
this License Agreement.
(e) (i) COMPANY's license to distribute the Product(s) is limited to
distribution only with those Customer System(s) described on Exhibit(s) C for
the particular Product(s) and only inside the Customer System package.
(ii) COMPANY shall comply with: (A) the additional provisions, if any,
provided in Exhibit(s) C with respect to Product(s); and (B) marketing or
advertising guidelines provided with the Product Deliverables or otherwise
provided in writing by MS.
(iii) COMPANY shall not modify or delete any part of the Product software
in any manner, except as expressly permitted in the applicable Exhibit C.
(iv) COMPANY may supplement but shall not modify or translate Product end
user documentation. COMPANY shall not remove or modify the package contents of
Product or APM.
(f) (i) COMPANY shall include APM with Product software distributed by COMPANY.
(ii) COMPANY must distribute one (1) copy of such Product end user
documentation as may be required by MS with and inside the package of each
Customer System distributed with Product software and/or hardware.
(g) All distribution and use of the Product is by license only. MS does not
authorize all or any portion of the Product to be "issued to the public", "put
into circulation", or subject to a "first sale" as the copyright laws may use
those (or similar) terms. COMPANY's license to distribute the Product is limited
to distribution of the Product by COMPANY to end users for use pursuant to the
EULA.
(h) MS reserves all rights not expressly granted in the License Agreement(s)
including, without limitation, modification rights, translation rights, rental
rights, and rights to source code. MS expressly reserves its exclusive right
under applicable copyright, patent, and trademark laws to distribute copies of
Product by any means. Without limitation, MS does not authorize COMPANY, and MS
reserves its exclusive right, to distribute the Product separately from Customer
Systems; any such unauthorized distribution by COMPANY shall constitute a
violation of the License Agreement and MS' distribution right under applicable
law. COMPANY acknowledges that MS (and/or its suppliers, if applicable) shall
retain all copyright, patent, moral, trademark, title and other proprietary and
intellectual property in the Product software, Product Deliverables and
components thereof, in whole or in part in any form.
III. ADDITIONAL PAYMENT TERMS.
(a) COMPANY agrees to pay MS the royalties in Exhibit(s) C in accordance with
Section 3 of the Business Terms Document. Royalties are based upon COMPANY's
estimated shipment volume indicated in Exhibit(s) C.
IV. LICENSE TERM.
The term of this License Agreement shall run from the License Effective Date
until one ( 1) year from the end of the calendar month in which the License
Effective Date occurs.
V. ENTIRE AGREEMENT.
This License Agreement does not constitute an offer by MS, and it shall not be
effective until signed by both parties. Upon execution by both parties. this
License Agreement together with the Business Terms Document as incorporated
herein shall constitute the entire agreement between the parties with respect to
the subject matter hereof and merges all prior and contemporaneous
communications.
VI. EXHIBITS.
The following Exhibits are part of this License Agreement:
Exhibit C1 - Windows Desktop Family
Exhibit D - Brand Names and Trademarks
Exhibit N2 - Additional Addresses
The terms of the Exhibit(s) shall supersede any inconsistent terms contained in
this License Agreement.
CONFIDENTIAL
<PAGE>
VII. PRIOR AGREEMENT.
Provided that, as of the Effective Date of this License Agreement.
COMPANY has complied with all terms and conditions, including payment, under
DTOS dated March 1, 1996 between COMPANY and MS (or between COMPANY and
MSCORP. as assigned to MS), MS Contract No. 4556-6079 (hereinafter the "PRIOR
AGREEMENT"):
(a) the difference of i) the initial payments made by COMPANY pursuant to
Exhibit(s) C of the PRIOR AGREEMENT, minus ii) the amount of such initial
payments determined to be due to MS under the terms of the PRIOR AGREEMENT
shall be carried forward to this Agreement. If amounts due MS equal or exceed
initial payments, no amount shall be carried forward. Any initial payments
carried forward pursuant to this provision may be applied only against initial
payments due in accordance with Exhibit(s) C of this Agreement, and
(b) the PRIOR AGREEMENT shall be deemed to be terminated as of the Effective
Date hereof.
NOTICE:
For Product(s) specified in Exhibit C as licensed under the "per system" royalty
calculation provisions, please note the following:
This is a Microsoft Per System License. As a Customer, you may create a "New
System" at any time that does not require the payment of a royalty to Microsoft
unless the Customer and Microsoft agree to add it to the License Agreement.
Any New System created may be identical in every respect to a system as to which
the Customer pays a Per System royalty to Microsoft provided that the New System
has a unique model number or model name for internal and external identification
purposes which distinguishes it from any system the Customer sells that is
included in a Per System License. The requirement of external identification may
be satisfied by placement of the unique model name or model number on the
machine and its container (if any), without more.
If the Customer does not intend to include a Microsoft operating system product
with a New System, the Customer does not need to notify Microsoft at any time of
the creation, use or sale of any such New System, nor does it need to take any
particular steps to market or advertise the New System.
Under Microsoft's License Agreement, there is no charge or penalty if a Customer
chooses at any time to create a New System incorporating a non-Microsoft
operating system. If the Customer intends to include a Microsoft operating
system product with the New System, the Customer must so notify Microsoft, after
which the parties may enter into arm's length negotiation with respect to a
license to apply to the New System.
IN WITNESS WHEREOF, the parties have executed this License Agreement by their
duly authorized representatives as of the date set forth above. All signed
copies of this License Agreement shall be deemed originals. Each individual
signing on behalf of COMPANY below hereby represents and warrants that he or she
has full authority to sign this License Agreement and bind COMPANY to perform
all duties and obligations contemplated by this License Agreement. If COMPANY is
located in a jurisdiction in which a corporate seal or "chop" is commonly used
as an instrument of agreement execution, in addition to the individual signature
provided below, COMPANY's seal or "chop" should be entered below COMPANY's
signature block.
MICROSOFT LICENSING, INC. INSIGNIA SOLUTIONS, INC.
/s/ David Kaye /s/ Stephen Ambler
- ------------------------------- --------------------------------
By (Signature) By (Signature)
David Kaye Stephen Ambler
- ------------------------------- --------------------------------
Name (Print) Name (Print)
OEM Accounting Manager Chief Financial Officer, VP, Secretary
- ------------------------------- --------------------------------
Title Title
October 29, 1998 25 September 1998
- ------------------------------- --------------------------------
Date Date
COMPANY's seal or "chop"
NOTICE:
This is an OEM distribution license. Product can only be distributed with a
Customer System, as specified in the License Grant Section hereof.
2
CONFIDENTIAL
Microsoft License Agreement [or Desktop Operating System Products,
#5110550216-5 dated October 1, 1998, between MICROSOFT LICENSING, INC. and
INSIGNIA SOLUTIONS, INC.
<PAGE>
EXHIBIT C1
WINDOWS DESKTOP FAMILY
PRODUCT TABLE(S)
<TABLE>
<CAPTION>
Product Name Language Applicable Royalty*** Basis (e.g., Estimated Billing Type****
And Version* Versions** Additional Per Copy or Monthly
Provisions Per System) Volume
- ------------ ---------- ---------- ---------- ------------ --------- ----------------
Microsoft-Register Trademark-
Windows-Registered Trademark- (17),(99) * Per System- *
Desktop Family
<S> <C> <C> <C> <C> <C> <C>
Microsoft-Register Trademark- AR, CA, CS, DA, (20),(21),(24), Royalty Type II
MS-DOS-Register Trademark- DE, EL, EN, ES, (25),(26),(30), Specified
Version 6.22 FI, FR, HU, IT, (31),(52),(99) for the
with Enhanced IW, JA, KO, NL, Family
Tools Version NO, PL, PT, RU, Above
1.02, and SL, SV, TH, TR,
Microsoft XT, XZ, YL, ZH
Windows(&
for
Workgroups
Version 3.11
Microsoft-Register Trademark- AR, CS, DA, DE, (18),(20),(21), * Type II
Windows EL, EN, ES, FI, (27),(28),(29), In Addition
NT-Register Trademark- FR, HU, IT, IW, (30),(31),(99) to the
Workstation JA, KO, NL, NO, Royalty
Version 4.0 PL, PT, RU, SL, Specified
(1-2 Processor SV, TH, TR, XC, for the
Version) XT, XZ, ZH Family Above
Microsoft-Register Trademark- AR, CS, DA, DE, (18),(20),(21), * Type II
Windows EL, EN, ES, FI, (27),(28),(29), In Addition
NT-Register Trademark- FR, HU, IT, IW, (30),(31),(99) to the
Workstation JA, KO, NL, NO, Royalty
Version 4.0 PL, PT, RU, SL, Specified
(1-4 Processor SV, TH, TR, XC, for the
Version) XT, XZ, YL, ZH Family Above
Microsoft-Register Trademark- CS, DA, DE, EL, (18),(20),(21), * Type I
Windows EN, ES, FI, FR, (27),(28),(29), In Addition
NT-Register Trademark- HU, IT, IW, JA, (30),(31),(32), to the Royalty
Workstation KO, NL, NO, PL, (99) Specified
Version 5.0 PT, RU, SV, TR, for the
(1-2 Processor XT, ZH Family Above
Version)
Microsoft-Register Trademark- AR, CS, DA, DE, (18),(20).(21), * Type I
Windows EL, EN, ES, FI, (27),(28),(29), In Addition
NT-Register Trademark- FR, HU, IT, IW, (30),(31),(32), to the Royalty
Workstation JA, KO, NL, NO, (99) Specified
Version 5.0 PL, PT, RU, SV, for the
(1-4 Processor TR, XC, XT, ZH Family Above
Version)
Microsoft-Register Trademark- AR, CA, CS, DA, (18),(19),(20), Royalty Type II
Windows-Register Trademark-95 DE, EL, EN, ES, (21),(26),(30), Specified
EU, FA, FI, FR, (31),(99) for the
HU, IT, IW, JA, Family Above
KO, NL, NO, PL,
PT, RU, SK, SL,
SV, TH, TR, VI,
XC, XT, ZH, ZY
</TABLE>
3
CONFIDENTIAL
Microsoft License Agreement for Desktop Operating System Products,
#5110550216-5 dated October 1, 1998, between MICROSOFT LICENSING, INC. and
INSIGNIA SOLUTIONS, INC.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Microsoft-Register Trademark- AR, CS, DA, DE, (18),(19),(20), Royalty Type II
Windows 95 EL, EN, ES, FI, (21),(26),(30), Specified
FR, HU, IT, IW, (31),(99) for the
JA, KO, NL, NO, Family Above
PL, PT, RU, SK,
SL, SV, TR, XC,
XT, ZH.
</TABLE>
* Other Available Versions: If the release listed in the Product Table above is
not available in a particular licensed language, COMPANY may receive Product
Deliverables for the latest available preceding release of such Product in such
language by sending written notice to MS as specified below. If COMPANY is
licensed for the EN version of a Product in the Product table and at least one
(1) other language version of the same Product, then in addition to the language
versions specified in the Product table above for such Product, COMPANY may
receive Product Deliverables for the licensed Product in other available
language versions by sending a written request to MS as specified below. All
such COMPANY requests for additional Product Deliverables shall be sent to the
attention of OEM Accounting Services at the address for royalty reports listed
in Exhibit NI of the Business Terms Document. Any such additional language
version(s) or preceding version(s) added by notice shall be deemed licensed
hereunder on the same basis (i.e., "per system" or "per copy") as the versions
listed in the table above. For language version(s) added by notice, COMPANY
shall pay MS the highest royalty rate specified in the Product table above for
licensed language versions of such Product.
** Language Version Key: Please refer to the Language Version Key in Exhibit L
of the Business Terms Document for explanation of Language Version codes.
Localized versions are licensed on an if and as available basis.
*** A Product is not licensed hereunder unless royalty rate(s) are indicated in
the Product table of this Exhibit C.
**** Billing Type: Type I - based on third party reports, Type II - based on
COMPANY royalty reports, as specifically set forth in Section 3(e) of the
Business Terms Document.
INITIAL PAYMENT AMOUNT
The Initial Payment Amount for Products licensed under this Exhibit C shall
be *, and shall be paid in accordance with Section 3(b) of the Business Terms
Document, as incorporated by reference into the License Agreement.
ADDITIONAL PROVISIONS KEY
(Note: Only those Additional Provisions applicable to licensed Product(s) may
appear. Section numbering may not be consecutive.)
(17) If COMPANY is licensed for the Windows Desktop Family, COMPANY may
distribute not more than one (1) of the listed Product combinations or Products
[e.g.: Microsoft MS-DOS with Enhanced Tools and Windows for Workgroups, or
Windows 95, or Windows NT Workstation Version 4 (1-2 Processor Version), or
Windows NT Workstation Version 5 (1-4 Processor Version), etc.] with each
licensed Customer System. COMPANY's report shall separately indicate the
quantity of each such Product or combination that COMPANY distributes.
(18) (a) COMPANY is not licensed to, and agrees that it will not, modify, in any
way, or delete any aspect of the Product software (including, without
limitation, any features, shortcuts, icons, Active Desktop components (as
described in the OPK), "wizards", folders (including subfolders) or programs of
Product software) as delivered in the Product Deliverables, except if and as
specifically permitted below or in the OPK User's Guide ("OPK") provided in the
Product Deliverables. In particular, and without limitation, this means that
COMPANY is not licensed to and agrees that it will not:
(i) Modify or obscure, in any way, the sequence or appearance of any
screens displayed by the Product software as delivered in the Product
Deliverables from the time the Customer System completes BIOS processing after
being switched on by the end user and transfers control to the Product software
loaded from the hard disk ("End User Boot") until the time that the "welcome
screen" program has been run and closed by the end user and the Customer System
displays the Product software "desktop" screen defined in the OPK ("Desktop
Screen").
(ii) Except as provided in (iii), display any content (including visual
displays or sound) from End User Boot through and including the time that the
Customer System has displayed the Desktop Screen.
(iii) Modify or obscure, in any way, the appearance of the Desktop Screen
(including without limitation, the addition or modification of background
wallpaper bitmaps displayed upon End User Boot); provided, however, that (A)
COMPANY may add icons or folders to the Desktop Screen provided that any such
icons are the same size and substantially similar shape as icons included on the
Desktop Screen as delivered in the Product Deliverables and that any such
folders are the same size, shape and appearance as folders included on the
Desktop Screen as delivered in the Product Deliverables and (B) COMPANY may
further modify the Desktop Screen when running in "Active Desktop" mode as
provided below in (b).
(iv) Use any portion of Product software to enable any programs or other
content to run or appear prior to End User Boot.
4
CONFIDENTIAL
Microsoft License Agreement for Desktop Operating System Products,
#5110550216-5 dated October 1, 1998, between MICROSOFT LICENSING, INC. and
INSIGNIA SOLUTIONS, INC.
<PAGE>
(v) Configure any programs (including without limitation any "shells",
"screen savers" or "welcome" scripts), "wizards" or other content to be
enabled, run or initialized automatically (i.e. without requiring a
deliberate act of the end user) from an icon or folder on the Desktop Screen
or from the "Start" Menu of the Desktop Screen or otherwise. By way of
example only, and without limiting the generality of the foregoing, COMPANY
agrees that it shall not (1) populate with any programs or other content the
Product software "Start-up" directory (e.g., "Windows\Start
Menu\Programs\StartUp" folder for Windows 95, or 0%windir%\profiles\-LESS
THAN-user(s)-GREATER THAN-\Start Menu\Programs\Startup" folder for Windows NT
Workstation 4.0) or (2) populate the boot.ini, config_sys, autoexec.bat,
win.ini, system.ini, system.dat or user.dat files in any manner which will
cause any program or content to run or load automatically upon End User Boot,
except for device drivers necessary to support preinstalled or preconfigured
hardware devices (e.g., network cards, printers, etc.).
(vi) Modify or add content to any directories installed by the Product
software, except as permitted in the OPK for Active Desktop customization and
for preinstallation of applications by COMPANY.
(b)(i) if the Product software includes the ability to run in "Active Desktop"
mode, COMPANY may customize the Active Desktop in the Preinstalled Product
Software in accordance with the instructions for customization provided in the
OPK, provided COMPANY otherwise complies fully with Additional Provision (18)(a)
above. Upon request, MS shall provide COMPANY with a copy of any such
instructions.
(ii) In order to perform the customizations provided in the OPK, MS shall
provide COMPANY with an Internet Explorer Administration Kit ("IEAK") or other
kit. MS grants to COMPANY a nonexclusive, limited worldwide, royalty-free
license during the term of the License Agreement to use the IEAK to customize
the Preinstalled Product Software provided that COMPANY shall use the IEAK
specific to such release of Product and solely in accordance with the
instructions in the OPK. In the event that the capabilities and/or instructions
of the IEAK are in conflict the customizations authorized in the OPK (e.g. the
IEAK provides different customization capabilities than those authorized in the
OPK), the instructions in the OPK shall take precedence.
(19) COMPANY shall include a full copy of the back-up disk images ("CAB" files)
contained in the OPK and such other directories or files as specified in the OPK
on the hard disk drive of each Customer System distributed with the Product. If,
and only if, COMPANY distributes the Product software solely as Preinstalled
Product Software (i.e., without a back-up copy of the Product on CD, diskette,
magnetic tape, or other external media) with any Customer System that is
designed to include or be used with a 3.5" disk drive, then COMPANY shall also
preinstall the Microsoft Create System Disk Tool contained in the OPK on the
hard disk drive of such Customer System to enable the end user to make a back-up
copy of the Product software according to the terms of the EULA. Diskette images
may only be used with the Microsoft Create System Disk Tool. COMPANY may not
distribute, use, or authorize the use of the Microsoft Create System Disk Tool
or diskette images except as provided in this Additional Provision or as
specified in the OPK.
(20) Notwithstanding anything to the contrary contained in the License Agreement
(including Exhibits and the Business Terms Document as incorporated therein),
COMPANY may distribute Product(s) only with Customer Systems which are marketed
and distributed exclusively under COMPANY's or COMPANY Subsidiaries' brand
names, trade names and trademarks. The Product(s) may not be distributed with
Customer Systems which are marketed or distributed under any name which includes
any third party brand names, trade names or trademarks.
(21) The royalty rate(s) specified above require pre-installation of the Product
as the "default" operating system on each Customer System distributed with the
Product (i.e., the Product will set up and execute unless the user configures
the Customer System otherwise). COMPANY shall preinstall the Product software
solely in accordance with the installation instructions set forth in the "OPK
User's Guide" included in the preinstallation kit portion of the Product
Deliverables ("OPK"). COMPANY may use the information, tools and materials
contained in the OPK solely to preinstall the Product software in accordance
with the OPK User's Guide and for no other purpose. Other than as specified in
the OPK User's Guide, COMPANY shall not modify the Product software, nor delete
or remove any features or functionality without the written approval of MS in
each instance.
(24) Windows for Workgroups version 3.11 includes Microsoft At Work fax
transmission software, which provides methods for stand-alone and networked
computers to send and receive fax messages with certain security levels. French
law (Decree 92-1358 of December 1992) generally prohibits the use in France of
such technology, unless special approvals are granted. Accordingly, OEMs should
provide only the version of Windows for Workgroups version 3.11 designed for
France to avoid violating the Decree.
(25) The Japanese language version of the MS-DOS operating system is version
6.2/V. The Japanese language version of Enhanced Tools for MS-DOS 6 is 1.0/V.
(26) (a) Notwithstanding anything to the contrary in Section 11 of the License
Agreement and in Sections 2 and 6 of the Business Terms Document, COMPANY may
install one or more language versions (listed in the Language Version box above)
of Product software with each applicable Customer System provided that COMPANY
complies with the following restrictions:
(i) COMPANY may distribute such multiple language versions of Product
software only in the form of Preinstalled Product Software. COMPANY may
distribute only one backup copy of Product software in one language version for
use on each such Customer System;
(ii) COMPANY shall use the set-up utility included in the Product
Deliverables which allows the end-user to choose one, and only one, language
version of Product for the Customer System.
(iii) COMPANY shall follow all guidelines and procedures set forth in the
Product Deliverables regarding the installation, set-up, and initialization of
multiple language versions of Product software, and
5
CONFIDENTIAL
Microsoft License Agreement for Desktop Operating System Products,
#5110550216-5 dated October 1, 1998, between MICROSOFT LICENSING, INC. and
INSIGNIA SOLUTIONS, INC.
<PAGE>
(iv) COMPANY shall clearly indicate to end-users, including without
limitation, in advertising and on Customer System packaging, that end-users
shall have access to one language version only.
(b) COMPANY hereby indemnifies MS and its suppliers from and against all
damages, costs and attorneys' fees arising from claims or demands resulting from
COMPANY's distribution of multiple language versions including, without
limitation, claims that the end-user is entitled to use more than one language
version of the Product or that advertisements, Customer System packaging, or
other representations made by or for COMPANY are false and/or misleading.
(c) COMPANY's report shall separately indicate the number of Customer Systems
distributed with each combination of language versions of Product.
(d) Provided COMPANY complies with all terms and conditions of the License
Agreement, including the Business Terms Document as incorporated therein and
this Additional Provision (26), for purposes or the royalty calculation
provisions of Section 3 of the Business Terms Document, preinstallation of
multiple language versions of Product performed in accordance with the
instructions for multiple language installation provided in the OPK shall
constitute "one language" version. In such event, COMPANY shall pay the highest
royalty applicable to the language versions distributed.
(e) If COMPANY does not comply with all of the requirements stated above, in
addition to any other remedies MS may have, COMPANY shall pay MS the applicable
royalty for each language version of Product software included with the Customer
System.
(27) In order to support end-users of this Product, COMPANY agrees to employ at
all times at least one (1) support technician who has successfully completed, at
COMPANY's expense, the Microsoft Certified Professional program for this
Product.
(28) (a) Though the Product Deliverables for this Product may include versions
of the Product designed for other types of microprocessors, COMPANY is licensed
to distribute the Product only with and for use on Customer Systems based on the
Intel x86, Pentium or compatible architecture.
(b) COMPANY shall include a full copy of the \i386 directory, \support directory
(except\support\opk\support\hqtool and \support\scsitool subdirectories), and
\drvlib directory contained in the OPK on the hard disk drive of each Customer
System distributed with the Product.
(29) COMPANY is not licensed to distribute this Product on Customer Systems
which are capable of utilizing more microprocessors than the number specified in
the Product table above.
(30) The Default Charge for this Product as described in Section 3(c)(vi) of the
Business Terms Document shall be thirty percent (30%) of the highest royalty
rate for the Product stated in the Product table above.
(31) COMPANY may not distribute more than one Windows operating system (e.g.,
Windows for Workgroups, Windows 95, Windows 98, or Windows NT Workstation) with
the same Customer System.
(32) COMPANY agrees that MS may, in its sole discretion, change the Billing Type
for this Product to Type II upon prior written notice to COMPANY.
(52) (a) The Chinese (Simplified) language versions of MS-DOS are available with
only simplified Chinese character fonts licensed from a third party. COMPANY
acknowledges that such fonts may differ in quality and characteristics to
Chinese character fonts available in other Microsoft Products.
(b) The Chinese (Simplified) language versions of MS-DOS are available only
through selected Authorized Replicators as specified by MS. From time to time,
MS shall provide an updated list of Authorized Replicators through which the
Chinese (Simplified) language version of this Product is available.
(c) The packaging for the Chinese (Simplified) language version of this Product
distributed with Customer Systems within or to the PRC shall be clearly marked
in both English and simplified Chinese, "Not for distribution or use outside the
People's Republic of China".
(99) COMPANY may grant end user organizations which acquire at least fifty (50)
units of Customer Systems ("End User Organizations") the right to install
Customer Systems either from a network or from a master CD Supplied by the
COMPANY and will not be required to provide product manual and certificate of
authenticity, but only if the following conditions are satisfied:
(a) COMPANY and the End User Organization enter into a written agreement
(hereinafter "Volume Purchase Agreement") that requires such End User
Organization:
(i) to comply with obligations substantially the same as those imposed on
COMPANY by Sections 6(a)(ii), 6(b), 7(a), 7(c), 14, and 17(b) of the
Business Terms Document;
(ii) to cease installation of Product software upon notice from COMPANY or
MS of the termination or expiration of this License Agreement, or
suspension of any license rights for such Product(s);
(iii) to provide monthly reports to COMPANY which shall specify by Product,
the number of copies of each Product installed by the End User Organization
during the most recent month; and
(iv) to pay MS or COMPANY's attorneys' fees if COMPANY or MS employs
attorneys to enforce any rights arising out of the Volume Purchase
Agreement.
6
CONFIDENTIAL
Microsoft License Agreement for Desktop Operating System Products,
#5110550216-5 dated October 1, 1998, between MICROSOFT LICENSING, INC. and
INSIGNIA SOLUTIONS, INC.
<PAGE>
(b) The Volume Purchase Agreement shall name MS as a third party beneficiary
of the Volume Purchase Agreement with respect to (MS) Product
software and that MS shall have the right to enforce the terms and
conditions of the Volume Purchase Agreement (including without limitation
the ability to audit the End User Organization in accordance
with Section 14(b) of the Business Terms Document as they relate to MS
Product software.
(c) COMPANY shall maintain at its principal office proper records and entries
which specify by End User Organization, Product, the number of copies
of each Product installed by each End User Organization authorized to
exercise any rights or COMPANY pursuant to this Agreement; and
(d) Within thirty (30) days after request by MS, COMPANY shall provide MS with
a list of End User Organization authorized to exercise installation rights
pursuant to this License Agreement, and shall provide MS with a true,
correct and complete copy of any Volume Purchase specifically requested by
MS, or at the option of COMPANY, a written summary of the terms of the
Volume Purchase Agreement in sufficient detail for MS to determine whether
such agreement complies with the requirements of this additional Provision
(99)(a), and such other information about the End User Organization as MS
may reasonably request. Upon request by MS, COMPANY shall promptly notify
MS of the termination, expiration or significant modification of the terms
of such Volume Purchase Agreement(s).
(e) COMPANY shall provide reasonable assistance and cooperation to remedy any
material non-compliance with the terms of this Section 6(c) by any End
User Organization.
(f) Notwithstanding the definition of Customer System in Section I (d) of the
Business Terms Document and below, for purposes of the distribution of the
Product under this License Agreement only, the term "Customer System"
shall mean COMPANY's SoftWindows X emulation software.
(g) This Product may be distributed through retail channels directly to end
users only. It must be individually shrinkwrapped and not combined
with any other product.
CUSTOMER SYSTEMS
COMPANY's Customer Systems shall be the assembled computer systems described in
the table below which (i) are configured for use only by a single user; (ii) are
designed to use a video display and keyboard; and (iii) include at least a CPU,
a motherboard, a power supply, a hard disk drive (except if the Product software
is installed in ROM), and a case. Each listed Customer System must have a unique
model line name, model name, or model number which COMPANY uses both internally
(in COMPANY's books and records) and externally (on the Customer System case and
packaging). For each Product which COMPANY chooses to license for distribution
with the listed Customer System, the letter "s" or "c" in the relevant box
indicates whether COMPANY is licensing the Product on a "per system" or "per
copy" basis, respectively. New models may be added by agreement of the parties.
At COMPANY's option, for purposes of administrative convenience, COMPANY may
designate models by model line or series (e.g., "Jaguar model line", "Jaguar Pro
series", "Jaguar Pro 750 model line", "Jaguar Pro 950 series", etc.). Customer
Systems defined by model line or series shall include all present models which
include the designated model line or series name, (e.g., "Jaguar Pro model line"
includes Jaguar Pro, Jaguar Pro 950, Jaguar Pro S, etc.; "Jaguar series"
includes Jaguar, Jaguar Pro, Jaguar Pro 950, Jaguar S400, etc.; "Jaguar Pro 950
series" includes Jaguar Pro 950, Jaguar Pro 955, etc.).
In the event that COMPANY designates models by model line or series in this
Exhibit C, then COMPANY may elect to include as Customer System(s) new models in
the model line or series by including any such new model(s) on its royalty
report for the reporting period in which each such new model is first
distributed with the Product. Unless otherwise agreed to by the parties prior to
COMPANY's first distribution of a new model with the Product, each such new
model designated on a royalty report shall be licensed for the remainder of the
term of the License Agreement on the same basis (i.e., per system or per copy)
as the other models in the model line or series and shall bear the applicable
royalty set forth in this Exhibit C. Any new model in the model line or series
which is not included in a royalty report as a licensed Customer System (and is
thus not licensed for the applicable Product) must have a unique model number or
model name used for internal and external identification purposes which
distinguishes it from any model which COMPANY has designated previously as a
Customer System.
Product Number Key:
<TABLE>
<CAPTION>
Item # Legal Name
<S> <C>
2076 Microsoft-Registered Trademark- Windows-Registered Trademark-Desktop Family
</TABLE>
Royalty Basis Key: C = per copy; S = per system; if Product box is blank in the
Customer System Table below, such Product is not licensed for distribution with
the listed Customer System.
CUSTOMER SYSTEM TABLE
<TABLE>
<CAPTION>
Model Name/Model Number Processor 2076
<S> <C> <C>
SoftWindows 95 PENTIUM OR S
COMPARABLE
SoftWindows 98 PENTIUM OR S
COMPARABLE
SoftWindows NT PENTIUM OR S
COMPARABLE
</TABLE>
7
CONFIDENTIAL
Microsoft License Agreement for Desktop Operating System Products,
#5110550216-5 dated October 1, 1998, between MICROSOFT LICENSING, INC. and
INSIGNIA SOLUTIONS, INC.
<PAGE>
COMPANY hereby represents and warrants that the names and numbers indicated in
the Model Name or Model Number column in the table above accurately denote the
actual designation used by COMPANY to identify the listed models (on the
Customer System case and in COMPANY's internal books and records).
8
CONFIDENTIAL
Microsoft License Agreement for Desktop Operating System Products,
#5110550216-5 dated October 1, 1998, between MICROSOFT LICENSING, INC. and
INSIGNIA SOLUTIONS, INC.
<PAGE>
EXHIBIT D
BRAND NAMES AND TRADEMARKS
COMPANY AND COMPANY SUBSIDIARIES BRAND NAMES AND TRADEMARKS
If COMPANY Customer Systems are marketed, licensed, or distributed under
COMPANY's or COMPANY Subsidiaries' brand names and trademarks which do not
include COMPANY's name, those brand names and trademarks must be listed below:
THIRD PARTY BRAND NAMES AND TRADEMARKS
If COMPANY Customer Systems are marketed, licensed, or distributed by a third
party under brand names and trademarks which do not include COMPANY's name,
those brand names, trademarks and model names used for the Customer Systems by a
third party must be listed below. Certain Products may NOT be marketed or
distributed under any third party brand names or trademarks. Such Products are
indicated in the applicable Exhibit(s) C.
9
CONFIDENTIAL
Microsoft License Agreement for Desktop Operating System Products,
#5110550216-5 dated October 1, 1998, between MICROSOFT LICENSING, INC. and
INSIGNIA SOLUTIONS, INC.
<PAGE>
EXHIBIT N2
ADDITIONAL ADDRESSES
COMPANY:
BILL TO:
Controller
INSIGNIA
41300 Christy Street
Fremont, CA 94538-3115
USA
Telephone: 510 360-3786
Fax: 510 360-3704
E-mail:
SHIP TO:
Controller
INSIGNIA
41300 Christy Street
Fremont, CA 94538-3115
USA
Telephone: 510 360-3786
Fax: 510 360-3704
E-mail:
10
CONFIDENTIAL
Microsoft License Agreement for Desktop Operating System Products, #5110550216-5
dated October 1, 1998, between MICROSOFT LICENSING, INC. and INSIGNIA SOLUTIONS,
INC.
<PAGE>
MICROSOFT GENERAL OEM BUSINESS TERMS
#5110550206 dated October 1, 1998
with Insignia Solutions, Inc., a corporation of Delaware, USA
OVERVIEW.
This General OEM Business Terms document ("Business Terms Document")
sets forth general business terms and conditions that the parties contemplate
will apply to any License Agreement(s) (as hereinafter defined) that Microsoft
Licensing, Inc., a Nevada, U.S.A. corporation ("MS") and the company specified
above ("COMPANY") may enter into between the date first set forth above and
October 31, 2001. This Business Terms Document does not grant any license
rights to any MS products. This Business Terms Document shall have no force or
effect except if and as incorporated into a License Agreement by agreement of
the parties.
1. DEFINITIONS.
(a) "Associated Product Materials" or "APM" shall mean a certificate of
authenticity, an end user license agreement, a product registration card,
and/or other materials designated by MS from time to time which COMPANY may
acquire from an Authorized Replicator.
(b) "Authorized Replicator" shall mean a third party approved by MS from
which COMPANY may acquire Product(s) reproduced in accordance with MS
specifications. MS shall provide COMPANY with a list of Authorized Replicators
and shall notify COMPANY from time to time of changes to the list.
(c) "COMPANY Subsidiary" shall mean a company listed in Exhibit X, in which,
on a class by class basis, more than fifty percent (50%) of the stock entitled
to vote for the election of directors is directly owned by COMPANY, but only
so long as such ownership exists.
(d) "Customer System" shall mean COMPANY's computer system product(s)
described in the Exhibit(s) C to the License Agreement for the Product. Unless
otherwise expressly specified in the applicable Exhibit C, a Customer System
shall be an assembled computer system which (i) is configured for use only by
a single user; (ii) is designed to use a video display and keyboard; and (iii)
includes at least a CPU, a motherboard, a hard disk drive, a power supply, and
a case. Unless otherwise provided in applicable Exhibits C or D to the License
Agreement, Customer Systems shall be marketed and distributed only under a
brand name which includes COMPANY's name.
(e) "EULA" shall mean the end user license agreement for the Product which
shall consist of the applicable license and warranty terms for the specific
Product as determined by MS. The EULA shall be available from the Authorized
Replicator.
(f) "Initial Term" shall mean the term of the License Agreement as set forth
in the Term section of the License Agreement as of the License Effective Date.
The Initial Term shall not include any extension to the term of the License
Agreement unless expressly agreed in writing by the parties.
(g) "License Effective Date" shall mean date specified as such in the License
Agreement.
(h) "License Agreement(s)" shall mean the separate License Agreement(s) between
MS and COMPANY, which set forth the specific license and terms for specific
Product(s), and which reference this Business Terms Document.
(i) "MSCORP" shall mean Microsoft Corporation, a Washington, U.S.A.
corporation.
(j) "Period" shall mean a period described in Exhibit B to the License
Agreement, if any, such as the "First Period."
(k) "Preinstalled Product Software" shall mean the Product software installed in
ROM or on a hard disk in accordance with the terms and conditions of the License
Agreement and the instructions contained in the Product Deliverables.
(1) "Product" shall mean the copyrighted and/or patented MS product(s)
(including, where applicable, Product software in object code form, Product end
user documentation, APM, and Product hardware) identified in the Exhibit(s) C to
the License Agreement(s). Only those Product(s) for which Customer Systems and
royalty rate(s) or, in the case of Product hardware, price(s) are specified in
the applicable Exhibit C to the License Agreement are licensed under the License
Agreement.
(m) "Product Deliverables" shall mean (i) Product software in object code form,
if applicable, (ii) installation utilities and related documentation, if
applicable; (iii) a single copy of Product end user documentation; (iv) one or
more units of Product hardware, if applicable, and (v) any other deliverables
identified in Exhibit C to the License Agreement or otherwise identified by MS
as Product Deliverables.
(n) "Product Release" shall mean a release of Product which MS designates as a
change in the digit(s) to the left of the decimal point in the Product version
number [(x).xx] or a change in the annual identifier (e.g., 96 or 1996). Any
Product for which no version designation is listed in the applicable Exhibit C
to the License Agreement shall be deemed to be version " I.O."
(o) "Reporting Period" shall mean the interval described in the Royalty Reports
and Payments Section of the License Agreement for which COMPANY shall submit its
royalty reports and payments.
(p) "Supplement" shall mean a release of a supplement to, or replacement of, any
portion of Product as MS may provide to COMPANY from time to time.
(q) "Suppliers" shall mean any and all entities (e.g., MSCORP) which license or
otherwise supply MS with Products or portions thereof for redistribution and
sublicense by MS.
(r) "Update Release" shall mean a release of Product which MS designates as an
increase in the digit(s) to the right of the tenths digit in the Product version
number [x.x(x)].
(s) "Version Release" shall mean a release of Product which MS designates as an
increase in the tenths digit in the Product version number [x.(x)x].
2. PRODUCT TERMS.
(a) Nothing in this Section shall be construed to be a grant of license with
respect to any Product. Any such rights will be granted only if and as specified
in the License Agreement.
(b) With respect to Supplements, MS may grant to COMPANY one or more
non-exclusive, limited additional rights, including without limitation, those
set forth in Exhibit F hereto, in a "Supplement Addendum" for such Supplement.
If COMPANY decides to exercise any such additional rights granted for a
particular Supplement, COMPANY shall fully comply with all of the terms and
conditions of the applicable Supplement Addendum, regardless of whether the
particular terms of the Supplement Addendum are described in Exhibit F.
(c) (i) COMPANY shall distribute Product end user documentation as set forth
in the License Agreement. In the event that MS designates some portion of the
Product end user documentation as optional, COMPANY shall make one (1) copy of
CONFIDENTIAL
Business Terms Document
<PAGE>
such optional documentation available to the licensed end user of the Product
software either: (A) inside the Customer System package with the Product
software, hardware and required Product documentation, as applicable; or (B)
directly through an MS authorized fulfillment source in accordance with MS then
current specifications for fulfillment of Product end user documentation.
Product end user documentation shall not be available through any other COMPANY
distribution channel.
(ii) COMPANY may provide Product software on external media (i.e., diskette or
CD-ROM) to licensed end users of the Product software to replace a copy of
Product software originally distributed by COMPANY in accordance with the
License Agreement which is defective in media or reproduction directly through
an MS authorized fulfillment source in accordance with MS then current
specifications for fulfillment of Product software replacement media. Product
software replacement media shall not be available through any other COMPANY
distribution channel.
(iii) MS shall provide COMPANY from time to time with a list of fulfillment
sources authorized by MS.
(d) If COMPANY distributes the Product software (other than as Preinstalled
Product Software), COMPANY shall distribute the Product software on separate
media (e.g., separate diskettes, CD-ROM disc, etc.) from other products.
(e) COMPANY shall place Product packages inside Customer System packages and
install Product software on the hard disk drive or ROM of a Customer System
solely on COMPANY premises by COMPANY employees.
(f) COMPANY shall not reverse engineer, decompile or disassemble any Product
except as permitted by applicable law without the possibility of contractual
waiver. COMPANY acknowledges that information on interoperability of the
Product with other products is readily available. Except as necessary to
install Preinstalled Product Software, COMPANY may not reproduce Product or
any part of Product Deliverables. COMPANY shall make no use of Product
Deliverables except as described in the License Grant Section of the License
Agreement.
(g) COMPANY shall adapt the EULA as may be required by the laws of any
non-U.S.A. jurisdiction in which COMPANY distributes the Product. COMPANY may
use its name in place of references to "PC Manufacturer" and/or "Manufacturer"
in the EULA. Any printed EULA for the Product distributed by COMPANY must be
identical to the on screen EULA presented to the end user during Product setup,
if any.
(h) COMPANY agrees that it shall not distribute Product software or
documentation in encrypted form, except as otherwise specifically provided in
the License Agreement.
(i) COMPANY acknowledges that MS may refuse to fill COMPANY's orders for
Product, and/or require the Authorized Replicator to refuse to fill orders for
Product, in quantities beyond those which, in MS opinion, COMPANY will be able
to distribute, or make timely payment for, in compliance with the terms of the
License Agreement. COMPANY further acknowledges that MS may suspend COMPANY's
license rights under the License Agreement, refuse to fill COMPANY's orders for
Product, and/or require Authorized Replicator to refuse to fill COMPANY's orders
if (i) COMPANY or any COMPANY Subsidiary fails to comply with any provision of
the License Agreement or any other agreement between COMPANY or any COMPANY
Subsidiary and MS, or if (ii) Product licensed to COMPANY is available other
than inside Customer System package.
(j) If the License Agreement grants to COMPANY the right to grant license
rights to COMPANY Subsidiaries, COMPANY hereby irrevocably and
unconditionally guarantees each COMPANY Subsidiary's compliance with the
terms and conditions of the License Agreement(s). COMPANY agrees that it
shall be jointly and severally liable with each COMPANY Subsidiary for any
breach of the terms and conditions of the License Agreement by a COMPANY
Subsidiary. At least thirty (30) days prior to exercising any license rights
or receiving any confidential information under any License Agreement, each
COMPANY Subsidiary shall execute and deliver to MS the COMPANY Subsidiary
Agreement in the item indicated in Exhibit X. Subsidiaries of COMPANY (or any
other entities) which distribute Customer Systems received fully assembled
and packaged with Product in accordance with the License Agreement from
COMPANY or COMPANY Subsidiaries need not be listed on Exhibit X as COMPANY
Subsidiaries.
3. PAYMENT AND REPORTING.
(a) COMPANY shall pay and report to MS in accordance with the terms of the
License Agreement, subject to the following basic payment and reporting terms.
(b) COMPANY shall pay MS the initial payment amount(s) ("Initial Payment
Amount(s)"), if any, specified in Exhibit(s) C of each License Agreement upon
signing of such License Agreement. Provided COMPANY has complied with all
material terms and conditions of the License Agreement(s), such Initial Payment
Amount(s), after deduction, by set off or otherwise, of any outstanding amounts
or obligations due to MS, will be refunded to COMPANY within forty-five (45)
days of COMPANY's final royalty report and payment under the License Agreement.
COMPANY may not recoup the Initial Payment Amount(s) against royalties due to MS
or payments made to any Authorized Replicator.
(c) (i) Royalties and prices exclude any charges by Authorized Replicator for
units of Product or APM ordered by COMPANY. Royalties and prices also exclude
any taxes, duties, fees, excises or tariffs imposed on any of COMPANY's or
COMPANY's Subsidiaries' activities in connection with the License Agreement.
Such charges, taxes, duties, fees, excises or tariffs, if any, shall be paid
by COMPANY. In the event COMPANY fails to accrue any royalties due MS under a
License Agreement prior to its termination or expiration, MS may charge
COMPANY an administrative fee for each License Agreement in the amount of ten
thousand dollars (US$1O,000.00).
(ii) Per unit prices/royalties in a License Agreement are given on an "FCA"
or "Free Carrier" (MS shipping point) basis (per Incoterms, 1990 edition),
and exclude shipping and handling charges.
(iii) For Product(s) specified in the applicable Exhibit C to the License
Agreement as licensed on a "per system" basis, COMPANY shall pay MS the royalty
set forth in the applicable Exhibit C to the License Agreement for each Customer
System distributed or placed in use by or for COMPANY (or, in case of Type I
Products, the number of units of Product acquired by COMPANY, whichever is
greater). For Product(s) specified in the applicable Exhibit C to the License
Agreement as licensed on a "per copy" basis, COMPANY shall pay MS the royalty
rates set forth in the applicable Exhibit C to the License Agreement for each
unit of Product licensed, distributed, or placed in use by, or for, COMPANY (or,
in case of Type I Products, the number of units of Product acquired by COMPANY,
whichever is greater). For Product(s) specified in the applicable Exhibit C to
the License Agreement as licensed on a "per unit" basis, COMPANY shall pay MS
the royalty/price set forth in the applicable Exhibit C to the License Agreement
for each unit of Product acquired by COMPANY.
(iv) In addition, COMPANY shall pay MS the Localization Additional Royalty
or, in the case of Product hardware, the Localization Additional Price
specified in Exhibit(s) C to the
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License Agreement, if any, for each unit of non-U.S.A. English version
of Product distributed, placed in use or acquired by or for COMPANY.
(v) Where multiple "Releases" (i.e., Update Releases, Version Releases, or
Product Releases), language versions, or media versions (e.g., MS-DOS and
MS-DOS ROM) of a Product are licensed for the same Customer Systems, COMPANY
may distribute only one (1) unit of Product hardware, and only one (1)
copy of Product software in addition to one (1) copy of Preinstalled Product
Software in one (1) language and Release for use with each such Customer System.
COMPANY shall pay MS the amount applicable to the Release and language version
shipped. Any Customer System licensed on a per system basis for more than one
Update Release or Version Release of a Product, but distributed without Product,
shall bear the base royalty for the most recent Release of Product licensed.
(vi) If, at any time, MS becomes aware of any distribution of Product in
violation of the License Agreement, or if COMPANY cannot properly account, in
accordance with Section 14(a), for any units of Product acquired by COMPANY
then, without limiting MS' remedies, MS may charge COMPANY for each such unit of
Product, the Default Charge specified for such Product in the applicable Exhibit
C to the License Agreement. COMPANY shall pay any such amounts within thirty
(30) days of the date of MS' invoice.
(d) In the event income taxes are required to be withheld by any non-U.S.A.
government on payments to MS required hereunder, and provided that COMPANY
promptly delivers to MS an official receipt for any such taxes withheld or other
documents necessary to enable MS to claim a U.S.A. Foreign Tax Credit, COMPANY
may deduct such taxes from the amount owed MS and shall pay them to the
appropriate tax authority. COMPANY will make certain that any taxes withheld are
minimized to the extent permitted by the applicable law.
(e) (i) Type I Products): For each Product identified as Type I in Exhibit C to
the License Agreement, COMPANY agrees that the following additional payment
provisions shall apply:
(A) MS shall invoice COMPANY each month during the term of the License
Agreement for Product royalties based on reports from MS authorized third
party service provider(s) (e.g., Authorized Replicators or other service
provider(s)) concerning shipments of such Product(s) to or on behalf of
COMPANY. MS' billing of COMPANY, based on reports from third party service
provider(s), shall not relieve COMPANY of any payment obligations under the
License Agreement. COMPANY shall make payments to MS within thirty (30) days
of the date of MS invoice.
(B) If in any calendar month during the term of the License Agreement, (1)
COMPANY identifies any discrepancies in MS' invoice(s) received during such
month, or (2) COMPANY distributes Customer Systems licensed for any
Product(s) on a "per system" basis without such Product(s), COMPANY shall
submit a report to MS within fifteen (15) days after the end of such month,
and fifteen (15) days after termination or expiration for the final full or
partial month. Any such reports shall be in the format specified by MS from
time to time and shall designate the number of each Customer System licensed
on a per system basis distributed without Product, together with the name
and version number(s) of the licensed Product(s) and/or specific details of
any discrepancy. MS will invoice COMPANY for any additional royalties due
or, subject to MS verification, credit COMPANY's account after review of
any such report(s).
(C) If, upon termination or expiration of the License Agreement,
COMPANY his inventory of any licensed Product(s) under such License
Agreement, COMPANY shall submit a report detailing such Product(s) in
inventory including the number of units, name(s), version number(s), and
other information as MS may request.
(D) After COMPANY submits the inventory report described in subsection (C)
above and provided COMPANY has complied with all terms and conditions of
the License Agreement, including without limitation Section 11 below, the
following shall apply. Those royalties corresponding only to that portion
of Product inventory consisting of the latest available Product Release
and for which a royalty previously had been paid to MS will be credited by
MS to COMPANY's account, after deduction, by setoff or otherwise, of any
outstanding amounts or obligations due to MS.
(E) MS or its authorized representatives may inspect COMPANY's premises,
books and records to verify COMPANY's credit request in subsections (C)
and (D) above. COMPANY shall provide such additional documentation as MS
may reasonably request to support and verify such request.
(F) If COMPANY has inventory of Product(s) acquired under another OEM
license agreement and for which COMPANY has not paid a royalty to MS as of
the License Effective Date of the applicable License Agreement for such
Product, COMPANY shall submit a report indicating the number of such units
in inventory within thirty (30) days of the License Effective Date of such
License Agreement. In the event that MS and COMPANY agree that COMPANY may
distribute such units under such License Agreement, MS shall invoice
COMPANY at the royalty rate in such License Agreement for such Product(s).
COMPANY shall pay such royalties within thirty (30) days of the date of
MS invoice. COMPANY shall thereafter be deemed licensed to distribute
such Product(s) under the terms of the License Agreement.
(ii) Type II Product(s): For each Product identified as Type II in Exhibit(s) C
to the License Agreement, COMPANY agrees that the following additional payment
provisions shall apply:
(A) COMPANY shall make royalty reports to MS within fifteen (15) days
after the end of each calendar month during the term of the License
Agreement, and fifteen (15) days after termination or expiration for the
final full or partial month thereof. MS shall invoice COMPANY for Product
royalties. COMPANY shall make consolidated (i.e., on behalf of COMPANY and
COMPANY Subsidiaries) payments to MS as specified in the attached Exhibit
NI within thirty (30) days of the date of MS invoice.
(B)In the event that COMPANY's report is not received by MS within the
above-specified period, COMPANY authorizes MS to bill COMPANY, and COMPANY
shall pay MS, based on reports submitted to MS by the MS authorized third
party service provider(s) for the subject reporting period and, at MS'
option, for all subsequent reporting periods during the term of the
License Agreement. MS' billing of COMPANY based on reports submitted by
third party service provider(s) shall not relieve COMPANY of any reporting
or payment obligations under the License Agreement.
(C) COMPANY's royalty reports shall be in the royalty report format in
Exhibit R or other format as MS may provide from time to time and shall
specify royalties for each Product and language version described in
Exhibit(s) C to the License Agreement.
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(D) If, upon termination or expiration of the License Agreement, COMPANY
has inventory of any licensed Product(s), COMPANY shall submit a report
detailing Product(s) in inventory including the number of units, names,
version number(s), and other information as MS may request.
(iii) Type III Product(s): For each Product identified as Type III in
Exhibit(s) C to the License Agreement, COMPANY agrees that the following
additional payment provisions shall apply:
(A) COMPANY shall order units of Product from MS. COMPANY's orders
must be in writing and each order must be for the minimum number of
units of Product and in the increments specified in the applicable
Exhibit(s) C to the License Agreement for Product orders. Orders may be
submitted only by COMPANY and/or COMPANY Subsidiaries. COMPANY's order
shall clearly indicate the quantity, version number, and part number, if
applicable, of Product being ordered. Unless otherwise specified by MS in
writing, COMPANY's order shall be accompanied by payment at the unit price
identified in Exhibit(s) C to the License Agreement. COMPANY's order
payment shall be:
(1) made payable to the order of MS;
(2) in the amount of all monies due for such order; and
(3) submitted by wire transfer as specified in Exhibit N1.
Orders received without the required payment will not be processed. MS, in
its sole discretion and upon written notice to COMPANY, may instead
require COMPANY to remit payment to an intermediary at the time of
delivery of the order to COMPANY.
(B) COMPANY's orders shall be sent at least thirty (30) days prior to
the requested delivery date to the address listed for Product orders in
the License Agreement. MS may, with prior notice to COMPANY, elect to
specify a different address to which COMPANY shall send its Product
orders. COMPANY shall not submit purchase orders via electronic mail until
COMPANY has completed and returned to MS a Purchase Order by Electronic
Mail Authorization Form in the form available from MS.
(C) If MS does not require payment at time the order is submitted, (i)
COMPANY hereby grants MS a purchase money security interest in the Product
and shall, upon request of MS, execute any and all documents to protect
and perfect MS' security interest as MS may request; and (ii) payment
shall be due in accordance with the terms set forth by MS when credit is
granted.
(D) MS or its Suppliers may, without prior notice to COMPANY, elect to
cancel the production of Product. In such instances, any monies paid by
COMPANY to MS for unfilled orders of Product will be returned to COMPANY.
MS shall make reasonable efforts to notify COMPANY in advance of any such
cancellation.
(iv) Any Product(s) for which a billing Type is not specified in Exhibit(s)
C to the License Agreement shall be deemed to be a Type II Product, unless
otherwise specified in the License Agreement.
(f) (i) No additional royalty or price shall accrue for multiple copies of a
given release of Product software distributed with a Customer System as
permitted under the License Grant Section of the License Agreement (e.g., (1)
one copy of Preinstalled Product Software and one (1) copy of Product software
on external media).
(ii) No royalty shall accrue to MS for a commercially reasonable number
of units of Product software (A) used by COMPANY solely for testing systems;
or (B) shipped to replace copies detective in media or reproduction, provided
that such replacement copies are distributed in accordance with Section
2(c)(ii) at no charge to the end user, except for COMPANY's reasonable cost
of materials and shipping and handling costs: or unopened returned Product
for the month reported, not to exceed 8% of total monthly shipments as per
the royalty report.
(iii) If in any calendar month COMPANY assigns any units of Product
software for COMPANY's internal testing as provided in subsection (f)(ii)
above, COMPANY shall make a report to MS within fifteen (15) days after the
end of such month. and fifteen (15) days after termination or expiration for
the final full or partial month. Such report shall be in the format specified
by MS from time to time and shall designate the number of such Product
software units assigned to testing along with, for any Authorized Replicator
Product units used for testing, the corresponding certificate of authenticity
number for each such unit. MS will issue a credit to COMPANY's account for
any royalties paid for such units after MS' review and verification of
COMPANY's report.
(g) If the License Agreement includes Minimum Commitment Payments, the
following shall apply to such License Agreement:
(i) Minimum commitment and royalty payments made in one Period may not be
applied to minimum commitment payment obligations in another Period. Minimum
commitment and royalty payments made under one License Agreement may not be
applied to or recouped by minimum commitment payment obligations under any
other License Agreement.
(ii) The amount by which cumulative royalties during a Period exceed minimum
commitment amounts then payable for the same Period under a License Agreement
shall be calculated as of the end of each Reporting Period and the excess
amount shall be referred to as "Excess Royalties". Excess Royalties shall be
paid to MS in accordance with Subsection 3(e) above. Excess Royalties shall be
applied under a License Agreement to reduce future minimum commitment
payment(s) payable during the Period in which such Excess Royalties accrue.
(iii) To the extent that cumulative minimum commitment payments during a
Period exceed cumulative royalties for such Period under a License Agreement,
such excess shall be known as "prepaid royalties" and shall be recoupable
against future royalties under a License Agreement only during the Initial
Term of the License Agreement and only for the Product(s) licensed therein.
Prepaid royalties are not recoupable against payments made to Authorized
Replicator.
(iv) Once COMPANY has accepted any release of Product pursuant to Section 4
above, minimum commitment payments are not refundable.
(v) Any amounts credited to COMPANY in accordance with Section 3(e)(i)(D)
above, shall be limited to those royalties for which COMPANY's payments
constituted Excess Royalties under the terms of the License Agreement.
(vi) Each minimum commitment amount shall be payable on the date specified
in Exhibit B to the License Agreement.
(h) If the License Agreement does not include Minimum Commitment Payments,
the following shall apply to such License Agreement. If in any three monthly
reporting periods during the term of the License Agreement (whether or not
consecutive), COMPANY's reported shipments of the applicable Customer Systems
(for Product licensed on a per system basis) or Product (for Product licensed
on a per copy basis), respectively, are twenty percent (20%) or more below
COMPANY's estimated monthly volume specified in the Product table in the
applicable Exhibit C. COMPANY and MS shall negotiate an increase in the
royalty rate(s) to reflect COMPANY's lower shipment volumes. If, for any
reason,
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MS and COMPANY are unable to agree upon new royalty rate(s) within thirty
(30) days after the date COMPANY'S royalty report is due for the third such
low-volume month, COMPANY'S royalty rate(s) for each Product included in the
volume estimate accompanying the royalty rate shall increase by twenty
percent (20%). Such increased royalty rate(s) shall be in effect for the
remainder of the term of the License Agreement commencing with the
monthly reporting period following the third low-volume month. Provided,
however, that if COMPANY's reported monthly volume returns to or exceeds
the original estimated monthly volume for any three (3) consecutive months
thereafter, COMPANY's royalty rate(s) shall be restored to the rate(s)
specified in the Product table in the applicable Exhibit C commencing with
the monthly reporting period following such three (3) consecutive months,
(i) (i) All reports submitted by COMPANY under this Section 3 shall be (A)
consolidated (i.e., on behalf of COMPANY and COMPANY Subsidiaries), (B) sent
as specified in the attached Exhibit N1; and (C) certified as complete and
correct and signed by a duly authorized officer or director of COMPANY.
(ii) A copy of COMPANY's reports shall be sent to MS electronically or
via facsimile in addition to the original copy sent in accordance with
Exhibit N1.
(iii)In the event that COMPANY's report is not received by MS within the
applicable time specified above, a five percent (5.00%) late reporting charge
shall be added to COMPANY's invoice.
(j) (i) All payments made by COMPANY under this Section 3 shall be: (A)
consolidated (i.e. on behalf of COMPANY and COMPANY subsidiaries); and (B)
sent as specified in the attached Exhibit N1.
(ii) A ten percent (10.00%) late charge and a one percent (1.00%) monthly
finance charge will be assessed on all amounts that are past due, including
receipts for foreign taxes withheld.
(k) COMPANY shall provide MS with a copy of its U.S.A. state resale exempt
certificate, if applicable, with the initial License Agreement which
references this Business Terms Document when it is returned for signature by
MS. If COMPANY is located in a jurisdiction which utilizes Value Added Tax or
sales tax numbers ("VAT Number") for tax identification purpose, COMPANY's
VAT Number shall be provided in the attached Exhibit N1.
(l) Upon request by MS, COMPANY will provide MS with COMPANY's current
audited financial statements.
4. DELIVERY AND LIMITED WARRANTY.
(a) For each Product licensed under a License Agreement referencing this
Business Terms Document, MS shall deliver, or cause to be delivered. Product
Deliverables to COMPANY.
(b) MS and its Suppliers shall have no liability for failure to deliver
Product Deliverables by any particular date. COMPANY shall not distribute for
revenue any release of any language version of a Product until MS delivers
Product Deliverables to COMPANY identified by MS as final Product
Deliverables and MS advises its OEM customers generally that Customer Systems
may be distributed with such release of language version of Product.
(c) Product Software. (i) MS warrants that Product software conforms
substantially to the Product end user documentation.
(ii) If Product software fails to conform substantially to the Product
end user documentation, then within thirty (30) days after MS' delivery to
COMPANY of Product Deliverables for each release of Product licensed
hereunder, COMPANY may report such deviations from end user documentation
("Deviations") to MS in writing. If COMPANY reports any Deviations prior to
acceptance, then MS shall have sixty (60) days to correct such Deviations.
Upon delivery of a corrected release of Product to COMPANY, COMPANY shall
have thirty (30) days in which to reject the Product software for failure to
conform substantially to the Product end user documentation.
(iii) If COMPANY does not report Deviations within the applicable period
described in Section 4(c)(ii) above, or if COMPANY distributes the Product to
a customer for revenue, COMPANY shall be deemed to have accepted the
Product. If MS fails to correct Deviations prior to acceptance, then as
COMPANY's sole remedy COMPANY may terminate the License Agreement with
respect to such release of Product,
(d) Product Hardware, (i) MS warrants to COMPANY that each unit of Product
hardware furnished under the License Agreement will, at the time of shipment.
be free from defects in materials and will conform to the Product end user
documentation. COMPANY shall be deemed to have accepted the Product hardware
unless COMPANY provides written notice of non-conformance as provided below.
(ii) COMPANY's remedy and MS' obligation under this limited warranty
shall be limited to, at MS' election, (1) return of the Product hardware for
credit to COMPANY's account; or (2) repair or replacement of any defective
Product hardware.
(iii) This limited hardware warranty applies only if:
(A) written notice of non-conformance and request for return authorization
is received by MS at the address specified for return authorization
requests in the License Agreement within thirty (30) days after shipment
to COMPANY;
(B) after MS' authorization, the Product hardware is returned to MS or
its designee; and
(C) after examination, MS determines to its satisfaction that the
Product hardware is non-conforming,
(iv) Any repair or replacement shall not extend the original warranty
period. This limited warranty shall not apply to Product hardware which MS
determines has been subject to misuse, neglect, improper installation,
repair, alteration, or damage either by COMPANY or another.
(v) COMPANY may return, in accordance with and subject to 4(d)(i) above,
an entire shipment of Product hardware which fails to meet an Acceptable
Quality Level of.65 under a Level II, Normal, Single sampling plan as
described in the then current US Military Standard Sampling Procedures
(MIL-STD-105E).
(vi) Additionally, if, within thirteen (13) months after shipment of the
Product hardware to COMPANY, Product hardware is found to be defective by
COMPANY's end user customer when used with the COMPANY Customer System with
which Product hardware was shipped, COMPANY may return the Product hardware
to MS for repair or replacement pursuant to the terms and conditions of the
warranty section of the EULA provided that:
(A) COMPANY confirms that the Product hardware failure occurs while in use
with the original COMPANY Customer System with which Product hardware was
shipped;
(B) COMPANY confirms that the Product hardware failure is not related to a
failure of COMPANY's Customer System;
(C) COMPANY makes reasonable efforts to verify the Product hardware failure
is not related to an end users failure to clean or maintain the Product
hardware with reasonable care;
(D)written notice of nonconformance and request for return authorization
is received by MS at the address specified for return authorization requests
in the License Agreement within thirteen (13) months after shipment of such
Product hardware by MS to COMPANY,
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(E) after MS' authorization, the non-conforming Product hardware is
returned to MS or its designee;
(F) after examination, MS determines to its satisfaction that the Product
hardware is non-conforming; and
(G) any repair or replacement shall not extend the original warranty
period. This limited warranty shall not apply to Product hardware which MS
determines has been subject to misuse, neglect, improper installation,
repair, alteration, or damage either by COMPANY or another.
(e) Product may be returned for (at MS' option) credit, repair, or
replacement only in the event of a breach of the above limited
warranties. No returns will be allowed for any other reason. COMPANY
shall be responsible for all freight and other charges in connection with
delivery of repaired or replaced Product to COMPANY and COMPANY's end user
customers.
(f) MS makes no warranty with respect to defects in replication, media or
other materials acquired from Authorized Replicator(s); any warranty for such
materials shall be provided by the Authorized Replicator(s).
5. DEFENSE OF INFRINGEMENT CLAIM.
(a) MS shall defend COMPANY against, and pay the amount of any adverse final
judgment (or settlement to which MS consents) resulting from, third party
claim(s) (hereinafter "Indemnified Claims") that: (i) the Product(s) infringe
any copyright enforceable in any Included Jurisdictions (defined in Section
5(d), below); or (ii) the Product name(s) or trademark(s) ("Mark(s)") infringe
any trademark rights enforceable in the Included Jurisdictions; provided MS is
notified promptly in writing of the Indemnified Claim and has sole control
over its defense or settlement, and COMPANY provides reasonable assistance in
the defense of the same.
(b) In the event MS receives information concerning an intellectual property
infringement claim (including an Indemnified Claim) related to the Product(s)
or Mark(s), MS may at its expense, without obligation to do so, either (i)
procure for COMPANY the right to continue to distribute the alleged
infringing Product or Mark; or (ii) replace or modify the Product or Mark to
make it non-infringing, and in which case, COMPANY shall thereupon cease
distribution of the alleged infringing Product or Mark.
(c) MS and its Suppliers shall have no liability for any intellectual
property infringement claim (including an Indemnified Claim) based on
COMPANY's (i) manufacture, distribution, or use of any Product or Mark after
MS' notice that COMPANY should cease manufacture, distribution, or use of
such Product or Mark due to such a claim; or (ii) combination of a Product
with any other product, program or data; or (iii) adaptation or modification
of any Product. For all claims described in this Section 5(c), COMPANY shall
indemnify and defend MS and its Suppliers from and against all damages, costs
and expenses, including reasonable attorneys' fees.
(d) MS and its Suppliers shall have no obligation to COMPANY for any
Indemnified Claims which arise outside the geographical boundaries of the
United States, Canada, Australia, Japan, the European Union, and Norway
("Included Jurisdictions").
6. ADDITIONAL TERMS.
(a) COMPANY shall: (i) contractually obligate (e.g., by contract, invoice or
other written instrument) all distributors, dealers and others in its entire
distribution channels to comply with the License Grant Section of the License
Agreement; (ii) deliver copies of such contracts (or relevant portions
thereof) to MS upon request; (iii) promptly discontinue distribution of
Product to any such distributor, dealer or other in its distribution channel
which does not comply with the License Grant Section; and (iv) cooperate with
MS in investigating instances of distribution of Product which does not
comply with the License Grant Section.
(b) (i) COMPANY shall acquire all components of each unit of Product software
and documentation to be distributed with a Customer System (i.e., APM.
Product end user documentation, and Product software on external media, as
applicable) from a single Authorized Replicator and in a single package or
stock keeping unit. Provided, however, this shall not preclude COMPANY from
acquiring separate units of Product from multiple Authorized Replicators.
(ii) All orders placed with MS or Authorized Replicators, and payments to
the Authorized Replicators, shall be made by COMPANY or COMPANY Subsidiaries.
Shipments made by or for MS and Authorized Replicators may be delivered only
to locations owned or controlled by COMPANY, COMPANY Subsidiaries or, if
applicable, Third-Party Installers, as defined in any attached Exhibit 1.
COMPANY hereby certifies that all addresses to which COMPANY or COMPANY
Subsidiaries request Product delivered shall comply with the forgoing
requirement.
(c) (i) Where COMPANY distributes Preinstalled Product Software, COMPANY
shall place a notice over either the Customer System power switch in the
"off" position or the power inlet connector which informs the end user that
turning on the Customer System indicates acceptance of the terms of the
EULA. COMPANY may use an alternative procedure, subject to MS review and
approval, provided that (i) the end user is required to take some affirmative
action to use or install the Product software, such as breaking a seal; (ii)
the end user is advised that taking such action indicates acceptance of the
terms and conditions of the EULA; and (iii) the end user has the opportunity
to read the EULA and the applicable warranty in its entirety before taking
such action.
(ii) If COMPANY enters registration information on behalf of end users in the
boxes provided for any on-screen end user registration process for the
Product software, COMPANY shall not enter its own name or make any other
false or fictional registrations. COMPANY may not (i) relieve end users of
their obligations to enter Certificate of Authenticity ("COA") registration
numbers in the on-screen end user registration process and to reply to
on-screen end user license agreement inquiries or (ii) insert COA
registration numbers or reply to end user license agreement inquiries for or
on behalf of end users.
(d) (i) The License Agreement does not include technical support by MS to
COMPANY, its distributors, dealers or end users. Technical support may be
available from MS, MSCORP or their subsidiaries pursuant to a separate
agreement.
(ii) COMPANY shall provide end user support for the Product(s) under
terms and conditions at least as favorable to the end user as the terms under
which COMPANY provides support for COMPANY's Customer Systems to end users
generally, but %vhich in no event shall be less than commercially reasonable
end user support. COMPANY further shall provide end users with telephone
customer support and to prominently display its customer support telephone
number for such assistance in or on Customer System documentation.
(e) COMPANY shall not advertise or otherwise market the Product(s) as
separate items, but shall clearly indicate in all marketing materials
relating to the Product(s) and Customer System(s) that the Product(s) are
available only as part of a Customer System. COMPANY shall not publish or
otherwise mark a separate price for the Product(s).
(f) COMPANY agrees that it will preinstall and begin shipment of the most
current licensed release of Product (i.e., Product Release,
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Version Release, Update Release or Supplement) on all licensed
Customer System models which are distributed on or after the sixtieth
(60th) day (or an earlier date, at COMPANY's option) following MS'
shipment of the corresponding Product Deliverables for such release.
Provided, however, if shipment of the Product Deliverables from MS
occurs between September 1st and October 31st of a given calendar year,
COMPANY agrees that it will begin shipment of most current licensed release
of Product no later than February 1st of the following year.
7. INTELLECTUAL PROPERTY NOTICES.
(a) COMPANY will not remove, modify, or obscure any copyright, trademark,
patent, or mask work notices that appear on the Product as delivered to
COMPANY. COMPANY recognizes that MS or its Suppliers may seek patent
registration for the Product.
(b) COMPANY shall market the Product only under the Product name(s) and
version number for such Product provided to COMPANY. COMPANY shall use the
appropriate trademark, product descriptor and trademark symbol (either "-TM-"
or "-Registered Trademark-" and clearly indicate MS' or its Suppliers'
ownership of its trademark(s) whenever the Product name is first mentioned in
any advertisement, brochure or in any other manner in connection with the
Product. COMPANY shall not, at any time, use any name or trademark
confusingly similar to an MS or its Suppliers' trademark, trade name and/or
product name. COMPANY shall undertake no action that will interfere with or
diminish MS' or its Suppliers' right, title and/or interest in MS' or its
Suppliers' trademark(s), trade name(s) or Product name(s). COMPANY shall,
upon request, provide MS samples of all COMPANY marketing literature which
uses Product name(s) or otherwise describes the Product.
(c) COMPANY shall not use or display any MS or Supplier logo (i.e., including
without limitation any stylized representation of the Microsoft name used by
MS or MSCORP) in its materials or packaging, except as provided by separate
written agreement with MS or its Supplier.
8. PROHIBITION AGAINST ASSIGNMENT AND SUBLICENSE OF LICENSE AGREEMENT(S).
The License Agreement(s), and any rights or obligations thereunder, shall not
be assigned or sublicensed by COMPANY (by contract, merger, operation of law,
or otherwise) except to COMPANY Subsidiaries if and as provided in the
License Agreement(s).
9. TERM OF LICENSE AGREEMENT(S).
Each License Agreement shall have its own term as defined therein.
10. DEFAULT AND TERMINATION.
(a) The non-defaulting party may terminate the License Agreement if any of
the following events of default occur: (i) if either party materially fails
to perform or comply with any provision of the License Agreement; (ii) if
COMPANY manufactures or distributes any MS or MSCORP product which is not
properly licensed under the License Agreement or another valid agreement with
MS, MSCORP, or an MS or MSCORP licensee; (iii) if Product is available other
than inside the COMPANY's Customer System package; (iv) if COMPANY becomes
insolvent, enters bankruptcy, reorganization, composition or other similar
proceedings under applicable laws, whether voluntary or involuntary, or
admits in writing its inability to pay its debts, or makes or attempts to
make an assignment for the benefit of creditors; or (v) upon default or
continuing default by COMPANY under any License Agreement or other agreement
between COMPANY and MS or MSCORP.
(b) Termination due to breach of Sections 2, 6(e), 8, 13, 14(a), 14(c) of
this Business Terms Document (if and to the extent incorporated into the
License Agreement) or of the License Grant Section, or (if applicable)
Exhibit S of the License Agreement shall be effective upon notice to the
defaulting party. Termination due to Section 10(a)(iv) shall be effective
upon notice or as soon thereafter as is permitted by applicable law. At the
option of the non-defaulting party, termination due to a breach of any
provision of the License Agreement may be effective upon notice to the
defaulting party if such party has received two (2) or more previous notices
of default during the term of the License Agreement (whether or not such
previous defaults have been cured). In all other cases, termination shall be
effective fifteen (15) days after notice of default to the defaulting party
if the defaults have not been cured within such period.
(c) In the event of COMPANY's default, MS may terminate the License
Agreement in its entirety or as to any individual Product(s). Termination of
the License Agreement as to any particular Product(s) will not affect the
terms and conditions of the License Agreement as they apply to the other
Product(s) licensed under the License Agreement.
11. OBLIGATIONS UPON TERMINATION.
(a) Within ten (10) days after the earlier of termination or expiration of
the License Agreement, COMPANY shall: (i) at MS' direction, either (A)
deliver to MS, (B) deliver to a third party authorized by MS for destruction
at COMPANY's expense, or (C) destroy, at COMPANY's expense, all units of
Product and all Product Deliverables; and (ii) provide written notice to MS
signed by an officer or director certifying that COMPANY has fulfilled the
applicable 11(a)(i) requirement. COMPANY and each COMPANY Subsidiary may,
however, retain one (1) unit of each Product for support purposes only.
Except as expressly provided in Section 3(e), there shall be no refund,
credit, or adjustment for amounts paid for Product(s) returned to MS in
accordance with this Section 11(a).
(b) Termination of the License Agreement as a result of COMPANY's default
shall result in acceleration of COMPANY's obligation to pay all sums COMPANY
contracted to pay under the License Agreement, (including minimum commitment
payments described in Exhibit B to the License Agreement, if such License
Agreement includes minimum commitment payments.)
(c) Upon termination or expiration of the License Agreement, all of
COMPANY's license rights therein shall cease and COMPANY shall cease all
distribution of Product. Sections 5, 12, 13, 14, 15 and 16 of this Business
Terms Document and Section S1(d) of Exhibit(s) S to the License
Agreement(s), if applicable, shall survive termination or expiration of the
License Agreement.
12. LIMITATION OF LIABILITY AND REMEDY.
(a) Total liability of MS and its Suppliers to COMPANY under the License
Agreement, including Sections 4 and 5 above, shall be limited to one hundred
percent (100.00%) of the amount having actually been paid by COMPANY to MS
under the License Agreement. COMPANY releases MS and its Suppliers from all
obligations, liability, claims or demands in excess of the limitation.
(b) The rights and remedies granted to COMPANY under Sections 4 and 5
constitute COMPANY's sole and exclusive remedy against MS, its Suppliers, and
their officers, agents and employees for any and all claims arising in
connection with the Product(s) or the Product Deliverables, including but not
limited to claims regarding MS' duties to correct any Deviations, MS'
delivery of Product(s) or Product Deliverables, or indemnification or
contribution from MS with respect to any infringement of the rights of a
third party, whether arising under statutory or common law or otherwise.
(c) SECTION 4 CONTAINS THE ONLY WARRANTIES MADE BY MS OR ITS SUPPLIERS. ANY
AND ALL OTHER WARRANTIES OF ANY KIND WHATSOEVER,
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INCLUDING THOSE FOR NON-INFRINGEMENT OF INTELLECTUAL PROPERTY,
MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY
EXCLUDED. NEITHER MS NOR ITS SUPPLIERS MAKES ANY WARRANTY THAT THE PRODUCT
WILL OPERATE PROPERLY ON ANY CUSTOMER SYSTEM(S). COMPANY AGREES MS AND ITS
SUPPLIERS SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT,
ECONOMIC OR PUNITIVE DAMAGES EVEN IF MS AND/OR ITS SUPPLIERS HAVE BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(d) (i) As partial consideration for the rights granted to COMPANY under the
License Agreement(s), COMPANY agrees not to (A) sue, or (B) bring,
prosecute, assist or participate in any judicial administrative or
other proceedings of any kind against MS, its Suppliers, their
subsidiaries, or their licensees (including without limitation OEM
customers and end users) for infringement of COMPANY Patents (as
defined below) which occurs during the Immunity Period (as defined
below) on account of the manufacture, use, sale or distribution of:
1) Any releases of the Product(s) licensed to COMPANY under the License
Agreement, except as otherwise provided in subsection (iii), below; or
2) Future releases of the Product(s), or replacement or successor
product(s) to the Product, to the extent such future releases or
replacement or successor product(s) use or embody inventions used or
embodied in a version of such Product(s) licensed to COMPANY under the
License Agreement.
(ii) "COMPANY Patents" as used in this subsection 12(d) means all patents
throughout the world, other than design patents or the equivalent, owned
or acquired by COMPANY for inventions made prior to termination or
expiration of the License Agreement, or for which COMPANY has or
acquires rights prior to the termination or expiration of the License
Agreement. The "Immunity Period" shall commence upon the first to issue
and shall terminate upon the last to expire, of any of the COMPANY
Patents (in any jurisdiction).
(iii) In the event that MS provides COMPANY a new release of a Product under
the License Agreement, and COMPANY determines that such new release uses
or embodies inventions not used or embodied in a prior release of the
Product licensed to COMPANY thereunder, COMPANY may elect to not license
such new release by so notifying MS in writing within sixty (60) days
after its receipt and prior to COMPANY's shipment of such new release.
COMPANY's election under this paragraph shall not affect COMPANY's
obligations above with respect to any prior release(s) of the Product
licensed under the License Agreement.
(iv) In the event COMPANY assigns COMPANY Patents or rights to enforce
COMPANY Patents, COMPANY shall require as a condition of any such
assignment that the assignee agree to be bound bv the provisions of
this Section 12(d).
13. NONDISCLOSURE AGREEMENT.
COMPANY shall keep confidential: the Product Deliverables; the terms and
conditions of any License Agreement (including this Business Terms Document
as incorporated in a License Agreement) and any other non-public information
(including, without limitation: any and all MS and MSCORP product pricing
information, the terms and conditions of any proposed (or actual) license
agreement or other agreement concerning MS and MSCORP products, license
negotiations, as well as any information or correspondence relating to
released or unreleased MS and MSCORP software or hardware products, the
marketing or promotion of any MS and MSCORP product. and MS' and MSCORP's
business policies or practices) and know-how disclosed to COMPANY by MS or
MSCORP or any of their subsidiaries. However, COMPANY may disclose the terms
and conditions of the License Agreement, the Business Terms Document and any
other agreements or proposed agreements in confidence to its immediate legal
and financial consultants as required in the ordinary course of the COMPANY's
business.
14. AUDITS AND INSPECTIONS.
(a) During the term of the License Agreement and for three (3) years
thereafter, COMPANY shall keep all usual and proper records and books of
account, and all usual and proper entries relating to each Product licensed
sufficient to substantiate the number of copies of Product acquired,
distributed or otherwise disposed of by or for COMPANY, and the number of
Customer Systems distributed by or for COMPANY. COMPANY shall maintain on
COMPANY premises such records for itself and for each COMPANY Subsidiary
which exercises or has exercised rights under the License Agreement.
(b) In order to verify statements issued by COMPANY and COMPANY's compliance
with the terms of the License Agreement, MS may cause (i) an audit to be made
of COMPANY's and/or COMPANY's Subsidiaries' books and records; and/or (ii) an
inspection to be made of COMPANY's and/or COMPANY's Subsidiaries' facilities
and procedures. Any audit and/or inspection shall be conducted during regular
business hours at COMPANY's and/or COMPANY's Subsidiaries' facilities, with
or without notice. Any audit shall be conducted by an independent certified
public accountant selected bv MS (other than on a contingent fee basis).
(c) COMPANY shall provide MS' designated audit or inspection team access to
the relevant COMPANY's and/or COMPANY's Subsidiaries' records and facilities.
(d) Prompt adjustment shall be made to compensate for any errors or omissions
disclosed by such audit. Any such audit shall be paid for by MS unless
material discrepancies are disclosed. "Material" shall mean: (i) a breach of
the License Grants section of the License Agreement; or (ii) for reporting or
payment discrepancies, the lesser of Ten Thousand Dollars (US$10,000.00) or
five percent (5%) of the amount that was reported under the License
Agreement. If material discrepancies are disclosed, COMPANY shall pay MS for
the costs associated with the audit. Further, COMPANY shall pay MS an
additional royalty of twenty-five percent (25%) of the applicable royalty on
Exhibit(s) C to the License Agreement for each unit COMPANY failed to report
that is in excess of five percent (5%) of the number of units actually
reported by COMPANY under the License Agreement. In no event shall audits be
made more frequently than semi-annually unless the immediately preceding
audit disclosed a material discrepancy.
15. CONTROLLING LAW; ATTORNEYS'FEES.
(a) The License Agreement, including this Business Terms Document if and to
the extent incorporated therein, and all matters relating thereto shall be
construed and controlled by the laws of the State of Washington, and COMPANY
consents to jurisdiction and venue in the state and federal courts sitting in
the State of Washington. Process may be served on either party in the manner
set forth in Section 16 for the delivery of notices or by such other method
as is authorized by applicable law or court rule.
(b) If either MS or COMPANY employs attomeys to enforce any rights arising
out of or relating to the License Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, costs and other expenses.
16. NOTICES. All notices, authorizations, and requests in connection with the
License Agrccment(s) shall be addressed as stated in attached
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<PAGE>
Exhibit NI (or to such other address as the party to receive the notice or
request so designates by written notice to the other) and shall be deemed
given on the day they are (i) deposited in the U.S.A. mails, postage prepaid,
certified or registered, return receipt requested; or (ii) sent by air
express courier, charges prepaid.
17. GENERAL.
(a) COMPANY agrees that it will not export or re-export Product to any
country, person, entity or end user subject to U.S.A. export restrictions.
COMPANY specifically agrees not to export or reexport Product (i) to any
country to which the U.S.A. embargoes or restricts the export of goods or
services, which as of December 31, 1996 includes, but is not necessarily
limited to: Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria, or to any
national of any such country who COMPANY knows intends to transmit or
transport the product(s) back to such country; (ii) to any end-user who
COMPANY knows will utilize Product in the design, development or production
of nuclear, chemical or biological weapons; or (iii) to any end-user who has
been prohibited from participating in U.S.A. export transactions by any
federal agency of the U.S.A. government.
(b) Neither this Business Terms Document nor any License Agreement
subsequently presented to COMPANY shall constitute an offer by MS; any
License Agreement(s) shall not be effective until signed by both parties.
Upon execution by both parties, the License Agreement (including this
Business Terms Document as incorporated in such License Agreement) signed by
both parties shall constitute the entire agreement between the parties with
respect to the subject matter thereof and merges all prior and
contemporaneous communications. Neither this Business Terms Document nor any
License Agreement shall be modified except by a written agreement signed on
behalf of COMPANY and MS by their respective duly authorized representatives.
Any statement appearing as a restrictive endorsement on a check or other
document which purports to modify a right, obligation or liability of either
party shall be of no force and effect.
(c) Neither the Business Terms Document, the License Agreement(s), nor any
terms and conditions contained in such documents, shall be construed as
creating a partnership, joint venture or agency relationship or as granting a
franchise.
(d) If any provision of the License Agreement or license of any particular
Product shall be held by a court of competent jurisdiction to be illegal,
invalid or unenforceable, the remaining provisions and license for remaining
Product(s), as applicable, shall remain in full force and effect.
(e) No waiver of any breach of any provision of the License Agreement shall
constitute a waiver of any prior, concurrent or subsequent breach of the same
or any other provisions hereof, and no waiver shall be effective unless made
in writing and signed by an authorized representative of the waiving party.
(f) COMPANY shall, at its own expense, promptly obtain and arrange for the
maintenance of all non-U.S.A. government approvals, if any, and
comply with all applicable local laws and regulations as may be necessary for
COMPANY's performance under the License Agreement.
(g) Product may be imported, distributed, or sold in or to a country or
territory only if allowed by, and in compliance with, all applicable laws and
regulations of such country or territory as well as all terms and conditions of
the License Agreement. COMPANY acknowledges that versions of certain Products
not localized for a specific market may be prohibited or subject to import and
distribution procedures or restrictions under such laws and regulations. By way
of example only, as of July 1, 1997, the U.S.A. English version of Microsoft
Excel 97 cannot be distributed to or for use in India, and games, entertainment
products and products with substantial amounts of video, graphics or similar
content may be prohibited or subject to specific import procedures under laws of
the People's Republic of China. COMPANY agrees to indemnify MS and its Suppliers
from and against all damages, costs and expenses (including reasonable
attorneys' fees) incurred by MS or its Suppliers in connection with any and all
claims, demands or actions arising from COMPANY's importation or distribution of
a Product in or to a country or territory not in compliance with the laws and
regulations of such country or territory.
(h) Any Product which COMPANY distributes or licenses to or on behalf of the
United States of America, its agencies and/or instrumentalities (the
"Government"), shall be provided with RESTRICTED RIGHTS in accordance with DFARS
252.227-7013(c)l(ii), or as set forth in the particular department or agency
regulations or rules, or particular contract which provide MS equivalent or
greater protection.
18. EXHIBITS.
The following Exhibits are part of this Business Terms Document:
Exhibit F - Supplement Rights
Exhibit I - Third Party Installers
Exhibit L - Language Versions Key
Exhibit N1 - Addresses
Exhibit R - Sample Royalty Report
Exhibit X - Company Subsidiaries
The terms of the attached Exhibit(s) shall supersede any inconsistent terms
contained in this Business Terms Document.
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Microsoft General OEM Business Terms Document #5110550206-2 dated October 1,
1998, between MICROSOFT LICENSING, INC. and INSIGNIA SOLUTIONS, INC.
<PAGE>
MICROSOFT LICENSING, INC. INSIGNIA SOLUTIONS, INC.
/s/ David Kaye /s/ S M Ambler
- ------------------------------ ------------------------------
By (Signature) By (Signature)
David Kaye Stephen Ambler
- ------------------------------ ------------------------------
Name (Print) Name (Print)
OEM Accounting Manager Chief Financial Officer, VP, Secretary
- ------------------------------ ------------------------------
Title Title
October 29, 1998 25 September 1998
- ------------------------------ ------------------------------
Date Date
------------------------------
COMPANY's seal or "chop"
------------------------------
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Microsoft General OEM Business Terms Document #5110550206-2 dated October 1,
1998 between MICROSOFT LICENSING, INC. and INSIGNIA SOLUTIONS, INC.
<PAGE>
EXHIBIT F
SUPPLEMENT RIGHTS
The purpose of this Exhibit is to set forth additional license rights and
related restrictions which may apply to Supplement(s) as may be provided by
MS from time to time. The actual additional license rights and related
restrictions for each Supplement shall be identified in the "Supplement
Addendum" for each such Supplement. The license rights shall be royalty-free
and, except as specified in the applicable Supplement Addendum, shall be
subject to the terms and conditions of the License Agreement. COMPANY's
license rights to Supplement(s) shall expire the earlier of; (i) termination
or expiration of COMPANY's license rights to the Product to which the
Supplement corresponds; or (ii) termination or expiration of the License
Agreement.
1. "Reproduction Rights", if granted, shall mean:
(a) Reproduce, in accordance with specifications provided by MS, the
Supplement software in object code form on external media (i.e., diskette or
CD-ROM) and end user documentation for the Supplement, if any.
(b) Reproduce Product names and Product trademarks on packaging, labels, and
end user documentation for the Supplement subject to the following restrictions:
(1) COMPANY's labeling and packaging for the Supplement shall clearly
indicate that the Supplement is a supplement to and/or replacement of the
Product provided by COMPANY for use on COMPANY's Computer Systems:
(ii) COMPANY will cause to appear on the container and labels of
Supplement the copyright, trademark and patent notice(s), as they appear
on the applicable release of Product Deliverables: and
(iii) COMPANY's name and/or trademarks shall not be displayed in
relation to Product name in a manner which suggests that COMPANY's name
and/or trademarks are part of the Product name. COMPANY's name and/or
trademarks shall be displayed on the packaging and disk labels more
prominently than the name "Microsoft".
2. "Distribution on External Media with Customer Systems Rights", if
granted, shall mean:
(a) Distribute one (1) copy of the Supplement software, reproduced in
accordance with the reproduction rights granted for such Supplement, with
each of COMPANY's licensed Customer Systems to be distributed with Product
subject to the following conditions:
(i) COMPANY shall include with each copy of the Supplement a EULA
addendum which shall be substantially similar to the EULA addendum included
with the Supplement as delivered by MS, except that it shall be adapted as
may be required by the laws of any non-U.S.A. jurisdiction in which COMPANY
distributes the Supplement.
3. "Distribution to Existing End Users Rights", if granted, shall mean:
(a) Distribute one (1) copy of the Supplement software, as acquired from an
Authorized Replicator if available, or reproduced in accordance with the
reproduction rights, if any, granted for such Supplement, to licensed end
users of COMPANY's Customer Systems originally distributed with the Product,
subject to the following conditions:
(i) The Supplement shall be distributed directly from COMPANY or an
MS-authorized fulfillment source:
(ii) COMPANY shall include with each copy of the Supplement a EULA
addendum which shall be substantially similar to the EULA addendum included
with the Supplement as delivered by MS, except that It shall be adapted as
may be required by the laws of any non. U.S.A. jurisdiction in which COMPANY
distributes the Supplement, and
(iii) COMPANY shall offer the Supplement at no charge except that
COMPANY may charge its reasonable cost of materials and shipping and handling
costs.
4. "Distribution via Bulletin Boards Rights", if granted, shall mean:
(a) Post and maintain the object code version of the Supplement on COMPANY's
point to point communication link by modem (not Internet) bulletin board
comer(s) ("BBS") for distribution to end users of COMPANY's Customer Systems
originally distributed with Product, subject to the following conditions:
(i) COMPANY shall ensure that each copy of the Supplement includes a
EULA addendum which is substantially similar to the EULA addendum included
with the Supplement as delivered by MS, except that it shall be adapted as
may be required by the laws of any non-U.S.A. jurisdiction in which COMPANY
distributes the Supplement: and
(ii) COMPANY shall offer the Supplement at no charge to end users.
5. "Distribution via Internet Link Rights", if granted, shall mean:
(a) Create and maintain a link on COMPANY'S Internet home page(s) to MS' copy
of the Supplement on MS' Internet home page(s), at the Universal Resource
Locator(s) listed in the Supplement Addendum.
6. "Distribution via Internet Page Rights", if granted, shall mean:
(a) Post and maintain the object code version of the Supplement on
COMPANY's home page(s) on the Internet for distribution to end users of
COMPANY's Customer Systems originally distributed with Product, subject to
the following conditions:
(i) COMPANY shall include with each copy of the Supplement a EULA
addendum which is substantially similar to the EULA addendum included with
the Supplement as delivered by MS, except that it shall be adapted as may
be required by the laws of any non-U.S.A. jurisdiction in which the
Supplement is distributed: and
(ii) COMPANY shall offer the Supplement at no charge to end users.
7. "Other Rights", if granted, and restrictions shall be as set forth In
the applicable Supplement Addendum.
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Microsoft General OEM Business Terms Document #5110550206-2 dated October 1.
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<PAGE>
EXHIBIT 1
COMPANY USE OF THIRD PARTY INSTALLERS
Except as expressly provided in this Exhibit 1, COMPANY shall not reproduce,
duplicate, copy or otherwise permit the installation of Product software or
placement of the Product packages inside Customer System packages except on
COMPANY premises bv COMPANY employees. COMPANY may engage a third party
installer specifically approved in writing by MS ("Third Party Installer") to
install the Preinstalled Product Software for COMPANY on the Customer System
hard disk or ROM pursuant to Section 11(a)(i) of the License Agreement,
Section I(k) of the Business Terms Document and/or place the Product packages
inside the Customer System packaging in accordance with Section II(a)(ii)
of the License Agreement provided that all of the conditions listed below
are and remain satisfied.
(a) COMPANY shall provide MS with the name, address, and business profile
in the English language (including years in business, ownership profile,
tradenames used, nature of principle business activities, and summary of any
prior experience with installation or replication of MS products) of any
Third Party Installer COMPANY intends to engage for installation of the
Product(s) at least sixty (60) days before COMPANY intends to have the Third
Party Installer begin work for COMPANY. The Third Party Installer must be
approved in writing by MS prior to beginning work.
(b) COMPANY shall enter into a written agreement with the Third Party
Installer (hereinafter "Installation Agreement") that expressly provides that
MS is a third party intended beneficiary of the Installation Agreement with
rights to enforce such agreement, and that requires the Third Party Installer:
(1) to comply with obligations identical to those imposed on COMPANY
by Sections II(a), II(e), II(f) of the License Agreement and Sections 2(b),
2(d), 2(e), 2(f), 2(h), 6(c), 7(a), 11, 13, 14 and 17(a) of the Business Terms
Document;
(2) to consent to venue and jurisdiction in the state and federal
courts sitting in the State of Washington with respect to any action brought
by MS to enforce its rights under the Installation Agreement;
(3) to provide access to Third Party Installer premises to audit or
inspection team(s) sent on behalf of MS or COMPANY, with or without notice, in
order that such team may perform an audit of the Third Party Installer's books
and records and/or an inspection of the Third Party Installer's procedures to
determine compliance with the terms of the Installation Agreement and the
Business Terms Document;
(4) to halt reproduction of the Product upon notice from COMPANY or
MS of the suspension, termination, or expiration of the License Agreement;
(5) to distribute the Customer Systems with Preinstalled Product
Software only to COMPANY, COMPANY Subsidiaries, and/or COMPANY resellers and
distributors on behalf of COMPANY;
(6) to pay MS' or COMPANY's attorneys' fees if COMPANY or MS employs
attorneys to enforce any rights arising out of the Installation Agreement;
(7) to report to MS, in the form provided by MS, information
concerning Products installed including, without limitation, the number of
units of each Product installed and/or the number of packages inserted,
corresponding COMPANY model name(s), and shipment destination and the number
of units of Product packages in inventory; and
(8) to maintain the inventory of Product packages received from
COMPANY or the Authorized Replicator on behalf of COMPANY, if any, separate
from inventory of Product packages, if any, in the Third Party Installer's
possession for other MS OEMs (including the Third Party Installer, if the
Third Party Installer is an MS OEM).
(c) In order to distinguish each Product package from Product packages of
other MS OEMs, prior to delivery of any Product to any Third Party installer,
COMPANY shall require the Authorized Replicator to place COMPANY's name on a
conspicuous location on each Product package delivered to the Third Party
Installer by or on behalf of COMPANY.
(d) COMPANY shall report to MS within fifteen (15) days of the end of each
calendar month, the number of units of each Product which the Third Party
Installer shipped (1) to COMPANY or COMPANY's Subsidiaries, or (2) on behalf
of COMPANY, to COMPANY's resellers and distributors during such month.
(e) COMPANY hereby agrees to cease use of any Third Party Installer upon
receipt of written notice from MS.
(f) COMPANY hereby unconditionally and irrevocably guarantees the Third
Party Installer's fulfillment of the applicable obligations imposed by the
License Agreement and/or the Installation Agreement.
(g) COMPANY hereby indemnifies MS and its Suppliers for all damages
(including attorneys' fees) of any kind in connection with the Third Party
lnstaller's activities for COMPANY, including, without limitation, damages
resulting from: (1) a breach of the terms of the License Agreement and/or the
Installation Agreement, or (2) any and all unauthorized reproduction and/or
distribution of any portion of the Product by the Third Party installer.
(h) Within thirty (30) days of COMPANY's execution of the Installation
Agreement with each Third Party Installer, COMPANY shall provide a copy of
such agreement to MS at the address for notices specified in Exhibit N of the
Business Terms Document. If the Installation Agreement is not completed in
the English language, COMPANY shall also provide an accurate and complete
English translation thereof.
(i) COMPANY shall promptly notify MS of the termination, expiration or
significant modification of the terms of the Installation Agreement.
(j) Sections (f), (g), and (h) of this Exhibit 1 shall survive any
termination or expiration of this Exhibit 1.
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Microsoft General OEM Business Terms Document #5110550206-2 dated October 1,
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<PAGE>
EXHIBIT I
LANGUAGE VERSIONS KEY
The codes listed in the table below are used to describe the corresponding
language version for licensed language version(s) in Exhibit C to the License
Agreement(s), unless an alternate language key is provided in the Exhibit C.
MS may provide COMPANY notice of a revised Language Version Key reflecting
additional language version(s) and corresponding code(s) from time to time.
<TABLE>
<CAPTION>
Code Language Version Code Language Version
---- ---------------- ---- ----------------
<S> <C> <C> <C>
AF Afrikaans PT Portuguese
AR Arabic RO Romanian
BG Bulgarian RU Russian
CA Catalan SI Singhalese
CS Czech SK Slovak
DA Danish SL Slovenian
DE German SR Serbian
EL Greek SV Swedish
EN English (USA) TH Thai
ES Spanish TR Turkish
ET Estonian UK Ukranian
EU Basque VI Vietnamese
FA Farsi XA English (Australian)
FL Finnish XC Portuguese (Brazilian)
FR French XD French (Canadian)
GL Galician XT Chinese - Simplified
HU Hungarian XV English (Canadian)
IN Bahasa XX Spanish (Latin American)
IT Italian XZ English (UK)
IW Hebrew YD Arabic, French
JA Japanese YL Eastern European (English)
KO Korean YX Croatian
LT Lithuanian ZH Chinese - Traditional
LV Latvian ZY Pan European (English)
NL Dutch
NO Norwegian
PA Punjabi
PL Polish
</TABLE>
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Microsoft General OEM Business Terms Document #5110550206-2 dated
October 1, 1998 between MICROSOFT LICENSING, INC. and INSIGNIA SOLUTIONS, INC.
<PAGE>
EXHIBIT N1
ADDRESSES
<TABLE>
<CAPTION>
COMPANY: MS:
-------- --
<S> <C>
NOTICES: NOTICES:
MICROSOFT LICENSING, INC.
Richard Noling 6100 Neil Road
INSIGNIA SOLUTIONS, INC. Reno, NV 89511-1132
41300 Christy Street U.S.A.
Fremont, CA 64538-3115 Attn.: General Manager
USA
With copies to:
Telephone: 510 360-3700 MICROSOFT CORPORATION
Fax: 510 360-3701 One Microsoft Way
E-mail: Redmond, WA 98052-6399 USA
Attn.: Law & Corporate Affairs
Re: Microsoft Licensing, Inc. OEM Sales & Marketing
Fax: +1-425-936-7329
With copy to: MICROSOFT CORPORATION
One Microsoft Way
Leigh Dworkin Redmond, WA 98052-6399 USA
INSIGNIA SOLUTIONS, INC. Attn: Vice President OEM Sales & Marketing
41300 Christy Street Re: Microsoft Licensing, Inc. OEM Sales & Marketing
Fremont, CA 94538-3115
USA OTHER CORRESPONDENCE:
MICROSOFT CORPORATION
Telephone: 510 360-3728 One Microsoft Way
Fax: 510 360-3705 Redmond, WA 98052-6399 USA
E-mail: Attn: OEM Sales & Marketing Department
Re: Microsoft Licensing, Inc. OEM Sales & Marketing
Fax: +1-425-936-7329
Ron Workman
INSIGNIA SOLUTIONS, INC.
41300 Christy Street
Fremont, CA 94538-3115
USA
Telephone: 510 360-3822
Fax: 510 360-3702
E-mail:
COMPANY Support
telephone no: 248 594-5252
COMPANY VAT Number:
Reports & Payments to MS
<CAPTION>
Reports: Payments:
- -------- ---------
<S> <C>
Royalty reports shall be made to: Payments shall be made by wire transfer to:
MICROSOFT LICENSING, INC. MICROSOFT LICENSING, INC.
6100 Neil Road c/o NationsBank of Texas, N.A.
Reno, NV 89511-1132 Dallas, TX 75202 U.S.A
U.S.A. ABA# 11100001-2
Attention: OEM Finance SWIFT Code: NBKUS44DAL
Fax: +1-702-826-0531 Account # 3750891058
Regarding: Microsoft OEM Collections
</TABLE>
14
CONFIDENTIAL
Microsoft General OEM Business Terms Document #5110550206-2 dated October 1,
1998 between MICROSOFT LICENSING, INC. and INSIGNIA SOLUTIONS, INC.
<PAGE>
or to such other address or account as MS may specify from time to time. COMPANY
shall ensure that the regarding line stated above, the MS license number for the
License Agreement, and the MS invoice number, if any, are specified on each wire
transfer payment made pursuant to the License Agreement(s).
15
CONFIDENTIAL
Microsoft General OEM Business Term Document #5110550206-2 dated October 1,
1998 between MICROSOFT LICENSING, INC. and INSIGNIA SOLUTIONS, INC.
<PAGE>
EXHIBIT R
ROYALTY REPORT
COMPANY NAME: _______________
LICENSE #: __________________
REPORTING PERIOD: ___________
REPORT DUE: _________________
<TABLE>
<CAPTION>
Prod. 1 Prod.2 Prod.3 Prod.4 Prod.5 Prod.6 Prod.7
---------------------------------------------------------------------------
Customer System
<S> <C> <C> <C> <C> <C> <C> <C>
Model Name or Product Units/
Model Number Royalty Type
- --------------------------------------------------------------------------------------------------------------------------------
1 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
2 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
3 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
4 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
5 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
6 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
7 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
8 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
9 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
10 "Per System" units
"Per Copy" units
- --------------------------------------------------------------------------------------------------------------------------------
SUMMARY
- --------------------------------------------------------------------------------------------------------------------------------
Total Units "Per System" units 0 0 0 0 0 0 0
"Per Copy" units 0 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------------------
Enter the number of localized version
units shipped for each Product
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
CONFIDENTIAL
Microsoft General OEM Business Terms Document #5110550206-2 dated
October 1, 1998 between MICROSOFT LICENSING, INC. and INSIGNIA
SOLUTIONS, INC.
<PAGE>
EXHIBIT R
(Continued)
Dollar Recap
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Product 1
- -------------------------------------------------------------------------------------------------------------
"Per System" Activity "Per Copy" Activity
Amount Amount
Units Royalty Quantity Due Units Royalty Quantity Due
----- ------- -------- ------ ----- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1 to 0 $0.00 0 $0.00 1 to 0 $0.00 0 $0.00
$0.00 $0.00
+ $0.00 + $0.00
-------- -------
0 0
- -------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------
Localized Version Activity
Amount
Royalty Quantity Due
------- -------- ------
$0.00 0 $0.00 Product Total $0.00
- ---------------------------------------------------- -----------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Product 2
- -------------------------------------------------------------------------------------------------------------
"Per System" Activity "Per Copy" Activity
Amount Amount
Units Royalty Quantity Due Units Royalty Quantity Due
----- ------- -------- ------ ----- ------- -------- ------
1 to 0 $0.00 0 $0.00 1 to 0 $0.00 0 $0.00
$0.00 $0.00
+ $0.00 + $0.00
-------- -------
0 0
- -------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------
Localized Version Activity
Amount
Royalty Quantity Due
------- -------- ------
$0.00 0 $0.00 Product Total $0.00
- ---------------------------------------------------- -----------------------------------------
- -------------------------------------------------------------------------------------------------------------
Please send report to: -------------------------------
Microsoft Licensing, Inc. Total Reported $0.00
OEM Accounting Services -------------------------------
FAX: (1) 702-826-0531
</TABLE>
- -------------------------------------------------------------------------------
The undersigned hereby certifies that he/she is duly authorized by COMPANY to
complete this report, that the title listed below is his/her true and correct
title, and that this report is complete and correct.
Report completed by:
-------------------------------- ------------------
Signature Date
-------------------------------- ------------------
Print name and title Telephone Number
- -------------------------------------------------------------------------------
17
CONFIDENTIAL
Microsoft General OEM Business Terms Document #5110550206-2 dated
October 1, 1998 between MICROSOFT LICENSING, INC. and INSIGNIA SOLUTIONS. INC.
<PAGE>
EXHIBIT X
COMPANY SUBSIDIARIES
COMPANY Subsidiaries authorized to exercise rights under the License
Agreement are:
COMPANY shall provide MS at least thirty (30) days prior written notice of the
name and address of each additional COMPANY Subsidiary that COMPANY wishes to
add to Exhibit X. Additional COMPANY Subsidiaries may not exercise any rights
under the License Agreement(s) until MS approves such request in writing. Each
COMPANY Subsidiary, whether listed above or subsequently approved by MS, shall
execute and submit to MS a COMPANY Subsidiary Agreement in the form provided
below prior to exercising any rights under the License Agreement(s).
[SAMPLE FORM: To be printed on COMPANY Subsidiary's letterhead.]
COMPANY SUBSIDIARY AGREEMENT
For good and valuable consideration, _____________________, a
corporation of __________________________("COMPANY Subsidiary") hereby
covenants and agrees with Microsoft Licensing, Inc., a Nevada U.S.A.
corporation ("MS") that COMPANY Subsidiary will comply with all obligations
of Insignia Solutions, Inc., a corporation of Delaware, USA ("COMPANY")
pursuant to all License Agreements between COMPANY and MS that incorporate by
reference that certain General OEM Business Terms Document #5110550206
between MS and COMPANY dated October 1, 1998 (the "Business Terms Document").
COMPANY Subsidiary acknowledges that its agreement herein is a condition for
COMPANY Subsidiary to exercise any of the rights sub-licensed by COMPANY to
COMPANY Subsidiary pursuant to the terms of the License Agreement(s). COMPANY
Subsidiary shall be jointly and severally liable to MS and its Suppliers for all
obligations related to COMPANY Subsidiary's exercise of license rights or
receipt of confidential information under the License Agreement(s), including
but not limited to the payment of royalties for Product.
Capitalized terms used herein and not otherwise defined shall have the
same meaning as in the License Agreement(s).
IN WITNESS WHEREOF, COMPANY Subsidiary has executed this agreement as of the
date set forth below. All signed copies of this agreement shall be deemed
originals.
- ---------------------------------------
(COMPANY Subsidiary)
- --------------------------------------- ------------------------------
Signature Title
- --------------------------------------- ------------------------------
Name (Print) Date
18
CONFIDENTIAL
Microsoft General OEM Business Terms Document #5110550206-2 dated October 1,
1998 between MICROSOFT LICENSING, INC. and INSIGNIA SOLUTIONS, INC.
<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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
Insignia Solutions plc
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>
PROMISSORY NOTE $70,000 JULY 1, 1998
1. OBLIGATION - For value received, the undersigned, David Winterburn
("Borrower") hereby promises to pay to the order of Insignia Solutions
Inc., a Delaware corporation (the "Company") on or before January 10, 2002
(except as provided below), at the Company's principal place of business
at 41300 Christy Street, Fremont, California 94538, or at such other place
as the Company may direct, the principal sum of Seventy Thousand Dollars
($70,000) (except as provided below), together with interest on the unpaid
principal balance as calculated in paragraph 3 below.
2. FORGIVENESS - Provided the Borrower becomes and remains an employee of the
Company, unpaid principal due and payable under this Note shall be
forgiven by Seventeen Thousand Five Hundred Dollars ($17,500) on January
10, 1999, and by Seventeen Thousand Five Hundred Dollars ($17,500) each
January 10 thereafter up to and including January 10, 2002.
3. INTEREST - Interest will accrue throughout the duration of the Note on the
unpaid portion of the principal balance of the Note at US Prime Rates as
detailed in The Wall Street Journal; such interest to be calculated on a
simple interest basis, using a calendar year of 365 days. All accrued
interest payable is to be paid by the Borrower to the Company on the dates
principal is forgiven as detailed under paragraph 2. above.
4. REPAYMENT - Notwithstanding the provisions of paragraph 1 above, if (a)
Borrower fails to become an employee of the Company by September 1, 1998
all unpaid principal and accrued interest shall be due and payable by the
Borrower to the Company on September 30, 1998; or (b) Borrower becomes an
employee of the Company but Borrower's employment with the Company is
terminated for any reason before January 10, 2002, all unpaid principal
and accrued interest (except principal forgiven under paragraph 2 above)
shall be due and payable by the Borrower to the Company 30 days after such
termination.
5. DEFAULT; ACCELERATION OF OBLIGATION - Borrower will be deemed to be in
default under this Note and the principal sum of this Note, together with
all interest accrued thereon, will immediately become due and payable in
full: (a) upon the failure of Borrower to make any payment when due under
this Note; (b) upon the filing by or against Borrower of any voluntary or
involuntary petition in bankruptcy or any petition for relief under the
federal bankruptcy code or any other state or federal law for the relief
of debtors; or (c) upon the execution by Borrower of an assignment for the
benefit of creditors or the appointment of a receiver, custodian, trustee
in bankruptcy or similar party to take possession of Borrower's assets or
property.
<PAGE>
6. REMEDIES - Upon any default of Borrower under this Note, all remaining
principal and accrued interest under this Note shall bear interest at the
maximum rate then allowed under Article XV of the Constitution of the
State of California, the Company will have, in addition to its rights and
remedies under this Note, full recourse against any real, personal,
tangible or intangible assets of Borrower, and the Company may pursue any
legal or equitable remedies that are available to it.
7. PAYMENT - Borrower may prepay principal and/or interest due under this
Note at any time without penalty. Unless otherwise agreed in writing by
the Company, all payments will be made in lawful tender of the United
States and will be applied first to the payment of accrued interest, and
the remaining balance of such payment, if any, will then be applied to the
payment of principal.
8. TAX CONSEQUENCES - Borrower acknowledges that he is responsible for and
shall bear any and all tax consequences arising from the loan evidenced by
this Note.
9. GOVERNING LAW; WAIVER - The validity, construction and performance of this
Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Borrower
hereby waives presentment, notice of nonpayment, notice of dishonor,
protest, demand and diligence.
10. ATTORNEYS' FEES - If suit is brought for collection of this Note, the
prevailing party shall be entitled to recover its attorneys' fees, court
costs and litigation expenses in such proceeding. "Prevailing party" as
used in this paragraph means any party who agrees to dismiss an action
upon payments by the other party of sums alleged to be owed.
IN WITNESS WHEREOF, Borrower has executed this Note as of the date first above
written.
/s/ David Winterburn
--------------------
David Winterburn
ACCEPTED:
Insignia Solutions Inc.
BY: /s/ Stephen M. Ambler
---------------------
Stephen M. Ambler
<PAGE>
EXHIBIT 11.01
INSIGNIA SOLUTIONS PLC
STATEMENT REGARDING COMPUTATION OF EARNINGS (LOSS) PER SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- ---------------------------
1998 1997 1998 1997
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) $ (667) $ (641) $ 3,288 $ (7,866)
------- ------- -------- --------
------- ------- -------- --------
Calculation of basic earnings (loss) per share:
Weighted average number of ordinary shares
outstanding used in computation 12,164 11,695 12,118 11,614
------- ------- -------- --------
------- ------- -------- --------
Basic earnings (loss) per share $ (0.05) $ (0.05) $ 0.27 $ (0.68)
------- ------- -------- --------
------- ------- -------- --------
Calculation of diluted earnings (loss) per share:
Weighted average number of ordinary shares
outstanding used in computation 12,164 11,695 12,118 11,614
------- ------- -------- --------
Net effect of dilutive stock options outstanding - - 234 -
Weighted average number of shares and ------- ------- -------- --------
share equivalents 12,164 11,695 12,352 11,614
------- ------- -------- --------
Diluted earnings (loss) per share $ (0.05) $ (0.05) $ 0.27 $ (0.68)
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
Page 21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,1998
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 16,320
<SECURITIES> 2,500
<RECEIVABLES> 4,230
<ALLOWANCES> (1,644)
<INVENTORY> 26
<CURRENT-ASSETS> 22,280
<PP&E> 3,033
<DEPRECIATION> (2,057)
<TOTAL-ASSETS> 24,082
<CURRENT-LIABILITIES> 9,974
<BONDS> 0
0
0
<COMMON> 4,028
<OTHER-SE> 10,002
<TOTAL-LIABILITY-AND-EQUITY> 24,082
<SALES> 10,123
<TOTAL-REVENUES> 10,936
<CGS> 6,308
<TOTAL-COSTS> 7,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,212
<INCOME-TAX> 1,924
<INCOME-CONTINUING> 3,288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,288
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
